This article is part of our Restaurant Business Startup Guide—a curated list of articles to help you plan, start, and grow your restaurant business!
According to a study published in the Cornell Hospitality Quarterly, approximately 60 percent of restaurants fail within their first year of business.
If you are dreaming of becoming a restaurateur, you can increase your chances of success by honestly answering all of the questions proposed in this article, as well as checking off everything suggested below.
A popular industry
Restaurant sample business plans are the top three downloaded sample plans on Bplans. For some reason, a lot of people are attracted to running their own restaurant, pub, café, food cart, and coffee shop. I’ve spent many years working in restaurants, and I can tell you, it’s not an easy industry to be successful in.
I’ve been a technology entrepreneur, but not a restaurateur. I have never owned a restaurant, but I have spent many years working in them and managing restaurant staff—from Planet Hollywood, to Dave & Busters, to casino showrooms, restaurants, and cafés.
The years I spent in the restaurant industry are some of my favorite; I had fun and made a lot of tips. That said, it was also a very stressful industry to work in. Managing people in the restaurant industry is also not easy.
Typically, most of the people in the “front of the house” (on the restaurant floor) are not in the restaurant business as a career. They are mainly there to make money to help them transition into another job opportunity, or they are in college or saving money to go to college. Therefore, you will be hiring and firing more regularly than other industries would.
There are restaurant managers who are the exception to this rule. I’ve known many people in the food services or hospitality industry that have made great careers out of working in various restaurants. They are a special breed of people though. They typically don’t make that much money, yet they are expected to work far more than 40 hours a week, so you want to make sure you establish a working culture that does not burn-out your employees—especially those making a career out of it.
There are also waiters who are the exception to the rule of being in the industry temporarily, but it’s not the norm. You’ll find more waiters making a career out of working in restaurants in larger cities with higher-end restaurants where you can make a good living from the tips.
The “back of the house” workers (kitchen, line prep, dishwashers) are also mostly in the restaurant business to help bridge them to another gig. Chefs are again, usually the exception—especially if they are passionate about food, well trained, and from good culinary schools. If this is the case, these people are making a career out of working in a restaurant.
It’s important to know what kind of restaurant you want to start, and how you will effectively run and grow it.
Below are five questions to ask yourself before starting a business:
- Am I prepared to work way more than 40-hours a week?
- Do I enjoy managing people?
- Can I go without paying myself for months if needed?
- How long do I want to run this business?
- Who will take over the business if I no longer want to run it five, 10, 15 or 20 years from now?
In addition to these five questions, below are nine categories of business to address very closely before taking the leap into the exciting world of food and beverage.
It doesn’t matter if you want to open a large or small restaurant, a café, or a pub. All of the following categories and questions apply. Addressing each of the items below in detail will increase your chances of success.
- Learn what financial performance to expect.
- What is your plan to reach your sales projections?
- How much money do you need to start the restaurant? How do you know?
- How much money do you need to make in order to be profitable? How do you know?
- Benchmarks (what to expect from your financials).
Location, location, location
- Scout the right location, including who your neighbors are and will be.
- Research what was in your location before you and why they are no longer there.
- What restaurants in your area are successful and which are failures? Make sure you know and understand why.
- What will your floor plan look like?
- Will you own or rent your location?
- Consult with the owners of the real estate in the same area you are opening your restaurant. What did you learn?
- What kind of permits do you need?
- What ordering system will you use?
- How will you track inventory?
- What accounting and payroll system will you use?
- What business planning and financial management system will you use?
- Research your competition fiercely. What did you learn?
- How will you be better?
- Identify what you will do that no one else in your area is doing.
- What will people say about your restaurant? Why will they come back?
- What will your menu look like? Will it remain the same or change?
- Find a mentor who has “been there, done that”
- Find the right accountant, CPA, bookkeeper, attorney, and so on.
- What team do you need to run the restaurant? Kitchen manager, cooks/chefs, floor manager, trainers, hosts, waiters, bartenders, sales/marketing, and so on.
- How many people do you initially need to open your restaurant? How will you train them?
- What customer service culture will you create and how will you handle customer complaints?
- How will you handle technology down time (ex: crash kits)?
- Identify and research who will patronize your restaurant.
- Who are they? Where do they dine now? How will you attract and retain them?
- How will you handle slow times? (All restaurants experience seasonality, so plan appropriately for it.)
Equipment and supplies
- What kind of ovens and refrigeration will you need?
- Where will you source your food and equipment?
- How will you store it to keep it fresh?
- How much shrink is normal for your restaurant type?
That may sound like a lot of questions but the truth is, they’re going to be things you do have to deal with as you start, run, and grow your restaurant business.
Think carefully about each area before you get going. Above all, make sure to talk to people in the industry and in your area. Read reports, stay up-to-date with the latest news, and make sure to map out a plan.
Have you started a restaurant? What do you wish you’d known before doing so? Let us know in the comments below!