Top 10 Restaurant Startup Errors

Are you thinking of opening a restaurant? Are you prepared to make crucial decisions? As a new restaurant owner, knowing which steps you can take to avoid a disaster is essential.

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. I have had many requests from potential clients to develop concepts based on an idea. But only some have put together a business plan with some solid assumptions. So, instead, most of the time, I receive a PowerPoint presentation of some pictures from Pinterest or a mish-mosh of menu ideas that they believe could work as a restaurant.

For any new business, writing a business plan may be the best planning you can do. You may have a great idea, but is it feasible? Feasibility refers to whether your vision can be turned into a reality. Do you think your concept can make you money? Too many new entrepreneurs avoid the business plan because creating it takes time. However, your time on the project is well spent if it will save you from losing all your money. Overall, a business plan is a way for you to outline your vision and purpose of the business. It lets you lay out 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; having the right location can make or break your restaurant. You should never take a secondary place to save on rent. Would you instead save rent, or would you instead be closed? The answer is so apparent, 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 idea and have a vision for how you want it to look. You have created a mental picture from the space layout to the type of furniture to the fa?ade and the décor. Sometimes, what you have imagined can’t be fulfilled due to space configurations or other unexpected reasons. Therefore, working with your hired professionals: interior designers, architects, engineers and general contractors is wise. Please share your ideas with them and get feedback on any foreseen problems. Work together to create alternative plans for your concept. This may be better than the original plans you had envisioned.

4. Undercapitalisation. This is 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 than underestimate them. Common problems during startup may include construction delays or changes demanded by building inspectors. To cover such unexpected situations, 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. 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 investment required. Lower your sales forecast and slightly increase the amount of money needed.

5. Believing you will earn money after opening. If you think you will make money on the first day of space, you must be in dreamland. Even the best restaurant chains prepare for a loss for the first few months. Even if you achieve fantastic sales from the first opening day, it is natural to experience high food and labour costs. Within the first month, you and your managers are beginning to understand the business. You can always fix or adjust your food and labour costs, but if you run out of money, you need somewhere else to go but perhaps close. So, you must ensure you have enough money to cover any losses.

6. Operation, Procedures and Training Manuals. Training is critical to ensure a restaurant provides 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 provides consistency. Everything to do with the restaurant is outlined from detailed recipes, cashier procedures and server training manuals. A restaurant without documented operation, design and training manuals will soon be disorganised. Staff training involves constant repetition of procedures. Spend time creating manuals and save big later.

7. Focusing on what you like. Finding out what people in the local market enjoy is 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 analyse their menu. This will give you a sense of what the market is like regarding 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 dining.

8. Trying to please everyone. You must have gone to one restaurant in your lifetime and wondered why they have something on their menu that shouldn’t be there. So if you have 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 must define your niche and remain focused on filling that niche.

9. Lack of preparation on the day of opening. The worst thing you can do on opening day is be 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 quiet spaces. These openings are often modest since you haven’t heavily marketed or advertised. This will allow you to work out immediate kinks or foreseen problems. Schedule extra staff when it's time for your official grand opening, as you never know what will happen.

10. Owners need to be an owner. A good owner can manage the business well. However, sometimes new owners act like they are one of the employees. Assisting your staff in serving, cooking, and cleaning is all great, and it doesn’t mean you can’t. However, it’s essential to manage the business by actively analysing 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?

You can plan to avoid restaurant missteps.

There may be many more restaurant mistakes, but these are some of the most common ones new restaurant owners make. I have experience working in different managed restaurants, with each owner sharing at least one or more of these missteps. Proper planning is the most critical aspect of a new restaurant startup. You can just get organised, be prepared and know your role. With these three steps in mind, you will be well ahead.