As I shared in my Business in Vancouver article last month, my friend Aaron Koo was formerly a chef for many years, having worked at several high end establishments. He’s seen a lot and I enjoy hearing his insights on the restaurant business.
One such nugget of wisdom is when you start a restaurant, whether you are about to open or within your first year, you need to have one of two things: either a lot of money to burn through or a plan for how your restaurant will survive.
You’ll need a lot of startup capital beyond your branding and renovation costs as operating capital as you won’t know exactly how your restaurant will do its first year – it could be an instant hit or you could be sitting in an empty dining room most nights. No one/not enough customers are coming in but your operating costs don’t stop.
Or you’ll need a plan for how you’ll get customers through the door to spend money to cash flow your restaurant. Ideally the plan will account for trends, seasonal changes, and special events, and most importantly marketing.
Ideally you will have both. A long term plan on how to get your restaurant into the black as soon as possible and enough money to keep you going through that period; with enough set aside for your emergency fund for when things go awry and for unexpected costs (which always come up).
It astounds me how often restaurants in Vancouver open with only one or neither. I’d wager that the majority of owners have an idea only “in their head” of how things will work and just want to open their concept, expecting that once people hear about how good they are, they will come in droves and the restaurant will be ok.
These owners didn’t do any market research, didn’t audit their location, didn’t create a brand, don’t know how to market to bring people in, and in many cases, start over staffed and paying (wasting) way too much for food and kitchen.
What they should have done was talk to some experts first, get some other opinions, get real help in different areas, cost out their menu, get proper branding and a marketing plan…
It doesn’t make sense that a restaurateur will pour so much of their own money (and other people’s money as well) into renovating a location and opening a restaurant and not make sure they have every contingency covered, especially a plan how to get people through the door.
With the high failure rate of restaurants in their first year, it’s evident that many restaurateurs are doing exactly that. I hope you don’t become a statistic as well.
Senior marketing consultant, Eat Marketing