So You Want To Open a Restaurant


How many times have you heard a family member or friend tell you they secretly wanted to own their own restaurant?

It may seem glamorous to those on the outside, but those in the know realize that it’s not. You will require an all-consuming passion for the restaurant and the patience of a saint. You will be open six or seven days a week. You will definitely start earlier than you thought and have later nights than you bargained for. It is relentless day in and day out with no sign of a break.

The strongest advice I can give is to work in a restaurant before you buy one. The most successful owners have waited tables, tended bar, worked in the kitchen and managed front of house and operations before investing.

Chances of Success

Restaurants fail at a 57 to 61 percent rate with the highest failure rate of 26 percent during the first year, 19 percent in year 2 and 14 percent in the third year. According to H.G Parsa, author of a study on restaurant failures and associate professor of hospitality management at Ohio State many restaurants close not because they couldn’t succeed financially, but because of personal reasons involving the owner(s) such as divorce, poor health or simply a desire to retire. “The successful owners were either very good at balancing their family and work lives or single or divorced.”

Investment and Operating Costs

According to Forbes.com, you should anticipate spending an initial investment of between $100,000 to $300,000 to start a restaurant. Your planning should also consider the ongoing costs. Food is the most significant cost—up to 40 percent of your revenues will be spent on buying food supplies. Your next important cost is to pay your employees, which will be equal 20 percent to 25 percent of your sales. Rent or real estate costs are likely to be 8 percent of your revenues and you should allocate 3% – 6% of sales to restaurant marketing.

Marketing

A good restaurant marketing program should include Twitter, Facebook, Yelp, MySpace and active participation in at least three area chamber of commerce or business associations. It’s sad really, but 80% – 90% of restaurant marketing budgets are spent against what is known in the business as “new trial” – getting a new customer to visit for the first time. This is the least effective place to spend your money. The majority of new trial efforts utilize mass media advertising, which is costly and has dismal return on investment. The fact is, new customer acquisition is 7-10 times more expensive than building restaurant sales through increased frequency, check average and party size.

You can build frequency of customer visits with an aggressive loyalty campaign. Red Robin’s Red Royalty program makes every tenth item free in addition each program member receives a free burger during their birthday month. TGI Friday’s Give Me More Stripes rewards, not only offers members points for certain spend levels, they have now added VIP “jump the line” preference on busy weekend nights.

Instead of over-promising or making offers loaded with restrictions, make offers that are totally free of strings and disclaimers. For instance, your restaurant may try “Come in on your birthday and your meal is absolutely free!”

Skills Required

You need to have a friendly, outgoing personality. Not just for the customer but to manage your staff. Many restaurant staffers are unreliable part timers working for tips with high turnover and low ambition. You will also have to deal with creditors who don’t want to wait for their money and suppliers who don’t meet your expectations for time frame or quality. You will also need to be a creative problem solver who can be persuasive and diffuse/solve intense situations. And, if you don’t want to burn out early you need to learn to delegate.

Most importantly, don’t think you can run a successful restaurant, just because you have patronized a few.

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Explore posts in the same categories: Audience Targeting, CRM, Email, Local Search, Media, Positive Reviews, Reputation Management, Retail

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