Contrary to popular belief, the restaurant industry is brimming with significant opportunities for success. While it’s true that some restaurants face challenges, the majority do not fail in their first year. In fact, Forbes puts the failure rate at a modest 16%, and even Menu Tiger’s study, which found that 60% of restaurants struggle within a year and 90% in five years, leaves room for the remaining 40% to thrive. This means that you can be part of the successful majority with the right approach.
These statistics aren’t meant to discourage people from setting up in the highly competitive food sector—far from it. These resources can be valuable to new restaurateurs, who can avoid mistakes before they make them to ensure success and profitability in a tough sector.
So, with this in mind, what can you do to avoid being one of the three that fail and instead be one of the other two that last the distance?
A Business Plan
A business plan is your roadmap to success. Starting a restaurant without a business plan is like building a house on the beach when the tide is in. It seems like a fun idea, but inevitably, it’ll be washed away, and you’ll be left with nothing to show off your hard work.
What do you need in a restaurant business plan? You need a description of your business model and the type of restaurant you plan to open. You also need to know your service type, the cuisine you will be serving, the location design of the restaurant branding, funding for a sample menu, and your market research.
Market research
Building on the previous point, your market research is not just important; it’s the key to a successful venture. It will equip you with the knowledge of whether there is a demand for the type of restaurant you want to open. You can conduct surveys, analyze local demographics, and study your potential competitors to gain a comprehensive understanding of the market. This will help you grasp the social and economic factors at play in the location you want to open up in and, if there are any other competitors, what sets you apart.
The more you understand the market you will be entering, the easier it will be to make a more strategic decision that will benefit your restaurant and facilitate success moving forward.
Cash Flow Is King
Understanding that ‘Cash Flow Is King’ is crucial in the restaurant industry. You need to have the funding to get up and running, and you need to be able to finance the restaurant until it becomes profitable. It can take many months for you to break even; in the meantime, you need to have enough capital to cover your expenses. Ideally, you will want 12 to 15 months of capital to help you be successful, and if you don’t need it for this duration or are turning a profit prior to this, it can be converted to an emergency fund for leaner periods.
A well-thought-out projection model can help you obtain the right funding. Understanding the needs of the customer and the restaurant can help you maximize sales and bring in cash. This can be done by allowing multiple payment options, having self-serve options for ordering and payments, or investing in table management for restaurants that track the customer journey from the time they walk in the door until they pay and leave.
Consistency
When it comes to the restaurant experience, consistency is key to success. This means your service needs to be consistent, the food needs to be consistent, the quality of the ingredients needs to be consistent, and customers need to know what to expect when listing your restaurant to encourage them to return time and time again.
Anything that deviates from this can result in uneven customer service and experiences. Allit takes is for one bad meal or for them not to feel welcome, and they won’t return.
You need a simple to execute menu with consistent meals people can rely on to be good. Your team needs to be trained to the same standard, and then you need to ensure everyone is working at the same level for a seamless experience. Your cleanliness needs to be top-notch and consistently impeccable, and you need to be able to get food out to tables consistently so you don’t leave waiting too long.
There are, as you’re probably well aware, any aspects of running a restaurant that can lead to your downfall. However, these points can help you start as you go on and remove some factors that can impact your growth and sustainability.