by Jay Kitterman, consultant, LLCC Culinary Institute
A number of years ago, the State of Illinois implemented an early retirement program. I’m not sure why, but my contact information at Lincoln Land Community College was included on a resource list. I received numerous calls from those planning to take their lump sum from the state and start their lifelong dream. Typically, a caller would say, “I am thinking of opening a restaurant. What advice can you give me?”
I would then ask, “Have you ever worked in a restaurant?” Most often they would say “no” and some would even respond that they were not planning to operate it themselves, but hire someone to operate it for them. Today my response would be, OMG!!!!! If it was a joint husband and wife venture, my normal response was they should find a good marriage counselor, for operating a restaurant can be very stressful.
The restaurant industry is huge! I along with over a hundred thousand others just attended the annual National Restaurant Show in Chicago at McCormick Place. Everything you need for a restaurant was on display, and I will write more on the show in a future article. According to National Restaurant Association statistics, there are over 1 million restaurant locations in the U.S. There are over 14 million employees, 10 percent of the entire U.S. workforce, and $799 billion in sales. The industry has more minority managers than any other industry, and 50 percent of restaurant owners are women.
In Illinois, the restaurant industry is the largest private employer with 577,000 employees, and it is projected to grow to 620,000 employees by 2028. One interesting statistic is that the restaurant share of the food dollar is 48 cents, an amount that has increased annually. This is another reason that grocery stores are becoming more like restaurants with additional take out options, delivery and some, like HyVee, actually having a restaurant as part of the store.
So what if you get the bug and decide you want to get up every day and cook for someone else, serve it to them, hire all the employees, pay all the bills, clean up after every one leaves, and then start the whole process again the next day? Don’t say I did not warn you, for starting a restaurant is not easy! Yes, the food needs to be fabulous, but it is important to remember that food is only 20 percent of the restaurant success equation. Restaurants are a business first and foremost, and food is merely the product for sale. You need to know how to run a business first before you start throwing the burgers on the grill and inviting everyone to dine with you.
Adam Ozimek, in a Forbes article last year, wrote that the restaurant business is not quite the “gloom and doom” that American Express and others claim it is. In reality, only around 17 percent fail within the first year. In his article he states, “Research shows that that the median lifespan of restaurants is 4.5 years, slightly longer than most service businesses, which normally last a little over four years.
Ohio State University recently published a study listing common reasons that many restaurants fail within their first three years.
1. Bad location, poor visibility, poor parking and no foot traffic.
2. Restaurant owners who do not work. If you are the owner, you will need to work at the restaurant. It is impossible to sit at the bar with your friends and have a successful business.
3. Hiring poor management. Unfortunately, you can seldom trust someone with your money or business reputation. Remember, no one is going to care about your business the way you do.
4. Not paying taxes or bills on time. New operators sometimes think they can put off paying their taxes or fees, all reasons for the state or other local government to shut you down or place a lien on your personal accounts.
5. Bad customer service. This is obvious, but it is important to get customer feedback in the form of comment cards or just asking your patrons about their experience. Unhappy customers do not return and they tell others.
6. Not watching your cash flow. Cash is King! Make sure you have enough cash to open and to cover the big expenses of food and payroll every week. Chef Michael Higgins from Maldaner’s always told my students that you may think you own the restaurant, but you are the last to be paid.
7. Watch your food and payroll costs. These are normally the two highest expenses in operating a restaurant.
8. Not advertising. There is a lot of competition for the food dollar. As more and more chain restaurants open, advertising and marketing are both key in establishing a new restaurant. Discover all the new aspects of social marketing.
9. Differentiate your restaurant. Give people a reason to choose your restaurant over the hundreds of others in Springfield.
My good friend David Radwine, former restauranteur and chef extraordinaire, half-jokingly advises potential restaurateurs to consider bringing all the money set aside to open the restaurant to the top of the Wyndam (formerly the Hilton) and watch it fly away. It may be much less work and much more satisfying than opening a restaurant.
Of course many restaurants startups are very successful. If you are thinking about it, I strongly advise contacting Kevin Lust, director of the Illinois Small Business Development Center at LLCC, at Kevin.Lust@llcc.edu. He will be very honest with you on all the pluses and minuses of opening a restaurant or any other type of business.