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What Can Go Wrong in the Restaurant Business?

By: Maggie Lonsdale BA (hons) - Updated: 9 Oct 2012 | comments*Discuss
 
Restaurant Business Business Failure

The bottom line is that setting up a new restaurant is a risk. All businesses are a risk, of course, but a disproportionately large number of restaurants go out of business in their first year.

A good way to make sure that yours is not one of them is to arm yourself with the information about the common pitfalls. Many restaurants go out of business for the same reasons, so let’s have a look at the five major issues and how you can avoid them.

Money Worries

This is the biggie. A common cause of restaurant business failure is a lack of money, or a poor use of available money. For example, many new restaurant owners overspend on the décor of the restaurant and then they are in trouble before they have even started trading. Or they may build up too much credit with a supplier who then asks for it all to be paid straightaway.

Use the available ‘sale or return’ service from wine merchants rather than building up an expensive cellar that you may or may not sell. Be accurate in your menu planning and only buy and pay for what supplies you need. Think about what ingredients you can ‘add value’ to, rather than relying on expensive products that you may not sell and are then left with.

Staffing Issues

It is very hard to find good staff, both for service and chefs. In a traditionally difficult industry, UK trained chefs are few and far between, with staff from overseas often requiring costly visas and accommodation. Many of the successful start up restaurants do not rely on additional staff because the owners – perhaps a husband and wife team – are the chef and front of house.

A good way to find reliable staff is to make contact with your local catering college. Offer the most promising student part time work that fits in with their studies and you will have a mutually beneficial situation.

Insurances, Health and Safety

Too many new restaurant business enterprises think that the rules and regulations do not apply to them. However good you think your health and safety is, you still need to stick to the actual law surrounding this issue. Ask your local Business Link to guide you in the right direction – there is plenty of business advice available.

The legal aspect of running a restaurant also relates to the necessary insurance. Again, Business Link can make sure you have the correct business protection. Just don’t leave it to chance – all you need is someone slipping over and deciding to make things difficult for you.

Not Catering to Your Market

A common mistake is to open the sort of restaurant you would like to go to, rather than one which suits your locality and your market. Unless you have very deep pockets and it doesn’t matter if your business earns any money, you must assess the market and your target audience before you start getting the interior decorated in gold lame and a ‘caviar only’ menu printed on marble tablets.

Outside Factors

By their very nature, outside factors that can cause a restaurant to fail are out of your control. Issues such as the BSE crisis for a British steak house, or the crazy obsession with Atkins Diet just as you launch your pasta restaurant cannot be foreseen, but what you can do is as much research as possible in trends in eating and any other factors that may affect your business – environmental, social and financial.

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