Take a minute to read the article below. If you plan on being successful in restaurants, you must avoid these critical mistakes- the killers that bring down such a high percentage of new ventures- and the reason many people think of restaurants as "risky".
The truth is, restaurants can be extremely profitable cash cows- but only if you know how to avoid these mistakes!
You have probably noticed in your own experience that restaurants with only so-so food and marginal locations can manage to fill up night after night, while others, with great food and big advertising promotions and hype seem to be closing almost before the Grand Opening banner has come down. Now you will understand why!
This is the number one cause of restaurant failures. Poor management is a broad problem that covers a lot of ground- and usually means that there are many things wrong with the restaurant's operations. These could include excessive staffing, poor inventory control, unchecked employee theft, low enforcement of service standards and a variety of other problems.
The number one secret to running a professional, highly successful and profitable restaurant is having a great manager. In fact, taking over a troubled restaurant is very often a good way for a new restaurant owner to inexpensively acquire what turns out to be a very healthy operation once properly run from a previous owner anxious to get rid of it because they don't know how to run it or fix what's wrong. And not managing a restaurant well is the fastest way to bankruptcy!
So how do you manage a restaurant well? This question fills a good portion of the book that comes with our kit, but here are some key basics:
Know your numbers inside and out. You canít prevent food waste, inventory overstocking, poor pricing, incorrect staffing levels, or employee theft (to name a few) if you donít know what the numbers should be. And you certainly can't do it if you arenít religious about tracking everything and keeping clean, accurate and up to date books.
Get, be and stay organized- things will be hectic and chaotic enough without the added problem of a disorganized manager.
Be ruthless with cost control- a few extra dollars here and there adds up much faster than you would ever imagine.
Demand your employees provide A+ service at all times, and A+ quality work. If they donít, they shouldnít be kept around.
Remember at all times that the only reason you have a business is because people decide to come and eat at your restaurant- they have other choices, and you want to make sure they always leave happy- even if you have to comp a meal or apologize for something that wasnít your fault.
Many times a restaurant would have been successful if it just could have lasted a few more months- but bills piled up and the owner miscalculated how long it would be before the new operation broke even. Many restaurants end up shutting their doors because of this fairly basic problem.
The financial planning of a restaurant is a very critical part of the overall success of the venture, but few people really have the knowledge and experience to do it right. Some get lucky, but some don't. With the Restaurant Success Kit, the financial planning is made very easy and very understandable, and we lead you step by step through the process to ensure that you know exactly how much money you will need to raise, and how much you can spend each month, and how much to expect to make. But no matter what method or software you use, make sure you know these numbers inside and out, and donít start until you have enough money to make it all the way through even your worst case scenario, or else you might not make it, and it is much harder to raise more money later than it is to raise the right amount in the beginning.
People will stop coming to a restaurant much faster if they experience poor service than for any other reason, including high prices and bad food. And by providing great service an otherwise very mediocre restaurant can thrive. Unfortunately for them, many restaurant owners fail to realize this basic truth about the industry.
Providing good service sounds obvious, but what does it mean? And how do you get your staff to do it, when they make minimum wage and work long hours day after day? The secret is first to hire the very best people you can find- based on attitude and willingness to follow high standards and much less on previous experience, and then training and managing your staff to achieve maximum effort, and not by threat or constant monitoring, but because the want to do it! Having good service, no matter what type of establishment you run, will make a huge difference to all aspects of your business, including the bottom line. People will buy more and visit more often if they like the people who serve them, and they wonít come back at all if they donít!
Contrary to how a lot of restaurateurs seem to operate, you shouldn't simply throw open a restaurant in the first good space you find and expect the crowds to find you. Choosing your location, type of operation, menu, pricing, layout, and many other factors are important considerations which can be greatly enhanced by a good understanding of the market you are entering. Many restaurants that could have succeeded elsewhere fail because they were put in the wrong place or were the wrong concept for the area.
These mistakes are easy to avoid with a little advance planning and research, and in fact the best way to establish a highly profitable venture is to find the best fit for the best area and go with that. If you were thinking upscale French but determine the area is begging for a Mexican quick serve, you would do well to go with your findings. Or if you have your heart set on an original concept, then you can find the place it would work best, which isn't necessarily where you were looking. The trick is putting in the time to do the research, which really isn't that hard and doesn't take very long, but it pays huge dividends, and puts you ahead of most people who donít do any at all.
There have been many cases of restaurants that met or exceeded their projections for sales and number of customers, but still went out of business because they also underestimated their costs. It doesn't matter if you are doing $1 million in annual sales if your annual costs are $1.2 million. Many first time restaurant owners get caught up in the idea of making their dream a reality and decide to "spare no expense" in bringing their vision to life. Unfortunately, that is a great way to turn the dream into a nightmare.
Without careful planning and a good understanding of what it costs to open and run a restaurant, it is hard to get a restaurant as profitable and successful as it can be, especially in the beginning years. Our kit can help with all those details. Our experience and first hand knowledge of all the costs, including the hidden costs that newcomers don't see coming, can ensure that your new venture is well planned and completely within budget and on track for success right from the beginning.
Hopefully this overview helps get you on the right track. Obviously there is much more to learn, and it is key to understand the details before plunging your hard earned dollars and valuable time into a project of this scale. And the best way to do this is with a business plan and financials package tailored specifically for restaurants- our Restaurant Success Kit!
Best of Luck,
The RestaurantFunds.com Team
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