Every new restaurant business owner is bound to make mistakes. Some will be costly, but if you can keep your sense of humor and learn from those mistakes, your business (and your attitude) will benefit in the long run.
You’ve launched your new restaurant and you’re starting to see customers, but running a restaurant is serious business, especially because your financial livelihood is most likely tied up in startup costs.
In the early days, it can be easy to get tunnel vision as you try to bring your idea to life. You can lose sight of your target market’s preferences (the type of food, ambiance, lifestyle), their current habits (where they’re already eating out) and even forget to keep an eye on your competition.
Here are 10 expensive mistakes new restaurants make all the time. Don’t let them stress you out. If you approach your potential weaknesses a little more light-heartedly, you’ll probably find it’s easier to step back and take steps to reduce risk and prevent issues that could threaten your restaurant’s survival.
1. You don’t need to learn anything new—gut instinct it is!
How it plays out in your head: No market research, yet six months down the line, you’re featured on the cover of Forbes with the headline calling you the “latest czar of the restaurant industry.”
How it would play out in reality: No market research, and six months down the line, you get an interview request for an article on “lessons from failing businesses.”
How to avoid making this mistake:
- Do market research to understand your restaurant’s local area, your target market’s preferences and habits, and what you need to watch out for in terms of competition.
- Do a SWOT analysis to develop a thorough understanding of your strengths, weaknesses, threats, and opportunities. Be honest!
- Take a look at you and your team’s skills gaps. If you’re not as good at financial management as you are serving up amazing meals, find a mentor or business advisor, take a class, or hire someone you can trust and take their advice.
Questions to help you get started with a feasibility report for your restaurant:
- Financial and personnel resources
- Do you have sufficient financial backing to survive the competition?
- Are you armed with a trustworthy personnel network of superheroes that can withstand sudden attrition?
- Location and pricing feasibility
- Is the restaurant located in an area that is convenient for your target market?
- Are the menu prices appropriate for your target customer and their taste?
- Opportunities and threats:
Consider every finding of the feasibility report to avoid overstepping your boundaries and being prepared for the challenges. Experiment with the gut instinct bit once you hit your break-even point.
2. Believing it’s all about you—and the customer is not king
How you imagine it playing out: The customers are poring over the first three pages of the menu which are all about your personal journey—and they are patting your back on their way out.
How it would play out in reality: The customers have become experts in flipping straight to page four of the menu where the appetizers start.
How to avoid this mistake:
Resist the temptation to indulge yourself at the expense of your target customer. Approach decisions from the standpoint of the kind of customers who would visit your restaurant.
Every aspect of your restaurant’s design should fulfill one or of these two roles:
- Helps customers identify with your restaurant
- Entices them to spend
Rapport building
Even if your aim is to take the customer through your journey, do it in a way that somehow translates into business.
A crisp online video of you with the customers, or you working alongside your chefs would interest the customer much more than lengthy printed menu stories that they might not be able to relate to, and might even turn them off. A decent video on your website is also a subtle way of displaying your kitchen’s hygiene, your chef’s expertise, and the ambiance you’ve created.
Restaurant theme and personality
Your restaurant’s theme and personality should not be crafted to mirror your personality; instead, it should feel comfortable and inviting for your target customers. Anything too experimental runs the risk of diminishing sales once the curiosity factor wears off, especially if it takes some time to get the food and your kitchen processes right.
Promotions
Understand your customer’s motivations when designing promotions as you want to blow your trumpet around a trait that the customer would readily agree with, and thus respond to every time.
If they visit for your upmarket reputation, the advert can read, “Impress your boss or date tonight with the luxurious spread at Seven Seas.” And if they visit for the convenient location, “Hop, skip, and jump to your favorite restaurant to try the new chef’s Christmas special!”
3. Jumping in with just enough money to get started
How it plays out in your head: You achieve break-even in the first month. Then you recruit your nay-saying friend to handle your accounts.
How it would play out in reality: You have to beg your nay-saying friend for a loan to keep the business afloat another six months.
