The idea of owning a restaurant can be thrilling to the core that you sometimes forget the obligations and problems restaurant business can entail. The inexperience and challenges lead to many restaurants closing down in the first year. Don’t become a casualty, you need to pay attention, recognize bad signals and understand common problems so that you can make the correct decisions when it comes to running your own restaurant.
One of the main reasons for restaurants to close down within the first year is a low start-up capital. You need sufficient money to get through the first 18 months at least. You can put up your own capital, have a business partner or financial contributors. You may have to take out a loan, but the bottom line is the start-up capital should be sufficient to last through some challenges and difficult times, at least until you start breaking even.
Do not go on a shopping spree buying new furniture and equipment. There are plenty o f benefits to using used equipment. You have not won the lottery, so learn to be frugal. If you have a credit card use it only when necessary. The working capital should not run out before you start breaking even or making a profit. Have cash in reserve for up to 16 months. This is to be prepared for any uncertainties you may have to face during the initial operation.
Pay attention to financial investments for instance like high rent. Do not pay unrealistically high rent on your restaurant. Have a good business plan and rent out within reasonable limits. It does not mean that you should look for a shack somewhere to cut down on expenses. You can rent out a good place as long as you are not cutting corners on important elements like ingredients.
Study the market and your competition. Ignorance of either of these two will set you up for failure. You need to understand the market you plan to cater to. Are there similar restaurants, what is the audience like, what about your competition, are they already established or starting out? You need to look at these questions and find answers to all of them and be thorough in your knowledge and understanding of the industry so that you can increase your chances for success.
The location of your restaurant is vitally important. Once again market research matters in this instance. When choosing a location there should be accessibility of parking, visibility of traffic and traffic by foot. For instance, if your restaurant is urban and trendy an ideal location would be some place down town with a lot of traffic.
Restaurant promotion matters. You cannot expect success without promoting your restaurant. A restaurant consultant will ensure you include advertising in your overall marketing plan.