Imagine yourself approaching a restaurant and noticing that the place is full. There is a waiting list to be seated, and despite the long wait time, people are still inclined to put their names down. Given all this, it’s reasonable to assume that this is a successful restaurant business. However, in reality, there’s much more to it.
In order to have and run a successful restaurant business, an entrepreneur must be well-informed in all aspects of the business and efficient business systems. The basics can be gleaned from restaurant management books. These will help a new business owner understand what it means to be a restaurant manager or owner.
Before opening a restaurant, it’s important to remember not everything is what it seems to be. In fact, what might look like a thriving business, can actually be in trouble. This is also important for people that are opening a coffee shop, opening a ghost kitchen, opening a food truck, and opening a bakery.
This article covers what it takes to run a successful restaurant business. Having a profitable menu, such as a prix fixe menu or a table d hote menu, is only the beginning of what you need to have a thriving restaurant.
Restaurant Business: What Is a Successful One?
A successful restaurant business means having great food, an ideal location, excellent service, and an enjoyable atmosphere. However, these are just the basics that may result in a successful restaurant establishment. In order for your guests to have a consistent and exceptional dining experience, a lot of work must be put in behind the scenes.
There are numerous factors that the guests don’t see when it comes to having a successful restaurant business. These include having:
- An experienced chef
- A solid location
- An established business concept
- Reliable staff
- Restaurant technology
- Loyalty programs
- Solid financial standing
A restaurant and bar owner must learn how to run a profitable establishment through these key factors and more. Otherwise, they might end up with a failed business. Be sure to also familiarize yourself with O2O efforts to attract new customers from the online realm.
Key Takeaway: Having a successful restaurant business means much more than just having good profit. It also means you have a good location, food, top-notch service, and an enjoyable atmosphere.
Common Reasons for Restaurant Failure
The biggest reason for restaurant failure is the lack of a solid restaurant business plan. Aside from planning menu options, this includes planning every last detail of your restaurant. Kitchen appliances, floor plans, menus, and staff sections should all be planned out ahead of time.
To ensure proper planning, funding, and management of your restaurant, it’s crucial to write a business plan. The details of your business plan depend on your establishment and the niche market you serve. It could be a restaurant business plan, winery business plan, eCommerce business plan, or a subscription box business plan.
It’s also common for restaurants to fail due to a lack of vision. Without a clear vision of what kind of restaurant you want to have, it will be tough to bring it to life.
5 Tips for Having a Successful Restaurant Business
Restaurant competition is fierce. That’s why it’s important to focus on a few key factors when running a restaurant business so that it can be successful. Paying attention to your restaurant profit and loss statement is crucial, but it’s not enough.
Some of the most important factors of running a successful restaurant business are intangible. This means that they can’t be classified as an item on a spreadsheet. Below are five tips for having a successful restaurant.
1. The 3 Essentials: Chef, Location, Concept
It’s rare to come across a successful restaurant without an excellent chef, a great location, and a solid restaurant concept. These three essential factors work together. The location of your restaurant and your chef should fit well with the restaurant concept.
When it comes to location, accessibility is huge. If your restaurant is accessible, you have a high chance of running a successful establishment. Accessibility refers to the location of your eatery and in terms of mobility so that all diners are accommodated.
The concept of your restaurant can be broad or specific, and it depends on the kind of food you want to serve such as fine dining or fast food. This is where your chef comes into play. Your chef will work with your restaurant concept to prepare foods that correlate with your menu.
2. Reliable Staff
The people that work for a restaurant are part of what makes it profitable. Happy staff members come to work on a daily basis and have a positive effect on work morale. This is reflected in the customer service that is provided to the guests.
Common restaurant staff includes wait staff, bar staff, and different types of chefs, including an executive chef, chef de partie, and sous chef. In order to retain your restaurant staff, it’s best to offer them competitive pay, time off, and benefits. Investing in your employees will help you increase your retention. It will also give you peace of mind that they’re getting the healthcare they need and are paying their bills.
