7 Mistakes To Avoid While Running a Restaurant Business

Starting a Restaurant can be an exciting idea, and it is a dream to many, but according to the reports, 95% of restaurants get shut down in the first 5 years, which simply means that only 5% survive after 5 years. So in this post let’s discuss about some most common mistakes food business owners make so that you can ensure that you are not doing the same.

1. Running a Restaurant is not a Part-time job.

So, the first mistake people make is that they think a restaurant/cafe is a passive income business, so if they set it up first, then there is no need to look into it again, it will function on its own and keep generating the profits.

Before starting, I want to make it very clear that running a restaurant or food business is just like running any other business. It is no different than any other business, in which you have to take care of store location, marketing, sales, costing, margins, customer experience, product quality and what not!

But, on the contrary, food businesses, just like any other business, need full attention, at least until you have created all the SOP’s and auto pilot mode for your business. But even after that, you will have to look after multiple aspects.

Therefore, Gone are the days when you can put a restaurant business into the bucket of passive income.

2. Expenses

As discussed in the previous point, “restaurant” is a “business”. So, in business, you would have to keep track of your expenses, they can easily go out of hand if not taken care of.

Common expenses in your restaurant can be

1. Rent
2. Salaries
3. Electricity bills
4. Equipment Maintenance
5. Raw material supplies
6. Other miscellaneous costs.

Proper accounting helps in calculating your margins and setting your sales targets.

3. Menu Setup

One of the most common reasons for the restaurant to fail is poorly structured food menu pricing. First of all, you must be aware of costing of all of your dishes. Ideally price of the dish should be no less than 3 times the cost, keep in mind that you are not just selling the food, you are selling a full service which includes other costs as well. Conduct a thorough market research and compare with the competitor’s prices and quality. Pricing plays an important role in Indian markets.

After setting up the menu pricing properly, you can try to up-sell and cross-sell the dishes to increase per-order value.

4. Location

For any food business, location is one of the most important factors to consider, so make sure to choose the right of location for your restaurant.

Never hurry in choosing the location for your restaurant, if can be a make or break factor.

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4.1 Points to keep in mind while selecting the right location

1. Type of crowd in the location: Before finalizing a location, think research about the type of people visiting that location. For example, if you start an expensive fine dining restaurant in a location where the majority of the crowd involves students, it won’t be a good idea, in that case, you can start some QSR to serve pizza or burgers.
2. Rent: See if the rent of the shop fits your budget.
3. Existing competition: Research, who is your current competition in that location. For example, if you are planning to start a burger store, that location already has Burger King in place, so you will have to work hard in terms of branding and marketing to beat that up. You will have to play with brand positioning by setting up a clear USP (Unique selling proposition).

💡 A unique selling proposition (USP) is a short statement that explains what makes a product or service better than its competitors.

4. Shop Location: Usually, restaurants located in front of the road or on a road corner performs better than the ones which are in back side, or in small hidden ally, as they have visibility advantage. So, pick a shop which is in the front side of the market and has a bigger front opening.

5. Packaging

Packaging is one of the most ignored factors in food business and good packaging becomes more important in the case of cloud kitchens as it serves as a “face of the restaurants/kitchens” who do not have any store-front.

When it comes to cloud kitchens, food packaging is your store front.

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Good packaging serves two purposes:

1. Keeps food fresh, and prevents food from spilling at the time of delivery.
2. Works as a marketing agent: Brands having good food packaging get more social media shares and also make customers feel amazing!

You are not just selling food, you are selling the experience. So make sure it is worth every penny!

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So investing in good packaging is always a good idea, If you have just started the restaurant and don’t have budget for that, you can invest in good quality generic packaging and get stickers printed which costs very less, and can get the work done, but please don’t send your food like this 😬

6. Product

In Restaurant business, every dish is your product. So please treat it seriously, every dish in your restaurant must take care of these four points to ensure the overall success.

1. You have to be clear about the costing, and it should cost same, every time it is made
2. If must have a defined recipe, it should taste same every time.
3. Picture of, how the dish will be served to the customer or how will it be packed (in case of take away orders)
4. Keep making changes to your recipe, such that the product quality and taste keeps improving without affecting much on the costing.

A professional chef can help you out in all this process and make your life easier 😉

7. Team

Staff training is often ignored, when people start a restaurant. You can create a training manual for your new hires on how to handle kitchen, how to make the food consistently and most important, how to treat the guests with respect, which includes tackling the difficult situations.

Summary

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