It’s very unfortunate but we see well many often smart people get in the restaurant business and make many the same mistakes.
Today we are going to discuss some of the most common missteps and poor decisions that we see first time restaurant owners making both before and then after the restaurant opens.
If you decide to move forward and open your own restaurant, being aware of these common pitfall should be extremely valuable as you make those crucially important planning and startup decisions that can literally “make” or “break” your restaurant.
Avoid these common errors, and you will dramatically improve your chances for success.
We are going to discuss this topic within the framework of the three steps to restaurant success:
1. First of All, find out what they want, remember, it’s not about what you want to sell, or what you are passion about cooking, it’s all about what to the people in your market want in terms of Food, Beverage, Atmosphere, Service, Style, Price, Speed and so on.
2. Step 2, is Go and Get it.
After listening to the market and identifying what they want, you have to create it, that means finding the right location, and in incorporating the design, ambience, equipment, menu, recipes and skills needed to give your market what they want
3. And then Step 3, Give it to them.
Once the restaurant opens, you’ve got to be ready with the well trained capable staff to execute and deliver the high quality guest experience that your customers want consistently every time, and you have to be able to do it in a profitable manner.
Just to review further, the first two steps take place in the startup phase before the restaurant opens, and those decisions will determine whether you have a shot that having a good restaurant which is providing the experience that appeals to a sufficient number of people in your local market.
Step 3, Give it to them, begins on the opening day when the focus shifts from the startup activities to taking care of customers, ensure the quality and the consistency and managing the financial aspects of the restaurant.
These activities will determine whether the restaurant becomes a “good” that is a profitable business.
So, here are the common mistakes we see connected with Step 1, Finding out what they want.
1 Number 1, WRONG CONCEPT:
• Is we see many independent owners starting restaurants without finding out what the people in the local market actually want to buy.
In other words, instead of being market driven and determining what type of concept or experience that restaurant should provide, they started out focused inward, on the menu or the products that they prefer to sell, or the type of restaurant that they want to own and operate.
So, as a result, they begin the process of planning and developing the restaurant based on an idea or product or experience that they are personally passion about, before identifying if it’s something that people actually want.
If you cannot articulate who will want what your restaurant will offer and why they want it you will have a serious problem.
Now, do some folks get lucky? Yes they do!
But relying on luck is not a winning business strategy, especially when putting hundreds of thousands of dirhams or more on the line, THAT is a recipe for disaster.
Don’t make the mistake in believing that just because you and possibly a few friends or family members think you have a brilliant idea for a restaurant that anyone else in your town or area will think so too. You must find out the people in your market want to buy.
So how you find out what they want to buy!
You have to go out and talk to as many potential customers as you can and you ask them, what restaurants do you go to on a regular basis now and why?
And what kind of dining experience would you like to have that currently isn’t available.
Ask them to be specific, what kind of food, location, service style, price points etc.…
Would they be attracted to and how often they would go?
Talk to people and then listen very closely to what they say. Talk to enough people and I promise you, you will end up accumulating lots of incredible valuable information, and you will likely discover that what they want, is quite different than what you initially thought.
That is the first and the most important step in the process. Just because you built it, does not mean that they will come, unless, you are able to give them what they want. So FIND OUT what they want.
• We also see many independent restaurants are open that we refer to as “Weak Concept”, in other words, the restaurant has few of any meaningful distinctions that defining characteristics that set them apart from the competition, or delivers a clear compelling value proposition, it lack of distinction often means that the restaurant either intentionally or by default is attempting to appeal to everyone.
And when you try to appeal to everyone, very often, you end up appealing to no one.
One of the main reason many first time independents lack to find the characteristics is that they are focused almost exclusively on the food and the menu in describing their concept and restaurant .Sure, the food and menu is important, in most of the restaurants, it will be THE driving force of the concept, but never forget a restaurant today is SO much more than just the food, it’s about the entire dining or guest experience.
• In addition to the food and menu, a restaurant’s concept should encompass everything about the restaurant that touches the customer, PHISICALLY, VISUALLY and even EMOTIONALLY.
