Restaurant Confidential: Things No One Tells You When Opening A Restaurant

There are very few things more exciting than the thought of starting your own restaurant. Perhaps you've been working for another owner for several years learning the trade and have finally decided to strike out on your own. Or maybe you're leaving a corporate job to follow your dream of opening a little place and finally get to do something new. 

No matter what your reason is, there are a few things to keep in mind when it comes to opening a restaurant. From the long hours and stressful days to tracking inventory and making sure overhead costs remain low, ensuring your restaurant is successful will likely become more than a full-time job.

The number of restaurants that fail in their first year is about as high as you might think. According to Rory Crawford, co-founder and CEO of Bevspot, about 60% of new restaurants fail within three years. More frightening, he notes that the percentage rises to about 80% over the course of five years. With more than 1 million restaurants currently operating in the U.S., the margin for error is thin. But with a little luck, a lot of sweat and some smart decision making, your restaurant could be the talk of the town long after its grand opening. 

You're Going to Work… A Lot (You're Going to Need A Lot of Money, Too) 

As with any new venture, you're going to be sinking a ton of time and money into getting the place up and running efficiently. If you decide to manage the restaurant yourself, expect to be the first person in the building each day and the last one to leave. In most cases, a restaurant manager will work much more than a standard 40-hour work week, including rush hour times, late at night and during the weekend.

Most managers who are hired to run restaurant locations work between 50-60 hours a week. For a new owner, you could be working even more than that. Some days might be easier than others, and sometimes you could be working 16-hour days with enough time to go home, sleep for a bit and come right back to the restaurant. You'll also likely have to deal with angry customers, stressful work shifts and the occasional drunk customer. But if you're passionate about your work and want to grow, the long hours may not feel that bad at all.

Long days probably won't be your only concern, either. From your busboys to your cooks and everyone in between, one thing is for certain; they all want to get paid. You also still likely need to afford rent and utilities, and pay for all the ingredients, plating, silverware, décor and marketing you're likely doing. That's why it's important to have plenty of cash on hand, especially during those integral first months and years. 

Johan Engman with the Rise & Shine Restaurant Group says, 'When starting out, whatever amount of money you think you need, triple it. When you're up and running, stick to it and don't get discouraged if it doesn't take off from day one. It's vital that you believe in yourself and use that confidence prudently to keep you motivated. Keep in mind that if it was easy, everyone would do it!' 

You'll Need to Create a Good Menu 

When it comes to owning a restaurant, your food is likely going to sell your story more than the funky décor, provocative marketing strategy or pricing. According to Le Cordon Bleu, creating an extensive menu can be a double-edged sword, especially when it comes to turning a profit.

'Providing a range of options on the menu means you increase the likelihood of customers finding a dish to suit their taste,' the culinary institute states. 'By appealing to a broader audience, you improve the odds of customer satisfaction. There is a danger, however, in adding too much variety to your menu. American psychologist Barry Schwartz describes this as the 'paradox of choice'. When presented with too many options, consumers can feel they have experienced 'missed opportunities', affecting their level of satisfaction.'

Once you know what you plan to serve your customers, you'll need to price it in a way that makes it an attractive purchase but still turns a profit. Le Cordon Bleu suggests marking up your dishes 300 percent to cover the cost of ingredients, but also the rent, your staff and utilities, and other costs.

Another good way of pricing out your menu is by breaking down how much each ingredient costs and adding up those amounts to get your final menu item total. According to Matthew Ling, Principal of the Orion Restaurant Group, knowing exactly what it costs to create your menu items can help you more appropriately compete in the market.

'Every menu item should have a recipe card detailing each ingredient used in its preparation and the quantity used,' Ling said. 'Additionally, each ingredient's corresponding price should be broken out and totaled to give an accurate cost of the menu item. The most frequently used pricing calculation is the 'factor' method. This method is based off food cost only and does not account for labor costs. This is calculated by taking the total cost of the menu item's ingredients and dividing by the target food cost percentage that you would like to achieve. Due to fluctuating food prices, this should be done at a minimum twice per year, and ideally at the end of every quarter.' 

Choose the Right POS For Your Needs 

You can't run a restaurant without a point of sale system, but don't just pick the first POS solution that catches your eye. Take stock of what you need it to do and then find a system that supports those needs. 

For example, you might want your information stored off-site. That means you'll likely be looking for a cloud-based solution. Perhaps you're looking for a POS that includes online ordering, loyalty programs, kitchen display systems and offline capabilities. Depending on your needs, you can settle for a cheaper option that offers a meat-and-potatoes experience or look for a solution that supports third-party integrations. 

Having the right POS system in place can entirely change the way your restaurant operates. By connecting your inventory tracking to your POS, you can know exactly how much of any given ingredient you have and quickly remove menu items when they sell out. Labor tracking and scheduling can be more effectively planned out because you'll know when your peak times are and how many people will be needed to cover the restaurant. All of that can be maintained by your point of sale. 

Marketing a Restaurant is a Lot of Give and Take  

Saying you have the best Italian restaurant in the city is one thing, but having other people spread that message for you is totally different (and, frankly, a lot more effective). When marketing your restaurant, you'll want to think about what makes you unique and how you can exploit those differences to delight your customers and turn them into raving fans.

Make use of geofencing and geotargeting to reach out to the audience you want to target. Try out different promotions and see what works. Start a loyalty program! The trick to properly marketing a restaurant, or anything for that matter, is to always make sure the customer receives the right message at the right time but is also rewarded for doing the things you want them to do.

For example, if someone is a regular customer of yours and signs up for your loyalty program, they're not just giving you their money each day - they're providing you with valuable data you can use to fine tune your restaurant's offerings. In return, offer them exclusive deals or other perks they can take advantage of.

Restaurant Ownership Can Be Rewarding 

Despite a lot of work, long hours and wearing many hats, owning and operating a restaurant is an experience like no other. You get to meet a variety of interesting people, work with talented cooks and chefs and build your own little at-work family. But keep in mind, it's still going to be an uphill battle.

'Even with an amazing concept, great food and top-notch service, this is a challenging business to be profitable in,' Ling said. 'By consistently reviewing the numbers that are crucial to success, you will be able make educated decisions that will set you up for sustainability and growth.'

With proper planning and a generally sound understanding of the industry, you can beat the odds and make money for years to come!