Starting a business is risky, no matter what industry you’re operating in. While the jury is still out on whether restaurants fail more than other businesses, it has been found that they tend to operate at a higher risk, specifically because banks hesitate to lend to them, suggests Insurance Quotes and Business Insider.
As a restaurateur, part of your job is eliminating as much of this risk as possible. One way to do that is to learn from those who came before you and those who help restaurants mitigate these risks and succeed in a crowded market.
Keep the following advice in mind as you begin you restaurant startup journey. It won’t be easy, but with some help from these experts, you may be able to dodge a few mistakes.
While insurance is important for all businesses, Sam Meenasian, vice president of sales and marketing at USA Business Insurance, poses an important question: “But are all businesses faced with the same loss exposure? Most likely not. Start up restaurant businesses more than anyone need to protect their assets.”
When choosing your insurance, remember to consider all of your risks. For a restaurant, there are many, from the obvious, like slip and fall losses and spoiled food, to what might be less obvious for a first-time restaurateur.
As Meenasian suggests, “A restaurant is one of the most common places to accept credit card payments, but what happens when the information is compromised? What happens when there’s an equipment breakdown and the food goes bad?”
The right policy will offer both liability and property coverages along with specific restaurant insurance extensions to meet the business requirements, explains Meenasian. When choosing an insurance agency, consider those that specialize in working with new restaurants so you’re working with someone who completely understands the scope of your needs.
You may be so focused on all the in-house details, that you forget how many of your customers may be enjoying your food at their own home. In fact, Paul Kalms, partner of Virtual Restaurant Consulting, suggests that nearly 50 percent of total restaurant orders are now consumed off-premises and that percentage is expected to grow.
This is why you need a plan. But what goes into an off-premises dining strategy? “This means getting your menu online and offering delivery either directly or by partnering with the third-party delivery platforms [Postmates, Grubhub etc]. It also means thinking about this when designing your restaurant and having a dedicated area for pickup either by customers or delivery drivers, and considering delivery driver parking,” Kalms says.
If you’re not sure whether it’s worth the extra effort, or important to do right now, Kalms says it is. He explains, “We have implemented this strategy in many of our brick-and-mortar client restaurants and it has literally saved many businesses from extinction.”
Your restaurant has a physical location—but the modern customer lives online, and you can’t underestimate the importance of setting up and maintaining an online presence to attract these customers. For a restaurateur, this means creating social media profiles, verifying your business on Google and setting up accounts on review sites, suggests David Mitroff, Ph.D., founder of Piedmont Avenue Consulting.
But don’t forget about your website, which is just as important. Mitroff says,“Most of the restaurants don’t have their business website or if they do, it’s not updated regularly. With so many affordable options for hosting and website design, creating a website for your restaurant is actually a simple goal to accomplish.”
This is even more important if your restaurant will be operating in a popular tourist area. This is when a website is critical because most diners will look at your website and search for a menu before coming in.
Bottom line, “Not having the most current information on the website and social media presence can lead to a potential loss of your business,” says Mitroff, so don’t let it fall to the wayside.
The space you choose for your restaurant can greatly impact your success as a startup restaurateur. As you tour potential restaurants, consider that the “conviviality and fullness of your dining room, reservations area, and casual bar or outdoor deck should work no matter what food or beverages you serve,” says Baron Christopher Hanson, lead consultant and owner of RedBaronUSA & Baron Christopher Development, LLCs.
Hanson has seen many great chef- and bartender-led restaurants fail as a result of this: a poor shape or flow or general layout of the physical restaurant, which can be annoying to customers. What’s worse, poor layout can lead to less connectedness between you and your guests, which tarnishes the experience.
To avoid this problem, Hanson says, “Focus on a patron and employee restaurant design first, one that hums during slow and slammed shifts, then fill your space with the best, most cost-effective, most profitable food and beverage menus second. Menus can be easily tweaked. Finished construction, not so much.”
This critical piece of advice comes from Alan Donovan, founder at Oat Shop in Somerville, Massachusetts. He explains his experience with this: “Prior to signing a lease for our brick and mortar at Oat Shop, we operated as a pop up out of an existing restaurant for three months and we also did various farmers markets and events to test out our product line, gauge consumer interest and spread the word about our business.”
In a potentially crowded space, this extra time may be what you need to test both market interest and dishes and products that you plan to sell.
Donovan says, “this test period gave us insight into the best areas to start our business and helped refine our menu as well.” The good news is, there are many opportunities to do pop ups and collaborate with other local businesses on the cheap—use this to your advantage so you can be sure of your menu ad concept before getting into a lease.
As a restaurateur, you may also be managing staff—from managers to waiters—and listening to them is critical to being successful, suggests Bryn Butolph, Managing Partner for Cornerstone Hospitality Consulting and President and Co-Founder of Eat Clean Meal Prep.
Butolph says, “My staff know at anytime that they can call, text, or email with any questions or concerns they might have … this lends a hand to open communication and will allow for trust and assurance for your staff to know that you're available at all times.”
While this can seem time-consuming, Butolph suggests. “The constant communication and contact between management and their staff will continue to engage them in their work.” As the face of your business, it’s critical that they’re excited about their work and shown appreciation and respect by you and other management staff.
There’s a lot for you to learn as a first-time restaurateur, and the advice of those who’ve been there, or who have seen many restaurants succeed and fail, will help you avoid potential mistakes and risks. Keep these tips and ideas in mind as you embark on starting your restaurant to set yourself up with a foundation for success.
Jessica Thiefels is founder and CEO of Jessica Thiefels Consulting, an organic content marketing agency. She’s been writing for more than 10 years and has been featured in top publications like Forbes, Entrepreneur and Fast Company. She also regularly contributes to Virgin, Business Insider, Glassdoor, Score.org and more. Follow her on Twitter @JThiefels and connect on LinkedIn.