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00:00 - Intro
1:46 - 3:14- #1 Fixed cost saving
3:15 - 4:10 - #2 Partner with your food supplier
4:11 - 6:19 - #3 Be a strategic marketer
6:20 - 7:53 - #4 Variable costs (Labor & Food cost)
7:54 - 9:03 - #5 Don't get fancy!


Today we are talking about Restaurant Startup Mistakes. Why do restaurants fail?

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Here are some of the reasons why restaurants fail.

Only 30% of businesses make it long enough to celebrate their 3rd year. There’s a lot to consider when opening a restaurant. How are you going to ensure that you make it through the first year?

#1 Fixed Cost Savings

These are costs that you have no control over. They are fixed when sales are good and when they are bad. Sixty to seventy percent of businesses don’t survive 1-3 years. Rent is the biggest cost in a business. It should be approximately 7-9% of your sales. Rent will make or break your restaurant.

To ensure that you won’t have to close your doors early on, put 6-12 months of fixed costs in savings before opening your restaurant. These costs include rent, insurance, basic bills, etc. Even if sales are not the best in the beginning, at least you’ll have peace of mind financially and won’t have to worry about closing your doors.

#2 Partner With Your Food Supplier

Develop that prime relationship with your rep. Each month, negotiate deals for certain items you use the most. Remember, you’re just starting out and every cent counts. Think of your top 10 most used items and make those deals. You’ll be thankful for that relationship in the months and years to come.

#3 Be a Strategic Marketer

You may not have much money in the beginning, but it is critical to spend it on marketing. It is an investment, not an expense! It is also non-negotiable. You have to spend money to make money and get those customers in your doors.

The minute you open your restaurant, you are going to have sales reps walking in or calling you. Companies like Yelp, Trip Advisor and Google Places, make their money off of your advertising. You might even have the local newspaper wanting you to place an ad with them.

It may sound good, but also may not be in your best interest. May of these companies will have you sign a contract and pay fees. This will not help you make dough, so it’s critical to read all the fine print and make smart decisions. We spent thousands of dollars in the beginning with our first location and learned some hard lessons. Weigh all your options and see which ones give you the best b. for your money.

#4 Variable Costs - Labor and Food Costs

One thing that makes the restaurant industry hard is the overhead rate. It is variable depending on how much staff you have and food costs is based on the percentage of sales. We have more control in these areas.

If sales are not good, we can send staff home. We can adjust how much food we order each week. You need to be obsessed with these two areas. It’s important to have a good POS system. If you have any questions on this, please send an email to makingdoughshow@gmail.com. You need to be able to remotely check your labor from your phone.

We always try to be between 20-25% plus all the taxes we have to pay. Be on top of your labor in your first year or you could be losing money. Check labor every hour or even every half hour.

#5 Don’t Get Fancy!

In our first year, we had flooring that was falling apart, chairs that needed to be replaced and the decor was not our style. We had to “let it go” and do only what was necessary in that first year. We learned to be frugal. Too many restaurants try to do it all in the beginning and don’t survive.

They spend more than they bring in and cause their own downfall. My advice is to save as much as you can. Invest in strategic and smart marketing. I’m happy to help you with any of the areas we’ve discussed.

No one wants or plans to close their doors in the first year. Everyone deserves a chance and some words of wisdom from those who have been “in your shoes”.

Plan ahead in this trying season so we can celebrate with you in the next one. It will be long hours, 60-80 per week and money will be tight, but you can do this! We want to hear your success stories so stay in touch.

Why restaurants fail, restaurant startup mistakes to avoid.


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