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  • Wed, Jan 9, 2013

    How To Actively Avoid Failure With Your Restaurant Startup

    When Mick Jagger sang, “If you start me up I’ll never stop” he was definitely not referring to a restaurant business venture. But the subsequent line, “You make a grown man cry” could very well have been snapped from the jaws of another entrepreneur staring misty-eyed at their defunct dream and wondering where it all went wrong. Let’s face facts, the restaurant business is tough and restaurant startups, no matter how tantalizingly tasty, all too frequently close down their kitchens for good. But where did they go wrong, and how can you avoid making the same mistakes?

    Despite the headline-grabbing restaurant startup failure statistics, (read the restaurant failure myth debunked) a report by the National Restaurant Association revealed that 2012 saw an exponential amount of growth within the industry and 2013 is predicted to be even stronger. This year, it is predicted that the industry will add 1.4 million jobs to the U.S. economy and generate $1.7 billion dollars per day. With this much potential for success, how do so many go wrong?

    Focus on talent first

    The biggest competition in the restaurant business is the hunt for exceptional staff. A restaurant startup needs to be ferocious in the labor market. Once a venture has the best possible staff, the customers will eventually follow. But even accumulating the perfect selection of staff is just the beginning. Once they are part of your team, you need to do everything in your power to make them feel appreciated and a valued part of your organization

    Implement solid procedures and systems

    A successful restaurant is essentially a series of procedures and activities that must be repeated in almost the exact way over and over again. This is key to the returning customer experience. But to experience this returning customer success, you must communicate your procedure system to your staff using engaging and digestible methods.

    Training manuals, scheduling procedures and hiring guidelines take time to create, but without them the startup restaurant greatly limits its chance of survival. It is for this reason that Elixserve was created, to offer a platform for business owners to design these procedures and systems using a proven template that greatly reduces the complexity and time it traditionally takes to communicate these ideals.

    Understanding capital needs

    A detailed capital budget is essential from day one. There are some in the industry who say that a CPA with restaurant sector experience should be a vital part of your startup team. They can help on a daily basis to align budgets, digest P&L’s, advise on how to make adjustments, and ensure that cost controls are being adhered to.

    Overages and unforeseen expenses will need to be accounted for and a startup restaurant needs a minimum contingency plan of 5-15%. Expect the unexpected and plan for the unforeseen. For the majority of new startup restaurants, it can take over a year to become profitable, and very few, 15% or less, start making money from day one.

    Have a clear concept and identity

    A study by Cornell University interviewed 40 restaurant owners, 20 of these had been successful in their venture for over 5 years and the remaining 20 had failed. Out of those interviewed, ALL of the successful owners could succinctly describe the concept of their restaurant, and ALL of those who failed could not.

    A truly astounding concept will have been refined over time into its purest form. People must be able to visualize it, understand it and be excited by it. A refined concept will infuse your design, your employees, your menu, your colors, your kitchen layout, everything.

    The value of experience

    Lack of experience in the restaurant industry will quickly sink you. You might end up overpaying for items or paying for things you simply do not need. Your venture will undoubtedly lead you to a restaurant supply store, and seeking the advice of an experienced chef could save you thousands in startup costs. In today’s economy there is a surplus of barely used kitchen equipment, and an experienced chef will know where to locate this equipment that is being sold for pennies on the dollar.

    An experienced business partner can offer invaluable advice in the rocky startup period. But no matter how well you know your potential business partner personally, always make sure that you know what they are like in the heat of battle. This can often be a completely different person to the one you thought you knew. On a similar note, 50/50 business relationships don’t work. Always make sure you hold more than 50% of the business, so that you have the final say.

    Death by Ego

    Successful owners know that their restaurant is about the customers and not their personal opinions. It is vital to be open to new ideas and opinions. Too many startup restaurants have owner ego to blame for their demise.

    On a similar note, it is essential that an owner stick to what they are good at and let others fill their gaps. Successful restaurants are fueled by interdependence rather than independence.

    Ego can translate to a menu as well. Be great at a few things, not average at a lot of things. Keeping the menu simple will control costs, allow your staff to focus, refine inventory management and establish your business identity. Be great at a few things.

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