It is such a revolving business with so many factors that the article title should be “Top reason restaurants fail”. For one an investment into a restaurant is not cheap, a small location with basic kitchen and just a few tables and chairs, a counter and a coffee table will cost around 60k to get started. Then you have multiple workers, kitchen staff, front of house phone handler and delivery guys. On top of all the fixed costs, rent, utilities, basic expenses such as trash collection and window cleaners - the costs don’t end.
The reason a restaurant business is so delicate is they operate on very thin margins. Each product sold increases a variable expense and increases fixed cost of doing business as well - this is a hidden factor that many restaurants tend to overlook. But if a business goes from 40 tickets to 60 tickets during a standard dinner hour, more than the food cost is required to handle those orders. It’s possible an extra prep person and a delivery person will all come into play. So no matter how you look at a restaurant the margins and profit is always thin, there is virtually no breakthrough point at which the restaurant becomes clean profitable because the expenses rise with every level of growth.
After analyzing large amount of various restaurants, we came up with a few tips on what is most likely to work. Efficiency, probably the most deciding factor in the success of a restaurant. The cleaner an operation, the higher chance of success. The most successful restaurants are the most focused restaurants. Small set of products can make a huge menu and illusion of lots of options, but a small set of menu allows to create efficiency in-house.
If you look at most established franchises, each one has it’s own focus. The product list is actually very small in each franchise to keep operation easily functioning. For example Wendy’s, the entire menu consists of the following (Bun, Wraps, Chicken Nuggets, Chicken Tender, Grilled Chicken, Chicken Pattie, 2 type of beef patties, fries, chili, cheese, salad, packed dressings) - The entire menu is around 10 total items, but the menu board is huge.
A Restaurant is already reliant on so much deciding factors, the chef, the prep, a phone person, a delivery guy/girl. One calls out, and the entire operation can fall apart. Unless the business puts efficiency first and create less reliance on any single factor. The business should always be able to run with at least 50% of the workforce gone at any given time. The worst thing is when one single customer has to hear “A driver called out so your pizza is a little late” - because today these same customers have so many options, so many choices and everyone wants it “now”.
Our number one tip is to focus on efficiency. Starting from the kitchen to the operation. Even if you have enough employees to cover tasks, if it’s possible to automate them then do it. For example our Online Ordering solution can help automate the order handling process. A food vendor may be able to supply fresh pre-cut vegetables. Of course each business needs integrity and it’s own prep, but some things may be automated or done in more efficient batches.
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