Running a restaurant can be an extremely stressful job. According to a statistical analysis quoted by CNBC, 6 out of 10 restaurants fail during their first year. The same reveals that eight out ten also shutter before their fifth year.
Among the reasons for failure, there are some factors common in most cases. With the old saying about learning from the mistakes of others, let us look at the common restaurant administration mistakes that most first-time restaurant administrators make and how you can avoid them.
Being aware of these issues beforehand will help you create an effective plan for your next startup.
1. Having Fewer Capital Funds
While setting up a restaurant, the owner has a lot to look into, and most first-time owners invest all their capital into creating a luxurious ambiance. They often overlook that they will need extra money during the initial 6-8 months for marketing and operations.
Restaurants are usually part of an oligopoly, and to earn a market share would take some time. It might take months to reach the breakeven point, and exiting the market before that can lead to heavy losses. It is a slow process, but in the long run, higher returns become guaranteed.
Hence, it is crucial to have enough working capital until you start earning good profits. The administration needs to stay motivated during this time. A demotivated administration will demotivate the employees leading to unsatisfied customers. If you rely on budgeting tips, do not forget to read our guide.
2. No Regular Finance & Price Checks
Alt-text: Picture of a paper with calculations and a calculator.
While the restaurant is running, if you fail to keep a check on the cost of goods sold and the amount earned each month, you might face fraud and failure at the same time. So, keep a strict check on the inventory and keep daily records.
3. Following the Trend Blindly
Most managers follow whatever is trending around them and often try to replicate what other in-demand restaurants are doing by copying their menu or theme.
What you need to understand is the fact that every trend dies after some time. You need to think outside the box and create your own.
For this purpose, complete market research is prime. Rather than following other restaurants, create your own USP to attract customers. If the administration has a clear image of the next trend, they will have a more efficient strategic plan. So, create your unique selling point!
4. Not Paying Attention to The Menu
The most common reason for failure among restaurants is poor menu designs. The menu card should itself call out customers and represent the theme of your restaurant.
Distinct categorization of starters, main course, desserts, drinks, etcetera makes it easier for the customers. Most menus only have the name of the dishes listed. What is missing is a brief highlight of what the platter includes.
Adding images along the cuisine names is one great way of attracting customers. However, do not overcrowd the menu. Keep the menu simple, clear, and readable. The prices and names should give a clear image of a casual or fine dining restaurant.
5. Not Engaging With Customers on Social Media Platforms
Most failing restaurants do not have their information on the internet like Instagram and Facebook. Hence, people do not know these places even exist.
In the modern-day world, where all the communications are happening on the internet, having reputable social media platforms is a part of marketing.
Updating your Instagram profiles with the latest menu additions, deals, and story highlights is a good addition. To make sure people know your restaurant has an updated profile, post more often and ask influencers to tag you in their reviews. This online engagement can also be a way of having direct conversations with your customers and taking their suggestions.
6. Poor Customer & Server Service
Your customer is the main reason behind your success. If a customer is not satisfied with the services you provide, then you have failed your job. A bad review can be bad for the reputation of any restaurant, be it old or new.
When a customer enters a formal dining place, his expectations are set too high, and you must meet them. Greeting your customers properly by serving welcome drinks or starters can be very helpful in this aspect.
To deliver the best to your customers, you need to train your staff well. For instance, in reply to thank you, saying my pleasure sounds more polite than no problem.
When hiring employees, you also need to make sure that they understand your work culture. A language barrier between customers and waiters can be frustrating. Check our guide on the basics of serving to train your servers well!
You can also use some hacks to improve your service.
7. Overworking and Mistreating People Who Work Under You
Alt-text: Picture of a restaurant with lots of customers eating and enjoying food.
When managing a restaurant, the owner can not meet each customer. Hence, you hire waiters for that. The staff of the restaurant reflects a clear image in the management they work.
It is basic etiquette to ensure that your employees are happy and their needs are taken care of well. The owner has to create a family-like environment for the staff and make sure they are all motivated, so they work in a way that leads to success.
A tip here is to make your staff feel empowered: help them work for success.
8. Choosing an Unsuitable Location For Your Restaurant
There are two types of location: either a traffic-based or a destination location.
Traffic-based locations have a heavy flow of potential customers moving around. Hence, they come with high rent. But, this does not mean that every customer that stops by will visit again.
It is the administration’s job to make sure that every customer has a luxurious dining experience. It should be good enough to make them want to visit again. If a customer stops by and leaves unsatisfied, his negative review can be dangerous. With high traffic locations, the restaurant might succeed initially, as people stop by to try the new spot but, if the services are not up to mark, the restaurant will fail in a few months.
If you are going out of the way by choosing a destination location: you need to ensure that your menu and ambiance are outclassing. You will also face high marketing costs so that more customers would want to go out of their comfort zone to visit your restaurant.
Restaurants fail because of several common restaurant administration mistakes and reasons. With our assortment of common problems and solutions, do not forget to keep these in mind if you venture into this market of restaurants.
Do your research and plan accordingly so that there is a higher probability of your success than failure. You might also want to check out mistakes that servers make in particular!