Let me explain.
A concept description should include meaningful and unique characteristics and design, atmosphere, service and even includes values, culture and other important aspects of your operation.
This could mean distinctions in sourcing products, sustainable practices, support for certain causes.
In other words, all the elements that define not only what’s on the menu, but also you are in a distinctive ways you intended to do a business.
Why this is so important?
The one reason is the largest living generation, millennials, those who are born between 1982 and 2004, tend to be particularly interested in the values and the operating practices that the companies they do business with.
They are looking for more than just products and services, they want an emotional connection with the companies that they patronize.
Millennials also spend more money dining out than non-millennials.
So when you are talking to potential customers, be sure and listen for all the things that they would like to see embodied in local restaurant.
Not just about the food and the service style, ask questions that drill down deeper to learn what types of values, business practices and other characteristics that they look for in companies that frequent on regular basis.
Again, listen to your market, let them tell YOU what THEY want and plan accordingly, your odds of success will go up dramatically
2. Now let’s move to common mistakes and step 2, Go and Get it.
• Another way to missteps, especially for first time operators has to do with finances.
Particularly the initial startup or the capital investment of the restaurant.
Often the first time restaurant owners in particular, their total startup cost in relation to the sale potential of the restaurant, let me say that in general the anticipated sales volume should be at least 1.2 to 1.5 times the Total Startup Cost of opening the restaurant:
For example, if it’s going to cost 1,000,000 Dirhams to open a new restaurant, there should be a high level of expectation that the restaurant in this location will be capable in generating annual sales of at least 1,200,000 to 1,500,000 Dirhams.
For every Dirhams of startup investment there should be an expectation of generating at least 1.2 to 1.5 Dirhams in sales for the project to make economic sense.
In a location there is LEAST, one thing you must do in considering any location is to prepare a reasonable conservative projection of sales volume based on an estimated check average and anticipated a daily guest counts. THIS is a very very important exercise to conduct in analyzing any site or location.
• Also, cost overruns are common for first time operators because there are always and surprises always end up costing more money. This puts many new restaurants in a position of starting out in a hole in owing money more than they have, that is why, under capitalization is such a big reason many restaurants go under shortly after opening or within their first year.
They simply runout of cash before the restaurant has a chance to become profitable.
We always recommend first time operators add at least a 20% contingency to the startup budget for unforeseen startup expenditures and cost overruns.
• Also, since many first timers are unfamiliar with the construction details, contracts, and choosing and working with contractors, problems often arise that extend the construction period or cause the project to go over budget.
• Another big mistake, is choosing or settling on a poor location.
As you can imagine selecting the wrong location can be devastating for a restaurant.
Here are few the most common location mistakes:
a) First, a restaurant opens in a wrong market.
b) Next is poor access or visibility, especially for the new concept, the location must be convenient and easy to access. Even the smartphone apps that help people find you online, still there is no substitute for a highly visible and appealing store front and sign that lots of people see it every day.
c) Another common mistake is going into a location that is too expensive, a good rule of thumb is that occupancy cost should be no more than 10 % of your yearly projected sales.
Occupancy cost includes rent, common area maintenance, insurance, real estate fees etc.…
Even if you have a stellar concept and lots of customers, if your rent is too high, it will seriously handicap your restaurant’s potential for success.
As you can see the restaurant business is much more than just serving food and customers, it’s also about numbers and making smart business decisions.
3. Now let’s move to step 3, GIVE IT TO THEM.
I’m talking about some of the common mistakes that occur once the restaurant is open.
• Number 1 in the operating phase is the lack of systems
Systems in a restaurant includes checklist and forms and manuals and procedures and other tools to ensure that the restaurant is organized and operates in a consistent predesigned and determined way all day every day
And these systems need to be in place and functioning on DAY ONE!
So that means that the process of assembling and creating some level of operating systems should begin way before the Opening Day. That is actually it is a very important start up activity.
In many new independent restaurants, there is no standard recipes, or instructions how to prepare every single item on the menu exactly the same way every time.
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