Why do so many restaurants fall at the first hurdle?

By Jeff Gitter

Having a restaurant that’s full every night but not making any money is the nightmare position in which many rookie restaurateurs find themselves.  

If you watched BBC2’s recent series, The Restaurant Man, you will have seen what it takes to start a restaurant and what can make the difference between success and failure. The hard fact is that in the US 80% of new restaurants go under within five years and 60% don’t make it past the first year of trading.  Empirically, my guess is that these figures won’t be very different in the UK.

Here are my top six reasons of what generates the most problems for restaurateurs.

  1. You opened your restaurant because you love food and enjoy eating in restaurants

    No, no, no.  Please don’t do it!  There’s no substitute for experience.  Potential restaurateurs don’t seem to realise quite how demanding opening and running a restaurant can be and by the time that they do, it’s often too late.  They will sometimes then try to sort things out by hiring someone with the right sort of experience to save their sinking ship.  This can be effective but adds to the already massive financial burden.

  2. You think the finances will take care of themselves 

    Wrong.  It’s not enough just to know proper restaurant accounting procedures (wet/dry costs, gross profit margins, expenses, working capital, cash flow); you also need to know how to maintain and check the numbers you generate and keep them up to date.   At the outset, build a financial model – cash flow and profit and loss forecasts. This will ensure that you don’t run out of cash after a week and a half!  Understand how much each plate of food and each glass of wine costs to put on the table.  Then regularly compare your actual figures with budgeted figures – budgets and budgetary controls are essential.

  3. You’re quite good at bossing people around

    That’s not going to work. A restaurant comprises many different skills sets, talents and personalities.  The best managers are the ones who have worked their way up the chain of command, starting at the bottom – see my point 1.  Managers need to understand the pressures of those they are managing and if they’ve done the job themselves in the past, they should be more understanding and supportive whilst having useful insight into how best to approach, motivate support and relate to their teams.

  4. If the food’s good, the service isn’t that important

    I must disagree! Think about your paying customers.  How often will you give a restaurant a second chance if you don’t enjoy the experience first time around?  Most people put a lot of store by first impressions and it’s those first impressions that determine repeat business.  The way customers are handled through each step of the dining process – from being greeted at the door through the “tempo” and service during the meal, to paying the bill – has an impact on whether you will retain them. Customer retention is more cost effective than finding new customers.  As my Dad used to say, “the best restaurant is the one that knows you best” – so you want them back.

    And watch out for user-review sites (e.g. TripAdvisor).  If your customers leave glowing reviews, these will pay dividends.  With the digital era continuing to grow and expand, review sites will likely become increasingly important.  The best way to maintain a good reputation is to provide flawless customer service.

  5. If the food’s not perfect, that doesn’t really matter

    Oh, it matters all right.  Food is the cornerstone of your business; it’s a simple fact that it must be your top priority.  But so often, restaurant owners are blind to their own imperfections. This is not routinely due to poor taste or quality, more often it’s due to a breakdown in the chain of command and quality control.  When your daily prep and presentation becomes routine, it can lead to steps being skipped. Then you have the nightmare scenario – your most popular dish veers away from what it used to be and the end product becomes compromised.  It’s critical to have a system to consistently review dishes and also to review your quality control measures.  Regular tastings will ensure that the quality is tiptop.

  6. Any customer is a good customer

    Naturally, getting bums on seats is what it’s all about but if you’re a fine dining establishment charging £100 per head, you won’t want to be attracting students, for example.  Equally, if your offering is a low cost, great value one, you need less demanding customers.  Make sure that you know your target market and aim to attract them to your restaurant by creating the right ambience, furniture, marketing – all the things that conspire to bring in the business you want.

If you’d like to chat to me about your restaurant business, please email or call me - jeffgitter@lubbockfine.co.uk, 020 7490 7766.

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