By Staff Writer
According to Elbert Hubbard, “The greatest mistake a man can ever make is to be afraid of making one.”
As human beings, it’s in our nature to be imperfect; making mistakes is inevitable. In addition, human history only proves that making mistakes has made the world become better and more successful. It has empowered scientists to create better technology.
Consecutive mistakes have resulted in doctors seeking more innovation in diagnosis and treatment. Ultimately, mistakes have forced human beings to look for something better. What I’m trying do desperately to get across to you is: making mistakes isn’t necessarily a bad thing. Usually. But when talking about restaurant start-up mistakes, why not avoid those costly learning lessons the best you can.
The Cost of Business Mistakes
When talking about business, making mistakes is a whole other ball game. A businessman would tell you that making mistakes in business is costly— and he wouldn’t be lying. Each mistake made in the business world, let alone the restaurant industry, is extremely costly. Errors are basically liabilities and result in a significant loss of profit and maybe cost you the entire business itself.
While some mistakes are acceptable and redeemable, some are very hard to recover from. Some mistakes you make while starting up your restaurant could cause your business to fail. Thankfully, there are ways to avoid these mistakes altogether. Lucky for you that you are here to learn about them.
Mistake #1: Unclear Vision
One of the most important things in starting a restaurant business is understanding its purpose, theme, culture, menu, hiring and training process, marketing strategy and where you’ll be opening up (location). There are a lot of things to consider during restaurant development. The vision and creative period of your restaurant start-up is usually the fun part.
However, when it comes down to the nitty-gritty, people often get overwhelmed with all of their ideas and some tend to veer away from reality. It’s important that when starting any business, especially a restaurant start-up, you have a clear vision of what you want it to be. You can’t start a restaurant thinking you’re opening a free-for-all.
For one, that’s just downright silly and impossible and the business will eat you alive. There are many of factors to consider when establishing your own restaurant. For instance: what products you’ll be selling, how you’ll be operating on a daily basis, what the image of the establishment would be, and where you’ll be located.
So, how do you narrow down your choices and create a clear vision of what you want your business to be?
First off, you have to consider what inspired you when you thought of buying your first dream bar or restaurant. What was your initial idea? Was it a coffee shop? A steakhouse? A dessert place? Once you narrow that down, stick to it. As an entrepreneur, you should be able to describe your ideal business in one to two sentences. A great idea to better grasp this concept is whether or not your target market will be able to understand what your business is from the business name.
If customers can’t grasp the idea of your restaurant from the name and the two sentence description, they have less chance of being curious enough to try it out. This two-sentence description can also become your guide in making decisions. Should adding a certain item/product change the two-sentence description? If so, maybe it shouldn’t be added in the first place.
Next, start thinking about how big your budget is. Does your budget allow realization of your vision? If not, change your vision. Make it more practical. As mentioned earlier, the early development and planning of your restaurant can become overwhelming. Sometimes, being too excited about your ideas and concept deviates from the reality of the budget.
This goes back to the two-sentence description we were talking about. It’s important to appropriate your vision with your budget. Otherwise, you’re just planning to disappoint yourself and jeopardize the entire business venture.
Mistake #2: Trying to be an All-in-One
One of the worst things you can decide during the development process is to think that everyone is your target market. This simply is impossible; a target market is called a target market because they are your ideal customers. This all goes back to your vision. As much as you want to attract all types of customers, the reality is you can’t please everyone.
As the saying goes, go narrow and deep, not wide and shallow.
In the restaurant industry, offering a broad menu to attract everyone will result in putting pressure on buildout costs and operational costs. This requires a large inventory and a large operational capacity. In addition, when it comes time to develop your takeout menu and program (so important in this day and age), you have to consider the complexity of the menu from a time and cost-efficiency standpoint.
For example, setting out to be an all-in-one place in your area might attract and get a couple of crowds curious. You could serve burgers, fries, pasta, pizzas, curries, sushi, pad thai, and samosas. However, the size and cost of the inventory would be crazy large.
At the same time, should a large crowd of customers order the various menu items, there could be a constant possibility of running out of certain items on the menu. Not to mention the issue with perishable items when certain menu items don’t get ordered. This could result in non-returning customers or even give your new restaurant a bad reputation.
Focusing on who you want to visit your restaurant will immediately give you a rough sketch on your future goals. What would be the things that would attract this certain type of crowd? What would be the appropriate menu for this target market and this demographic area? Knowing these things are essential to running a restaurant business.
Mistake #3: Not Understanding the Market
Yes, we just talked about this, but it is THAT important to focus on what your target market wants. Any successful restauranteur knows their target market well. Aside from this, it’s imperative that you know the different patterns of your target market. Knowing your target market will let you answer practical questions about your ideal restaurant.
Will your target market use cars to get to your venue? Where would your target market ideally hang around in? Is there a location that would give them access to your restaurant? Should you put in parking spaces? Would your target market typically dine-in or would they prefer take-out orders? What would be the best portion size for your target market? Single servings or sharing capacity?
