Cashing in on the restaurant business

Yaneek Page, Business Writer

These days, it seems that every other person wanting to start a business is considering opening a restaurant, café, or lunch eatery. Regrettably, the majority of them will fail fast and miserably because of poor preparation and inadequate industry knowledge.

To the entrepreneurial neophyte, the restaurant business seems attractive because people have to eat, so there is a market. You can start quickly with limited capital; no special skills, education or licensing is required; there's big profit and growth potential; and regulations are minimal and straightforward.

Restaurants can be lucrative but it's a myth that they are easy to operate and scale. In reality, it's a challenging and competitive business no matter where in the world one operates. In our locale, many struggle to maintain viability while most fail within the first few years of starting.

So how can entrepreneurs who dream of owning their own restaurants avoid falling into the fail trap? It comes down to a few key success factors, mainly: knowing the market dynamics; understanding the business; maintaining steady traffic; consistently delivering value; and managing costs, inventory, sanitation, and service.

Research, testing, and planning are the initial steps after developing a concept and deciding on the category, for example, fine dining or fast food, etc.

The market will make or break you, so one has to assess size and viability of the target market, know their tastes and preferences, how they think, income, educational level, stage in life cycle, geographical location, needs, entertainment preference, and so on.

The research should also explore what target customers want to eat, likely frequency of visits, average, spend, and factors that would affect patronage.

RIGHT NICHE

This will help to determine the niche, differentiation, menu, pricing, dining experiences, and conveniences to ensure the consistent flow of customers that are needed for success, particularly in an environment where real and discretionary incomes are decreasing.

Location selection needs careful consideration. Set-up costs can be high, so utilising a space that is already outfitted for a restaurant will save time and thousands of dollars.

Given the high cost of electricity, al fresco or open-air dining, whichare preferable to closed dining, which requires air conditioning. Convenience, security, parking, cleanliness, and even the aesthetics of the surrounding environs matter.

The restaurant business requires a delicate balance of managing food and beverage production and inventory at the 'back of the house' and excellent hospitality, great customer experience, and efficient operations at the 'front of the house'.

Inventory management is important because high food costs will erode profits. Cost containment, reliable suppliers, organising inventory, separating it into groups, and reducing spoilage are a few considerations.

Successful restaurateurs know the profitability of each menu item and control costs accordingly.

Standardising and documenting the food-handling and production processes will support consistent taste and quality, contain food costs, reduce waste, and improve food safety.

Front-of-house operations are what customers see, hear, smell, and experience, so making the right impression counts. The ambiance, appearance, lay out, comfort, amenities and entertainment must impress patrons. Employing the right people who engender a culture of service and adherence to processes and procedures can provide a competitive edge.

Servers must be trained to be knowledgeable, hospitable, attentive and versed on soft selling to customers. The aim is getting customers to spend more money while maximising the table turnover rate/reducing the time they spend at the table.

Many restaurants limit their own success by failing to capture customer data, respond to customer feedback and complaints, not investing in technology to improve efficiency, insufficient marketing and limited innovation in their offerings.

Additionally, few new entrepreneurs understand and manage risks that could devastate the business - particularly fire, fraud, and injury to staff and customers.

These risks can be reduced with insurance, financial controls, implementing HACCP food-safety management system, and workplace safety policies.

Finally, there are statutory and regulatory requirements to be satisfied, in particular, business and tax registration, food handler's permits, public-health certification, fire safety, and trade and spirit licences. Implementation of these key success factors won't guarantee resounding success, but it will definitely heighten the possibility.

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Yaneek Page is an entrepreneur and trainer in entrepreneurship and workforce innovation. Email: yaneek.page@gmail.com Twitter: @yaneekpageWebsite: www.theinnovatorsbootcamp.com