3 Things You Can’t Afford To Be Frugal With in the Restaurant Business
You’re bound to come across a stat, which says that “90% of restaurants fail within the first 12 months” if you browse the Internet for enough time. Luckily for all of us, that stat is made up.
That doesn’t mean that opening a restaurant is easy. In fact, almost 20% of people close their restaurants after the first year. As the years go by, the percentage of closed restaurants increases. After the first five years, chances of staying in business are slim, to say the least.
In some cases, that happens because people spend too much money on things they don’t need to run a restaurant. Other times, it’s the opposite, which brings us to our topic of the day.
Let’s discuss three things you can’t afford to be cheap on, if you want to run a restaurant.
Your Full-time Workers
Your business is only strong as your employees are. A good staff is a backbone of every establishment and restaurants are no different. As the time goes, your business will grow and you’ll see that running the operation is simply impossible without proper workers.
That’s why you should never be cheap with your employees. An underpaid employee is an unsatisfied employee. A dissatisfied employee won’t – and in fact, can’t – do a good job as a satisfied one and that’s the reality. Employee satisfaction is at an all-time low in the United States and much of that dissatisfaction has to do with pay.
If an employee has been hard-working and loyal to your company, make sure to give that employee a raise. Keep the rest of the staff well-compensated too, to motivate them to keep grinding and putting 100% every day. Your employees are the best investment.
Running a restaurant requires a lot of equipment. Your kitchen needs to be updated with the latest utensils your dishes require. In a way, investing in your equipment is also investing in your employees. If you force your chefs to work with old equipment, they’ll surely leave your restaurant after a couple of months and start working with your competitors.
How much money you invest in your equipment and what equipment you need to buy heavily depends on the type of restaurant you’re running. If you specialize in sushi, you’ll need special rice cookers and sushi containers. On the other hand, if you serve more meat, you’ll need to buy specialized grills and fryers. It’s also important to see what your customers desire.
Simply put, you have to give your customers what they want. If your customers want slurpees, you should definitely get a big frozen drink machine soon. Of course, this doesn’t mean you should waste thousands of dollars on every single kitchen utensil. You should assess your situation, see what you need, and only then start spending.
The last thing we need to discuss today is insurance. If you’re just opening a restaurant for the first time, you’ll need to familiarize yourself with different types of insurance you need. Three main types of restaurant insurance are:
- General liability: If anyone slips and falls inside your restaurant, general liability will cover you, whether the incident was your fault or not. Since so many people like to sue establishments nowadays, having general liability is a must.
- Property insurance: This policy will protect your restaurant if a fire breaks loose or if anyone badalizes your premises. Keep in mind that property insurance doesn’t always cover natural disasters (more on that later).
- Employee coverage: You never know when one of your workers will get injured on the job. That’s why you need to have all of your employees covered. It will also cover the people who no longer work in your restaurant until they find employment.
And that’s not all. You might need additional insurance because of your lender. There’s a good chance you’ll have to carry a large life insurance policy in order to keep your lender satisfied. Also, if you live in an area where the weather conditions can be problematic, getting an insurance policy that covers natural disasters could be a good idea.
There are more than 1 million restaurants operating in the United States at the moment. The number is possibly going to grow in the next couple of years. That means, if you want to enter the restaurant industry, now’s the perfect time.
But if you don’t want to end up losing your investment, you need to handle your finances carefully. Knowing what you need and don’t need to spend on is crucial to your success. As they say, knowing is half the battle.
Now, go out there, fulfill your dream, and win the battle entirely.