Restaurant fails 101
Having the desire to serve food is a great reason to open a restaurant, but as many are aware in foodservice and hospitality, it takes much more than a whim and a little bit of capital to open and maintain a foodservice business. According to the National Restaurant Association, only 70% of businesses make it to year five in the foodservice industry. And of the ones who survive, about 90% of those will stay in business for a minimum of 10 years.
So, what is the best course of action for lasting success? Proper planning and foresight! There is a saying that goes in the world of manufacturing and engineering, “Do it right the first time.” A saying that when put into action, provides products that consistently meet customers’ needs and ensures lasting success for any business.
An important way to safeguard against failure is to know what leads to it. Our team of professionals have been in the foodservice industry for decades and have seen many failures as well as triumphs.
In order to help you stay on the right track, we’ve compiled the most common fails that could lead a foodservice business to close its doors within the first five years. The top reasons include (but are not limited to):
- Low startup capital
- Inexperience
- Bad partner relations
- Unfavorable location
- Poor marketing
- Inconsistent service
- Poor inventory and management
- Lack of originality
- Not knowing your audience/client base
There’s another very important piece to this puzzle, and that is the equipment purchasing process. Not having what you really need from the beginning can lead to the downfall of any restaurant business.
There’s more to opening a restaurant than building it out, equipping and decorating a space. There’s having months of payroll in advance, capital for utilities for the first six months at a minimum and having enough inventory in your pantry, prep kitchen and coolers before opening night.
One of the things that the pros here at ACityDiscount wholeheartedly advise against is under-sizing and cutting back costs on your equipment. They stress that this is not being looked at as an opportunity to upsell, but useable advice from decades of experience in the industry with small-to-medium restaurant businesses. Below are some tips from the pros on how to best prepare any restaurant business for success beyond the first five years.
1. Invest in efficiency
Invest in high efficiency items that will give you a better return on investment in energy savings and will bring down the cost of ownership of your equipment over time.
Most times, the pricier option will save you more in the long run because it is simply built better and is able to produce consistent results, in a more efficient manner, in a shorter amount of time.
One of the main pieces of equipment that, when skimped on, can have terrible effects on business are fryers. Our sales team laments over fryers being notorious for not being very efficient, and can eat up most of your utility costs, if you let them.
Pitco makes a high-efficiency gas fryer that uses a 35 lb. tank, which will cook as much as a 45 lb. tank with 70,000 BTUs instead of the average 115,000 BTUs – this translates to energy consumption being decreased by half and oil usage decreased by 25%. Although the unit costs about 40-50% more, it will pay for itself in energy savings during the first 12 months of operation.
PRO TIP: Find test kitchens in your area and test out equipment and food concepts before diving in.
2. Overestimate storage and refrigeration
When you are opening a restaurant or taking over a space, making sure you have enough cold storage is key, and having too much is always better than not having enough. That way you can grow into your space.
Not having enough space can lead to frustration and overspending. Most people going into foodservice have unrealistic expectations when it comes to storage and refrigeration, according to ACityDiscount pros. Maximizing on cold and dry storage is one of the most important factors for lasting success.
The more space you have for storage means the more your product can be spread out and items can remain easily identifiable and accessible. Additionally, when products are piled on top of each other, it becomes difficult to gain a realistic understanding of your inventory. The more spread out the inventory, the easier it is to maintain and incorporate the FIFO (first-in first-out) rule, thus managing waste in a more effective way. Less product loss = better cost of ownership.
Having to receive food deliveries every day because you don’t have enough storage negatively impacts your cost of ownership over time. When you do have more than enough storage, you can take advantage of bulk purchasing or buying larger amounts of food at discounted prices, and this will pay dividends in the long run.
3. Give yourself room to grow
Being flexible and giving your business room to grow in your physical kitchen space is also something that
Build your kitchen with room to grow in mind. Hoods, for example are a very important piece of this puzzle because it’s where you will place all your cooking equipment, and as your business grows, so will your need for equipment.
If your hood is going on a back wall and your wall is 12-feet wide, when you first open you might only put 4 ft of cooking equipment on that wall, so you might buy a 5-ft hood (including overhang space). But let’s say your restaurant grows and you need to add on to your cooking equipment. Buying a brand-new hood is going to be more expensive than simply purchasing a longer hood in the beginning and leaving space to add on to later.
Putting your equipment on casters is also important for growth. As your business grows, your employee base grows and your menu changes. It’s important that you can move equipment around in order to accommodate production and keep it fluid.
4. Be picky about your menu offerings
A bigger menu means more food stock and more space you may need. Keeping your menu concise and focusing on the things you specialize in will work best for keeping inventory down and saving you precious capital. You could even repurpose the same ingredients you buy for variation in your dishes.
For example, one of our customers, Da Vinci’s Donuts, specializes in making delicious donuts from scratch. They are so successful at their specialty, they quickly went from having one location to four in Georgia, and they plan to open three more by the end of summer 2019.
PRO TIP: The great thing about building the capital to open more locations with a concentrated product or menu is that you already know what kind of equipment you will need for future locations, so building out new kitchens becomes a seamless process.
Over time, experimenting with different menu items is where the idea of “failing-fast” could come into play. By breaking concepts or implementations into small projects, executed over a short period of time and measuring results, chefs can try new menu items or concepts in order to evolve in a more concise fashion.
5. Be cautious with used equipment
Many restaurateurs or business owners who are starting out are working within a tight budget and are looking for good deal on used equipment. In this case, it’s important to practice caution when buying from any used equipment dealer. If there is a price that seems too good to be true, it probably is.
Here at ACityDiscount, we use a rigorous process to asses, repair and price used equipment so we can provide our customers with the best deal. After sourcing used equipment, each item is carefully inspected for damages and assessed for resale. Not everything we purchase makes it to the website or showroom floor.
Certain items such as refrigerators, ranges and ice machines go through a detailed testing process at ACityDiscount, adhering to the most up-to-date industry standards so that we are not reselling any outdated pieces of equipment or items that do not meet industry code.
Ice machines are run for certain periods of time to test out ice loads. They are then sanitized, and non-functioning parts are replaced. Refrigeration is tested anywhere from two days to two weeks, especially during the hottest months of the year in Georgia. Jennifer Hyaduck, head of redistribution and used equipment explains, “the environment works out because if we can put it through the test in our warehouse, it will work fine in your kitchen.”
Gas burners are also tested to make sure all burners work, nothing is clogged, and parts are replaced. All testing processes are well documented for these item types. Warranties are also offered on a case-by-case basis.
When looking to buy any piece of used equipment, make sure the dealer you are buying from has a process of checks and balances so that you don’t end up with equipment that fails you.
6. Don’t rush opening day
This is the last and probably most important tip. Rushing to your opening date is a sure way to start off on the wrong foot in this business. There are many moving factors that one needs to be aware of before opening day. Our pros advise against setting a hard date for opening and recommend being flexible.
Anything can go wrong or take longer than expected before you can open your doors, from foodservice equipment delays in shipping to health department paperwork. If you have purchased any type of specialty equipment items, make sure you plan for lead times before scheduling your opening day. The worst mistake any restaurant or food service business could make is to fire up all the equipment for the first time to use on opening day.
PRO TIP: Think soft opens and private opening events and ramp up from there to an official opening night.
Our pros are here to help and advise you on new and used restaurant equipment at every stage of your business. Give us a call at 404-752-6715 (ext. 2 for sales) or stop by our showroom in the Atlanta suburb of Norcross at 6286 Dawson Blvd NE to speak with one of our experts today.
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