Owning a restaurant is a quintessential dream for many foodies. The thought of serving culinary delights in a homey place surrounded by friendly people is enchanting. Statistics, however, indicate that almost 30% of new restaurants fail within the first year in business!
Shocking, isn’t it?
Just because you can cook delicious meals that astound family and friends at home doesn’t mean your culinary skills will appeal to the mass market.
According to experienced restaurateurs, you must understand the intricacies of the restaurant business to increase your chances of success. Today we explore the top things you must know as you establish your new restaurant.
1. New Restaurants Aren’t Cheap
Between leasing costs, staff wages, marketing costs, licenses and the food itself; a new, small restaurant can set you back $50,000 or more. Your expenses depend on the size, location and theme of your restaurant. You can get financing from banks or family, but keep in mind that margins for most restaurants are pretty low.
Consider a catering or food truck business as an alternative starting point to help you assess if a restaurant is the best path.
2. Location Matters
To use a real estate adage, “You make money when you buy.” The restaurant’s location can make or break your business. You need an accessible place with ample parking, foot traffic and a broad population base that resonates with your restaurant’s concept. Choose a location before you create a business plan or dash off to the bank for a loan. It influences among other things your menu and pricing.
3. Have a Clear Business Plan
Put your restaurant’s business plan into writing. Research, assess and plan for licensing, employee safety codes, health codes, tax laws, etc. Your business plan should also clearly outline your restaurant’s concept and the intended target market. Figure out how to do something unique that no one else offers and that appeals to a specific demographic.
4. Create a Coherent Restaurant Concept
A restaurant’s concept will guide the menu, decor and even the name. It lets people know what to expect. Keep in mind that people don’t just come to eat; they also come for the experience. Consider whether your concept fits in with your location. You can also pick a custom-made concept in the form of a franchise. It gives you strong name recognition and built-in marketing but doesn’t come cheap. Franchises, however, also come with a stringent set of rules.
5. Learn How to Manage the Business
Preparing mouthwatering food isn’t the only skill you need as a first-time restaurateur. You also must understand the business and money-management side of things. It entails learning to hire the right people; managing cash flow and inventory; negotiating rental leases; navigating regulations; licensing requirements, etc.
6. Prepare to Work Long Hours
Get ready to put in long hours at work. You’ll be at work most of the time as a newbie restaurateur. You can kiss your weekends and holidays goodbye. These are some of the busiest and most profitable days in the restaurant business.
7. Put Proper Systems into Place
Most franchises succeed because they have systems and processes that govern all aspects of the business. Develop robust systems at your new restaurant to minimize waste and keep costs manageable. Clear systems free you to spend time and money on guest experience. A focus on your patrons is the best, most effective way to generate positive word of mouth and keep customers coming back.
A passion for food alone won’t sustain your new restaurant. You must also learn how to navigate and balance other aspects of the business such as marketing, financing, people management, and more.