These are only some of the questions that a restauranteur should know the answer to. By understanding their target market’s behavior and preferences, they allow their restaurant to slowly take shape.
Another thing to consider is how competition changes all the time. In the same way, trends vary. A good restaurateur is aware of the trends in the community, the city, country, and the world. The best way to operate in synchrony with your target market is by knowing when, what and how to adapt to the evolving market’s needs and wants.
You should be aware that knowing your target market is not only a skill to use during the start-up but throughout your restaurant’s lifetime.
Mistake #4: Compromising on the Lease
For good measure, it’s also important to know your location. Basically, your location should gel well your target market and vice versa. A great way to narrow down your ideal location is list down the top 5 most important things about your location.
Once you list that down, start putting an asterisk on the points that are important to you, but more importantly, what’s also important to your future guests. In this way, you remove all the emotion in the decision-making and focus on what is practical.
Location, Location, Location
As just about everyone knows by now (if you don’t know this, GET OUT NOW) one of the most crucial things to consider in establishing your restaurant is its location. This can ultimately make or break your business. Even the best restaurants with great concepts and great financial backing have been endangered if the location is wrong.
However, your task with the location doesn’t end when you find an optimal spot. The location needs to have lease terms that can support your concept. Rent should never exceed 6% of the restaurant’s projected revenues. Occupancy costs, on the other hand, shouldn’t exceed 10% of the total revenue.
Escalation clauses, renewal terms, and covenants related to opening hours, exclusivity, or design, are other things to look out for. It’s imperative that you hire a great lawyer who will review all lease details before allowing you to commit to the real estate, no matter how optimal the location might seem to be.
Mistake #5: Not Being Flexible
Now that we’ve discussed how to visualize your concept, it’s time to discuss the importance of flexibility and adaptability. While having a strong vision is good, it’s also important to remember that in order for your restaurant to thrive, you must be willing to adapt.
While sticking fiercely to your vision and refusing the slightest deviation is incredible and telling of your commitment as a restauranteur, it can also become your downfall. On the other hand, practicality is also a great trait as an entrepreneur.
A mistake often made in start-up restaurants is how rigid the restaurateur is. Some of the realities entrepreneurs must face are costs, health codes, labor availability, and permits. Sometimes, it’s alright to sacrifice a bit of your vision in exchange for your restaurant’s full operation.
The last thing to be flexible about is the target market’s taste, behavior, and wants. There’s a saying that goes, “The only constant in life is change,” and that resonates in every aspect in life. Businesses need to be adaptable to society’s ever-changing behavior in order to thrive. Because in business, it’s not usually a straight path into success. More often than not, there are a ton of bumps in the road that you’re supposed to practically deal with.
Mistake #6: Relying on Being Profitable Immediately
Anyone starting a restaurant should know that the first couple of months to the first year are crucial in establishing your roots. While this might mean immediate profit for some, it isn’t necessarily the same for all restaurants.
In fact, the most common reason for failure in restaurant industry is lack of financial backing, so be prepared to ride out some bad months and quarters. If you aren’t able to do that, you should wait until you can.
A proper business plan would tell you the projection of what sales would look like in a month or a year. However, it’s absolutely foolish to believe that these projections are actually predictions. Usually, it will be a lot of months or even a year to see that your concept is running smoothly as planned and your projected sales are becoming a reliable profit.
It’s important to stay grounded and remember that things might be a little slow. Understandably, running a business is a process. Establishing one is a learning process that will cost you. Ensuring that you have sufficient capital to cover rent, payroll, and vendor invoices while your business is still starting is important. This will give you ample time and resources to make sure that your business stays afloat while it still finds its footing.
Mistake #7: Not Hiring Good Management
We’ve saved the most critical mistake for last. Outside of not having enough financial backing, poor management is the #1 reason that your bar or restaurant will fail. If you don’t know how to manage a restaurant successfully, then you’d better hire someone who does. But you’ll still need to know how to manage them. You are the one that needs to understand how to turn you managers into great leaders.
It takes so much more to managing a restaurant that most people realize. This is why putting systems in place is so important: because there is so much to do and one or two people can’t keep all those tasks in their head day after day. To run a successful restaurant, a manager’s job duties include (but are not limited to):
- Hiring both FOH and BOH employees
- Training those employees
- Opening and closing duties
- Customer service
- Dealing with unruly customers
- Recording daily sales
- Inventory management
- Purchasing and invoicing
- Analyzing profit/loss statements
- Leading and motivating the staff
- Menu creation and item costing
The list goes beyond that but you can see that if you hire a half-ass college kid who can’t wait to get home to play on their X-Box, you can watch your dreams being flushed right down the toilet, so don’t take this last mistake lightly.
Avoid the Big Mistakes
It’s important to know which mistakes are minor and which ones are the ones that could cost you your entire business. Mistakes are normal and they are good for learning life lessons, but avoiding the major ones will allow you to survive, and hopefully to eventually thrive.
Thanks for being here.