A quiet restaurant without customers is a good place for a man to read his book. But does the restaurant owner want to see that?
The annual growth of the restaurants in Australia was 5.6% since 2012 (see Diagram 1, left graph). However, 60% of new restaurants do not make it past their first year and 80% of them go under in five years (see Diagram 1, right graph).
What happened to these restaurants? Can we find ways to avoid the issues and be successful?
Business management
The Challenge: Business management is one of the most challenging parts. A new restaurant owner needs to hire new staffs, build the relationship with staffs and customers, consider the operating cost and so on.
There is no doubt to hire experienced cooks and baristas. But restaurants often hire part-time waitstaff to reduce the labour costs in hopes that they can increase sales more and do multiple tasks (eg. take orders, settle bills, clean tables, etc). It takes time and money to interview, train and onboard the new staff. More specifically, the cost of staff turnover is around $146,600 (USD) per year.
As a new restaurant, it’s hard to remember how busy the restaurant will be every hour, even every day.
The Solution: First step is to separate business management into different areas so that they can be prioritised and re-prioritise as needed. This helps to focus on doing what you want to achieve.
- Hire the right people: From experience to attitude and common courtesy, your staff are a reflection of your business. Hire the people you are proud to have on your team and add value to your business.
- Invest in your people: To reduce the staff turnover, the relationship with your staff is just as important as with your customers. Hold regular staff meetings or “huddles” to let them ask questions, raise concerns, provide opinions and learn from each other.
- Let technology do the “hard work”: Use technology to do the hard stuff like predicting the best start/stop times for each staff’s shift or providing reliable and deeper insights into your business (eg. the sandwich sells better every Monday, prepare more ingredients on that day)
- Continuously measure: Frequent evaluations your business against short term and long term goals are crucial to know if you’re on track and identifying issues early.
Attracting customers
The Challenge: To get customers in the door, new restaurants often set a budget for online and traditional advertising and promotions. A brand-new restaurant usually spends 25% to 35% of the gross revenue on marketing.
We know that retaining an existing customer costs less than acquiring a new customer. Restaurants try to make delicious food but if the service is bad, customers will often just remember the bad service. Speaking with your customers is key to building a relationship with them, but is it worth spending 5 minutes with each table when taking orders? There are other considerations that wait staff to gauge like when is the best time to speak with the customers, take the order and how to effectively communicate with different customers.
The Solution: Great service is one of the most effective ways to keep customers coming back. When the customer wants to return again and/or recommends others to visit you, the restaurant will be a success.
- Hire experienced staff: The experienced staff can provide a better service. For example, a full time experienced staff can remember “Susan likes iced coffee”, while a part-time staff doesn’t because he/she has less chance to meet “Susan”.
- Make part-time staff “professional” and “experienced”: We believe that every staff can be an “experienced staff” with access to the knowledge about your customers. Technology provides an opportunity to remember the customers’ favourite food and their ordering behaviours.
- Reduce the time spent on “transactional” tasks: It will reduce the repetitive tasks performed by wait staff (eg. taking orders manually with paper) so that they have time to build relationships with your customers. As a result, restaurant staff will have more time to add value to the customer’s dining experience in addition to providing more meaningful recommendations (aka “upselling” but in a non-intrusive way).
Fresh dining experiences
The Challenge: It looks profitable and easy to open a restaurant/cafe when we see a line of people waiting outside a restaurant/cafe. But the real work is giving customers a reason come to your restaurant, not the one “next door”.
Once the first restaurant posts the menu online, customers would go there because they saw the food and the price. But now, customers can find any menu online if they search thoroughly.
When we open a random restaurant website, we’ll see the story on the home page, the menu that we can download, the gallery with some tasty food photos, the facebook icon on the contact us section. The websites all look very similar to one another. In fact, we’ve just created more work for the customer because someone convinced you that your brand was important and needed to be plastered all over your website. But the problem with this is the lack of attention to the user experience and hence communicating these “fresh ideas” about your restaurant offering is lost. These websites often take too long to load and the navigation is different for each website which means the user needs to think more. There must be a better way to make a better first impression.
The Solution: People don’t just dine out for the food but they’re also paying for the entire experience, from beginning to end.
- Make your menu searchable: If the creative dishes are your selling point, a mobile-friendly, searchable menu is far quicker to find than a PDF menu. You can also keep your menu fresh and “live” with creations made just seconds ago. The dining experience starts online.
