It’s safe to say that if you’re thinking of opening up your own restaurant, there are probably an unimaginable number of things on your mind. With the sheer magnitude of the responsibility of starting your own restaurant on your shoulders, it’s no surprise that there are bound to be things that may slip your mind altogether.
Before you start implementing these tasks however, the first and foremost thing on your to-do list should be quite simply an analysis of the kind of expenses you’re expecting. A rough estimate states that around 60% of new restaurants fail within the first year of operation itself. And what is the reason? A vast majority of cases are simply the old cash flow problems, and it’s quite shocking how almost everyone is aware of this on the surface level however fail to realize the necessary measures they must take in order to avoid meeting the same exact fate when their own restaurant is in question.
If you don’t track your expenditure at the early stages itself, you may take far greater time to overcome your start-up cost because you won’t even know what figure you’re aiming at in order to simply break-even, let alone make a profit! Keeping a close eye on cash outflow is the only way a restaurant owner can make something of the cash inflow, so tracking all your spending is at the very core of what being a good restaurant owner is about.
There are so many expenses to track that it’s no doubt that a few may fail to occur to a restaurant owner when doing cost allocation for the business. This could throw the calculation way off if there is something that requires a significant amount of investment from the restaurant owner at a later date, leading to overspending and breach of budget lines.
One of the fundamental and defining factors of what a restaurant is like is simply the staff of the restaurant. Of course, the chefs of the restaurant are literally the core of the business, because at the end of the day they’re the ones actually producing what is to be served to the customers. They alone hold the ability to make or break the product being offered, and it’s a thin line between a recurring customer and a bad review. One simple flaw in the food like adding too much salt can deter new customers from ever visiting the restaurant again. A dish that doesn’t taste as expected can put off customers from the entirety of the rest of the menu. Food that is generally inauthentic or simply doesn’t taste as good as what the competitors are offering gives a brand image that may never leave the restaurant, or at least will be super hard (and expensive) to come back from. On the other hand, food that lives up to or even exceeds expectations is likely to make customers keep coming back. So, it’s obvious that you must hire a talented chef, but it doesn’t end there. The quality of service offered by the waiters and waitresses is equally as important for a customer’s experience at a restaurant. Ensuring that the staff is amiable and that each customer’s needs are being met with utmost care and attention gives people a personalized experience that they never forget, and keep coming back to. Right down to the delivery drivers, all staff must have values that align with the values of the business so that they can serve the customers exactly as the restaurant owner expects them to. Keeping high quality staff may cost more than you’d like to spend on staff in the short term, but over time the contribution they make to the business will be far greater than the cost bared at the initial stages. Payroll is a recurring cost, but don’t forget that the actual process of recruiting and training staff is cumbersome in itself, with a lot of time, effort, and of course – money that goes into it. However, this one time cost may just be a game changer, so it’s better to bear the cost now than to go on to regret hiring the wrong staff for your restaurant.
Eating at a restaurant is more than just paying for a meal. Customers often go out to eat in order to rejuvenate and have a fun day/night out, whether it’s in order to celebrate something or hang out with friends or simply wind down. It’s about the actual experience of going to a restaurant just as much as it is about what’s on the plate. It is therefore important that restaurant owners ensure they provide the best possible experience for customers when they eat in at their restaurant. The utilities are a must, everyone knows that. Proper lighting, heating/cooling depending on the weather, comfortable seating arrangements etc. But if you want to give the customer something unique or distinct to the restaurant, something they can remember and associate with the restaurant, or give them an appealing ambience that can make their meal one they enjoy thoroughly, interior decorations are a must. This is a cost that may seem unnecessary to spend loads of the start-up budget on, but it may just be the expense that ends up adding personality to your restaurant and bringing a consumer base to it. Having a theme is a great way to make your restaurant stand out. Particular objects based on said theme can be used to decorate around the restaurant and even things ranging from the menu card to the toilet doors can be customized to the theme of the restaurant. Or, a restaurant can simply choose a set of theme colours or aesthetics to base at the core of the design of the restaurant and work around that. If there isn’t a theme being followed, unique and eye-catching objects or decorated pieces can simply be placed around the restaurant to add some soul to it – live waterfalls for example! It’s a one-time that expense you would like to allocate a significant budget for.
Arguably, this is one of (if not the most) crucial part of the expenses one must endure when opening a restaurant. Since it’s a new venture, most customers are unaware of its existence completely. Promotion plays the role of informing and reaching out to customers, letting them know about the restaurant. It helps build a first impression and shows customers a reason they should try out your restaurant by advertising all it’s best qualities and what it offers to the customer. Often, promotional offers are used as a way to beckon people into the restaurant. Whether it’s the classic buy one get one free or simply a discount code, giving customers an incentive to try out the restaurant and give the place a chance is the objective. This will also be important in building a brand image for your restaurant. The way the restaurant is advertised says a lot about the target audience of the restaurant and hence makes the viewer form a perception of the restaurant which will hence directly affect the brand image, hence making it extremely important to ensure that the promotions used are in line with the values and image that the restaurant wishes to put forth. It is also obvious that bland and boring advertisements add little to no value to the actual marketing of the business, if anything, they can have a negative impact on the consumer as their first impression will be to classify the restaurant as “just another new restaurant” and doesn’t actually persuade them to try your restaurant out despite being aware of its existence. It is extremely important to ensure that when the restaurant is being promoted, something unique or new and exciting must be advertised that will allow the customer to differentiate the restaurant from other competitors and will catch their attention. How much budget you wish to allocate is entirely up to you, and there is no specific number that applies to each restaurant. Restaurant owners must look at the area, the people (target audience), the method of promotion, and most importantly the budget it can actually afford to allocate to promotional purposes. A combination deemed fit for all these categories to an acceptable extent is bound to be the suitable option to go with for your restaurant.