How to avoid making this mistake:
When starting out, you must have a six-month cash reserve—even if you are feeling confident about your heroic entry into the food industry. The high cost of marketing, salaries, appliances, ambiance, and so on will dry up incoming revenue instantly.
4. Taking the idea that “you have to spend money to make money” too far
How it plays out in your head: You get covered in Men’s World magazine sporting those ten good-luck rings that the mystic lady sold you on your grand opening day. Also, people are traveling from other parts of the world to try your new 11-in-1 coffee machine.
How it would play out in reality: Those rings have chased away your fashion-conscious (and sanity-conscious) girlfriend, while the expensive 11-in-1 coffee maker is being used to make the same three varieties of coffee every day.
How to avoid making this mistake:
When you’re starting out, the eagerness to spend every last dollar to make your launch perfect is understandable. Don’t do it.
Decide what you really need to spend in the beginning, and then create an extended expense budget that models what you’ll purchase or upgrade to when your cash flow allows. You do have to spend money to make money to a certain extent—but the trick is honing your ability to make better business decisions based on a keen understanding of your cash flow and financials.
5. Underestimating the connection between staff training and attrition
How it plays out in your head: Thou shalt pay wages and incentives, and thy peasants bow to thee. Twice a day.
How it would play out in reality: You bow and curtsy to your cooking enthusiast friend to get her to fill in for the two chefs who quit on Friday night.
How to avoid making this mistake:
Competing businesses are quick to poach talent with offers of money and incentives, but not everybody can offer a human bond and genuine concern. Staff can be made to feel like second family if you:
Don’t say it like Gordon Ramsay
Taking the time to gently but firmly explain issues to your staff may be time-consuming, but it’s more efficient than looking for new staff every month.
offer a gentle customer reminder
If your ambiance permits, subtle signage can make a difference. Just a simple inclusion like “Your servers try their best to give you excellent service today. Do thank them!” or “Just as you are a part of our small family at Happy Food Memories, so is our wait staff. Please be polite!”
Give Growth opportunities rather than money
To inspire loyalty, offer your staff something that does not come with a price tag—a brighter future. A time-based incentive like an education benefit for staff who have been on your team for at least two years can go a long way.
Understand that good leadership is always key
The best of workers would slack under the leadership of a lethargic and careless owner, while even the least experienced workers would quickly learn the ropes under a vigilant, fair leader who sets a good example.
Even if you have appointed a capable manager, keep visiting the restaurant personally and be in the know on all that goes down there—beyond just the weekly reports and numbers.
6. Believe that your customer would slay a thousand dragons to reach your restaurant
How it plays out in your head: Your restaurant would be the one that folks would later tell their grandchildren about: “Oh! The troubles we used to take to get there! But get there we did!”
How it would play out in reality: Your fixed costs are the only ones who won’t mind the hassle of visiting you regularly.
How to avoid this mistake:
Even for the famed restaurants, it’s only on special occasions that one would travel far. And it would help to remember that profitability isn’t going to be gained from revenue generated by occasional or casual dining. To be profitable, you’re going to need regular visitors.
Granted, online ordering and delivery have made life easier, but if you are looking for footholds, then offering location convenience is vital. Paying high rent for a popular restaurant location which will organically pull in crowds might make better financial sense than investing in an underground location which you “think” would get popular once you launch your restaurant. Run the numbers and make sure you can afford to take that chance!
7. Assume that the customer is as calm and wise as Yoda
How it plays out in your head: While waiting for their food, your customer would strike up congenial conversations about their lives with your staff—and they would love nothing more than to spend the last third of their visit filling up your feedback forms with praise.
How it would play out in reality: A scathing review titled, “(Don’t) Meet the New Tortoises of the Restaurant Business.”
How to avoid this mistake
Your best defense against the “make it quick!” generation can be small investments made towards crayons and printouts (race cars, horses, scenery). Ask the customers to draw and then sign these to showcase on your “artists of the restaurant” wall. Works wonders for kids and grown-ups alike!
