Mistake #1: Budgeting Like a Dreamer, Not an Operator
You’ve got the concept, the menu, the vibe. But if your financial plan is built on hope instead of hard numbers, you’re already in trouble.
A 2024 study from Restroworks found that poor financial management—including underestimating costs and over estimating profits—is the top reason restaurants fail in their first year.
James Groetzinger, who opened Parlor Deluxe in 2015, learned this the hard way:
“I definitely learned to take more time to budget and create a range of realistic sales projections.”
How to avoid it:
- Build a detailed budget: Include all startup costs, fixed and variable expenses, and realistic revenue projections.
- Plan for the unexpected: Set aside a contingency fund for unforeseen expenses.
- Monitor cash flow: Regularly track your income and expenses to stay on top of your financial health.
Mistake #2: Choosing the Wrong Location
Location can make or break your business. A spot with limited foot traffic, poor visibility, or inadequate parking can doom even the best concepts.
Groetzinger’s Parlor Deluxe suffered from a less-than-ideal location:
“The location was on a one-way street with no nearby parking lots… we weren’t getting a ton of foot traffic passing by.”
How to avoid it:
- Conduct thorough market research: Understand the demographics, foot traffic patterns, and competition in the area.
- Assess accessibility: Ensure there’s adequate parking and that the location is easy to find.
- Consider visibility: A highly visible location can attract walk-in customers and enhance brand awareness.
Mistake #3: Ignoring Customer Experience
You can have the best food in town, but if your service is lacking, customers won’t return. Poor customer service is a leading reason why restaurants fail.
Carl Sobocinski, owner of Table 301 Restaurant Group, learned the importance of aligning with customer expectations:
“We had a dress code that was a little more formal than the market wanted. We dropped the dress code after a few months, but the damage was already done. We had already created a perception that we were too formal, and it was hard to change that perception.”
This example underscores the importance of aligning your restaurant’s policies with your target market’s expectations. Implementing a dress code that doesn’t resonate with your clientele can create a lasting negative impression that’s difficult to reverse, even after policy changes.
How to avoid it:
- Train your staff: Ensure they understand the importance of customer service and are equipped to handle various situations.
- Solicit feedback: Encourage customers to provide feedback and use it to make improvements.
- Adapt to customer preferences: Be willing to make changes based on what your customers want and need.
Final Thoughts
Starting a hospitality business is a significant undertaking, and avoiding these common mistakes can increase your chances of success. Focus on realistic financial planning, choose your location wisely, and prioritize customer experience. Learn from those who have been there before, and be prepared to adapt and evolve.
References
- Restroworks: Top Reasons Why Restaurants Fail Within First Year Of Operations,
https://www.restroworks.com/blog/top-reasons-why-restaurants-fail-within-the-first-year-of-operations/