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Startup Mistakes to Avoid While Opening A Restaurant

Starting a restaurant business requires a lot of diligent planning and effort. Many restaurants fail to make the required profit or even sustain because of errors that can be easily avoided.

Along with the competition and market trends to bear in mind, owners also need to be aware of regulations and permits before they go about setting up their restaurant business. We discuss important mistakes that several business owners make while starting up their restaurant so you can avoid them and ensure your business draws in the profit it deserves.

Ten Common Restaurant Startup Mistakes To Avoid

Here are the mistakes that you should avoid while setting up your restaurant:

1. Not Having A Business Plan

A business plan includes your target market, the niche you want to serve, and how you intend to go about your business ideas. Though restaurateurs may have elaborate thoughts on how to design and run their business, not following it up with realistic plans will lead to trouble. The business plan is meant to help you with running your business seamlessly when you run into operational problems and as a working guide.

2. Being Ignorant About Capital Requirements

Restaurants require both starting capital and reserve funds to bail them out during cost overruns and delays in execution. Unforeseen costs are bound to knock at your doorstep at some point, but being ill-prepared for these situations can cast aspersions on your establishment even before it opens up. Set aside at least 20% of your starting capital for such situations and for basic expenses such as rent for at least the next 12-16 months.

3. Ignoring The Location

Location is integral to a restaurant’s success. If you’re thinking of setting up a food truck or a casual eatery in an upscale neighborhood, you might want to reconsider your choice. 

The same goes for high-end restaurants looking to set up shop near universities. Factor into your business plan your target demographics and niche before you pick a location. Once you shortlist a few, make a note of the competition and the footfall in the area.

town cafe

4. Failing To Obtain Permits

Not having the necessary permits and licenses can lead to hefty fines and penalties from the state and health authorities. Legal permits and licenses might be complex to understand, so it’s important to hire an expert when you’re going about registering and licensing your restaurant business.

5. Not Understanding Equipment Requirements

Equipment can either make or break a commercial kitchen. Since a good portion of your starting capital is set aside for kitchen equipment, it’s important to understand your establishment’s requirements and the volume of people you intend to serve. Consider buying equipment that is capable of supporting orders on your busiest day with an additional 20-30% capacity.

6. Expecting The Restaurant To Turn Immediate Profits

A common error made by novice restaurateurs is that they expect the business to become profitable right from their first operational day. Several business owners can overspend and not budget their capital in these expectations, and this can lead to a potential failure of the business. Always set aside standing capital to cover your operational costs and overruns, and follow through with your business plan diligently till you break even.

7. Not Training The Staff

Your employees represent your establishment and have the potential to influence your customers’ decisions. Make sure you set aside adequate time to train your staff before you open up for business. 

Poorly trained staff reflect badly on your reputation, and this can even demotivate your workers and lead to a high turnover rate – an additional cost for your business. Ensure you train your staff adequately and enable them to perform well in their tasks.

8. Poor Menu Pricing

Even if you run a fairly successful restaurant and see enough foot traffic, a poorly priced menu will fail to cut it. Improper menu pricing leads to losses. Make sure you incorporate all your costs and your expected profit into the prices of your dishes. 

Remember that you’re not merely selling food, but are also offering a complete experience to your customers and charging them accordingly. While making prices exorbitant is poor planning, charging your customers a reasonable amount is imperative.

menu

9. Ignoring Consumer Needs & Preferences

It’s important to understand what your customers want and expect from your restaurant before you cater to them. Considering customer preferences and needs is essential to restaurant success. While you must certainly market unique concepts and express your creative talents when showcasing your business, it’s also important to ensure that your customers appreciate and relate to the dishes you offer.

10. Insufficient Market Research

Failing to do sufficient research on your target market is sure to land your restaurant business in trouble. It’s important to understand consumer demand, and popular preferences should be taken into consideration when planning your restaurant’s concepts and offerings so you ensure your business markets to existing requirements. Consider what you intend to offer, what your ideal customer will prefer, and how your operation is different from your competitors’.

The Importance of Seasonal Equipment

Restaurants are year-round operations, and there are varied patterns of demand based on the time of year. Seasonal foods and offerings are important sources of revenue for your restaurant and also ensure your establishment actively engages with customer needs. 

Purchasing commercial kitchen equipment such as a small commercial ice maker, for the warmer seasons can help your business offer specials and much more. These important additions to your existing equipment can help you turn over large amounts of profit during these periods of seasonal demand.

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