Even though good benefits and pay is a crucial factor in having a reliable staff, a supportive and communicative environment also helps. Your staff should feel comfortable talking to you or human resources (HR) about anything work-related. This includes emergencies, scheduling, and company policies.
Your staff is part of your business, and you should treat them as such. They’re the eyes and ears of the restaurant. Each member of your team contributes to your success when running a successful restaurant business.
3. Utilizing Restaurant Technology
Competition within the restaurant industry is continuously increasing. Due to this, businesses need to adapt to the latest restaurant industry trends in order to keep up with the changing customer demand. These trends include food trends, beverage trends, supply chain management trends, direct to consumer trends, and of course, restaurant technology trends.
Some technological features that consumers are looking for in restaurants are an online ordering platform, online reservations, and modern restaurant payment technology including contactless payment, and contactless delivery options. This kind of restaurant tech helps to streamline various processes within the restaurant business.
Investing in a restaurant or bar POS system will allow you to manage your daily operations while reducing human errors and paperwork. These operations include staff scheduling, invoicing, inventory management, inventory turnover, and cash flow processes. Restaurant management software can also help streamline everyday operations.
It's also crucial to have an ERP system. Understand what is ERP and how it helps simplify daily business processes. You may want to consider using a business process flow chart template to create a map of your business processes. Even an eCommerce business guide may help in some cases.
4. Loyalty Programs
It’s crucial for any business to attract new clients. However, retaining existing clients is often less expensive than attracting new ones. POS system software is restaurant tech that allows you to run loyalty programs based on your existing clients.
With this software, you have the ability to add customer profile points when they place orders. It will also allow you to make customers eligible for discounts or promotions, and add other special restaurant incentives.
A loyalty program is likely to trigger customers to purchase more. It’s also likely for them to refer new customers to your business, therefore increasing your sales, revenue, and customer base as a whole.
Providing your customers with an excellent experience is something they expect. It’s also one of the quickest ways to get a successful restaurant business off the ground. Customer loyalty oftentimes outweighs attracting new customers because those newbies may never come back.
5. Manage the Numbers
Numbers are always a factor when running a business. In order for you to achieve restaurant success, you have to start with the right amount of capital. This will get your restaurant off the ground.
The not-so-glamorous part of running a business includes paying attention to the profit and loss statements as well as the cash flow. This is how you’ll keep track of the performance of your restaurant.
Familiarize yourself with the following important restaurant performance indicators:
- Cost of Goods Sold (COGS). This number refers to the cost required for creating each menu item that you sell.
- Cash Flow. Cash flow refers to the amount of cash going in and out of your restaurant on a monthly and annual basis
- Prime Cost: Attributes to the cost it takes to operate your restaurant. This includes COGS and labor cost.
- Retention Visitor Rate. The cost required to acquire a new customer compared to an existing customer.
- Revenue Per Available Seat Hour. This number is calculated by dividing the amount of money you’re making by the available seats you have during working hours.
Frequently Asked Questions About Running a Successful Restaurant Business
What Makes a Successful Restaurant Business?
A successful restaurant business starts with a solid restaurant identity and includes the following:
- The three essentials: a chef, location, and concept
- Reliable staff
- The use of restaurant technologies
- Loyalty programs
- Properly managed numbers or restaurant bookkeeping
Do Restaurants Make Good Profit?
Yes, restaurants make a good profit. However, they tend to have low profit margins. Restaurant profit depends on different factors including the type of restaurant, its size, and economic factors. On average, it takes about two years for a restaurant to reach its break even point and then turn a profit.
What Do Customers Look For In a Restaurant?
When looking for a restaurant, customers tend to prefer a comfortable and pleasant environment with high-quality food. They also value kind and respectful restaurant staff, easy payment methods through payment processing software, and minimal unwanted disturbances.