There’s high level of competition and plenty of details to perfect when starting a restaurant business. You have to set realistic goals and do a market analysis to build an excellent restaurant business plan. It is only when you understand various reasons why other restaurants fail that it will be easier to recognize bad signals.What are the major challenges that restaurant owners face when starting a restaurant business? What is your action plan to overcome them?
You might want to include these “10 Challenges in Building a Restaurant Business and How to Overcome them” in your restaurant checklist.
Finding the Best Location
In choosing a perfect location for your restaurant business, it is important that you understand the demographics and the neighborhoods, traffic and transportation as well as the value for your money. How cost-effective will the location be?
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How to Overcome
Make sure that the location does not fall into any of these conditions: Low visibility, poor accessibility, isolated area and wrong customer targeting. There are available location analysis tools that check traffic pattern information, demographics, lifestyle data, and competitive analyses.
Having Enough Capital
In a recent study of restaurant owners, only 38% described their financial situation as “good to excellent.” But when restaurant owners were asked to name what their biggest challenge is, managing their budget plan tops the list. Find out: capital budget template.
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How to Overcome
Educate yourself on the topic of business financing especially in managing a restaurant business. This will help you avoid the issue or properly manage the financial crisis if it arises in the course of your restaurant business operation.
Menu Development
There’s a potential to update your menu and recipe cost based on the seasonality and the availability of food items, hence, the re-pricing and reprinting to stay up-to-date with your recent offerings in such a limited time. Furthermore, people on restricted diets undergo menu evaluation and request detailed nutritional information for each of your menu item. In preparing a menu, it is downright necessary to conduct menu engineering analysis to understand customers’ demand, item percentage sales contributions, costs and profit margins.
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How to Overcome
Keep your menu size in check. It’s best to have a smaller number of quality meals. Also, consider your unique selling point. What makes your restaurant menu stand out among the rest? This certain uniqueness is what makes your customers remembers you once they are out of your restaurant.
Restaurant Concept
Given the rise of international restaurant franchises and other established competitors in the location, the challenge for a budding restaurateur is: How can a starting restaurant make its own mark? Before choosing a restaurant concept, you have to build a viable restaurant business model that gives information about how your restaurant will create a brand, attract customers and make enough money to survive.
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How to Overcome
Choose a concept that’s broad to allow you to innovate but narrow enough for customers to easily understand. Create some fusions. Surprise your customers and always be willing to experiment. Your concept must be about creating a space where customers want to linger, a concept that communicates to them an appealing identity.
Customer Service
Customer service training manual should come in handy for your staff. Your restaurant can serve delicious food, but what if the customer service was bad? Your staff should greet customers in a friendly and professional manner at all times. Customer service checklist should include smiling, making eye contact or promptly answering the phone in a friendly tone. If you want to gather information about customer preferences to bring useful and profitable changes in your existing restaurant services, customer satisfaction survey is very helpful.
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How to Overcome
We will overcome customer service challenges if we practice C.A.R.E.S. This is actually an acronym. First is Communicate to customers at their table. Second, be Accountable and never act like you are not responsible if something goes wrong. Next, is Responsiveness in keep the customers up to date about their orders; even if it means that it will take a long time. Empathy is also needed which is recognizing that customers are out to chill and not just for a quick meal. Lastly, is the Solution, this is letting the customer that you want their loyalty after you have resolved an issue with them.
Staff Management
It is not good when attention to mistakes increases because of neglect. You will have staff who will needlessly judge other staffs actions. Some staff are frequently absent from work. Gossips and intrigues could also arise and these are all signs of poor relationships that don’t have positive restaurant business effect. If any of these starts to manifest, an investigation should be in order. Goal setting, planning and recruitment are also under this area. It is useful to develop a staffing guideline chart that you and the manager can follow during the hiring process. Find our staffing plan template here.
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How to Overcome
“You’re only as good as the people you hire”. When your restaurant is still new, some of your staff’s duties will cross over from one category to another. It is important to hire people who are flexible in their duties. First thing you need to do is to list out the functions that your restaurant needs to perform. Then determine the number of people to perform such duties. Keeping a calendar is also necessary allowing you to plan ahead. Furthermore, a good staff management team keeps up with current trends in employee benefit packages. This will attract quality staff and retain your current trained staff. Meeting the needs of your employees will make your restaurant thrive.
Restaurant Promotion
Restaurant businesses are struggling to keep up with trends in digital technology. Your restaurant can live or die based on online reviews. Customers, especially the millennials have gone mobile and want in-app experiences, hence, wanting instant answers. “Does it make sense to still use the ‘old world”? Yes. Aside from being cost-effective, restaurant flyer and promotion posters have bigger recall value. They are also able to reach those digitally struggling customers.
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How to overcome
For starting restaurant owners, its is important to focus on important tactics. You have to clearly define and establish your own brand of identity that sets you apart from your competitors. Creating a deeper connection with your target customers is equally important. Challenge your creative mind and design compelling offers to entice more customers. Tap customers’ emotional aspects: ‘What’s in it for me’? Always make your marketing plan workable.
Dealing with Competition
According to restaurateur Danny Meyer, speaking to CNBC, “The biggest challenge facing restaurants is not rent or margins or tipping or marketing, it is competing for customers’ time”. This quote articulates that while grocery stores and delivery food apps may not be your direct competitors, they are grabbing a lot of customers. Aside from time, competitive pricing is also a game that demands in-depth knowledge of your market and target audience. Creating a competitor pricing survey is a great idea. Find competitive analysis template here.
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How to Overcome
Two of your important goals should be: To capture customers’ time and determine a competitive pricing strategy. Gaining your competitive edge requires a comprehensive analysis about the demographics of your surrounding area and your existing competitors. If you need to adopt successful strategies from your competitors, do it, but understand that directly competing with an established rival is not a good idea for a starting restaurateur.
Keeping up with Market Trends and Changes
Don’t expect your restaurant guests today to be the same as the typical restaurant guests 20 years ago. More and more customers start to care not only about flavors but also what the food will do to their bodies. Besides their healthy interests, guests seek new flavors and dining experiences. You need market analysis and market survey to understand and foresee market trends to reduce business risks. Find market analysis template and market survey template here.
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How to overcome
Given that digital marketing has taken over, it is important that we integrate marketing technologies into our customers’ lifecycle. New trends will continue to enter and you need to pay attention to every change. A plant based menu is also a new buzz for its obvious benefits. You may want to incorporate that on your menu. We have also been introduced to reservation ticketing. This way, customers can book their seats and pay for their meals in advance.
Unexpected Challenges and Expenses
No matter how prepared you think you are, unexpected and overlooked expenses and challenges will hit. Frequent unexpected challenges are: Financial deposits, design and constructions materials, chefs requests and full costs of food. Managing day to day restaurant expenses and expense tracking your inventory and sales with point-of-sale system are important components of running a restaurant.
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How to Overcome
You should be prepared with at least one year worth of capital for expenses, and a rainy day fund to deal with unexpected cost increases that might take you by surprise. The more preparation you can put into your business before you open your doors, the higher your chances of success will be.