Avoid these top 10 mistakes opening a restaurant

Don’t Make These Mistakes Opening A Restaurant

Business Plan – We offer a free business plan at our website. It’s a real working business plan specifically built for the operation of a restaurant. Use it as a guide and always work with a professional when your build your business plans. Don’t fall into the trap of not taking the time and effort to write a business plan. At a minimum, it will give you an idea of your concept, financial projections, and start-up cost. After writing your business plan, make sure to review it monthly because things will change and you should update your business plan regularly. If you decide to open a second restaurant, your first business plan is like a journal you can revisit to better prepare yourself for your next build out.

The Wrong Location – I don’t want to bore you with the cliché location, location, location, but it’s true. I’ve had some awesome locations and a very poor location. It so happens that the poor location was not my first choice. I wanted to be in this very busy shopping center near COSTCO, but the location was already under contract by Nestle. The east end where COSTCO resided was a very busy section of the mall. I took the west end thinking that the traffic would trickle over to my side of the mall. I couldn’t believe that just being on one side of a shopping center could make that big of an impact and it did. We had to market the heck out that location just so the customers that shopped at COSTCO knew we were there. The right location can either make or break your restaurant. You should never take a secondary location just to save rent. High visibility and accessibility are two key points to having a great location.

Startup Costs – Knowing your startup costs are important to the success of your opening. This is where you business plan comes into play. Many times owners are undercapitalized because they believe they’re going to get the best deal on used equipment or they plan to cut certain corners to open their store with minimal investment. Underestimating a restaurant’s startup costs can result in bankruptcy. If you run out of money, you’re GC (General Contractor) will stop working and all sub contractors will be pulled off the site. You’re rent doesn’t stop just because your construction has stopped. One of the best ways to get the right start up costs should be done after you get your architect’s plans. The plans will have all the materials and equipment needed to build out your restaurant. Also have your recipes ready and your inventory cost planned out. I created a software tool to help with knowing your cost. Go to www.recipe-costing.com.

Follow Up –  After you get your plans back from your architect do the following:

1. Get three quotes from general contractors that have experience building out restaurants.
2. Take the equipment list from the architect’s final plan and get three quotes on new equipment from equipment vendors.
3. Get three quotes for your external sign.
4. Get three quotes for your décor work.
5. Finally, make sure you keep your funds in escrow with an attorney that’s work in the restaurant business.

Let your attorney pay your vendors during the start-up. Your attorney will make sure the work is done and free of any liens before they pay any of your vendors. The attorney is an added cost, however, you will be elated when you run into the first signs of trouble and you have someone representing you at every turn.

Use the highest of these quotes for your business plan startup costs. You will use the lowest one when you’re ready. In the beginning, it will give you a very good idea of what your initial costs may be and it’s an opportunity to see if all your vendors are all on the same page or are the numbers all over the place. Use the sample business plan to review other costs. When you have the total startup costs take about 15%-20% of your startup cost and add it as your working capital fund. When I setup my accounts, I have an operating account, payroll account, merchant account, and working capital account. If you pay royalties and your franchisor requires an ACH, then create a royalty account to drop your royalties into that account. I know it sounds like a lot of accounts. It works well when tracking your funds and reconciling.

Profitable Day One – It’s unlikely you’ll be profitable in the first few months. When we opened our Homestead location, we had incredible sales the first 6 weeks. We call it the honeymoon stage, and with all those sales we were still in the red. The reason for not making a profit had to do a lot with training new employees and lots of mistakes on the line. During this time you may have a lot of marketing going on, a soft opening, coupons, and free giveaways will all take away from your profitability. After the world wind, it will take time for you and your manager to get inventory and labor under control and get a real good feeling for your business.

Operations – Before opening, make sure you have your procedures in place and your opening checklists. Utilizing these check lists can help increase your success and will insure your employees know what you expect from them. Before I let any of my cooks on the line, I make sure they take a product knowledge exam that they must score a 90% or better. Knowing what goes into the recipe makes the cook much more confident and the learning curve to prepare the meal decreases tremendously. Our point of sale had a training mode and we had an exam for our employees running our point of sale system. Every job in your restaurant should have a knowledge exam.

Know your customers – After doing your research, site survey, and developing your business plan you should have the pulse of your customers. Keep in mind that you are providing your customer a food service they are missing. Your concept should be the first one or the best one, and make sure you’re focused on serving your customers.

Keep your menu simple – The data you have collected is telling. If you did the research you know what your customer is missing in the local market and what they want. Now keep the menu simple. Don’t try to be every food to everyone or your food cost and success will slip away quickly. Once you have a concept, you need to define your niche and remain focus in filling that niche. Try to use a single food item like chicken breast in many menu items to reduce your food costs.

Opening Day and No Plan – The worst thing you can do on opening day is being unprepared. I recommend doing a soft opening for the first week. Don’t advertise you’re opening until you are absolutely sure you’re ready to go. I’ve been to openings where the restaurant owner opened the doors and was missing key items. The employees were frustrated, the owner was putting out fires, and the customers left with a bad taste in their mouth. The customer’s first impression is the most important and you have to impress them as soon as they walk through your doors if you want them to return. The soft opening will allow you to work out kinks or any foreseen problems.

Be an Owner – Your employees rely that you know it all and you are their comfort zone. Be patient and develop a nurturing environment to keep your staff at ease. They are going to make mistakes, don’t crucify them since it will only crush the little self-esteem they have left on doing a good job. Explain their mistake, correct it, and tell them to try again. You’re not one of the employees or their assistant. You’re their emotional and spiritual leader. Lead them and when they make a mistake let them fix it with your guidance. Don’t jump on the line and push them aside. There is a difference between working in your business and working on your business. Your job is to work on the business managing cash flow, reviewing reports, analyzing and strategic planning to grow your business.

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