There is no doubt that running a successful restaurant business is not easy. According to The National Restaurant Association, which represents 500,000+ restaurateurs across the world, around 30% of restaurants fold every year. With profit margins of around 6% for small establishments and 15% for the bigger and chain restaurants, making it work is tough. That is why anyone who wants to get involved in the industry needs to set themselves up for success.
Research is essential
The biggest mistake people make when getting involved in the industry is overestimating demand. There is a tendency to assume that if an area does not have many existing restaurants a new one will be an instant success. Often, this turns out not to be the case. Usually, the reason there are very few restaurants in the area is that there is very little demand. Perhaps the people who live there do not have much spare income or the area has a high nighttime crime rate which keeps people away.
This example demonstrates why in-depth research is the first step. Would-be restaurateurs need to spend time eating and drinking in the area themselves to gain an understanding of what is likely to work and what is not. As well as go online and look at the demographics of the people who live and work in the area.
Testing the waters
If at all possible it is wise to test the waters a bit before signing a lease. That could mean opening a food truck first to find out if a certain type of cuisine is popular. Would-be restaurateurs are increasingly taking advantage of the chance to open a pop-up establishment first. It takes a lot of time and effort to do so. But it is a lot less expensive than opening a restaurant that fails within its first year. Many entrepreneurs view the money that they spend during the research phase as an investment.
Putting in place a proper opening schedule and plan
Opening a restaurant is a highly complex process. Licenses need to be acquired and maintained. The list of equipment that has to be bought and installed is a long one. Then there is hiring and training staff and stocking the kitchen and bar. To successfully open a restaurant requires hundreds of little tasks to be done in the right order. It is therefore essential that everything is carefully planned out. Fortunately, there are comprehensive checklists available online and from trade associations that are designed to help new restaurateurs to plan their new ventures properly.
Invest in technology
Wise restaurateurs invest in technology. They know that spending a little extra up front will save them money over the long term. Take for example digital signage for restaurants. This relatively cheap technology saves establishments that use them hundreds over the course of a year.
Digital menus enable owners to be far more flexible about what they sell. So, if the chef is offered a batch of vegetables at a discount, they can take the deal. Knowing that they can create some special dishes with those ingredients. Meals that can be added to the menu with only a few keystrokes.
Set a budget
It costs between $100 and $800 per square foot to kit out a restaurant. It is vital that a new restaurateur sits down and identifies what they need and gets a rough idea of what the costs will be. If their ideas turn out to be too expensive they can rework things and open a slightly different type of restaurant.
Have plenty of cash in reserve
The fact that opening a restaurant is such a complex venture means that there is a lot that can potentially go wrong. So, it is essential to have some cash in reserve to sort out the issues that will arise.
Monitoring profit and loss from the beginning
For any business, keeping track of outgoings and the funds that are coming in, is essential for success. Firms that use the latest accountancy apps and software can key all of that information into their restaurant´s accounts system as they go. So that at the end of any given day they know how much cash is available within their business. They can also immediately pull off reports that enable them to pick up on whether a new dish is selling fast enough to make a profit or not. If it is not they can put the price up immediately or remove it from the menu to stop losses in their tracks.
Owners that do the above set themselves up for success. But it is important to bear in mind that because the industry is continuously evolving, what restaurant owners need to do to remain successful will also change, over time.