How to Start a Restaurant Business
Starting a restaurant business is an alluring dream for many but a reality for only a select few. The restaurant business is like the start of the New York marathon. Thousands of people start the race but only a fraction of those people finish and an even smaller percentage actually succeed in meeting their goal for the race. Why? Well, it simply isn’t as easy as most people think and there are key skills and attributes that the entrepreneur must consider when thinking how to start a restaurant business. The National Restaurant Association (“NRA”) claims that over 42,000 new licences are issued each year in the US. These are lofty numbers and you would be forgiven for thinking this is a positive.
The reality is that restaurants have the highest attrition rate of any business type. The attrition rates in the sector very wildly, ranging from 90% failing in the first year, to as low as 20% in the first year of trading. A recent academic survey conducted by researchers at Michigan State University found that 27% of start up’s failed in the first year; after three years 50% of those restaurants were no longer in business; after five years 60% had fallen away and before the end of the decade 70% of restaurants were no longer trading. While these may seem like scary statistics a subsequent study at Cornell University in 2005 revealed that 81.4% of small business failures result from factors within the owner’s control. In other words, despite these damning metrics, failure is by no means inevitable. So how can restaurateurs evade this landmine? Here are our top tips on how to start a restaurant business.
Top Tips For A Successful Restaurant Business
Most people dream of having a buzzing little establishment with perfect ambiance, a hoard of adoring, loyal customers and a cash register that is brimming with money every night. Nice dream, but it takes a special kind of person to make that a reality.
Key Personal Traits that typify a successful restaurateur.
1. Unwavering Tenacity
The restaurant business is characterized by long hours, customer complaints and an endless list of tasks to perform, and that’s before we even get into the strategy! This is not an easy ride and to succeed you will need all the determination at your disposal to get through each week. Ask any chef, restaurant owner or hospitality worker. It is hard to succeed and only the strong survive. You need to stay the course and remain positive in the face of adversity. Most restaurateurs lament about the hard start but also revel in the “tipping point” when their business really took off. Maintaining the momentum is the trick and tenacity is pivotal in achieving this.
2. Attention to detail
Everything comes down to the detail in this game. You are providing an experience for your customer base and if you concentrate on getting the detail right you increase your chances of making that experience meet the customer needs. This trait is so important, not just in terms of the quality control of each dish that is served but also in terms of the kitchen cleanliness, ensuring licences are up to date, that the booking system works, the list goes on… If you have a “devil may care” attitude then you won’t last five minutes. Being meticulous about all aspects of you business from the product to the business strategy is absolutely critical. Maui restaurants
3. Managing People
You can’t run the place yourself. You must recruit and recruit well. You must possess the ability to place trust in your brigade to get the job done in line with your values and strategy. Getting the right chef (assuming you are not one), the right waiting staff and front of house are critical and you have to be able to communicate effectively to motivate and delegate responsibility. When thinking about how to start a restaurant, think about starting a winning team. Managing that team is critical to your success. Teamwork and communication are pivotal skills to ensure success. Empathy and leadership qualities are outstanding traits for the restaurant business.
Key Business Success Factors
1. Do a Restaurant Business Plan
The best advice you can receive when thinking about how to start a restaurant business is to do a business plan. It is absolutely pivotal. The restaurant business is so customer focussed that doing your homework is the difference between success and failure. Market and customer research will enable you to plan your business model effectively to ensure you continually meet the needs of your customers. It will also help you plan your finances to ensure you run an effective operation and don’t run out of cash. It’s all about seeling an experience in the restaurant game and you need all the right information at hand to ensure you hit the mark and have a strategic plan to explain to a bank or investor to attract the funding you need to open the restaurant. Opening your doors without a business plan is suicide because planning retrospectively while running the business is almost impossible. Prevention is better than cure.
2. Be flexible
Make sure your business strategy is flexible. It will need to be in order to continually meet the needs of those customers. Everything from menu construction, wine list, decor and your marketing strategy must be nimble and react instantly to changes in demand. Most businesses keep monthly financial records but in the restaurant game weekly financials help you keep your finger on the pulse and provide an opportunity to cater changing customer demands to maximise sales. This is where the business plan really becomes valuable. It should evolve with your operation. It is not just a static document used for getting funding. Restaurants with nimble business models are the ones that succeed.
3. Focus On The Customer
This flows directly from the initial research you will have done on your market and customer demographic but the focus on the customer should be first and foremost in your mind. Talk to your customers and ask questions about what they like and what they would like to see changed. Rotate your menu and keep it simple. Long convoluted menus breed confusion and make delivering the meals so much harder for the staff. Your customer will guide you in presenting the best menu and setting to maximise sales. They are the source of your success.