Alarming rate or restaurants fail within their first year, whereas 59 percent of all hospitality businesses fail within a period of three years. This too is a first-year problem, due to the fact that sometimes, a flaw in your business model or a mistake you make early on may need more time to escalate enough to cause a problem. The next thing you need to understand is the fact that the majority of businesses fail even if their food is great, which is a problem of a different kind. With that in mind and without further ado, here are seven tips for your first year of running a restaurant.
1. Have more start-up capital
The first thing you should consider is getting more startup capital. There’s a myth online that in order to start a business in the hospitality industry you need to have about $30,000. Still, this is the minimum recommended capital and, in reality, the more you have, the greater the level of financial insulation your business will have. The majority of guides, for this very reason, suggest that you should muster at least $50,000 to $75,000. Another thing you need to keep in mind is the fact that a business in the hospitality industry burns money fairly quickly. This is why it’s vital that you have a healthy reserve of operational capital.
Infographic created by Clover Network, a restaurant POS provider
2. Have a malfunction contingency plan
As a restaurant, you’ll often depend on the quality of your commercial kitchen equipment in order to make food. Keep in mind that regardless of how much you’ve paid for that fridge; you can’t let your restaurant depend on the presumption that it will never break down. Your equipment will get damaged and broken down, while kitchenware may be broken, damaged, or lost. This is why you need to have a reliable supplier that can deliver these items back to you in no time, should it be necessary.
3. Prick the right location
A location of a restaurant is supposed to be its permanent trait. Why? Well, because unlike other businesses, you shouldn’t try to relocate at a later date. Your guests will know you like that restaurant on (enter location) and by moving, it will be as if you started a rebranding process. This means that you’ll have to build your reputation from scratch. Therefore, pick the right location (the one that is attractive to your main target demographic and easily accessible) and understand that this is the place where your business will stay indefinitely.
4. Every dollar counts
One of the best things about the restaurant industry lies in the fact that your entire income is in either cash or credit card transactions. This means that you don’t have to struggle with invoices or account receivables like in retail. Due to the fact that finances in the restaurant industry are so specific, what you might want to consider is hiring a specialized hospitality accounting firm to help you with the financial aspect of your business. This ranges from taxation advice and support, all the way to financial planning. Needless to say, both of these functions can be vital in the early stages of your restaurant business.
5. Learn more about your competitors
One of the most important success factors that often get overlooked is the knowledge of your competition. As a restaurant manager, you need to be aware of the fact that even the most loyal of your guests won’t be exclusive to you. Like in the fashion industry, there’s not a single person out there that goes for a single brand and ignores all the rest. Therefore, all you have to worry about is making sure that you’re more frequently chosen by your target audience. This leads us to our next tip…
6. Adequate promotion
The next thing that often gets terribly underused is the lack of promotion of your restaurant. You see, when it comes to profit, it’s true that customer retention is the most important thing in the hospitality industry and especially in the food industry, however, you need to make people come the first time around, so restaurant marketing is the very important thing. As always, you need to focus on your menu (alluring images of food are even worth hiring a professional photographer over). Second, you need to display the price, especially if you have a special order in place. These two factors alone should be able to win the majority of people over.
7. Avoid the hands-off approach
In the end, this piece of advice is, more or less, exclusive to the restaurant industry, due to the fact that a lot of industries require you to just delegate tasks and don’t meddle. In the business industry, you just have to micromanage or, at least, vehemently supervise what everyone’s doing at all times. Regularly check on vital business processes, with special emphasis on what’s going on in the kitchen. Needless to say, this is probably the only way for you to make it in this industry.
With these seven tips on your side, you stand a lot better chance of actually making it through the first year in this industry and for every year that you survive, your odds drastically improve. In time, you’ll have such a loyal guest base that running a successful restaurant business might become a fairly simple process.