This week I’m answering a question from a reader who asks:
We’re in the planning stages of a new restaurant and we want to know if there are any ways to plan for longevity? The statistics for restaurants are pretty bleak, but we want to build a business that succeeds for the long-term. Anything we should focus on to do this?
You’re right, Sean. There are statistics that say up to 90% of all restaurants fail in the first year! Though, others have done the math and found that the real number is closer to 30%. Despite these statistics, thousands of restaurants open each year hoping to find a place in the winner’s column.
It’s smart to plan for the long-term. Many times, people focus on getting to opening night, but don’t have strategies and a plan for what happens next.
A restaurant without a business and branding plan is a plan for failure and puts everything at risk.
To ensure a bright and long future, smart restaurant operators address the following three key items and should be able to answer the vital questions associated with each.
1) The restaurant has a solid and sustainable concept.
In an article titled “Why Restaurants Fail” in Cornell Hotel and Restaurant Administration Quarterly, the authors interviewed owners of both successful and failed restaurants to determine the main causes of failure and how to build a business that lasts. It turns out that concept is king.
“Successful restaurant owners all had a well-defined concept that not only provided a food product, but also included an operating philosophy, which encompassed business operations as well as employee and customer relations.”
Failed restaurant owners, when asked about their concept, discussed only their food product.
Food quality does not guarantee success; the concept must be defined by the type of food served.”
A restaurant concept is a creative theme that tells an emotional story about the restaurant’s food and beverage offering, it’s culture, environment, and the experience. When executed properly, a concept can help a restaurant be a powerful, memorable brand by standing for something and by being uniquely positioned in the competitive landscape.
A restaurant concept can be anything from a refined, understated, and simple French bistro to a creative mix of unexpected elements like a burgers and lobster pub that includes novelty elements and gimmicks.
A sustainable restaurant concept considers the future, how it can evolve over time, and how it might adapt to changing market conditions. So even if a concept is built around a trendy idea, smart operators think about ways that the concept can remain relevant if the trend loses its popularity, if the economic climate changes, or if new competition enters the same market. In an ideal scenario, to earn back the start up investment a restaurant should be able to go for 5-7 years before a major revamp is needed.
As you develop a concept, this is a good framework to guide your creative thinking. Consider all of these elements and how the concept will be reflected in each area:
- The category/service style
- Food type
- Delivery method
For more help on on creating your concept, see this article.
- Can your restaurant concept withstand an economic downturn, new competition, and a fickle consumer base?
2) The restaurant invest in its people.
Dedicated, engaged, and loyal employees are the lifeline of any business, including restaurants. Employee turnover is costly and bad service will run off customers faster than wildfire. That means that from day one of business, you must invest in proper on-boarding, brand education, training, and customer experience.
- Have you made employee development, training, and culture building a priority?
- Do you have a welcome orientation ready for each new hire that teaches the team about your restaurant concept, service standards, brand?
- Do you have ongoing training in place to keep everyone’s skills sharp?
- Do you have culture building programs to recognize and reward employees for their contributions?
3) The restaurant has Plan B ready.
Like in all business, the unexpected happens. In the restaurant business this can mean anything from road construction that blocks access to your establishment, an accident that damages your image, or a deep pocket competitor that suddenly attracts and steals away your customer base.
Restaurants that survive tough times have a Plan B. It should include how you will deal with the worst-case scenario; loss of customers, cash flow crisis, and reputation management. Any of these situations can kill a business.
- Are you ready with Plan B?
- Do you have a credit line or a cash reserve that can carry you through revenue losses and a crisis PR plan?
- Are you keeping your expenses flexible, so if you need to cut back you can?
We’d like to see the statistic of new restaurant longevity and prosperity swing the other direction where 90% of new businesses are smashing successes. Do your homework, have a strong and sustainable concept in place, train and educate employee, and have Plan B ready—let’s make this happen!
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