Starting a restaurant: Be thoroughly prepared before taking the plunge

This post is cross-published with Data On a Plate.

 

A large number of entrepreneurs enter the food service industry with concepts and dreams alone, hoping that their venture will be successful because they’re offering something new to the market. It cannot be emphasized enough how critical it is for entrepreneurs to do their homework before jumping into the restaurant business. It starts with asking if the market is prepared to accept what you are offering.

Any amount of time, money, and effort spent on the groundwork for your restaurant can only benefit your business in the future. If you’re investing half a million to a million dirhams on a restaurant in the UAE, you’d rather spend the time and money initially learning from experts and getting your business strategy right than regretting it later when you start losing every single penny that you’ve invested. There are so many common mistakes we see entrepreneurs making that could have been avoided easily, and we also see them being repeated because of their carelessness.

 

Think beyond location

Nobody can argue against the importance of location for a restaurant business. If you can afford a prime location, take it only for the right reasons, such as your target customer, tenant mix, and propensity to consume.

However, the majority of new entrepreneurs face the reality of not being able to get the best locations. Furthermore, it would be unwise to spend all your capital acquiring a prime location and risking your cash flow, particularly if your brand is new to the market.

New restaurateurs must start thinking of alternative ways to get the attention of customers, such as better service and delivery. Good examples of such restaurants in Dubai that have created the wow factor include Freedom Pizza and Smiling BKK.

 

Have realistic ROI expectations

The restaurant business in the UAE is a capital intensive business, requiring from 1 million to 2 million dirhams. Don’t expect returns for at least the first two years. In the third year, you’d be lucky to recover some of your costs. If you survive up to the fourth year, you’ll start seeing a return on your investment.

It is common for restaurateurs to recruit the available talent, spend money on their training, and find out that they don’t perform up to expectations. Be prepared for hiring costs. You may need to hire and rehire until you have the best team.

 

Create a roadmap for expansion

If you want take the franchising route for expansion, take that into account in your business plan and develop your brand accordingly. The vision and commitment required for franchising a brand is different from those required for organic growth. Franchising demands the preparedness for co-ownership of the brand. It is important to have that mind-set even before you open your first outlet. This would require you to direct all your efforts to make your brand attractive to potential investors in the future.

If your restaurant is not ready for franchising after its first outlet and you need more confidence, open a few branches, test, and perfect your business models before talking to franchisees. If you’re not interested in franchising, consider launching smaller formats, which will make it easier for expansion.

 

Don’t become the barrier to growth

As captain of the ship, avoid becoming too comfortable that you forget the vision you had initially. You cannot be the jack of all trades. It’s easier to delegate responsibilities to the right people as long as you direct them towards your vision.

Avoid becoming entangled in the complexities of managing day to day operations that you start resisting change and gradually becoming part of the problem yourself. More importantly, keep the excitement of entrepreneurship alive and maintain the enthusiasm you had while starting out.