Three in five new restaurants will fail within 36 months. That’s a sobering statistic, and there’s a reason for it. The hospitality industry is one of the toughest to do business in and succeed at. The biggest reason most new restaurants fail to get off the ground is the lack of funds or the inability to maintain control over their costs.
How can you ensure this doesn’t happen to you if you want to open a restaurant?
When it comes to your costs, you need to plan ahead and consider everything – be it minor or major. For example, floor space can cost run anywhere from $100 to $800 square foot, dependent on your needs. Your plumbing, electrical and mechanical needs can run anywhere from $70,000 to $100,000 – same for equipment. Make sure your budget includes furniture.
It’s imperative to watch your spending when you decide to open a restaurant. You want to stand out but not at the price that you run yourself out of business. What are some things to consider in your budget?
Used vs. New Equipment
Believe it or not, you should be more concerned with getting the right equipment for your restaurant instead of new equipment. Restaurants that are going out of business will often have equipment you can buy for cheap. Consider second-hand options or doing some shopping on the Internet. Never buy something you don’t need right away.
Decorations
Like your business equipment, don’t get fixated on décors. You can always create a memorable experience on a low budget. All you need is a couple of impactful elements that can speak volumes to your customers. Consider paint colors or soft lighting. Add an area where guests can sign their names. Little inexpensive things go a long way in making a big impact.
Don’t buy anything fancy until your restaurant is a bit more stable.
Technology
You need to purchase a restaurant point-of-sale system, which can handle the receipts, payments, inventory, etc. Be sure to find a system that includes bookkeeping or can be integrated with one. Be sure you consider what technology your staff may need to take orders. Do they really need iPads? If you want to go hi-tech, go for second-hand models or older models.
Marketing
When you need to keep your marketing costs low, the Internet is your ticket. There are all kinds of social media sites that can help spread the word about your business for free or low price. However, you must be actively involved with the social media account to reach your target audience and increase the base. While email marketing isn’t as nice as social media, it’s still a very effective online marketing technique to reach your audience.