Some of the best business brains in the game offer their top 10 tips on how to successfully open a restaurant. By John Burfitt
Starting a new restaurant business can be one of the most exciting times for any entrepreneur, as they turn a dream into reality. All too often, however, that excitement can overwhelm commonsense causing you to neglect what should be your main priorities at this time: asking questions, seeking advice and getting your head across all the important details.
“I love it when people get excited about their new restaurant, but you need to cut through all of that and be a tough realist,” says James Eling of consultancy Marketing 4 Restaurants. “You must keep that passion but look at it with a hard eye before you sign on for anything that you might pay a big price for down the track.”
We asked some of the best consultants in the game—Eling, Ken Burgin of Profitable Hospitality, Howard Tinker of Restaurant Profits, Tony Eldred of Eldred Hospitality and Jon Manning of Pricing Prophets—for their words of wisdom on the 10 steps to follow before opening a restaurant.
1. Decide on a concept
This is the time, Burgin says, to keep a simple approach. “Your concept needs to be original but familiar, because if it’s too way out, no-one will understand, and you’ll be spending extra funds on marketing just to explain what you’re offering.” James Eling recommends you “fall out of love with your concept very early. Everyone has clever ideas but you need to take a tough look to determine if what your ego wants to put out there is what that audience wants.”
2. Market research
Walking the local streets to see who is around and what else is on offer is an essential, Jon Manning says. “Just because there are a lot of places open doesn’t mean they’re all doing well, so determine if what you’re going to do fits in or will offer something different, and if it’s even wanted.”
Howard Tinker suggests wearing your consumer glasses when considering the area. “The dining public will be paying your wages, so make sure what you provide is what they’re willing to buy.” And be careful not to fall into a gap in the market, Jon Manning adds. “There may be a gap for a very good reason.”
3. Business plan
“If you do a business plan before opening a restaurant, then you’re ahead of 90 per cent of the competition,” James Eling says. “This is the number-one thing that must be done, and yet is the reason why so many fail, when people don’t understand what those numbers mean.” Tony Eldred believes one of the best ways to approach putting a business plan together is to actually work in a restaurant first “to understand how they run but importantly, how finely balanced the profitability really is”. Any plan must be realistic, adds Jon Manning. “It needs to be flexible, to change as the business changes.”
4. Dollars and sense
On the subject of money, Howard Tinker says: “You’re going to need plenty of it, and well beyond the opening,” since there may not be any profit for months. He adds that some places spend so much money on the fit-out and opening, there’s nothing left within a few months. “That’s when there are slow nights, and no resources left to pay for the marketing when it’s most needed.” Which is why any partner putting up funding needs to be aware it could be a long time before any profits are seen, Tony Eldred adds. “They need to be told to have realistic expectations from the very start, knowing what’s ahead.”
“Many go into business with no idea about recruiting, and just grab at anyone to do the job and end up with disaster.”—Tony Eldred, founder, Eldred Hospitality
5. Location, location
Questions needs to be asked about how the premises will work as a business, and if it’s a new lease or an existing one. “People fall in love with a building but need to consider how a business will function there and what it will cost to run,” James Eling says. Attention also must be paid to what type of business that location lends itself to. “Work out if this will be a destination restaurant, or will you be relying on walk-ins and if take-out is big business in this area.”
Investigate whether the gas, electricity and water supply will be enough to run your new business, advises Ken Burgin. “Look at what is there and is it enough for what you need before signing anything. I regularly remind many people that we are talking about commercial kitchens here, and that’s very different to what they have at home.” Other utilities like waste facilities and grease traps also need to be factored, along with collection services, long before a lease is signed.
7. Equipment needs
The many costs associated with what’s needed in a commercial kitchen to create a fully functioning business often comes as a shock to hospitality newcomers. “When people find out it’s $10,000 for this and $10,000 for that, it gets very confronting,” James Eling says. “You need to find someone to guide you through exactly what’s needed so you understand where the money is going, not to mention which units will require regular maintenance. All of that adds up.”
8. Regulations & licenses
Development applications from various councils, boards and authorities can take far longer to obtain than anticipated, sometimes resulting in delays of months before the new project gets the green light. “There’s so much paperwork that has to be signed off, and if you have negotiated a rent-free period, you don’t want that wasted while everyone’s waiting for the permits to come through,” says Ken Burgin. “State government small business websites usually offer good information and will do their best to guide you through,” he adds.
“When starting out on a new business, it’s essential to have really good people around you,” Tony Eldred says. “But many go into business with no idea about recruiting, and just grab at anyone to do the job and end up with a disaster.” Eldred advises that references must always be checked, trial and probation periods implemented, and coaching undertaken to ensure the right staff are in place and properly trained.
A promotional plan for a new business has to extend way beyond the opening date, says Howard Tinker. “You can get so overwhelmed by the launch, but you need to think ahead of that honeymoon period to the coming months as well,” he says. Offering free deals for coffee or a glass of wine at various times can be effective—and creating a calendar of special deals for key events like Mother’s Day, Valentine’s Day and Christmas helps keep up momentum. “Even if budgets are tight, making the most of your social media platforms, especially your website, is a low-cost approach, but can prove very effective in getting your message through,” Jon Manning adds.