There are many factors to consider when opening a restaurant. I recently had the pleasure of speaking with Founder & Chief Executive of Bureau Advisors, Jared Lewis. Jared’s consultancy firm works with clients in food service and hospitality, both independent and multi-unit.
Over the last 10 years, there’s been a tremendous interest in opening a restaurant from people with little to no experience in the food business. Individuals who consider themselves “foodies” have a lot of creative ideas that present new challenges. Jared specializes in helping these people who are in the pre-funding stage to achieve their goals and informs them operationally on what's necessary to be successful.
Here are the top 5 important elements to think about when opening a restaurant and some expert advice restauranteurs can use to be successful.
1. Create a sound business plan to attract investors
Bank financing for an independent, unproven concept is almost inaccessible. “Most of the time, in NY anyway and really anywhere with independent ventures it’s mostly 'Angel' Whether they are friends and family or 2nd and 3rd-degree investors. Part of what you sell to an angel investor is accessibility and fun. In exchange, hopefully, you’ll make your money back, but you’ll always have a reservation or a place to take clients.” Non-monetary motivations work for someone who has a spare 100K to spend in NY, particularly in finance. Consider doing a swot analysis for restaurant ideas and to find out information about competitors and your local market. Within your business plan, you should consider creating a website, and don't forget to create a privacy policy. Your business plan should cover white label vs. private label intentions.
2. Choosing a harmonic design concept
You shouldn’t make design decisions without professional guidance. While aesthetics are critical when planning a restaurant, it's important to keep in mind that decisions should align with financial goals and realities first and foremost. “If you go to Per Se, you’re going to have plenty of room, people aren't on top one another because expectations are higher. It's important as a business owner to know your price value equation what you're trying to accomplish.” Incredibly impactful advice, especially when you look at multi-unit operations.
3. Technology Optimization
Spend more money on accounting and have an understanding of your business performance metrics. If a trusted waiter is entering bills or writing checks, you’re not going to have actionable information for a better performing business. “Inventory management and investing in the right kind of tools can make a huge difference. It’s about staying in business, so financial management has to be a focus.” With razor-thin margins, waste reduction can also attribute to the financial impact.
4. Choosing a realistic location
“A lot of people get into leases that they will never be able to afford. That can’t be an afterthought, you can’t fall in love with a space because it feels right.” Benchmark what expenses should be as a function of revenue. Rent occupancy cost in NYC should be 8-10% of your budget. Also think about foot traffic, if you have a destination location like Gowanus, Brooklyn it may be cheaper to lease. The money you save in occupancy you may need to spend on marketing to promote your business. It can also keep you from becoming part of the high restaurant failure statistics.
5. Staffing bench-strength
People are less reliable than you expect them to be. A “General rule of opening a new place: you should over-staff in the beginning until you know when people are invested.” Often times, working in a restaurant is subsidizing other careers. Develop staff schedules around that, and a policy to deal with unpredictability. Employers shouldn’t treat their staff like placeholders. If you value employee goals outside of work they’ll be more motivated to perform well.