“Businesses with fewer than 20 employees have only a 37%chance of surviving four years (of business) and only a 9% chance of surviving 10 years. Restaurants only have a 20% chance of surviving 2 years. Of these failed business, only 10% of them close involuntarily due to bankruptcy and the remaining 90% close because the business was not successful, did not provide the level of income desired, or was too much work for their efforts.”

–excerpt taken from an article written by Rob Holland, ‘Planning Against a Business Failure’

As a new restaurant owner (or soon to be), that quote must have sent chills up your spine. Everyday, people are pouring their entire life savings, betting their children’s education funds, and risking their marriage to fulfill a life long dream of opening their own restaurant. No doubt, there are risks involved – lots of risks. It’s important to not tumble into the traps that have already robbed the dreams of so many restaurateurs.

Making mistakes is a part of learning – as the old saying goes ‘learn from your mistakes’. However, time and time again entrepreneurs continue to make mistakes and not learn from them. Just like people, organizations tend to make mistakes repeatedly; are adverse in setting up a guard against making mistakes; and tends to focus on the bad while overlooking the good. Business owners often forget to look on the bright side to see what they are doing right.

Mistake #1 (and the biggest one): Failure to Plan

I cannot place enough emphasis on the importance of planning. This critical success factor is often overlooked by current jobs, life styles, personal schedules, and other important details that go into opening a new restaurant. Business and market planning should be the first and foremost step to take when deciding to pursue a new venture. By doing your due diligence and taking the time to research the full potential of your products, service and customer base will give you a clear picture of whether or not your dream is destined for success or failure.

Business and market planning will also give you an insight into the barriers and obstacles you may encounter along the way. You get to know the players that exist in the industry and how to compete in the game. You will know what types of funding you need (because you will need funding!) – what government funds and bank loans will you require at start up? You need to formulate financial plans on how to effectively use your funds. You will have an idea of when you plan to break-even and how fast you plan to expand. A detailed business plan will also assist in obtaining investments. You need to confidently show that you conducted research and have planned strategies on how to reach repayment.

This is essentially the road map on how you will achieve success. Think about it: you see the big picture – your own restaurant running efficiently, making you profitable, and giving you the kind of life you’ve always imagined. Now, how are you going to achieve that big picture? What steps do you need to take to reach that end goal? Your plan should tell you (1) where you are now, (2) where you want to be, and (3) how you plan to get there. By completing your business plan, you will have reports on your business field, the industry, trends, risk analysis, marketing needs, target markets, competitors, and financial overview. Your plan will tell you how to make your restaurant successful– this is the roadmap of your future.

Mistake #2: Not taking preventative measures

It happens all the time – business owners get too caught up with the venture itself that taking preventative measures to avoid failure are often overlooked. Restaurateurs must ensure they are keeping up with changes that may affect the business. Costs must be periodically reviewed to ensure they are within budget. This goes for overhead as well. Owners/managers should prepare reports on sales projections, cash flow forecasts, labour reports, and benchmarking actual performance to the actual plan. Where was it off and how can business be improved? Regular progress meetings should be held in order to detect future risks and identifying the preventative measures to take to minimize potential losses.

Mistake #3: Refusing to accept changes

Embrace change! Easier said than done, right? But in the world of owning your own restaurant, this is no longer a choice – it is mandatory! The world of business is moving at a lightning speed and those who do not keep up will be left behind. Just when you’ve adapted to a new trend or adjusted to a new way of doing something, it is time to change again. There is no ‘break time’ in this playing field. Constant change is inevitable; whether or not you embrace it is a different story.

The mistake of not embracing change does not just affect new business owners – people who have been in business for 25+ years must continue to embrace change. There is always something new to learn – who your best customers are; changes in tastes and preferences; what marketing ads are most effective; are you staffing efficiently; and the list goes on. Businesses change and so do people. Your market can be changing on a daily basis. Failure to keep up with these changes will unquestionably lead to losses. Consider running a business as a constant learning process – never stop learning!

Mistake #4: Lack of knowledge, tools, and resources

Another cause of business failure is the lack of knowledge, tools, and resources that help restaurateurs succeed. Knowledge is powerful – it can give you priceless information that can assist in making informed decisions. Knowledge can come from your education in college/university, generating reports, monitoring trends, networking with others in your industry, and acting on the information that comes your way. Subscribing to informative magazines and visiting websites that are directly related to your area of business are also quite valuable. Attending tradeshows, seminars, and workshops will help you identify upcoming trends and obstacles in the restaurant industry.

