Thu, March 28, 2024

Lessons From Restaurants

 

Don MacNeil is the former Marketing Director of Windsor Jewelers and long-time on-air radio professional.

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Is it just me, or…

Lessons From Restaurants

Have you ever driven past a freshly opened restaurant – one that’s clearly a mom-and-pop startup with a sign that’s been painted by a family member and you can still tell what the building was in a former life, and thought, “Doesn’t stand a chance?”

Maybe there’s a bank loan involved in this noble, but doomed endeavor.  Worse, maybe instead, life-savings are at stake, but the net result is sadly the same.

This time, we’re going to take a look at restaurant dos and don’ts through the lens of basic principles that apply to your small business, regardless of type.

Conventional wisdom for decades held that – based apparently on some Ohio State University study done in an unnamed year – 60% of restaurant startups fail in the first year and 80% don’t make it to five years.

Then in 2014, a pair of economists wrapped their arms around a ton of data from 1992 through 2011 and determined that the reality was far lower – around a 17% failure rate in the first year overall, although that figure grew when 20 or fewer employees were involved.

By comparison, other service-providing businesses had a 19% failure rate in the first year. 21% of offices of real estate agents and brokers fail in the first year, and the number is 19% for both landscapers and automotive repair. The failure rate for full-service restaurants was found to be the same as that of insurance agencies and brokerages.

The National Restaurant Association pegs first-year failure at 30%.

Most of these studies offer up lists of failure reasons, such as not enough industry experience, not enough operating capital, poor location, not knowing the numbers, ineffective menu pricing and planning, failing to adapt, being too trendy, high staff turnover rates, inconsistent food and service, not enough repeat customers, mixing family and business.

And thanks to social media, one new one: you’re forever just one bad lasagna away from a Yelp review that can sink you.

The stunner is that none of these lists mention a restaurant’s crucial staging aspects, like curb appeal, professionalism of signage, attention to overall atmosphere or how to market the place. Isn’t a huge reason you dine out the magic that it’s not your kitchen?

Over the years, I’ve wrestled with the idea that at the moment an application is made for a business license – and just to make certain Mom and Pop get off to their best possible start – a new venture would be assigned a temporary marketing firm whose task it would be to head off mistakes and identify insufficiencies. Wouldn’t the loaning bank be totally on board with this, and be motivated to underwrite the brief period the marketing folks would be needed?

I’ve profiled a restaurant’s startup challenges here, but the principles apply across all enterprises. You may be great at what you do, but not cut out to launch and sustain a business. They’re two very different skill sets.

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