So You Want to Open a Restaurant

Easy, isn’t it? (OK, that´s a joke). Opening a restaurant will be one of the most difficult jobs you’ve ever undertaken, and hopefully, one of the most rewarding. There are numerous things you need to consider when starting on this journey. Here are just a few:

Concept and Brand

What are you going to sell and why? To whom, when, where and how? Lack of a great concept and a great brand can mean your business is failing before you even start.

If you cannot clearly explain what you are doing in three or four words, you don’t have a concept. Here are a couple of examples of good restaurant concepts:

• Modern Thai cafe
• Hip Mexican cantina

And here are some that don’t work

• A mix of a lot of different cuisines
• Food that I like
• My own personal style

It´s not enough that you understand your concept. Your customer must understand it as well, and they have to understand it in just a few words. Your brand is not your logo.

Your brand is the total sum of opinions, beliefs and experiences that customers (and non-customers too) have about your product. Your logo is one step towards a brand, but many other things contribute, including your restaurant’s name, interior design, colors, uniforms, menu, music, lighting, customer service, food, website, social media, advertising, and much more. Branding is often difficult for non-marketers to understand. Branding is a complete experience, a complete set of ideas, and not just a name and a logo. Get it right, and you can move mountains. Get it wrong and you are a “me too” on your way to the restaurant graveyard.

USP

Your USP is your Unique Selling Point. In short it means, how are you different from everyone else? In what ways are you the first? The only? Let´s take the example of the Thai cafe above. According to TripAdvisor, there are 177 Thai restaurants in Brisbane. So if you open the 178th, how are you different? Saying you are a modern Thai cafe, will limit you down to say a dozen direct competitors, but then what else can you do? Here’s some ideas:

• The only restaurant with Royal Thai cuisine in Brisbane
• The only restaurant in Chiang Mai (northern) style in Brisbane
• The only Thai seafood restaurant in Brisbane (you would have to check if that is true)
• The only organic Thai restaurant in Brisbane (again, check)
• The only Thai restaurant with a day-long brunch

Regardless, you have to offer something different, something unique. You have to give your customers a reason to visit and a reason to come back. Brands without USPs are brands that do not last long.

Location

Do you put your new restaurant in the City Centre, Fortitude Valley, New Farm or Paddington? Or do you try a more alternative or unfamiliar neighborhood? Location, just like brand and USP, can make or break you. And unfortunately, it´s one of the few things you cannot change after your restaurant opens, well, not without huge expense and perhaps a landlord dispute. We can help advise you on restaurant locations and how to model for potential customer traffic. You have to find the correct balance between rent paid and revenue achieved. In the business, your lease should not exceed a certain percentage of sales, of course, the lower this percentage the better. Many restaurateurs make the mistake of either overestimating sales, or not even projecting sales when they sign a lease. They then pay dearly for that mistake.

People

Who you hire counts as much or more than how well you cook. People come to restaurants for many reasons, and just one of them is the food. They come because they are comfortable, because the wait staff are friendly, because the restaurant is dependable, because it is well lit in the evening, because it is near to attractions they enjoy. Hire the right people and give your customers a reason to come back. You should strive to have the friendliest and most outgoing team in town. If you don’t have that, change the team. You can train people how to cook and how to serve customers. It is much harder to train people on how to be friendly and nice. Trust me.

Money

Restaurants cost money. They cost money to build and to fit out. Inventory costs money. People cost money, as does rent. In order to open a successful new restaurant, you have to have enough money for renovation, fit out, and opening inventory. Then you will also need enough working capital to make it to break even on a monthly basis – and that may take some time.

We can advise you on how to raise the money needed to open your restaurant. There are a number of options. The important thing is to be realistic about the amount of money you need, the time that is required to raise that money, and the sales levels that will be necessary to pay the money back. Not all restaurant ideas are good ones. Sometimes, it’s better to know your concept won’t work before you spend any money.

Budget and Cost Control

In order to move forward in a business, you have to have a roadmap. The budget is your roadmap. It tells you what your sales levels should be, what your costs should be and whether or not you should be making a profit. If you have a budget, and things begin to go badly, at least you have a roadmap telling you something is wrong, so you can begin to identify solutions. Not having a budget means you are driving blind. There are no expectations, so there is nothing to measure your performance against. Although not having a budget does not guarantee failure, it does indicate that the owners are not serious about success.

