Opening a new local restaurant can be fun and exciting, but becoming profitable isn’t as easy as it seems. Restaurant profit margins are already thin at just 3-5%, and that means even small mistakes can hurt your profits. If your operation isn’t tightly managed from the start, you’re more likely to make costly mistakes.
Not all mistakes are obvious, like launching unpopular menu items. Sometimes they’re rooted in disjointed systems and the wrong equipment. If you’re starting a restaurant business, here are some of the most expensive mistakes to avoid.
- Buying the wrong equipment
The equipment you buy will impact operations from top to bottom. It will determine how efficiently your team can prepare and serve meals and clean up at the end of the day. Many new restaurant owners spend too much money on high-tech equipment or buy cheap equipment that fails fast. The key to getting this right is identifying exactly what you need, avoiding fancy models, but not cutting corners on quality.
- Underestimating operating costs
If you’ve never run a restaurant before, it’s easy to underestimate how much money it takes to launch. Consult with someone experienced in the industry so you don’t burn through your cash reserves before you have stable revenue.
You’ll need to cover more than just opening expenses. Until you start generating meaningful revenue, you’ll need to budget for costs like monthly utilities, food inflation, payroll taxes, linen services, and maintenance.
- Not thoroughly training employees
Labor is going to be one of your biggest expenses, so hire wisely and train thoroughly. Poorly trained staff tend to increase food waste through preventable mistakes like overportioning, mishandling, and cooking errors. Make sure everyone is trained to the same standards, not just regarding meal prep, but to state health code standards as well.
It’s also important to train your employees how to care for the equipment they use every day. For example, if you serve beverages using a soda gun, your team needs to be aware that they can’t let the pump continue to run if it’s not dispensing. Pumps will keep running when the BIB is empty, and if it doesn’t get shut off, it can burn out. Pumps are expensive to replace and pump parts, like seal kits, require downtime to replace. To avoid these issues, train your team to listen for the pump to stop after each use and turn it off if it’s still running.
- Overspending on renovations
When you find a good space, it’s tempting to spend a lot of time and money on renovations to make everything look perfect. However, aesthetics won’t matter if your kitchen is slow and the layout isn’t efficient. If you’re going to spend money on remodeling, prioritize improving flow over looks.
- Complex dishes and a large menu
Specialty dishes and big menus sound good on paper, but aren’t ideal. Offering a large menu requires keeping more ingredients on hand and takes more prep work. Having a lot of ingredients creates more inventory to track and increases spoilage.
Complexity might be appropriate for a fine dining experience when done right, but it’s unsustainable for a basic restaurant. When you offer complex specialty dishes, you slow down the kitchen workflow and it takes longer to deliver the food. And serving a specialty item that isn’t truly your expertise can hurt you. Many people are routinely disappointed in complex dishes that look good on the menu but fail to deliver.
- Choosing the wrong location
Location matters immensely in the restaurant industry, but it’s not just about where your physical building is located. You also need to consider parking access, parking costs, delivery logistics, and foot traffic patterns.
Your restaurant should be easily accessible from the main road and the parking lot in general if there are other businesses around. If your restaurant is visible from the main road but difficult to access once in the parking lot, you’ll lose patrons.
- A poor kitchen layout
Nothing slows down a kitchen team like a bad layout. It makes preparing and delivering orders slow, and frustrates your staff. Your employees shouldn’t constantly cross paths and walk long distances between prep stations. This will kill your profits during peak hours once people learn that your kitchen is slow.
In addition to an efficient kitchen layout, you need an efficient storage design to prevent spoilage and over-ordering. It should be easy for everyone to see what’s available without having to unpack stacks of boxes or search around.
Successful restaurants require attention to detail
Most restaurants fail because of misplaced priorities. When you focus on a lean budget and operational efficiency, you’ll have a better chance of building a sustainable, profitable business.
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