Starting a Restaurant

As entrepreneurial enterprises are concerned, opening a restaurant is by far one of the hardest endeavors to undertake.  While the rate of restaurant failure isn't nearly as bad as it's purported to be, restaurants do fail at a much higher rate than many other types of self starter business.
For that matter, even franchised restaurants (usually the smaller "fast food" variety) have a failure rate just a few percentage points below self-starters.  So what, you may ask, can entrepreneurs do to increase their chances for success?

Here are three tips to succeeding in the restaurant business that successful owners adhere to.  The first of these is location.  Yes, there are some restaurants located in out of the way areas that do succeed on word of mouth, but those instances compared to the instances of restaurants failing because they are in bad locations are miniscule by percentage.  The safest bet is to always make sure there is plenty of traffic where you want to open up.  Established areas are best, but consequently, most expensive.  Do not get in over your head with a lease that will bury your chances for success from the start, but do not choose an out of the way location because it is cheap.  Try to find some middle ground.

The next tip is to concentrate solely on the things that will make people want to come in and more importantly, want to come back.  I know this sounds a little too simple, but it involves a lot more than just good food and a nice atmosphere.  The key is to turn out great food, provide a great atmosphere and to have exceptional customer service, day in and day out.  Whether you run a sandwich shop or a high-end bistro, getting these three elements together and doing so consistently is paramount to success.

The third tip is to find and culminate good business relationships with your suppliers.  Having a supply chain you can count on will allow you to concentrate on what is important, which is running your business while at your business.  You will need to find food distributors and a restaurant supply distributor you can count on.  Food distributors that are able to deliver on time and are committed to bringing you quality products every time will help you to produce consistently good food that your customers want and eventually come to expect.  A good restaurant supply company can make all the difference between having a smooth operation that allows you to run your back of house effectively.

Of course, there is a lot more to the restaurant business than these basics, but in the end, the basics are what separate successful restaurants from failed restaurants.

Many people dream of owning and running their own restaurant.  For many it will remain just a dream, but as Benjamin Christie explains, a select few will make it a reality – the following article is courtesy of Benjamin Christie www.benjaminchristie.com

Once established and trading, a restaurant has less than a 30 per cent chance of surviving the first 12 months and less than a five per cent chance of surviving three years.  There are many contributing factors for success and it starts at the beginning of the development.  Developing a restaurant is a risky business and not for the faint hearted, it can be a very difficult road ahead.

Nowadays developing a quality restaurant takes extensive amounts of time, effort, patience and capital to achieve success.  For well-capitalised parties there are a few companies which specialize in the total design, development and opening of the restaurant from paper to turnkey operation.  These types of companies will often charge a percentage of the final costs of the restaurant – as you can imagine it can be quite costly.  The advantage of using these companies is that they often have the structures, plans and contractor network for the development to happen very fast indeed.

The most important element of a restaurant development is the concept itself.  The concept once defined will outline how the restaurant will look, feel and most importantly be positioned in the market.  Once your concept has been developed, talk to friends, associates and even potential customers about your concept to gauge their interest and opinion.  This is an ideal environment to define and even redefine your concept.  Once the concept has been finalised it will be necessary to outline the entire project in a business plan.  Businesses that fail to plan, plan to fail, it is that simple.  If you will be requiring investors then a business plan will be essential.

The business plan must include the mission statement, concept, potential competitors, market research, development outline, ideal location, timelines and most importantly the financials.  The document should be ideally about 15-20 pages in length and give readers a real insight to the business.  Potential investors will be more interested in a quality concept than extensive amounts of financials.  Keep it simple and straight to the point.  For those who don’t have the required funds for development, an investor will be required.  For most chefs partnering with an investor with an understanding of business, accounting and taxation may prove rewarding in the long term.

There are two main ways of securing funding for a restaurant development.  The first is to partner with the investor for a percentage of the business.  It will depend upon on the amount invested as to the percentage of ownership.  It is important to note that you will operate and manage the restaurant whilst they collect the profits.  Be sure to have a third party negotiate the final percentage of ownership, don’t just settle for 50/50.  The other avenue for securing capital is via a bank loan.  The banks will be often apprehensive to fund a large proportion of the capital as they view restaurants, especially developments, as high risk.

Once the capital has been be secured, finding the right location is the next important step in the development stage.  The location of the restaurant will play a major role in the success of the business.  Part of this process is consulting the business plan, as the concept and potential clientele will play a significant role in determining the correct location.  For example, a restaurant with an emphasis on the corporate market would ideally be located in the central business district near stock markets, offices etc.  Whereas a family-styled restaurant would be more appropriate in the outer suburbs.  The designing and fit-out stage of the restaurant will take the greatest amount of time from start to finish.  Factors certainly decided by the budget, but critical to the overall development are; the restaurant design and layout – reception, guest and service areas; kitchen layout – delivery, service and cool room areas.  To reduce capital outlay, it may be worth considering the use of secondhand equipment not only in the kitchen but also in the restaurant.

There is an abundance of quality used kitchen and restaurant equipment available on the market often sold through commercial auction establishments.  Often not budgeted and unexpected are the hidden costs involved in developing a restaurant.  These costs can be attributed to areas such as business registration, liquor licensing, food production licence, considerations for HACCP and statutory requirements.  These expenses are compulsory and are enforced by local and state authorities to meet public food and liquor standards.  Be sure to thoroughly review the costs associated prior to commencing the development.  Once the fit-out is approaching four weeks to completion, thought must be given to stimulate interest in the market for the restaurant.  Once again, depending on the type of restaurant it may be beneficial to engage the services of a public relations consultant to actively stimulate the appropriate markets.

Media hype is very positive particularly when the restaurant is in pre-opening stage.  By the pre opening stage of the development, staff recruitment, suppliers, menus, systems and procedures should all have been finalised.  Other areas of attention include cash handling systems, human resource systems, food-handling issues, purchasing and rosters.  The first few service periods of any restaurant will be difficult; hence, it is positive to ‘soft open’ on friends, suppliers and associates.  It is important not to have an official opening until the operation is running smoothly and all problems have been ironed out.  After the restaurant has opened, six months will pass very quickly indeed. At this stage, it is an ideal time to review the business plan and ensure that all key areas of the restaurant are being addressed, i.e.: mission statement, client profile, turnover and most important; profitability.

All restaurants in the first few months of opening have increased trading as people try new concepts.  It is important for restaurateurs to note that the period from six moths forward is critical to the restaurant’s future.  Retaining patrons and promotions in this period are essential also.

Good Luck.

Benjamin J J Christie
Chef and Restaurant Consultant

www.benjaminchristie.com