An area where businesses fail on a daily basis is the failure to keep up with learning about new/potential customers. Even after all the business planning, developing marketing campaigns and promotions, and monitoring and increasing growth – failure to keep an updated record of your customers’ key demographics and trends can result in you missing out on amazing opportunities. Trends change and the information you worked so hard to gather may be outdated before you know it.

You will need a ‘business toolkit’ to survive in this fast paced playing field. Tools refer to the accessibility to critical information that helps you run your business. It can range from advice counsel, specific documents (application forms, legal documents, and financial spreadsheet templates), employee management and training. In this day and age, technology is a must. Computers, data systems, and Point of Sale systems give you greater insight into your business allowing you to make better business decisions now and in the future. How can a restaurant succeed without all the necessary tools to make that organization work? A plumber would not be able to fix a clog without his handy toolkit… and you will not be able to run a restaurant (at least not successfully) without your business toolkit.

Your resources are the backbone of your business. Resources are any person or any organization that contribute to the success of your restaurant. This includes lawyers, accountants, staffing agencies, your networks, the Internet, tradeshows, and most importantly, your staff. These VIP (very important people) can make or break your restaurant. There is also an abundance of resources available to restaurateurs – some are free while others you have to pay for. For example, you can attend tradeshows that relate to the restaurant industry – this will give you knowledge. There, you will be able to learn about new technology advancements that can help you run your restaurant more efficiently – this can contribute to your business toolkit.

Mistake #5: Not realizing the time consumption involved

Although this mistake is rarely mentioned, it is one of the main culprits that cause restaurants to fail. Opening a new business is incredibly time-consuming, and not just at the beginning. It is an on-going responsibility for as long as you want to stay in business. It entails serious time commitment and requires you to make sacrifices on a weekly if not daily basis. Pressure from family and spouses are often the reasons that restaurants do not make it pass their first year of business. A successful restaurateur must be able to balance their family life and work life. That is why more often, those who do decide to pursue this type of venture or either single, divorced, or have a heck of a supportive family that will be there for them.

Failed owners were most likely unable to sacrifice missing another one of their kid’s schools play, another birthday or anniversary, and pressure to spend more time with family. So before you hop onto the ‘let’s open a new restaurant’ bandwagon, be 110% sure that you will be able to balance and devote time to both running your business and maintaining a healthy relationship with your family.

Daniel Mitchell works with Halo Web Based Point of Sale to provide high-quality, cost-effective POS Restaurant

Creating a restaurant menu is tricky business. Not only does it involve selecting attractive and popular dishes, but also pricing them competitively. Pricing is important not only to make the business profitable, but also to offer good value to customers to win them over.

Tips on Pricing the Food Items

Let’s see how to price the food items on the menu:

* Generally, successful restaurants keep the food costs in the range of 27 to 32% of food sales. These percentages can be higher or lower depending upon the type of restaurant. However, to be more accurate, it’s best to compare your cost percentage with restaurants having similar menus and services.

* While calculating the cost of food, all ingredients must be included. Work out the cost of each recipe for each menu item and don’t forget to include things, like spices and garnishes in the cost.

* Your recipe costs for items and sales prices will determine whether your food cost is in line with the industry averages. This will also help in monitoring your performance and analyzing problems and trends.

* Ideally you should be able to determine a consistent overall food cost which, when combined with proper pricing, will positively impact on your profitability.

* It’s also important to remember there are other costs of operating a restaurant that need to be taken into account to determine optimal pricing for menu items. These include the cost of labor, rent and debt.

Tips on Pricing Alcoholic Beverages Now, let’s see how to price the alcoholic beverages on the menu:

* Beverage costs are generated in the mid-20% range of beverage sales. As for food, these can be higher or lower. Fine dining establishments may run up to 40%. On the other hand, restaurants serving draft beer may run as low as a 15% beverage cost. So, it’s important to find out the industry averages by comparing your cost percentage to restaurants with similar menus and service levels.

* Beverage costs, like food costs, must be constantly monitored, by comparing with previous performance, with other restaurants and the industry averages. This will help you to competitively price the items and increase profitability of your total operation.

* Although you’ll need to cater for normal taxes, you must be clear about additional taxes in your local jurisdiction, as they may impact beverage pricing. In Philadelphia, for instance, there is an additional beverage tax of 10%.

If you take the above factors into account while pricing the items on your menu, you’ll certainly succeed in running a profitable restaurant.

Lydia Quinn writes for R & I Solutions, makers of Cost Genie restaurant costing software. Get a free demo at: http://www.costgenie.com

According to the National Fire Protection Association cooking equipment accounted for 14% of the total number of non residential structural fires in the US between 1999-2002 and is the second leading cause of fires next to arson.