As much as one may assume that there is no need for legal consultation because you’ve garnered enough knowledge by your own to avoid the cost of hiring an advisor, at the end of the day a professional’s word is a professional’s word. There are permits needed and regulations to be followed and agreements to be made which are legally absolutely essential to satisfy for a smooth and trouble- free business operation. It may seem like an expense you wish to put off, but getting in trouble with the law is the last thing a restaurant owner would want to deal with. Not only will it instantly tarnish the reputation you would’ve worked so hard to build from scratch and tear down the image of the restaurant if word gets out, but it is also likely to cost you a lot more in fines than it would’ve to simply hire a legal advisor in the initial stages. Another expense to take into consideration is insurance. With the amount of investment that goes into starting a restaurant – it is better to be safe than sorry!
Most restaurants are quite obviously operated upon rented property. Yes, it’s a recurring cost, but it seems like the wisest option to go with considering the restaurant owner will be investing large sums of money into opening up the restaurant and is playing at a huge risk if the restaurant fails. There’s no shortcut for those rental costs, but the problem is that a lot of people assume that rent is the only expense they must make for the premises. Maintenance and utilities are a vital expense! Paying for water and electricity is a huge recurring cost of operation, but most people know that already. Maintenance on the other hand, people tend to overlook initially. Ensuring all health and safety regulations are met is extremely important, not just legally but morally. Specially with the latest government social distancing regulations due to coronavirus it is essential that proper social distancing measures are implemented and that the whole place is sanitized. In general, health code regulations like pest control and fixing of faulty equipment are also costs one can’t help but bear.
We all know raw materials are essential for producing the meals in the restaurant, however there is a ton of other equipment that goes into cooking than one would expect when it comes to operating a restaurant. Since food has to be prepared in bulk and certain processes may take longer than the restaurant can afford without professional equipment, buying the relevant equipment needed in order to improve the functionality of the kitchen is a must. Whether it’s a sous vide machine or a professional blender, every restaurant has certain appliances that in the long term will add so much value to the business. Not only does it reduce customer wait times by quickening up otherwise cumbersome processes, it also ensures that the outcome is always professional standard by eliminating most possibilities of human error intervening with the quality standards. But the preparation of the food isn’t the only place where equipment will be required. Crockery, cutlery, glassware, table linen, table service, and staff uniforms are just some of the various other equipment you can expect to be making expenses on. And don’t be fooled, as much as we may like to believe that it’s truly just about what you put on the plate and not the plate itself, every element that is presented to a customer adds to the experience the customer will take home from the restaurant. A simple but true example is that if you put a 5-star dish on a paper plate, it is still likely to be viewed as a dish of lesser value compared to just a regular tasting (but well decorated) dish on expensive crockery. It’s all about perception and added value! You must align the equipment you wish to use with the image you wish to portray.
It’s a given that restaurants need to arrange for good eat-in facilities so that their
customers can comfortably enjoy their meal. Ranging from the actual physical
seating arrangements to the quality of service offered by the staff to simply the
ambience in terms of music or lighting. However, what a shocking number of
restaurant owners forget is that there is a world of potential customers just a
Delivery is the future of the food business industry, and quite frankly it’s a service that is not only in high demand but at this point can act as a huge let down for interested customers if not offered. All that aside, a big misconception is that delivering food is not the same as offering the customer an experience of the restaurant. Sure, it may lack some aspects that you could say define your restaurant (interior design or the theatrics of serving the food etc) but at the end of the day, it’s a service offered by the restaurant and hence classifies as an experience for the customer.
A quality factor does indeed come into play. Is the food still hot when delivered? Did it take longer to reach the customer than anticipated? Was it packaged safely so that leaks and tampering are avoided? Was it sent packaged in an appealing manner so that the customer can enjoy the aesthetics of the restaurant or was the packaging used cheap or unappealing, contributing to the brand image of the restaurant? Was the delivery driver friendly? Was the payment method offered quick and easy, whether a well-functioning credit card machine or prompt exact change?
Whether they deliver through in-house drivers or third-party delivery aggregators, offering a high-quality delivery service can be a significant cost that restaurant owners tend to overlook. And now more than ever, given that Covid-19 has changed the way everyone eats, works, and lives now; food business’ “new normal” must include a food delivery option to reach new potential customers and keep serving existing customers.
So how can you find a reasonable and reliable solution to the food delivery changes in demand while managing your costs in an effective and sustainable manner?