Running a restaurant is a tough endeavor. The slim margins and high overhead mean most new restaurants (about 80%) fail within the first five years. However, if running a restaurant is your dream, there are things you can do to increase your chances of success.
My partner works in food sales and has helped many new restaurant owners finetune their menu and business strategy. Today I thought I’d pick my partner’s brain and share some tips for entrepreneurs who are looking to get into the restaurant business.
Get Some Restaurant Experience
My partner works in food sales and has helped many new restaurant owners finetune their menu and business strategy. After all, running a successful restaurant is more than just serving great food. It’s important to get your premises looking as attractive as possible, which is why it’s so important to put effort into finding signage for restaurants and other forms of decor. Today I thought I’d pick my partner’s brain and share some tips for entrepreneurs who are looking to get into the restaurant business.
If you’ve never worked in a kitchen or waited tables, it may be a good idea to get a job in a restaurant before you open your own establishment. Learning more about the food service industry and inner workings of a restaurant will help prepare you to run your own joint. If you’re thinking of serving alcohol in your restaurant, taking responsible beverage service training in California, or in your location, is vital.
Balance Price and Quality of Ingredients
Many restaurant owners don’t track their food costs carefully, which is one of the reasons why so many establishments fail. Your food cost for each dish should only equal 30% to 35% of the price the customer pays or less. However, you shouldn’t skimp on quality ingredients just to keep your food costs low.
Shopping based on price and always choosing the lowest cost ingredients can backfire. Customers can taste the difference between sub-par frozen burgers and fresh, hand-formed patties, for instance. Although the per case cost of quality meat and produce is higher, it often breaks down to dollars or even cents per serving.
The better your food tastes, the more you’ll be able to charge, so investing in fresh ingredients usually pays off. If your food is top-notch, customers will keep coming back and may even recommend your restaurant to friends and family, which helps build a strong customer base.
Reduce Your Overhead
Running a restaurant comes with a lot of overhead. You have to pay rent, employee salaries, buy ingredients, purchase plates and cutlery, and outfit the kitchen with all the tools and appliances your chef needs. As a result, profit margins in the restaurant business are slim—they usually average between 5% and 7%. That’s why it’s important to find ways to reduce your overhead wherever you can. One way you can do this is by looking for commercial kitchen rental opportunities, allowing you to cook in a fully-equipped kitchen without having to buy all of your own equipment.
Open a Food Truck Instead of a Brick-and-Mortar Restaurant
If you’re not set on owning a brick-and-mortar restaurant, starting a food truck instead is a good way to lower overhead. Food trucks can be purchased for $30,000 or $40,000. If you save up for a few years, you could buy a food truck in cash so you don’t have a rent payment (unless your city or state requires you to prepare your food in a commissary kitchen, which you’ll have to lease).
Work Alongside Employees
Some restaurant owners hire managers and employees so they only have to visit occasionally. But working in the restaurant alongside your employees at least a few days a week can help you save money on labor costs and stay on top of business operations.
Sublease Your Kitchen and Reduce Utility Costs
If you decide to open a brick-and-mortar restaurant, you can lease your kitchen to food truck owners and bakers who need commercial kitchen space to offset your overhead costs. Simple changes like turning your dishwasher off at night so it doesn’t continuously heat water and only providing water to guests who ask for it can also help you save money and reduce your operating expenses.
Find Ways to Draw Customers In
These days, there’s so much competition in the restaurant industry that you need to find ways to set your business apart. My partner says the best-performing restaurants usually have something unique going for them like restaurant tvs, fun themed decor, a great location, an innovative menu, or frequent events like live music nights. Figure out what the unique selling proposition of your restaurant is and how you’re going to draw customers in.
Are you considering opening a restaurant? Share your plans in the comments section below!
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Vicky Monroe is a freelance personal finance and lifestyle writer. When she’s not busy writing about her favorite money saving hacks or tinkering with her budget spreadsheets, she likes to travel, garden, and cook healthy vegetarian meals.