Forgot your password?
We’ll send you an email with reset link
You’ve decided to take the leap and open your own restaurant. Congratulations! This is an exciting time! But don’t go shopping for real estate just yet. You have a lot to think about between now and the grand opening.
Like all new restaurant owners, chances are you’ll make some all-too-common mistakes along the way. Here’s how to avoid making some common rookie mistakes as a restaurateur.
1. Skipping the Restaurant Business Plan
Before you jump all in, you need to create a business plan, which helps you zero in on the direction in which you want to take your restaurant business. It outlines your full restaurant strategy as well as your goals. A business plan also attracts potential investors by giving them a clear picture of your concept, growth plan, and revenue goals.
Truthfully, your restaurant may not survive its first year without a detailed plan that lists customer demographic, food costs, competition, goals, menu items, ambiance, and more. Start with a business plan template. Toast offers one specifically designed for restaurants. It will guide you through every part of a restaurant business plan, so you don’t leave anything out.
And if you need help costing out your restaurant, we have created a guide to restaurant costs you may find beneficial.
Chances are, you’re not a professional business writer or know someone who is. Thankfully, there are resources that can help you write out an impressive business plan. Places like the Small Business Development Center or SCORE can possibly provide assistance. They can even proofread and edit your mock business plan and sharpen it up to attract investors.
2. Not Having a Financial Planner or Mentor
The National Restaurant Association estimates a 30% failure rate for US restaurants, and that’s in a year not dominated by a pandemic. One of the reasons many restaurants fail is a lack of financial planning.
Just because you’ve got a knack for cooking doesn’t mean you’ve got stellar finance skills (but if you do, that’s great).
If money management isn’t your forté, hire a mentor or business advisor, or even enroll in a basic business class to learn the ropes of money management and business. Just make sure the advisor or mentor you turn to has your best interest at heart, and is trustworthy. Seek help if you need.
3. Not Budgeting Properly
Speaking of money management, another common mistake is mismanaging your budget. In your business plan, include your startup expenses as well as your ongoing costs. Experts also recommend low-balling your startup budget to save money. Don’t forget to factor in for unforeseen expenses, or you could end up bankrupt before you even officially open.
Once you plan your initial startup costs, you’ll have to create monthly, quarterly, and yearly budgets. That will include average food costs, overhead, and payroll. Inventory management software can help you budget for food-related expenses, while employee management software can help you cost out your labor.
4. Skipping a Marketing Plan
Your marketing plan may change over time, but it should be included in your business plan. At the very least, your marketing plan should include budget and resources for a website and social media accounts. Through your site and through social media, you can display your menu, announce new dishes and promotions, and even talk to your customers, building a community for your restaurant.
You should also claim your business on search engines such as Google and Bing and make sure the information for your restaurant (hours, contact information, delivery information, etc.) is always up to date.
Beyond that, you can decide whether or not you will use traditional advertising channels, community outreach, or some other platform to get the word out about your restaurant. Whatever you choose, just make sure your audience is there. If you are a food truck, for example, you probably want to rely more on social media and perhaps even an app and less on ads in Gourmet Magazine.
Factor in the approximate costs for each marketing strategy, and consider hiring an advertising or PR agency for some assistance.
5. Forgetting About Your Employees
How you treat your (future) employees will affect the future success of your establishment. Make sure the business plan includes information on how many employees you plan to hire, what their responsibilities will be, what you plan to pay the FOH and BOH employees, scheduling plans, benefits you plan to offer, and employee engagement and incentive plans.
To help you organize everything from schedule to tipping, you can use employee engagement software. Integrate it with your inventory management software to get the full picture of your restaurant operations.
6. Thinking Like an Owner Instead of an Investor
If you were asked to invest in a new restaurant, what would make you hand over money to support someone’s culinary dream? When drawing up the business plan, think like an investor and not like an owner.
Write a business plan that will appeal to investors; get them excited to invest. What makes your restaurant really stand out in the space? Can you show that you’ve done your market research? Have you included realistic financial goals?
Bottom line, investors are looking for a return on the money they invest. In an industry with such a high failure rate, they will be looking for more than a flashy concept and a really good head chef. They’ll be looking at the numbers.
7. Ignoring the Competition
If there are four 50s-themed diners in a two-mile radius of your location, do you think it’s a good idea to open another one? Probably not. Even if there was only one, if that restaurant has been a neighborhood fixture for decades, it’s going to be tough to muscle in on their market share.
Competition in the restaurant industry is fierce, and something you should research. What are they getting right — and what are they doing wrong that you can do better? Study other restaurants in your area, even if they are radically different from yours and learn what seems to work for them, and not work.
Chat with their customers and learn what they like and don’t like — feedback from area locals can be invaluable for your own business. The restaurant industry is inundated with the same types of restaurants. Make yours stand out from the competition.
When launching your new culinary business venture, chances are you’ll be told it’s so risky, or that many restaurants can’t stay in business today. But as long as you’re aware of potential business pitfalls, you have a chance at beating the odds and opening a successful restaurant.