Starting a restaurant is a dream come true for many people. However, it’s expensive to make that dream a reality, and “common wisdom” says that it is one of the least likely to succeed. So-called, “experts” often claim that as many as 90% of new restaurants fail in the first year. But RestaurantOwner.com thinks that the common wisdom is wrong. They say the actual number of failures in the first year is closer to 26% and about 19 percent failed in the second year and 14 percent in the third year. Other sources say only 17% of restaurants fail in their first year. Much depends on which year. Some years like 2009 had a much higher failure rate than others.
This is actually close to the average of all businesses with more than 20% of all new businesses failing in their first year. According to the Bureau of Labor Statistics (BLS) for businesses that started in 2019, 78.1% were still in existence a year later for a failure rate of 21.9%. On the other hand, information companies had the highest failure rate at 63% failing in their first year.
To put yourself and your business in the best financial position possible, you should look for ways to save money when you’re first opening. Naturally, you can’t skimp on food quality, so you have to find other places to cut costs. Here are some things to keep in mind when opening a restaurant.
Labor
One of your biggest expenses will be labor costs. You need a good staff to help get you off the ground, but you’re going to want to minimize your labor costs in the beginning. Don’t hire more people than necessary and plan to handle a lot of the work yourself. If you are cooking, you won’t need to hire a cook. If you are running the front end of the business, you won’t need to pay someone else to do it. The more you handle yourself, the more you will save.
With that being said, you don’t want to take on too much or take on something you aren’t qualified to manage. Otherwise, your business might suffer.
Marketing
Naturally, you need to market your new business. However, you don’t need to spend a lot of money on it. Handle marketing yourself. To save money, really focus on digital marketing. Create a blog, utilize social media, and get listed in google local. Consumers use their smartphones when researching places to eat out. You want to pop up in search engine results to gain as much exposure as possible.
Used Equipment
Many restaurant owners choose to purchase brand new equipment for their restaurant. They end up spending a lot of money and probably making monthly payments on all of it. However, there are a number of sales for people looking for restaurant equipment. Restaurant owners will sell their old equipment for a fraction of the price of new equipment. You can find used restaurant equipment, with everything from pots and pans to used stainless steel three-door commercial freezers for much less than you would find it new. Better yet is to take over a location that is already set up as a restaurant. This will save you a lot on equipment and renovations (and you may even pick up some of the old restaurant’s regular customers. Of course, you need to understand why the previous restaurant failed and not make the same mistakes.
Rent
You do not know how successful your new venture will be, so you don’t want to work out of a building too large for you. You’ll be stuck with a large rent payment without the sales. It’s best to start small and then possibly grow bigger. You can always add to the building or move into something bigger when your restaurant takes off.
Opening a restaurant is difficult, but it’s one of the most fulfilling things in the world if you succeed. These tips can help you start on the right financial foundation.
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