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Top 5 Challenges Facing Restaurant Start-Ups

Date: 19-Jun-2019

Intense competition and ever-changing public tastes ensure Australia’s restaurant industry poses challenges for innovators looking to explore business opportunities in the sector.

The restaurant sector continues to be a high-risk economic proposition and one fraught with ownership issues. Between the demands of operations, marketing and customer service, you have a raft of detailed concepts to master while continuing to keep your offering fresh and engaging.

However, by understanding the 5 most common issues facing restaurant owners, you can develop management strategies to increase your chances of making your  new restaurant a success.

 

1. Your Menu

 

One of the fundamental issues confronting restaurant owners is designing their menu. An attractive menu is always a delicate juggling act. Do you have too few or too many choices on your menu? Is each dish correctly priced? Have you built seasonality into your menu offering? Is there a consistent idea behind your menu that contributes to your restaurant’s USP?

Always strive to keep your menu size manageable. Rather than pushing a ten-page missive, consider fewer dishes and executing them exceptionally well. Prospective customers need to understand what your restaurant is really offering.

Extensive menus that lack focus delay decision-making, meaning customers take longer to order. This translates into lengthier ticket times. Too many different dishes on the go simultaneously lead to insufficient popular dishes being prepared, resulting in protracted order preparation. Each table subsequently requires more time to service; hence your table turn rate will be unnecessarily slow.

The more choices on your menu, the more different ingredients you need to source, purchase, and store separately. This bloats your inventory and adds to your costs. So, slimming down your menu and aligning its underlying philosophy with your restaurant’s unique proposition will only boost your competitive position.

 

2. Capital Adequacy

One aspect of the industry where novice restaurant owners often encounter trouble is the level of capital adequacy they plan for. More specifically, far too many owners start their business while lacking sufficient capital. Not backing yourself with the capital needed to run your business long enough to get it established can seriously impact the longevity of your restaurant. Owners should ensure they have sufficient capital to run for their first year, and factor in funding to cope with unanticipated cost increases and expenses.

Each case is different, but there are some overlapping factors that apply to almost all restaurant businesses.

 

3. Identifying Your Unique Selling Point

Are you an all-day diner or a romantic experience? Are you focused on a theme or a vibe? Customers need to understand what they are getting when they dine at your restaurant. They should recognize intuitively why they eat at your establishment and don't go to the competition.

 

While a sublime menu, a brilliant chef, and seamless customer service are integral to your commercial success, they do not constitute a unique selling proposition (USP). They simply meet your customers’ generic expectations of a restaurant. You need to differentiate your product from the herd of competitors.

Preferably, you should have an original concept for your USP. A compelling proposition for customers that transcends fabulous food and excellent service will define your business and help attract customers. For longevity, you need to offer customers a unique reason to dine at your venue.

A USP communicates a vibe to your customers that makes a visit to your restaurant memorable long after they have left. Combine your USP, your food, and your service, to nurture emotional connections between your customers and your restaurant.

Perhaps your USP is clear in your own head, but there’s currently no action plan for how to effectively project it during the dining experience? Get a few friends to do a walkthrough of the space and experience, and report back to you about what they think makes your restaurant different to the local competition. If their feedback is wildly varied, or they struggle to come up with something unique, you know there’s work to be done.

 

4. Effective Inventory Management

All savvy restaurant owners keep a sharp eye on expenses. One crucial area, which contributes to keeping your costs low, is how effectively you manage your inventory.

 

Let your inventory get away from you and you will suddenly discover your costs spiralling upwards. Unanticipated costs, grumpy suppliers, and supply overages or shortages can make your restaurant’s peak times a living hell.

Look to constantly monitor your inventory and fine-tune your ordering process to minimise waste and keep a handle on fluctuating seasonal costs. All these factors can erode your gross profit on menu selections. Always know how much your ingredients are costing you and factor cost fluctuations into your operating budget. While it may not be feasible to do as an ongoing task, it would be beneficial to run a report over three months, recording ingredient cost fluctuations. Planning menus and pricing based on averages over a longer time period will always be more accurate when you have more data at your disposal.

 

5. Hiring Staff

Highly successful food service business owners recognise how important recruiting the right staff and building an effective restaurant team is. Your restaurant needs to have a sound team in place across high and low seasons, but especially during peak times of the year where customer volume rises, such as the summer.

Recruiting and training high-performing staff can significantly reduce your operating costs over time while enhancing your customer experience.

Many restaurants make the mistake of hiring the wrong staff and suffer a high staff turnover. Poor staff can also damage your relationships with customers.

Look to inspire both your management team and your staff. Train them to cope with any eventuality, good or bad. Ensure they are motivated and enthusiastic and bring your restaurant’s DNA to life.

 

Final Observation

Starting and managing a restaurant is a gruelling but rewarding experience. Ensuring everyone in your team identifies with and understands their role will go a long way to building success. Similarly, paying attention to overcoming these five key challenges will help your restaurant enjoy long-term success.