10 Restaurant Startup Mistakes

Thinking of opening a restaurant? Are you prepared to make important decisions? As a new restaurant owner, it is important to know which steps you can take to avoid a disaster.

Avoid These Mistakes Now!

The most common restaurant mistakes that new owners make are usually the ones that play a vital role in the overall success of a restaurant. The following is a list of the Top 10 restaurant missteps.

  1. Avoiding the business plan . For any type of new business, writing a business plan may be the best planning you can do. You may have a great idea, but is it really feasible? Feasibility refers to whether your idea can be turned into a reality. Can your concept make you money? Too many new entrepreneurs avoid the business plan because it takes time to create. The time you spend on the plan is time well spent if it is going to save you from losing all your money. Overall, a business plan is way for you to outline your vision and purpose of the business. It allows you to layout your concept and most importantly review financial projections and investment requirements.
  2. Taking a secondary location . What’s the old saying? You know, location, location, location. That’s right, you know having the right location can either make or break your restaurant. You should never take a secondary location just to save rent. Would you rather save rent or would you rather be closed? The answer is so obvious, so why take the risk? High visibility and accessibility are two key points to having a great location. Unless you’re super famous, don’t think that people will come to find you.
  3. Being closed-minded in concept . You have defined your concept and have a vision for how you want it to look like. From the space layout to the type of furniture to the façade and the décor, you have created a mental picture. Sometimes what you have imagined can’t be fulfilled due to space configurations or other unexpected reasons. Therefore, it is wise to work with your hired professionals; interior designers, architect, engineer and general contractor. Share your ideas with them and get feedback to any foreseen problems. Work together to create alternative plans for your concept. This may in fact be better than your original plans you had envisioned.
  4. Undercapitalization . This is perhaps the most common mistake for new restaurant owners. Underestimating a restaurant’s startup costs can result in bankruptcy. Having a great concept doesn’t prevent you from running out of money. It is always better to overestimate your costs then underestimate. Common problems during startup may include construction delays or changes demanded by building inspectors. To cover such unexpected problems, money should be set aside for working capital which should cover up to one year of rent. In addition, contingency money should also be set aside for any other unexpected problems that may arise. The norm is to set aside 10%-15% of the total investment required for contingency. A good practice is to remain conservative in forecasting your sales and the amount of investment required. Lower your sales forecast and slightly increase the amount of money required.
  5. Believing you will earn money after opening . If you think you are going to make money on the first day of opening, you must be in a dreamland. Even the very best restaurant chains prepare for a loss for the first few months. Even if you achieve fantastic sales from the first day of opening, it is natural to experience high food and labor costs. Within the first month or so, you and your managers are just beginning to get a feel of the business. You can always fix or adjust your food and labor costs, but if you run out of money, you have no where else to go, but perhaps close. Therefore, you need to ensure you have enough money set aside to cover any losses.
  6. Operation, Procedures and Training Manuals . Training plays a critical role in ensuring a restaurant is able to provide consistent service and quality food. Depending on the size of your restaurant, you may have 20 or even over 150 employees. Training takes time and costs money. Don’t stress yourself more than you have to. If you see any franchise restaurant, a system of operations, procedures and training manuals are provided for new franchisees. This allows every employee including the owners and managers to be unified which allows consistency. From detailed recipes, cashier procedures and waiter training manuals, everything to do with the restaurant is outlined. A restaurant that operates without any documented operation, procedure and training manuals will soon find themselves disorganized. Staff training involves constant repetition of procedures. Spend time on creating manuals and save big later.
  7. Focusing on what you like . Finding out what people in the local market enjoy will probably be the best thing you can do. It doesn’t matter what you personally like since you are not the paying customer. New owners are sometimes so focused on wanting what they like to place on the menu that they forget about the market. Visit other restaurants in the area and analyze their menu. This will give you a sense of what the market is like in terms of food and price. You may even want to go one step further and speak to the locals about what they like to do and where they like to go for dining.
  8. Trying to please everyone . You must have gone to one restaurant in your lifetime and wonder why they have a something on their menu that shouldn’t be there. So if you seen this before, don’t repeat the same mistake by trying to appeal to everyone. You will create confusion and complicate the customer by having too many items on the menu. Once you have a concept, you need to define your niche and remain focus in filling that niche.
  9. Lack of preparation on day of opening . The worst thing you can do on opening day is being unprepared. The customer’s first impression is the most important if you want them to return. Before setting a grand opening you should have a few soft openings. These types of openings are often quiet since you haven’t heavily marketed or advertised. This will allow you to work out any immediate kinks or any foreseen problems. When its time to have your official grand opening, schedule extra staff as you never know what will happen.
  10. Owners failing to be an owner . A good owner is one who can manage the business well. Sometimes new owners act like they are one of the employees. Assisting your staff in serving, cooking and cleaning are all great and it doesn’t mean you can’t. However, it’s important to be able to manage the business by maintaining an active role in analyzing the P&L, monitoring cash flow and making strategic decisions that will affect the business. If you are always helping your staff, who will manage your restaurant?

Plan to avoid restaurant missteps

There may be many more restaurant mistakes that you can think of but these are some of the most common ones that new restaurant owners make. I have experienced working in different managed restaurants with each restaurant owner having shared at least one or more of these missteps. Proper planning is perhaps the most important aspect to a new restaurant startup. Get organized, be prepared and know your role. With these three steps in mind, you will be well ahead.

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7 Responses to “10 Restaurant Startup Mistakes”

  1. Personal Finance Buzz Says:

    10 Restaurant Startup Mistakes…

    Thinking of opening a restaurant? Are you prepared to make important decisions? As a new restaurant owner, it is important to know which steps you can take to avoid a disaster….

  2. Dividend Growth Investor Says:

    It’s always interesting to read about business in general. Thanks a lot for posting this.
    How has your restaurant been doing?

  3. TheRestaurantBlogger Says:

    Thanks for asking how the restaurant is doing. We are busy working and setting everything in place to ensure we avoid the common mistakes of other restaurant owners. Yes, I thought an article on restaurant startup would be useful for new owners who may not have much experience. I worked for and witnessed a failing restaurant that unfortunately had a great vision and concept, but was poorly planned and executed. My wife and I are both fortunate to have worked at various restaurants and learned from their mistakes.

  4. Top 10 Foodie Millionaires | Million Dollar Journey Says:

    [...] like to read more from The Restaurant Blogger, check out a couple of his more his popular posts: top 10 restaurant startup mistakes and the truth behind [...]

  5. Cuisine Says:

    Hi,

    Your post is awesome. The person in charge of the restaurant management will need to know the restaurant’s customers. This will help for a good public relationship. Repeated customers who come to the restaurant often like to be remembered and treated well.

  6. Ray Camillo Says:

    Great article! If your article was boiled down to one word, it’d be planning. As a restaurant consultant, I see too many restaurants operating by the seat of their pants, playing catch up and never knowing why they’re struggling.

  7. Starting a Restaurant Says:

    Thinking that you won’t have to be there every night is a common mistake with new restaurant owners.

    Another is – going into it as a food lover rather than a businessman.

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