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6 Decisions Every New Restaurant Owner Has to Make, and How to Make Them

Posted by PCC Small Business Development Center on January 16, 2017

opening-a-restaurantIt goes without saying that opening a restaurant is a huge commitment. This is especially true for those who have never opened a restaurant before, and are putting all their chips on the table to fulfill a lifelong dream or passion.

It’s critical to have a great game plan before the doors even open, and to make the right decisions that will give your new restaurant the best odds at success. Here are six crucial decisions that anyone starting a restaurant will face, and how to make the right call.

1. Deciding What to Know

Every new owner comes from a different background, and with different strengths and weaknesses. Therefore, it’s common for new restaurant owners to be faced with figuring out what they should know about the industry and their business. The answer to this one is simple: a new restaurant owner should know everything.

Even if you hire people to do things like manage the kitchen and do payroll, the best restaurant owners know everything from front to back when it comes to their business. This allows them to make critical decisions without hesitation because they know exactly how things work and what the ramifications of their decisions will be. It also provides them a greater appreciation for their employees, as they know exactly the kind of hard work that goes into things like food preparation, sanitation, and bartending. The best thing to do is seek out mentorship from successful restaurant owners in your area. How did they educate themselves? What areas of the business are they most involved in? Also, listen and learn from your future staff, even at the lowest levels. Your cooks know all the ins and outs of food preparation, for example, so soak up as much knowledge as you can from them.

2. Building a Strong Business Plan

Deciding whether to build a business plan is a no-brainer, but figuring out how to develop a strong one can be complicated. From a high level, you need to think about what you’re selling, and what are your requirements for becoming profitable. More specifically, think about things like location, number of potential customers, and what you‘ll be charging. First, you’ll need to include an executive summary that lays out your general strategy, and rationalizes why your concept (and you) are well-positioned to succeed. The next section should be a company description, which gets into the nuts and bolts of the name of your restaurant, ownership structure, and relevant demographic data. This is to support the executive summary by providing evidence that you will be able to serve the local market.

This will then logically lead into a market and competitive analysis of the area. A good restaurant business plan clearly lays out the competition, including their location, pricing, and target demographic. You also want to break down the local consumers in your area. If your restaurant is fast casual, for example, you’ll need to figure out how many working professionals might be in the area as target consumers. Finally, you should outline the management and operational strategy that you’ll implement. Who will run the kitchen? What about the finances? You need to have the right people, and systems, in place well before the doors open to make sure mistakes are eliminated, or at least minimized.

>> Learn more about Restaurant Business Builders

3. Creating a Winning Marketing Plan

Any great marketing plan has a singular focus on your customers, who they are, and what they expect out of a great restaurant experience. And don’t just think of advertisements as your main source of marketing, because when it comes to restaurants, there’s nothing more important than word of mouth. Customers that have a great experience will spread the word, which is some of the best marketing you can get.

In addition to a customer experience strategy, your marketing plan should illustrate ways that you’ll partner with local advertising outlets that will target your area and the customers you’ll need. You’ll want to include a SWOT (strengths, weaknesses, opportunities, threats) analysis to lay out the landscape you’ll be marketing in. Then you can drill down into the “Four P’s,” which are Product, Price, Promotion, and Place. Any good marketing strategy will address these factors. How will your pricing bring people in? What promotions (and where) will you run? What makes your product unique and attractive to consumers?

4. Location, Location, Location

Location is one of the biggest factors that can make (or break) your success in the restaurant business. Think long and hard about where you’ll be located, and base your decision on the demographics and economics of various potential venues. If your concept is higher-end Japanese fusion, for example, opening in a blue-collar neighborhood might not be the best choice. On the other hand, areas where the concept is most likely to work might already be saturated with competitors. Your location should integrate well with your concept. Also, consider the availability of parking, neighboring businesses, and general safety of the area. These are all key determinants as to how much foot traffic (and eventual customers), your location will attract.

5. Being Clear on Cuisine

There is no “right or wrong” cuisine, that will all depend on your concept and target consumer. But the most important thing is deciding on a cuisine, and sticking to it. And when deciding on cuisine, know and take food costs and pricing into account. A steakhouse is likely to incur higher costs than a fish & chips shack, so make sure that the type of cuisine will work in terms of your costs, profitability goals, and your customers’ budgets. A big mistake that new restaurant owners make is trying to offer too many things in an attempt to attract multiple types of consumers. It’s best to pick one type of cuisine, and stay true to it, so you’ll develop a strong niche and reputation within the community.

6. Hiring Staff and Employees

New restaurant owners take many different factors into account when hiring staff and employees. Skills, years of experience, and how well they interview are all important. But what’s even more important is hiring people who believe in your vision for the restaurant. They need to share your belief that it’s a great concept, and people will love the experience. You should also bring on people who can sell, regardless of their position. Servers, for example, can be some of your best salespeople in terms of finding out what customers like and recommending the best dishes. Great communicators and sales-oriented staff can generate tons of revenue on their own.

In general, you should review your job descriptions carefully when posting them and make sure they match the expectations. If you’re opening a burger diner, don’t have ten plus years of fine dining experience as a requirement in the posting. It’s also a good idea to network with local culinary schools and students, to get a feel for the talent in the market and what they’re likely to charge. And finally, focus on hiring for attitude and not just skills. Skills can be learned and acquired, but someone with a great attitude and belief in your vision will pay dividends for years to come.

Few business ventures in life are more daunting than opening a restaurant. But by considering these six key decisions before taking the plunge, you’ll give yourself the best chance at a being a successful restaurant owner.

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The Oregon Small Business Development Center Portland Community College has  helped thousands of businesses over the past 40 years. We combine one-on-one  advising with programs taught by business experts, giving our clients the  resources they need to grow their businesses. We’ve celebrated many successes  with our clients. We'd love to celebrate your success. 

Topics: Small Business, Stories & News, Retail, Starting a Business, Food

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