Hi there, 

First of all, clarify the objective. Is it to maximize the profit (largest NPV) or to maximize investment return (highest IRR?). 

Second: Does your friend have any constraints (e.g. investment ammount) or a specific concept in mind (e.g. small coffee shop, thematic coffee shop)?

Regarding approach, the ideal spot is the one where (you can arrange this differently, of course, and this also depends on the answers to the first two questions):

1. There are a lot of potencial customers (large market size)
2. Customers have a strong willingness to pay (large gross margins)
3. Market is underserved (weak/no competition or easy to differentiate) (large market share)
4. The costs / investment are low (taking 1-3 into consideration, means a high NPV/IRR)

Your approach is good but I have a few comments:

• You are structuring through buckets. A better option is to structure around critical questions (and then use the buckets as necessary to answer each question).
• You are using competition as a proxy to identify where the demand is. While this can be useful to identify the locations with the largest demand, you are actually targeting a “red ocean”. It will be very difficult to make above average profits in such an area. You should instead look for “blue ocean” underserved markets which will be more profitable.