Most people in the restaurant business know that their industry is a fairly risky one. This article discusses some strategies for surviving and then thriving as a restaurateur.
According to an Ohio State University study, the majority of new restaurants won’t stay open for a year. In addition, about 80 per cent will close within five years, finds Business Insider research. On the other hand, some restaurant owners get the formula right and manage to stay in business. These successful restaurateurs even grow their restaurant into a very established and popular food venue that lasts for decades or even generations.
Typically, if any business isn’t growing, it’s in danger of failing. Most people are at least somewhat familiar with a Food Network chef named Richard Irvine. He is partly famous because he hosts a TV show about failing restaurants and what can be done to save them. This experience makes him a good source of information about the things that restaurant businesses need to do in order to survive. He responded to a request for information about the main reasons that restaurants fail to thrive. With the famous chef’s answers in mind, it’s easy to come up with some useful tips that can help any eatery fare better.
1. Improve accounting methods
Irvine says that he encounters many restaurant owners who can’t even answer basic questions about their profits and losses, labour costs, and food costs. He’s surprised to find that some owners have this problem even if they have run their business for a few years. They may have calculated food costs once. After that, they set menu prices based upon these initial calculations. Months or years later, they failed to stay on top of rising costs and never adjusted their menu prices to make up the difference. Suddenly, they may find that their revenues are the same or even greater, but their profits have tanked.
An investment in restaurant accounting software could help save both time and money. New software packages can even integrate with payment, inventory, and marketing systems in a very seamless and effective way. Mostly, just using good accounting software can help restaurant owners learn to properly track different kinds of revenue and expenses. They can also provide better information to base decisions upon. Good restaurant business software should be able to produce reports that make it easy to spot trends quickly.
2. Manage cash flow better
When financial professionals evaluate businesses, they tend to look at cash flow management as a primary indicator of success or failure. Cash flow is simply a term that describes how money comes in and goes out of a business. When revenues are higher than expenses, a cash flow is positive. It’s very true that most restaurants won’t enjoy a positive cash flow every day. Equipment purchases, repairs, or even payday may mean that a restaurant needs to spend more than it can possibly take in. However, there are ways to prepare for these issues without having to balance an urgent repair against meeting payday.
For example, it might be wise to open up a line of credit to provide funding for restaurant businesses. The good thing about a line of credit is that it works like other kinds of revolving credit. This means that the borrower only needs to pay fees an interest on money that they actually withdraw. At the same time, the flexibility of this kind of loan may make it easier to invest in business growth while managing operating expenses. New online lending platforms are usually faster to approve and fund loans, and some may be friendlier towards restaurant businesses than traditional financing companies have been in the past.
3. Work on customer retention
It’s a given that it’s cheaper and easier to keep a regular customer than it is to court a new one. Repeat customers bring in reliable revenue. In addition, it’s this type of pleased customer who is more likely to pass on the good news about a restaurant’s food to friends and family members. Mr. Irvine says that restaurant owners should focus on the basics of great customer service and good food as a first step. If a customer doesn’t like the food or the way that they were treated, he or she will probably choose another place to eat next time.
However, many food establishments go far beyond the basics in order to grow their customer base quickly. For example, a restaurant business might offer special promotions for customers who sign up for a mailing list. Subscription lists could include regular mail, email, text messaging, and even mobile apps. Periodic discounts or even menu updates could motivate diners to choose one restaurant over another one when they want to eat out. It’s also possible to encourage diners to act as brand ambassadors who bring in their friends and coworkers by offering great two-for-one or even four-for-two offers. Restaurant owners may need to try out a few different strategies to encourage repeat diners.
Why keep improving and growing a restaurant business?
Naturally, a restaurant’s first year in business may be exceptionally risky. According to Mr. Irvine, restaurants that survive the first few years may face their own share of pitfalls. Restaurant owners may begin running their establishments by following very good practices for service, quality, accounting, and cash flow management. As time passes, the day-to-day demands of keeping the doors open may make it tough to keep up with the basics.
However, if a restaurant can keep increasing profits over time, that’s a good sign that the enterprise has been a successful one. In this competitive business, restaurant owners need to constantly strive for excellence in all aspects of their business and they will be able to reach their biggest company goals.
This article was supplied by Kabbage.
Further reading on restaurant business
Trade shows for those involved in the restaurant business
These are the main events and exhibitions for those involved in food and drink businesses which may be useful to attend if you are looking to stay current about the latest developments.
UK Food & Drink Shows
|An event dedicated to pizza, pasta and Mediterranean casual dining sectors. Incorporates the European Pizza & Pasta Show and Iberica Expo
|Casual Dining Show
|Trade show dedicated to the casual dining sector.
|Commercial Kitchen Show
|Industry event for buyers involved in equipping and running commercial kitchens.
|The UK Food & Drink Shows
|This event unites several shows together under one roof - The Ingredients Show, FoodEx, Food & Drink Expo, Farm Shop & Deli Show, and the National Convenience Show
|Hotel, Restaurant & Catering show for all those involved in the hospitality sector
|The Ice Cream & Artisan Food Show
|Showcasing the entirety of the ice cream industry across a three-day event.
|Northern Ireland's largest show for food & drink products, catering equipment, and related services.
|IFE, International Food & Drink Event
|An event for food and drink professionals. Features the latest innovations from 1,500 international and UK suppliers.
|International Drink Expo I.D.E
|A dedicated show for the drinks industry for hospitality professionals.
|Diverse drinks industry event featuring products across every category.
|Dedicated show for the low and no drinks sector.
|An event for café, sandwich bar and coffee shop businesses.
|Natural Food Show
|A show for new food and drink products from organic, sustainable, net zero producers.
|The Restaurant Show
|Showcasing the latest products, services, and innovations in the restaurant market.
|Restaurant & Takeaway Innovation Expo
|An event for takeaway and restaurant owners. Runs alongside Coffee Shop Innovation Expo and Restaurant & Bar Tech Live.
|The Source Trade Show
|The South West's biggest trade show for the food & drink sector.
|Speciality & Fine Food Fair
|For buyers across retail, hospitality, foodservice, manufacturing and wholesale sectors.
|Street Food Live
|B2B event for street food and catering professionals.
|Tea & Coffee World Cup
|A trade show and conference for operators in the tea and coffee industry - "from bean and leaf to cup"