The CDC reports that the incidence of some food borne illnesses are on the rise from 2005 to 2006. Food imports into the USA have increased by 50% in the last few years. The FDA currently is only able to inspect approximately 1% of the 25,000 shipments that come into the US each day from 100 countries.

The potential of being linked to a food borne illness has probably never been higher due to:

Increased importation of food from all over the world
Decrease in the ability of the FDA to inspect imports
More sophisticated methods such as pulsed-field gel electrophoresis (PFGE) to link food borne illness to its source.
Traditionally high industry turnover rate which makes it difficult to train and educate employees in food safety procedures.
Legal doctrines of strict liability and constructive knowledge

Restaurants now more than ever need to be aware of the supply chain and take proactive measures to ensure the quality of the food they purchase and serve to their customers. It’s not enough to look at your insurance renewal and see that you have fire insurance, business interruption and first party food contamination coverage.

Too many restaurant owners feel a false sense of security, unknowingly being under insured and finding themselves with inadequate coverage. You cannot change anything about your coverage limits or policy provisions once a loss has occurred

The coverage forms available for real property and business income are fairly standardized by ISO Commercial Insurance Services. The same however, does not hold true when it comes to first party food contamination (see the September Issue of Upscale Quality Insurance Newsletter)

Manage your exposure by:

Establishing the amount and type of coverage you need.
Understanding what will trigger the coverage.
Determining how long your carrier will continue to pay your loss of income, advertising expense, and employees lost wages including your server’s tips after you reopen.
Establishing loss control and safety measures to prevent these types of losses from happening

What steps should you take?

Obtain a certified appraisal for the reconstruction cost of your building.
Determine the replacement cost of all your equipment, inventory and business personal property.
Review the terms of your lease as it relates to property insurance requirements especially improvements and betterments.
Maintain copies of all financial records, accounts receivable, customer lists and insurance policies at an off site location.
Complete a business loss of income worksheet.
Complete an analysis of potential post crisis and event response communication cost including the cost of a public relations firm.
Obtain a loss control inspection by a qualified restaurant loss control specialist
Implement an ongoing loss control and safety program including an emergency/crisis management response plan.
Read and review the actual policy provisions that trigger the coverage and govern the payment of your loss.

Fire insurance, including business interruption and food contamination coverage is relatively inexpensive when considering the premiums paid versus the amount of risk you are transferring to the insurance company. And, although the likelihood of fire or food contamination may be perceived as small, the ramifications can be disastrous.

With affordable premiums and complimentary coverage analysis, there’s absolutely no room for risk in your restaurant.

Contact Patrick Nolan today at http://www.qualityupscaleinsurance.com/contactus.html to learn more about the risk management solutions we have to offer and receive a free copy of our Fire Prevention Checklist from the Fireman’s Fund iCustomer Series Portal and Crisis Management tips from Peppercom-Strategic Communications Related articles which can be found in our October Newsletter at http://www.qualityupscaleinsurance.com

CDC Says Some Foodborne Illnesses Rose in 2006,
Illness Closes Bravo Eatery,
Leafy Green Catastrophe,
Outbreak Guilty as Charged

Too many restaurant owner’s focus on making the decor too elaborate. As a result it can appear to be cluttered. Your guests will like a simpler look in most instances, and it will allow them to focus on the overall atmosphere. They will be more concerned with how comfortable their chairs are then what you have placed on the walls for them to look at.

It is a nice gesture to have both tables and booths in your restaurant. Make sure customers get to choose which one they want to sit in though rather than a hostess mandating it. Some people don’t fit comfortably into a booth. You will also find some people with children prefer them as it reduces the chances of them getting down and wondering around.

Your staff should make sure they wipe down tables carefully so that they aren’t sticky. This is really annoying when you end up sitting down and there is something stuck to the table. Even though your staff is likely very busy, they need to pay close attention to such details.

Customers will be expecting a friendly staff that can easily meet their needs. Your employees are there to represent your restaurant so make sure they are comfortable interacting with people. Those that are too shy may come across as not enjoying what they are doing. Make sure your staff understands the reasons why they need to genuinely welcome guests to the restaurant.

Your staff also needs to continually check on customers and see what they need. Asking questions such as can I bring you more napkins or would you like more to drink are very well received. It allows the customer to feel like their needs are being taken into consideration the entire time they are in your restaurant. Having to ask for such items over and over again brings down the view customers have of your business.

Don’t forget to take some time to focus on the quality of the bathrooms you offer. Guests will expect them to be stocked with the items they need including soap, toilet paper, and paper towels. Try to get an employee to check them over on an hourly basis. This way you can take care of any issues that may be found in there.

In order for people to really enjoy their experience in a restaurant, they need to be comfortable. They want to have delicious foods offered to them but that is just the tip of the iceberg for the experience. The more you take care of the little things relating to your restaurant, the more successful your business will be.

