The Restaurant Blogger

Thinking of opening a restaurant? Are you prepared to make important decisions? As a new restaurant owner, it is important to know which steps you can take to avoid a disaster.

Avoid These Mistakes Now!

The most common restaurant mistakes that new owners make are usually the ones that play a vital role in the overall success of a restaurant. The following is a list of the Top 8 restaurant missteps.

1. Avoiding the business plan. For any type of new business, writing a business plan may be the best planning you can do. You may have a great idea, but is it really feasible? Feasibility refers to whether your idea can be turned into a reality. Can your concept make you money? Too many new entrepreneurs avoid the business plan because it takes time to create. The time you spend on the plan is time well spent if it is going to save you from losing all your money. Overall, a business plan is way for you to outline your vision and purpose of the business. It allows you to layout your concept and most importantly review financial projections and investment requirements.
2. Taking a secondary location. What’s the old saying? You know, location, location, location. That’s right, you know having the right location can either make or break your restaurant. You should never take a secondary location just to save rent. Would you rather save rent or would you rather be closed? The answer is so obvious, so why take the risk? High visibility and accessibility are two key points to having a great location. Unless you’re super famous, don’t think that people will come to find you.
3. Being closed-minded in concept. You have defined your concept and have a vision for how you want it to look like. From the space layout to the type of furniture to the façade and the décor, you have created a mental picture. Sometimes what you have imagined can’t be fulfilled due to space configurations or other unexpected reasons. Therefore, it is wise to work with your hired professionals; interior designers, architect, engineer and general contractor. Share your ideas with them and get feedback to any foreseen problems. Work together to create alternative plans for your concept. This may in fact be better than your original plans you had envisioned.
4. Undercapitalization. This is perhaps the most common mistake for new restaurant owners. Underestimating a restaurant’s startup costs can result in bankruptcy. Having a great concept doesn’t prevent you from running out of money. It is always better to overestimate your costs then underestimate. Common problems during startup may include construction delays or changes demanded by building inspectors. To cover such unexpected problems, money should be set aside for working capital which should cover up to one year of rent. In addition, contingency money should also be set aside for any other unexpected problems that may arise. The norm is to set aside 10%-15% of the total investment required for contingency. A good practice is to remain conservative in forecasting your sales and the amount of investment required. Lower your sales forecast and slightly increase the amount of money required.
5. Believing you will earn money after opening. If you think you are going to make money on the first day of opening, you must be in a dreamland. Even the very best restaurant chains prepare for a loss for the first few months. Even if you achieve fantastic sales from the first day of opening, it is natural to experience high food and labor costs. Within the first month or so, you and your managers are just beginning to get a feel of the business. You can always fix or adjust your food and labor costs, but if you run out of money, you have no where else to go, but perhaps close. Therefore, you need to ensure you have enough money set aside to cover any losses.
6. Operation, Procedures and Training Manuals. Training plays a critical role in ensuring a restaurant is able to provide consistent service and quality food. Depending on the size of your restaurant, you may have 20 or even over 150 employees. Training takes time and costs money. Don’t stress yourself more than you have to. If you see any franchise restaurant, a system of operations, procedures and training manuals are provided for new franchisees. This allows every employee including the owners and managers to be unified which allows consistency. From detailed recipes, cashier procedures and waiter training manuals, everything to do with the restaurant is outlined. A restaurant that operates without any documented operation, procedure and training manuals will soon find themselves disorganized. Staff training involves constant repetition of procedures. Spend time on creating manuals and save big later.
7. Focusing on what you like. Finding out what people in the local market enjoy will probably be the best thing you can do. It doesn’t matter what you personally like since you are not the paying customer. New owners are sometimes so focused on wanting what they like to place on the menu that they forget about the market. Visit other restaurants in the area and analyze their menu. This will give you a sense of what the market is like in terms of food and price. You may even want to go one step further and speak to the locals about what they like to do and where they like to go for dining.
8. Trying to please everyone. You must have gone to one restaurant in your lifetime and wonder why they have a something on their menu that shouldn’t be there. So if you seen this before, don’t repeat the same mistake by trying to appeal to everyone. You will create confusion and complicate the customer by having too many items on the menu. Once you have a concept, you need to define your niche and remain focus in filling that niche.
9. Lack of preparation on day of opening. The worst thing you can do on opening day is being unprepared. The customer’s first impression is the most important if you want them to return. Before setting a grand opening you should have a few soft openings. These types of openings are often quiet since you haven’t heavily marketed or advertised. This will allow you to work out any immediate kinks or any foreseen problems. When its time to have your official grand opening, schedule extra staff as you never know what will happen.
10. Owners failing to be an owner. A good owner is one who can manage the business well. Sometimes new owners act like they are one of the employees. Assisting your staff in serving, cooking and cleaning are all great and it doesn’t mean you can’t. However, it’s important to be able to manage the business by maintaining an active role in analyzing the P&L, monitoring cash flow and making strategic decisions that will affect the business. If you are always helping your staff, who will manage your restaurant?