Also, movies on projectors are inexpensive and very engrossing. And unless it’s a fine dining restaurant, it’s possible to focus mostly on quick-cooking and evergreen menu items. That’s happiness for everyone—the customers as well as your chef!
Also, reward your staff, especially those in the kitchen, for any innovation that saves time.
8. Decide to bring in the palate revolution
How it plays out in your head: Italian cuisine is your personal favorite, so you introduce it in a predominantly Chinese cuisine-favoring neighborhood. And voila! The new parents of your neighborhood are naming their new-born children after the Roman emperors!
How it would play out in reality: And voila! The revolutionary is back to his old job in eight months!
How to avoid this mistake: Ask yourself this: “How often have I really gone all-out experimenting with (eating) new dishes?” Unless you are a food critic, reviewer, or someone with a particularly adventurous bend of mind, the honest answer may be “rarely.”
The act of eating involves an emotional involvement that you don’t want to mess with, so it’s best to cater to the preferences of your locality’s palate. If you are keen to experiment or offer something new, make it within acceptable limits—some tweaking here and there to make it sound new, and based on a solid understanding of your target market and their tastes.
9. Introduce a radical new way to dine
How it plays out in your head: Your customers would queue up down the block for a chance to make their own smoothies on the bicycle-powered blender. After their grueling office hours. Every day.
How it would play out in reality: You’re cycling to work after having sold your car to pay off the debts from your failed bicycle-smoothie venture.
How to avoid this mistake:
It’s safer to have something experimental as “a part” of the whole concept, and not the entirety of it. Let that not be the only way for customers to get to their beloved smoothies—because the jovial lady who took those first-timer proud selfies on the smoothie blender might not be so jovial on her sixth visit.
10. You recruit that marketing agency with the fancy name
How it plays out in your head: You get 500 customers on launch day by offering burgers at a flat 80 percent discount (your marketing agency’s buzz-creating idea). Out of gratitude, those 500 customers continue coming to you every day for the rest of their lives.
How it would play out in reality: Your food costs go up, you pay staff overtime, and you pay the marketing agency for their “bright” idea! The next day, when the prices are restored, it’s just five people in the restaurant.
How to avoid this mistake:
Buzz marketing typically attracts the deal-hunter crowd which would not convert into regular, loyal customers. Instead, there are many options that you can try yourself, before taking the help of any overpriced “industry expert.”
Organic marketing and sales options
- Participate in event listings and food industry events: Put up stalls or cater during football matches, musical nights, school functions, and so on. Create discount offers to get your event customers to visit the restaurant. Attend events to scout for any opportunities of vertical and horizontal mergers and tie-ups. At other times, attend just for the joy of making new friends in a competitive industry!
- Invite food bloggers and create a blog: Pay for a bloggers table if so required, as these reviews are a sure-fire way to create interest and increase your ratings on food sites. Everybody enjoys giving their opinion, so invite customers to send in their recipes, ideas or reviews for the food blog, where you can subtly make announcements for the deal of the day, today’s chef’s special, new menu items added, and so on.
Effective paid marketing options
- Newspaper inserts and outdoor ads: Do inserts only for localities within a radius of a few miles of your restaurant. Innovative outdoor ads can also help entice the customer.
- Food and delivery apps: Visibility (and attractiveness) on these apps can be very useful for giving the business a boost. Most apps offer their partner restaurants a certain amount of free messages per week to inform about specials and events to their entire customer base.
- Recruit a tech intern: Many media- and tech-savvy students offer their services which are extremely easy on the pocket. As they themselves are the most active consumers of social media, they can be safely relied upon to work through the SEO needs while posting three to four stories per week (food images, new updates, customer snaps) on popular social networking sites.
To conclude, while it’s good to have the courage to do something different or stick to your vision, do make it a point to keep your customer in mind at all times.
So, here’s wishing you loads of beginner’s luck and better still—the first timer’s jackpot!
Mudita is a marketing consultant. With a background in media marketing and lectureship, she takes a keen interest in finding the pulse of businesses and people alike!