Patricia Farnham – Restaurant industry veteran, owner/operator, author and enthusiast. She recently put her considerable expertise (gained from many years of managing other peoples restaurants), to the test. She purchased a failing operation and turned it around quickly.

If you’re considering starting your own restaurant, or buying an existing operation, there are vital concepts you need to know to make it profitable. Check out her opinions regarding opening a restaurant on her website.

One tip for a successful restaurant is the location in which you restaurant is situated. This plays an important role in your success. The location of your restaurant should be easily accessible by any means. The floating population of that location should be high. In such locations you would easily attain many customers.

Another tip is to have friendly employees in your restaurant. The employees should be very active and fast in serving and be ready to satisfy all of the customers’ needs. Some of the employees may remember the regular customers and can more easily satisfy them by already knowing what will make the customer happy. Such employees are an asset for any restaurant. The employees should be persons who love their work and are generally happy overall. Happy employees sets the customer at ease and will allow the customer to enjoy their meal even more.

Your restaurant should have a system or a process that is in place to supply the raw materials for the preparation of your menu items. The process should aid in cutting down the waste to a minimum. This is very important in the functioning of any restaurant. Buying more of any raw item would be a waste. Stocking more inventory should also be avoided. Fresh items should be available then and there. Proper procurement and careful planning of food inventory is a must. Menu planning, restaurant inventory and costing software is available to help with this task and should definitely be considered. This type of software will save money in the long run and aid in the overall success and planning of your restaurant.

There must be consistency in serving the customers. A customer who returns to your restaurant would be expecting the same kind of service he had during a previous visit. He should certainly also expect the same quality of food. Having a consistency in the service and menu items is essential for success. This is very important in that many restaurants get repeated customers only through word-of-mouth. If you spoil the experience of any customer in your restaurant you cannot expect any referred customers through him. On the other hand, if he had a very good dining experience he is sure to recommend your restaurant to friends. Hence maintaining a consistency in service and food is a must for success.

Serving good quality food every time is essential for success in the restaurant business. If you are not serving quality food you can’t expect the customer to return to your restaurant again. Attention to each and every detail inside the restaurant is essential.

Lydia Quinn writes for R&I Solutions, developer of Cost Genie, a leading restaurant costing software package. Visit CostGenie.com for a free demo. http://www.costgenie.com

• CHART—The Council of Hotel and Restaurant Trainers, www.chart.org —A group of nearly 500 Hospitality Training and HR professionals working to enhance the people and profitability of its member companies. The group is an unbelievable resource consisting of conferences (twice yearly), regional training forums around the country (free), and an e-mail solution exchange.

• People Report, www.peoplereport.com —A consortium of restaurant companies who provide data on recruitment, hiring, training, and diversity which is compiled and shared with members to allow benchmarking and best practices. Curious how you are doing on the “People P&L?” Join People Report to find out.

• NRAEF, www.nraef.org —The National Restaurant Association Education Foundation supports everything from ServSafe, ProStart, and the Resource Center for Workforce Solutions to Daily Dose Language Training and providing Harvard Leadership Classes.

• ESL Resources, www.seddesaber.com —As the labor pool changes and shrinks, we must address the needs of our people. In many cases, that includes teaching the English language to build confidence and advancement opportunities. In addition to “Daily Dose,” there are a number of products and companies to help teach your staff English including Sed de Saber (from Retention Education).

• Go To (the best in) Class—Companies such as Hard Rock Café, www.hardrock.com , Zingerman’s Deli, www.zingtrain.com , and 2001 Malcolm Baldrige Quality Service Award Winner, Pal’s Sudden Service, www.busexcell.com , all offer classes teaching not only how they have been successful, but also how to apply the learnings to your business.

• Books/Videos—Ranging from Bob Farell’s Give ‘em the Pickle and FISH to Jim Sullivan’s MYOB, and my own Now That’s Quick Service That Sells! and Drive-Thru Excellence, there are a number of quality books and videos focused squarely on moving sales and service forward. Read/watch them and learn the secrets of today’s most successful companies.

There you have it—the information when you need to know it…NOW!

T.J. Schier is service professional, consultant and speaker with over 20 years experience in operations and training. Founder and president of Incentivize Solutions and podTraining, T.J. has helped numerous clients enhance their service and training programs and spoken to tens of thousands of managers, franchisees and operators in various fields. Visit http://IncentivizeSolutions.com/ for more info motivating today’s employees, training today’s generation and delivering outstanding guest service; or http://podTraining.us/, a unique new system and the foundation of ‘i-learning’ – using the device of today’s generation, the iPod – to train your workforce.