There are numerous reasons why many restaurants fail within their first five years of operation, so make sure you know exactly what you are getting into before jumping in with both feet. A good place to start is at the beginning, so here are the basic questions you should be asking yourself before buying a restaurant and starting a new business.
Do you have enough capital?
Opening a restaurant is a huge expense – one that you need to be adequately prepared for in order to start your business the right way. There are plenty of ways to secure the proper financing for your new venture, including:
- Budgeting like crazy and consulting a financial advisor to help create a savings plan
- Getting investors to help fund your business
- Getting a loan from a bank
- Getting a loan from a finance company like Bonsai Finance
- Picking up a second job you can do from home or in your downtime
- Getting a home equity loan and use your home as collateral
- Trying a crowdfunding campaign
- Using your savings
Do you know what questions to ask?
This is especially important for first-time restauranteurs. You don’t know what you don’t know, and when buying a restaurant, knowing what to ask could be the difference between success and shuttering your dream. Consider getting in touch with other restaurant owners and interview them on their experiences to get some insight into precisely what to know going into your new venture. There are also plenty of books and online resources you can tap into to find this information.
Do you know how to manage costs?
Yes, opening a restaurant is costly, but operating one is even worse, and most first-time restauranteurs don’t realize this until it’s too late. Make sure to stay on top of your expenses and understand which factors affect your bottom line,so you don’t go bankrupt before you turn a profit. You must understand the needs of your restaurant before opening so you can properly budget, allocate funds, and keep overheads low while maximizing profit from the get-go. Having the right accounting skills is crucial, as you need to know how to put good procedures and expense tracking systems in place. You will need to track invoices from suppliers, employee payroll, operating costs, property expenses, and more, which can get overwhelming and confusing quickly. Ensure this paperwork is organized, so nothing gets missed or lost.
Do you know how to manage the team effectively?
Restaurants are a diverse environment full of many different skill sets, experiences, and strong personalities. To enable success, it is imperative you understand the needs of the various teams, whether it’s with the kitchen staff, with the wait staff, the front-of-house staff, or the bartenders. Managing a restaurantis not a walk in the park. Each position is unique, so avoid grouping everyone together and trying to mass manage the whole team the same way.
Having a lot of experience in restaurants is helpful here because you know what it takes to be in the same position as your staff. Inexperience doesn’t need to be your downfall though, as long as you ensure you’re properly covering your bases. Consider getting proactive management training specific to the industry, or hire an employee (or two!) with a lot of experience managing similar roles.
Do you know the best ways to advertise?
Millennials and Generation Z have their fingers on the social media pulse, and so should the older generations. Traditional advertising only goes so far in today’s digital and Internet-obsessed world, so it’s certainly worth taking the time to learn and understand the tips and tricks of digital and social media marketing. Having a positive web presence is essential too, so make sure your website is professional and up-to-date. There are a few types of low-cost campaigns you can run on platforms like Instagram and Facebook that are highly effective, including:
- Influencer campaigns
- Brand awareness campaigns
- Sponsored content marketing
Before starting any campaign, make sure you know your target audience and are conscious of where they spend their time online. You want your campaign to appear before the right people to maximize effectiveness and keep costs to a minimum.
Do you have a list of vendors?
Everything in your restaurant is going to come from somewhere unless you’re making it yourself from scratch. Since that is not the most practical way to run a new restaurant, it’s important to shop around for suppliers for your equipment, ingredients, and supplies. You want to know you’re getting the best price you can find. Another tip is to do a local search, so you can support local businesses and help your bottom line when it comes to logistics. Do some research on exactly what kind of supplies your restaurant will need, but generally, every restaurant needs these items:
- Dining room furniture like tables, chairs, lighting, and decor
- Cooking equipment like stoves, ovens, grills, griddles, and immersion cookers
- Kitchen appliances like microwaves, mixers, soda machines, and ice machines
- Food storage equipment like walk-in coolers, freezers, and storage space
- Work areas like counters, countertop warmers, and prep tables
- Bar items like glasses, mixers, containers, and shelving space
- Front-of-house furnishings like a hostess stand, and chairs for waiting guests
- Miscellaneous smaller items like paper towels, bar rags, and bathroom supplies
- Point of sale system (POS)
Have you picked the perfect location?
Successful restaurants are all about location, location, location! Doing your research is key to making sure your vision matches the surrounding clientele’s interests and wants. Having a poor location can be the cause of a swift end to your new business, so do your due diligence in scouting the ideal spot for your restaurant.
The journey you embark on with your new restaurant will be challenging, but ultimately one of the most rewarding experiences you can imagine. These basic tips should be a great starting point in finding your way to becoming the best restauranteur you can be.