Plan to avoid restaurant missteps

There may be many more restaurant mistakes that you can think of but these are some of the most common ones that new restaurant owners make. I have experienced working in different managed restaurants with each restaurant owner having shared at least one or more of these missteps. Proper planning is perhaps the most important aspect to a new restaurant startup. Get organized, be prepared and know your role. With these three steps in mind, you will be well ahead.

Thanks for visiting The Restaurant Blogger. If you're new here, you can read my introduction here . If you enjoy my articles and would like to keep up with the daily updates you can subscribe to the RSS feed via reader.

If you enjoyed this article, get daily updates via RSS Reader!

No related posts

How is Your Restaurant Managed?

So what makes a good business a great business? It’s having a sound concept managed well. Few restaurants have both pieces of the puzzle but the ones who do are highly successful.

I have worked in three types of managed restaurants throughout my career:

1. High Quality Management
2. Satisfactory Management
3. Poor management

Scenario#1: High Quality Management

The first type of restaurant I ever worked at was a very well managed fine dining restaurant. This 65-seat fine dining restaurant achieved one of the highest sales volumes per seat in the industry including a 6% staff turnover rate compared to the average industry of over 250%. How did the owner do it? He was committed in placing a smile on every customer and staff member everyday. The people loved him including the food, service and the atmosphere and that’s why people continued to return. He interacted with his customers at every table ensuring their expectation was met, he treated his suppliers with sincerity and most of all he respected and cared for his staff.

Today, he no longer is a restaurant owner and has pursued his second longtime dream of coaching CEO’s and other executives in achieving their goals to becoming great employers. Up to this day I look back at the opportunity given to me. I was only 18 at the time while the rest of the staff was 28-45. Age didn’t matter. From being a customer at the restaurant, I became a waiter. I was crossed trained in every position of his restaurant which provided valuable experience up to now. I was fortunate to work and learn from one of the very best who I consider to be one of my close friends and mentors.

Scenario #2: Satisfactory Management

The second scenario type of restaurant was a highly successful concept but with problems in upper level management. Within the company’s chain of command too many positions with no hands on experience created havoc for restaurant managers. What may have seem to be a quick fix solution of terminating the weak, deemed more difficult as the chain was controlled by an inexperienced investment firm. The pressure to achieve higher profits was a constant agony for managers. Similar to any other restaurant owner, they wanted higher revenues and lower costs, but at what cost? Labor and food costs were significantly reduced to the point where both quality of food and service were reduced. Supplier relationships were destroyed and ended. New suppliers were signed based on price versus quality. Weekly food costs were achieved, but then targets were reset for the following week. If we achieved a 29% food cost, our goal was 28.5% the following week and so on. How could any restaurant continue to operate within those parameters? In the eyes of our corporate controllers and investors, this was an easy call. We did as we were told, to cut back on inventory and if it meant closing parts of the restaurant early, that was okay. The only aspect of the business the owners could understand was when profits were up or down.

Today, the chain somehow continues to do well, but how long will this type of management practice continue is questionable. For any restaurant, we want the very best of both worlds; high revenues and low costs. These goals are attainable, but it requires great restaurant management skills and owners who will provide the necessary support. Sadly, this corporate restaurant didn’t understand that for any business you need to spend money to make money.

Scenario #3: Great concept, Poor Management

The third type of scenario I have worked at was actually a great concept but with such poor upper management that it failed. This 120-seat Japanese restaurant was a unique concept offering a twist to traditional Japanese. The menu was large enough allowing anyone who was hesitant in trying sushi a chance to explore. We had rave reviews and a number request to franchise within in the United States and overseas. Again, the owners, a group of inexperienced investors was money driven and did not have any of the “know how” skills of the restaurant business. There were over 20 investors involved with each one having a different view. They all agreed on only one thing – excellent food! It was surprising how we could remain open for over one year. During the week, it was so quiet, except the usual Fridays and Saturdays. If only we made half of what we did on a Saturday throughout the week, then maybe the restaurant would still be open today.

