R.I.P. Restaurant in Peace
There is a unique perspective which I’m fortunate to possess and share. Currently I enjoy life as a business coach to the owners of small businesses but a number of you know that I spent 26 youthful and very busy years in the restaurant industry most of which were management in fine dining with a Charlotte based group. It’s not uncommon for folks to mention this background when asking about the local dining scene and inquiring about the short lifespan of independent restaurants. The vast majority of new businesses fail in their first few years of operation. Independent restaurants fail in even larger numbers; only 4% will make it 5 years.
Why do you suppose in an industry that people enter with such great passion there is such great failure? Here’s my take.
First, believing that you are a great cook and can nail all of grandma’s recipes is not a reason to open a restaurant. There is nothing entrepreneurial about being a great pie baker and the need to grow and sustain an ongoing operation isn’t measured by the cup or ounce.
Second, believing that “if we open it, they will come” without a marketing plan backed by a budget which consistently brings in new guests is a sure sign of a short-lived dream.
Third, believing that the front of the house and back of the house teams can go a single day without some form of training and retraining to your expectations of standards of service or consistency will put your dream into a tailspin so fast you won’t know what hit you.
Fourth, starting off without at least 6-8 months of funds needed to cover all your expenses is an indicator that you aren’t prepared.
Lastly, there is both art and math in play in the food business. The art is the creative expression of great food and its presentation. The math is, of course, knowing what makes you money and understanding the profit margins of every single item you sell. You may be surprised to learn that not all business owners “get” this part. They mostly know their costs and pretend to know their markups but they do not understand their margins. The margin is what you have left after paying for the raw goods and it pays for the rest of the operation as well as your salary and still leaves a profit for the business. Not running your business by the margins and acting as though your financial statements are best left to your accountant will sink you and all those dreams and you’ll be left wondering what happened.
Now this is not to say that some restaurants won’t make it anyway. Some do in spite of themselves. However, to stand the best chance of long-term success you’d better be more prepared than the average new restaurant starting out.
So, does any of this apply to your business even if you are not a restaurant owner? Business ownership is one way to a life of riches with opportunities. There is enough business out there for everyone to participate in your industry. Being prepared to withstand the market and building the team that can run it comes at a price called “preparation and follow through.” Now you know.
Take Action today to understand business success and then Go Run a Lap! Business is Fun!
Tony Marder is a Gastonia resident and President of ASM Ventures Corporation. His clients are family businesses who need to develop and implement new strategies to make more profit. You can reach him for questions or comments at www.enjoyingyourbusiness.com.