Reality Check: Understand These Principles Before You Consider Opening a Restaurant
The Rezku Team
So, it’s your dream to own a restaurant? Maybe it’s a shaded outdoor cafe, a corner sandwich shop, a bustling brew-pub or the next Michelin Star experience?
Owning a restaurant may seem glamorous, but the reality is it requires major personal and financial sacrifices. This post provides an honest look at the considerations to make before taking the leap.
1. Start Small
No. Even smaller.
An ant’s eye view of restaurant operations.
If you haven’t worked for years in in a restaurant – at every level, from dishwasher to manager – you’re starting at an incredible disadvantage.
Running a restaurant effectively requires a deep understanding of all the operational roles. Because at the end of the day, the responsibilities are all on on your shoulders.
When a someone calls out sick it will fall on you to jump in and take over. Buss a table, make a salad, greet the guests at the door – and every other job it takes to make sure your restaurant stays on track.
The smaller the concept the more manageable.
The gulf of knowledge required, time commitment, and operational costs between, say, a mobile coffee truck and a corner cafe should not be understated.
Now imagine the difference between running that cafe and a 200 seat five-star restaurant.
With customer demands so high and margins so low, this is not an industry you want to jump into with zero experience.
Ask anyone who is successfully running a restaurant and they will tell you the same thing. They started small.
They graduated through each level of the industry in a logical progression. Gaining priceless experience (while getting paid for it) over many years.
2. It Will Always Be Hard.
Despite years of real-world restaurant industry experience under your belt, the first years in operating a new restaurant will be an eye-opening journey.
Even if a new restaurant business survives the first year, remember that the challenges of the industry are “baked in”.
The Odds
Restaurants face a high failure rate. Around 60% fail to survive their first 5 years in business.
The Income
Operational costs are high. Margins are razor thin. The average successful restaurant is operating at about 5-10% profit.
The Hours
For an owner-operator, running a restaurant requires long hours and consistent attention. 60-80 hour workweeks are typical.
In the weeks and days prior to opening are the most demanding. Some owners work near-24 hour days, catching a nap in their car or office – if they are lucky.
3. It’s More Expensive Than You Think.
There are high initial upfront costs, and always something to break or go wrong.
From vents that are too small to water pipes bursting, to a slow permitting process, Murphy himself seems to preside over the entire process.
The Costs Compound
Plan ahead. Breakdown significant upfront costs like real estate, kitchen equipment, decor and licensing. The average starts at around $250k.
But there are many, many costs to consider in the run-up to opening. Carefully research ahead of time.
It’s important to give yourself a significant runway of at least 30% of your estimated opening costs due to the inevitability of unforeseen costs and delays.
They Don’t Work For Peanuts
Consider the increasing cost of labor. Every state is different but one thing is consistent – labor wage requirements continue to increase.
You’ll need to hire sufficiently for front of house and back of house. Attracting and retaining quality workers is key.
Labor is typically around 35% of the restaurant’s gross sales. So be sure to factor this calculation into your cash-flow estimates.
The Margins Get Squeezed
You may have dreamt that owning a restaurant meant you had full reign to make all the food you love. But it’s a business, not a fantasy.
Food costs continue to rise, making it harder for restaurants to hit their target ratio of 35% of sales.
To keep and attract customers with prices that fit their budget, consider that you may need to make some compromises with ingredients and what’s on your menu.
4. The Buck Stops Here
Being an owner-operator of a restaurant offers little in the way of work-life balance.
When you own a restaurant you’re like the president of a micro-country. Everything is your fault.
Say Goodbye To Personal Time
Consider the obligations you have outside of working at the restaurant and how robust your support network is.
Time with kids, friends, family? They’d better plan on visiting the restaurant.
If you’re lucky enough, you may be able to get them involved. One way restaurant operators spend more time with their loved ones is to make it a family business.
Do I Look Stressed?
There is no getting around the stress of the responsibility of running a restaurant.
If not sufficiently prepared, this stress will strain on our personal relationships and take a toll on our health.
It’s important to consider the effects of stress and prepare mentally, emotionally and physically ahead of time.
That’s All She Wrote
Running a restaurant isn’t a half-in, half-out venture, so this may be hard to read:
Even if you do everything in your power to run a successful restaurant, you have to understand that it just might not work out.
Doing something great in the world always involves navigating situations we don’t have control over.
If you have any doubts, ask any of the thousands of restaurant owners forced to shut down during COVID-19.
To the best of your ability, prepare yourself mentally and financially for the possibility that despite your best efforts, failure of the restaurant is a potential outcome.
3 Questions to Ask Yourself Before Opening A Restaurant
Answer these questions to know if you’re ready to open a restaurant:
1. Do I (and my business partners) have significant experience in the restaurant industry?
2. How will I embrace long hours, lack of personal time and complete and total accountability?
3. Am I ready to risk it all – Including financial stability and personal relationships?
How The Latest Technology Is Helping New Restaurants Succeed.
With all the responsibilities restaurant owners have, every push in the right direction helps.
For a restaurant starting out, the right technology stack can be “make or break”.
Business technology is here to make our lives easier by automating tedious tasks, streamlining operations and helping us use our time more effectively.
Modern Restaurant Management Systems Offer More Than In The Past
Modern cloud-based restaurant point of sale systems are not just a cash register. They offer a complete, end-to-end business management solution for restaurants – from employee timecards to inventory tracking, to sales reporting to online ordering and more.
Now is the best time in history for independent restaurant owners to leverage technology.
No matter the size or concept – all restaurants can afford the kind of business management technology that was previously only accessible to large chains.
Be Sure to Choose Your Tech Wisely
The right restaurant point of sale will maximize your efforts, giving you a leg-up as you start your journey as a restaurant owner.
The wrong point of sale will give you a tech nightmare, costing you thousands in equipment costs, operational bottlenecks and upset customers.
It’s a choice that new restaurant owners can’t afford to get wrong.
Experienced Restaurant Owners Trust Rezku
Rezku has worked closely with the nation’s most successful full service restaurants, cafes, pizzerias and bars for over 7 years. We started the restaurant industry ourselves.
Rezku takes a different approach to the point of sale business: We know that our success is tied directly to yours.
Our restaurant-specific POS solution is designed to be both comprehensive and user friendly. And we pride ourselves on the ability to coach restaurant operators at all levels of experience.
We provide expert guidance, consulting our customers with patience and knowledge of restaurant industry best practices.
When the stakes are high and everything counts, make sure you have a restaurant technology company that is in your corner.