- Provide a “photo-worthy” environment: If you want to get exposure online, make your food and environment “photo-worthy”. It’s so much easier to communicate and differentiate appetising food.
- Create memorable and sharable experiences: If you want to attract customers attention, use some new technologies to enable customers to share a fresh, new experience that they enjoyed. It will allow your customers to remember you long after they are gone and share their dining experiences with others.
Weak Systems
The Challenge: For new restaurants, buying the equipment and furniture cost a lot and is difficult to avoid. It’s often laborious, time-consuming and requires a dynamic set of skills to make informed decisions. From our research, owners spend on average $2,000 per year to get a POS system but do they really need such an expensive system?
Today, a quick Google search of POS system revealed that 7 of 18 results are advertisments. There are too many choices. Hence it’s time-consuming to comparing the features, the price and the review to choose a system. Every system says “We’re experienced, comprehensive, technologically-advanced, easy-to-use …”.
Although it “looks good” to have a comprehensive system with lots of features, these systems are designed for all kinds of businesses and this makes it even harder to imagine what will work for your restaurant. Adding more features usually equals to more money spent and a system that not to easy-to-use because it wasn’t designed holistically. But the most difficult part is knowing what will work best for you when you haven’t even started running the business yet.
The POS system is an important decision, as it’s not easy to change the system once you started to use it. It’s the “heart” of a restaurant.
The Solution: We conducted a POS system research last month and found that 40% of the POS system’s features (eg. roster management, inventory management, etc) were seldom used by the restaurants.
- Choose the most useful system: A featured system is an advantage when selling the product, but a restaurant should find the most useful system. It’s always not the most features ones, but it can provide the most suitable service for you and your customers.
- Quality systems: Customers’ dining expectation and technologies are changing the hospitality industry. Cash registers cost less, but a high quality POS system can help the restaurant save time and looks more trendy. At the end of a day, the system will generate a reliability report to help the owner understand the business.
Menu design
The Challenge: One of the most common problems restaurant owners face is the menu. Do you have too many or too few menu items? Are your dishes priced appropriately? And how will you know the answers?
Restaurants spend time and money on finding professional designers to make a nice looking menu with elaborate descriptions, but most of the time the customer is already sitting in your restaurant reading it so where is the return on that investment? Customers don’t usually spend too long looking at the menu. Also, the menu is updated on average 3 times a year to adapt to the needs of customers which cost from hundreds to thousands of dollars to make.
The Solution: A good menu can help a customer make the decision quickly and help a restaurant sell more dishes. How to let the menu help you?
- Attract your customers’ eyes: Customers don’t want to “read” the menu. Restaurant menus should be easy to scan by using photos or anything that attracts the eye and appetite of the diner.
- “Centralise” your menu and photos: As mentioned above, restaurants publish their menus online and use Facebook and Instagram to post photos of their food. So why not bring together these online menus and attractive photos, so that they are easier to find and get a single view of the engagement on your dishes? This will also enable the opportunity to recommend the perfect beverage or entree pairing every time.
- Make a social menu: A social menu will lead to more sales and happier customers. The digital menu also allows for frequent updates with fresh content to suit the needs of your restaurant or a quick change of events.
- Insights: Customers scan the menu and spend time on making decisions. As a business, would you like to know their thinking processes? An online menu website is able to track the customers’ behaviours and give businesses insights. For example, the average time spending on “Magritte Pizza, $12” is more than the time on “Hawaiian Pizza, $10”, but more customers order “Hawaiian Pizza”. You may change the “Magritte Pizza” price to sell more.
Conclusion
Opening a new restaurant is an exciting venture. However, speaking to other successful restaurant businesses and technology consultants who understand how to apply them correctly for your situation may be something you want to consider at the start and throughout your venture. Remember that building a strong team with the right skills and experience is just as important for your restaurant business. With vast options of restaurants, cafes and bars, you should thoroughly research right processes and systems to put in place to operate a profitable and long-term business.
“It is important to adapt and improve your offering to meet demand and consumer interests. This is what hospitality industry is about, isn’t it?” — Frederic Colin
Success is not achieved through doing something well once. As an owner, you need “business smarts”, ways to avoid mistakes, continuously experiment with new ideas and adapt your business with the rapid growth of technology and society.
And don’t forget to build good relationships within and outside your business to set strong foundation. It’s all a lot of work, but it’s worth it.
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