People tell you that you make the best meatloaf in town. In fact, everything you make is good. That's all the reason you need to get motivated and buy yourself a restaurant. After all, if the food is good, being successful should be a breeze, right? This is just one of the misguided concepts that contribute to why restaurants fail.
Before you get too excited about the fortune your going to make, you need to take a minute for a little reality check. The truth is, many people open their first restaurant without a clue as to what they are getting themselves into. They have grand visions of success, but not enough understanding of the business to capitalize on what they do well. It is that lack of understanding that is a huge reason why restaurants fail.
If the Location is Good, You Will Make Money
One of the axioms of business is that the 3 most important things for your business are, location, location, location. While it is true that a good location is a great investment for your business, having a great location is not a guarantee of success. In fact, some restaurants do very well with an average location.
Location is huge, but it isn't the only factor to consider. Even the best location can't overcome poor business practices. All it means is that more people will be able to see your restaurant sitting empty. You could end up being cursed by an empty parking lot.
One of the drawbacks of high visibility is that people will be able to notice that you don't have many customers on a Friday or Saturday night. If that trend continues, they will begin to wonder what is wrong with your restaurant.
Get the best location you can afford, but don't forget to pay attention to all of the other details of your business. You cannot expect the restaurants location to make every thing alright.
This Sounds Like a Reasonable Price
One mistake that restaurateurs without business experience make is to fail to properly cost out their recipes before they place items on the menu. They look at the item they want to sell, and then they set the price on gut feeling, and what they think customers will pay. In the end they have no idea how much the item actually costs them to make.
If you look at the budget of a typical restaurant you will notice that one of the biggest costs of the business is the food cost. If you can't control that line, you can add businesses name to the growing list of restaurant failures.
You absolutely need to be able to cost out the items on your menu, and to set a price that will make your business enough money to survive. If the price you come up with is too high, then you will need to adjust the recipe.
The Customer Obviously Doesn't Know Good Food
One of the biggest problems plaguing businesses today is the lack of customer service. Even businesses in the "service" industry do a terrible job of taking care of the customer.
If you want to survive in food service you need to have thick skin. One of the guarantees in this business is that you are not going to make everyone happy. You could have a recipe for BBQ ribs that has won awards in every contest you entered, and you will still get someone in your restaurant that complains about them. When that happens, your reaction is an indicator of how well you will do in the restaurant industry.
Your customers are your life-blood. They are the reason you open the doors every day. Without them your restaurant will surely fail. If you want to know why restaurants fail, look at how they treat their customers.
I Just Need Enough to Get Started (and then I'll earn the rest)
The number one reason restaurants fail is that they don't have enough money to start with. This is actually true of all new businesses. In order to save on interest payments, new restaurant owners will borrow the least amount they can get away with, and then suffer a cash flow crisis when the sales didn't meet their rosy expectations.
Once the money flow starts to slow, restaurant owners start looking for ways to preserve their cash reserves. Unfortunately, many of these strategies only serve to make the problems worse. They raise prices, or reduce portion sizes, or even start to purchase lower quality food items. Soon their reputation starts to suffer, and sales go even lower.
The best way to counteract that problem is to make sure you have enough financing to last you through the slow startup period. If you really want to avoid restaurant failure, make sure you have enough cash.
Learning why restaurants fail is a great way to make sure you do not make the same mistakes. Do your homework, and make sure you understand the business before you take the plunge. It will pay off in the long run.
Jim Smoot writes the "A New Restaurant blog at http://www.anewrestaurant.com He has been involved in the food service industry for over 30 years, and has spent over 20 years in management and leadership positions. Check out his blog for great tips and techniques designed to help you run your restaurant successfully. Learn to avoid the pitfalls that lead to failure.
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