There are dozens of considerations when starting a restaurant, but these are some of the more important ones. Do your research, plan carefully, and seek to execute flawlessly.
Concept is Important
Vinnie (that’s his real name, not a stereotype) owns a string of successful Italian restaurants in Southern California. Most of them are an upscale pizza format that serves a full menu of Italian food.
His one departure from this successful model was an Italian restaurant based on a fast-casual model. Customers ordered for either takeout or dine-in meals at a counter, waited for their food, and then enjoyed their meal in the casual dining area or outside the restaurant. The menu was great and just about everyone who walked in the front door raved about the food. They did a great catering business, too.
Vinnie had to close that location this past spring. “Closing down is not the right word,” he was quick to say on his last day. “Before the week is out, we will be open again, but as a new concept.”
Despite the quality of the food, Vinnie found the demographics did not support his type of Italian restaurant.
“I did my research,” he explained. “We had happy customers – raving fans, in fact. Just not enough of them. This area has had an infusion of new families. These folks are looking to avoid high real estate prices. Their price point for Italian food is lower. Pizza is what gets most folks in the door, and when they could feed the family at the five-buck joint down the street, they just weren’t coming to me.”
True to his promise, the former Italian restaurant reopened within a week. The new concept is – chicken and waffles – and it’s a hit.
If someone was going to successfully run the new concept, they had to have a passion for the new menu. Vinnie partnered the new concept with a long-time associate familiar with the menu, worked out a business agreement, and then stepped back.
The lesson for those who want to start a new restaurant is two-fold. You can have great food, but it’s often more about the concept. Also, if the demographics in your neighborhood aren’t drawn to your concept, customers won’t come in the front door.
Vinnie made another tough decision in the process too. He realized that his passion was Italian food. The co-owner/manager of the new concept was going to have to have a passion for chicken and waffles. He wisely stepped aside and let someone else take over.
There are certainly examples of restaurants that manage to be successful in any neighborhood, but the success stories are few, and many of them relied on dumb luck more than anything else.
The most successful restaurants are those that have a good concept and the right location, with the right demographics.
Fitting the Concept to the Location
Sometimes your success depends on seeing what no one else can see.
Just a few miles from Vinnie’s new waffle and chicken restaurant, in a neighboring city, is a location across from the post office. This building and location has long been a losing proposition for any business that moved in. It was a dry cleaner, then it was a furniture store, and there were other tenants. Every one of them failed.
Enter two local business women who realized the location was actually great. Until they came along, it had just never had the right business.
The building is situated between a large regional hospital and downtown, with city hall and lots of small businesses. Everything is within walking distance.
After a lot of time and money remodeling the building, they opened as a delicatessen and sandwich shop. The traffic from the hospital and city hall brings people in, and news of their catering service traveled fast.
Even better, many of their customers are the influentials in town – city officials, business people, service club members, doctors, etc. The kind of people who are well received when they give opinions. Word spread quickly about this new deli and sandwich shop. Within months they were the talk of the town.
Their story is the same as Vinnie, but with a slightly different twist. It’s all about the concept and demographic, and fitting the concept to the location.
Promoting Your Restaurant
So, let’s say you have a great concept. How do you promote your business after starting your restaurant?
Word-of-mouth is going to be your primary advertising vehicle because it’s the most trusted and free. In retail businesses as a whole, and restaurants in particular, about seven or eight of every ten people who walk in the front door do so because someone told them about your place. The more people that walk into your restaurant, the more people they will tell. This kind of promotion feeds on itself.
But what about the other 20-30% of folks that walk in? How you reach them depends on your target demographic.
For the deli/sandwich shop, their clientele were hospital employees, city employees, and local business people. These folks are constantly scanning email and social media. Many of them are very dependent on their smartphone.
Keeping Customers Coming Back
A Harvard study of the restaurant industry revealed that if you can increase the number of repeat customers by 5%, you can increase your profits by 25% to 125%.
As a new restaurant, every customer is a new customer. Here are some tips for making a good impression on first-timers:
- Train your staff to seek out those first-timers. Ask them how they found out about you, and pull out the stops when it comes to service.
- Make sure their order is PERFECT. You only get one chance to make a good first impression. Greet them with a smile and confirm everything in their order is correct. If it’s a delivery order, double check their bag before the delivery driver leaves.
- Once you identify a first-time customer, try giving them a promotion for a discount on their next order (getting them to come back a second time is critical to getting them hooked).
Other big decisions you will encounter when starting a restaurant will involve technology.
This is a very important one. A study by the National Restaurant Association cited that a third of all customers say technology options compel them to choose one restaurant over another.
There are lots of technology choices available for restaurants – tablets at the table, reservation systems, loyalty platforms – the list is endless.
The question quickly becomes one of which technologies to implement.
Towards the top of the list, if you will provide takeout and delivery, should be online ordering. Depending on your concept, takeout and delivery can be a sizeable chunk of your sales – 15%, 20%, or even more.
Takeout sales are great because they allow your restaurant to sell more meals without expanding your square footage or increasing your wait staff. Takeout customers are also your most loyal customers, which means they will drive more revenue than any other segment.
Starting a restaurant is difficult and expensive. Restaurateurs need to evaluate a lot of elements before they make their first sale. Hopefully these lessons are helpful to anyone looking to open their own restaurant.