Now, here are a few of the things that can go wrong:

Not enough cash to operate business

This is the number one reason that restaurants, and in fact all businesses, fail. The typical problem in a restaurant is that the renovation and fitout cost far more than anticipated, leaving no money left over for working capital. And the reality is that most new restaurants lose money for several months after opening. So without enough working capital, the restaurant dies. How to avoid this? Under-spend during renovation and fitout. If appropriate, consider buying used equipment, cheap furniture or limited decoration. Save as much money as possible for working capital. You can always do an upgrade after you are successful.

Wrong product

Maybe your idea is just bad. Maybe nobody wants Korean tacos, or Russian coffee shop food, or Estonian food here. Or maybe they do, but not the way you present it. Not every idea works. Not every idea is good. Be humble and talk to the market. Find out what it wants. Give them that.

Wrong location

Even if your concept is good and your brand is good, a bad location can still kill you. The problem often times isn’t that the rent is high for the city. Often it’s the opposite. The owner selects a location with low rent, and similarly low traffic. No one visits and the restaurant is a failure. Understanding the neighborhood and traffic patterns is key. The experience of a restaurant even a block away may not indicate how successful you will be. And some locations are simply cursed – for whatever reason, customers don’t want to go there and restaurants fail within that space time and time again. With the help of an expert advisor, we can advise you on location selection and which ones may be the most successful for you.

Idea not unique

This goes back to the idea of USP, or Unique Selling Point. Going back to the Thai restaurant example: if you were thinking about opening another middle of the road, mid-priced, ok-looking Thai restaurant in the city, can I advise you not to? With 177 competitors, why would you? If your idea is not unique, why should people go to your venue? Answer: they won´t. The restaurant graveyard is littered with the corpses of “me too”, just-ok, copycat restaurants trying to ride on a trend. In general, that doesn´t work. The trick is to do something unique but not strange, interesting but not scary, new but not confusing. It´s hard work to develop a good concept but it’s always worth the effort.

Poor customer service

Compared to some of the other problems outlined here, this one is actually relatively easy to fix. Just hire perfect people. Seriously. Hire people so great that the restaurant will have to perform. Hire people who are fun, outgoing, entrepreneurial, friendly, positive and supportive. Then train them in their job. The opposite strategy – to hire experienced staff without any care about personality – simply doesn’t work. You end up with staff who are experienced at being sullen, grumpy and unhelpful. And every reviewer who walks through your door will love to write about them.

Owner not in the business

If you want your restaurant to fail, my first piece of advice would be: don´t show up. There is a direct correlation between owner engagement and restaurant success. The owner has to be there and the owner has to attend to all of the details that make a restaurant great. Unengaged owners, and owners who don’t show up, are usually the death knell for the restaurant. Yes, you can hire a manager. But you cannot hire vision, and you will never find anyone as committed to the restaurant as you are (or at least, as you should be).

Lack of “software”

In my view, restaurants have both hardware –the physical building where the restaurant is located, along with the furniture inside–as well as the software. I use the word software to describe the more temporary aspects of a restaurant experience–the lighting levels, the music, the smells within the restaurant (hopefully good ones!), the friendliness of the staff, the attractiveness of the customers. This ‘software’ is the stuff that separates ok restaurants from outstanding ones. Terrible restaurants usually have terrible software, bad lighting, no music (or awful music), surly wait staff, miserable ambience. The only way to avoid this is to be super-sensitive to these issues. Lighting levels should be checked constantly, the music should be carefully thought out and perfect, any off smell should be immediately dealt with. Only the friendliest and most helpful staff should be hired, and the owner should do everything in their power to attract a nice clientele. This isn’t easy –in fact it´s really hard, but attention to the ‘software’ is probably the one thing that can lift a mediocre restaurant up to a great one.

Of course, this list isn’t exhaustive. But these problems represent the reason many restaurants fail time and time again.

Want to learn more?

Download my free ebook: 40 Terrible Mistakes that Restaurants Make…And How to Avoid Them

This ebook will help you think through some of the issues your restaurant might be facing, and give you ideas about how you can improve your operations.