The investors relied heavily on the managers to run the business, but when change or improvements had to be done, they were denied. What the owners could not grasp was the concept of a new startup. They expected profits within the first few months and with that mind set, anger was building among the investors. Pay checks began to bounce, rent was behind, lawsuits arose and finally bankruptcy. The owners were blind sighted to knowing that their actions and decisions caused the restaurant chain to fail. Entire meal comps were given left, right and centre to each investor, their friends and families who came to dine. Worst off, not a single penny was left for the servers who had to serve them. How this restaurant was managed on a corporate level is everything that a restaurant should not do or repeat. The concept was great but it was poorly executed. Sometimes I wonder where the company would be today if the owners were real restaurant owners.

Learn from Experience

Regardless of success or failure, take each working opportunity as a learning experience. Use what is presented to you as what you can do and what you will avoid for your own future restaurant. The greatest mistake you can do is having regrets. Remember, the best gain in knowledge is to learn from the best and the worst.

Stay tuned for my next posting about Common Restaurant Start up Mistakes.

If you enjoyed this article, get daily updates via RSS Reader!

No related posts

Do you ever wonder what happens to a waiter’s tip? What you may think is what most customers believe and what you about to learn will probably shock you. Depending on the type of restaurant, type of management and the number of staff, a waiter’s tip can vary.

Where Did My Tip Go?

A recent article published by the Chicago Tribune reveals the truth behind tips. There is one of two common types of tipping systems used in most restaurants; a Pool House or an Independent Contractor.

What’s the difference? Tips are placed in a pool and allocated to each staff member at end of the shift while the latter method involves a waiter breaking off a portion of his/her tips to share it among the support staff (i.e. busboys, food runners). Most of us have believed the notion, the waiter keeps everything. Well, if you are one of them, hopefully what you will read next will change your view the next time you enter a restaurant.

Take for example Chris Tallian, a 30 year old veteran waiter in Chicago who has been waiting for most of his adult life. Money has generally been good, but what he wants customers to know is what happens to tips.

At his present job at Nick’s Fishmarket, tips are divided among different staff members or so called support group, the people involved in creating the whole experience. Without their help there would be no table to serve. Therefore at the end of the night, Chris’ tip is broken down into the following:

• 1% to the hostess
• 5% to the bartender
• 13.4% to the busboys
• 26.8% to the captain
• 26.9% to the back waiter
• 26.9% to the front waiter (Chris)

So a $20 tip leaves Chris with only $5.36. All that work for not much at all.

What Happens to Credit Card Tips?

If you thought the tip you left on the credit card goes to the waiter, your wrong again. Instead, a restaurant may charge the waiter credit card processing fees. So even though it’s at no fault of the waiter to accept credit card payment, he/she is left paying for a restaurant’s credit processing charges. Sound fair to you?

Apparently this is legal in most states. Landry’s Restaurants, a Texas-based chain who owns the Rainforest Café subtracts waiter’s tips that are given on credit cards. Restaurants who practice this method usually charge 2 to 4 percent just to offset the credit card processing fees.

How to Get Most Out of Your Tip?

Waiter from the popular blog site, Waiter Rant states:

“If the customer knows tips are being pooled, they can slip the waiter a $20 and say this is just for you, nobody else.”

Waiter also suggest for customers to ask how the tipping system works. You may not get a detailed answer, but it is worth a try.

Three other tips to keep in mind include:

1. If possible, try to leave a cash tip just in case waiters are charged for credit card processing fees.
2. Observe the size of the restaurant and its support staff. If your service was met your expectations, then you may want to tip slightly more. The greater the support staff, the less gratuity for your waiter.
3. Leave a verbal tip by informing the management of your satisfaction of the service. Management will take notice and this should create job security for the waiter.

How Does your Restaurant Work?

Throughout my career as a waiter I have received two types of tipping systems:

Casual Dining – Japanese Restaurant

• 3.5% to the kitchen staff
• 96.5% to the waiter

In this instance, the tip distribution to the kitchen staff was insignificant. However the restaurant paid them well above average.

Fine Dining – Continental Cuisine

Lunch

• 1% of a waiter’s gross sale

Dinner

• 3.5% of waiter’s gross sale when one person is on the floor
• 3.0% of waiter’s gross sale when two waiters are on the floor
• 2.0% of waiter’s gross sale when three waiters are on the floor
• 1.0% of waiter’s gross sale when four waiters are on the floor

How much do you have to tip out? As a customer, how much do you normally tip a waiter?

If you enjoyed this article, get daily updates via RSS Reader!

No related posts