18 Dec Starting a Restaurant in a Down Economy: Outrageous or Opportunistic?
Starting a restaurant is by nature a difficult and trying endeavor. Studies have shown that an average of 50-60 percent of restaurants fail within the first five years, and 23 percent fail within the first year. That’s when the economy is healthy. Add a down economy to the mix and flying pigs would seem a more possible scenario than opening a successful establishment.
So if you’re an ambitious restaurant entrepreneur, should you just wait until the economy is in better shape before tackling a new eatery? Not necessarily.
If you have all of the right ingredients, you can build an establishment that caters to a penny-pinching public, and can survive through a struggling economy and beyond.
Keep an Open Mind
You’ve been dreaming about your restaurant for a long time. You’ve developed your ideal concept, brainstormed menu ideas and shopped around for the perfect décor. It’s all set in stone. While it’s great to have a plan and set lofty goals, it may behoove you to think outside your firmly established box. Especially in a recession when people are choosing to stay home and cook, it’s crucial to stand out from the competition. So if you’re opening an Italian restaurant, for instance, and the area where you’re planning to open your location is already saturated with traditional Italian eateries, consider opening an Italian-Mediterranean fusion restaurant to stand out from the crowd. Be imaginative, find out what the people want and be willing to stray from your original plan to get customers through the door.
Follow the Trends
While your mind is open, you might as well entertain the idea of incorporating some of the latest trends in the food service industry into your concept. While you don’t want to base your entire restaurant on a trend that may not last, giving the public a taste of something new—even if it may be temporary—can give you a leg up on your competitors. According to the National Restaurant Association’s “Chef Survey: What’s Hot in 2009,” some of the top trends that are bringing diners back to the table include:
- Locally grown produce
- Nutritionally balanced kids’ meals
- Sustainable seafood
- Gluten-free/food allergy conscious options
- Free range poultry and pork
Or come up with other ideas that create interaction between your chef and diners, like cooking demonstrations or classes. Give customers an experience and options they can’t find anywhere else or recreate at home and you’ll give them a reason to put eating out back in their budget.
Preparation with a Capital P
It may go without saying that undercapitalization and success don’t go hand-in-hand, but in a tough economy, having sufficient capital before you ever start building your restaurant is absolutely crucial. While you may have enough money to open your business, do you have enough to keep it open? It’s a good idea to have enough capital to operate for six months from the start, as well as a back-up source for capital that you can tap into if the economy doesn’t bounce back for a while.
Read one of our recent posts, “Throughput: How to Make Sales Per Hour Work for You,”for tips on how to operate more profitably, even in a down economy.
The Main Ingredient
For any restaurant to last, recession or not, it has to give customers a reason to go out to eat. Choose your target market and find out what they want. Then combine that with what you do best and add a pinch of creativity to cook up a popular restaurant that can take the heat, even in a down economy.