I’ve always wanted to own a restaurant. This year, that dream became a reality for me. I’m super excited about my new business but also very nervous. I know that a lot of restaurants fail early on, and I’m afraid that mine is in danger of becoming one of those. I know that new businesses don’t always take off right away, but I’m not happy with the way the cash flow is looking in my business right now, and it has me worried!
I think a big problem I’m having is that the expenses of running a restaurant are higher than I’d figured. I’m spending too much on plates and knives and stuff and not enough on the actual food. But I feel trapped and don’t know how to change this. Experts, please help!
Running a restaurant can be immensely rewarding, but — as restaurant owners such as you understand all too well — it can also be stressful and risky. The restaurant business is a tough one, and many restaurants fail early on. In fact, roughly 60 percent of new restaurants fail within their first year. Those are discouraging numbers, but don’t panic just yet. You can do things as a business owner to manage your expenses and work towards better profits and a brighter future for your restaurant business.
You need to find a way to make more money from your restaurant, but raising prices might be a bad idea. After all, your restaurant is new and already, according to your account, struggling. Higher prices might discourage customers, making your total profits lower even as your per-item profits rise. That’s just basic supply and demand, of course, and you probably realize it — hence your frustration.
But instead of raising prices, try other methods. You can cut those costs that seem to be such a big problem for you. With less overhead, you’ll be able to make more money in profit without actually increasing the gross income of the business.
Restaurant supplies seem to be one of your biggest expenses right now. The good news is that, now that your business is up and running, you won’t again need to buy a huge chunk of basic supplies all at once. But you will need to keep your restaurant stocked with plates, glasses, and utensils to replace the ones that are broken, pocketed, or lost. And that’s hardly an exhaustive list: you’ll also need cooking utensils, napkins, tablecloths, and much, much more. How can you get all of that for a reasonable price?
Your best bet, say the experts at hospitality supply company VEGA Direct Inc., may be to take a closer look at your vendors. Are you paying too much for what you’re getting in return? Are you using multiple vendors where one would do? Look to increase efficiency by streamlining your supply chain.
Turning to a larger company as a single-source solution for all of your restaurant supply needs might be your best option. Larger companies have distinct advantages that experts call economies of scale, and working with a company of the proper size and strength could allow your small business to piggyback on those cost-saving abilities. Paying just one company for all of your supplies and getting them in one big delivery could be more cost-effective than paying multiple smaller vendors, which could lead to you paying needlessly higher prices and unnecessarily multiplying your shipping costs.
Don’t stop there, of course. Keep looking for ways to cut costs. Consider outsourcing tasks that you don’t feel merit hiring full-time employees for. Consider hiring a consultant to help you analyze weak points in your business strategy. Outsiders often have a helpful, objective perspective. Use your own time wisely and hire the right people to support you, keeping in mind that hiring and firing employees can be very costly indeed.
Your restaurant won’t be earning massive profits overnight, but if you use your common sense and work on the areas we’ve discussed here, you’ll have a better chance of keeping your dream alive. Remember that some businesses don’t turn profits right away, and keep the faith: yours could be one of the many great restaurants that beat the odds and become diners’ favorites. Good luck!
- Restaurant Dining: Photo courtesy of Nick Ng | Used With Permission