Are you planning to start a restaurant?Want to increase the probability of turning it into a huge successIf yes, you need to control your expenses right from the start. The restaurant industry is famous for its lucrative return on investment (ROI). The ROI has two components. The first is the return, and the second one is investment. If you do not control the investment, you will never be able to get a good return.
Startup restaurants often overspend on a lot of things. It will inflate your investments therefore reducing the returns significantly. Owning a restaurant is no easy task. If you’re entering the restaurant industry, you need to watch out for the extravagant expenses that you should stay away from. We will highlight the 5 things startup restaurants typically overspend on and also provide you with actionable steps using which you can do to keep the expenses down. It will ensure that you get a decent ROI when starting up your own restaurant.
- Restaurant Marketing:
Sure enough, the restaurant industry is crowded. That does not mean that you go on spending on marketing. You need to ensure that you get bang for your buck as well.
A few mistakes which numerous restaurateurs often makes are:
- Many restaurateurs hire a restaurant advertising agency to look after the marketing aspect. It can pull on the marketing costs significantly.
- Restaurant owners often hire dedicated marketing and sales staff to market the restaurants. Once again, a Startup restaurant cannot afford this expense.
- Many restaurateurs advertise to a wide demographic rather than a targeted one, which again increases the marketing cost.
When you’re opening up a restaurant, it is essential to avoid these things. It will ensure that you can keep your marketing costs under control. Some of the ways to market your restaurant and prevent overspending include:
- As the owner, you have no other alternative but to understand the basics of online marketing for restaurants yourself. It will allow you to formulate a marketing campaign carefully according to your budget
- Rather than starting with the off-line marketing methods, it is better to start with the online ones. This currently is the most effective restaurant marketing strategy there is.
- You have to ensure that you have an active social media presence on all the networks. It will allow you to target the right demographic as well.
- You need to have a proper online presence, including your website, social media networks, as well as a blog. It will allow you to interact with people and attract them to your establishment. Facebook marketing for restaurants is a trend these days and it is very effective.
- You can network with others in the same industry to gain some referrals as well.
- You have to encourage your existing customer base to post reviews online. It will allow you to get more attention.
Following these simple steps will ensure that you have a proper marketing plan on a small budget. Moreover, since your marketing campaign will be entirely online, it is easy to monitor the results as well. It will allow you to kick start your restaurant without overspending on marketing.
- Restaurant Equipment:
Have you inquired about the cost of restaurant equipment?
If yes, you would know that there is equipment needed to start a restaurant and how high the cost is. However, there is a way to avoid overspending on the restaurant equipment as well.
I am talking about second-hand restaurant equipment and not about low-quality restaurant equipment.
The restaurant industry has a high failure rate. Someone else’s failure might be an opportunity for you. When establishing a startup, it is a good idea to network with others and keep your eyes open. The closure of another restaurant might help you get the restaurant equipment at a much lower cost. It will automatically help you avoid overspending.
In addition to second-hand equipment, there are a few other tips which you can follow as well to reduce overspending on restaurant equipment. These includes:
- You have to opt for specialist financing to purchase the equipment. It will ensure that you can pay for the equipment over a long time. The fixed monthly payments will ensure that you have a predictable payment system in place.
- Instead of buying the entire range of kitchen equipment at once, it is a good idea to buy what you need. When you do so, you can automatically reduce the spending on restaurant equipment.
- You have to also carefully check the construction quality of the restaurant equipment to ensure that you buy the ones that last for years together. It will ensure that you do not have to replace it anytime soon.
These three tips will ensure that you are always able to get value for money when you’re buying restaurant equipment. It will also mean that you can get the necessary restaurant equipment within your budget, which will once again help you start your restaurant without borrowing a large sum of money.
The technology, of course, plays an integral part in your restaurant. However, how much should you invest in technology?
When you’re trying to avoid overspending, it is essential to ask yourself this question before investing in technology. Some of the most common technological expenses for any restaurant owner are:
- POS system
- Server tablets
- Guest Management System
All these three systems might seem necessary to you, but you have to ask yourself the question, can servers manage without tablets
The answer is most likely going to be a yes. Rather than cutting down on technology expenses on the guest side, it is a good idea to cut them on the back-end side. However, some back-end systems are also essential, as the POS system. That is why you have to ensure that you cut down only on those expenses which will make little to no difference in the operation of the restaurant.
There are a few additional tips as well, which you need to look at while investing in technology.
- You have to ensure that you negotiate a good deal with the companies providing you with the hardware as well as software. Most of them would want to be partners with you and your business even if it comes at a discounted rate. That is why you have to negotiate hard before investing in technology.
- You have to always research for different vendors before picking one. The restaurant software and technology industry is pretty competitive, and for every piece of software or hardware, there are numerous companies that are willing to battle for your business. That is why, rather than going with the first company which you come across, it is better to compare different vendors and their offerings before choosing one.
- Even when looking for something as simple as a Wi-Fi set up for your restaurant, it is better to look at the most affordable company. The Wi-Fi setup will include Routers, ISP charges, and repeaters. You have to outsource the task to a company that can commit and complete the work within that budget.
These simple tips alone can help you save over £ 200 per month. It can make the difference between overspending on technology and getting maximum value for your money.
After reading the subtitle, you might be thinking, how can I avoid spending on decor?
We’re not asking you to avoid spending on decor but merely rationalizing it. You need to keep in mind that since you’re just starting up, you cannot spend on things la classic painting. When it comes to the decor, you can have a similar impact by investing in a few high-impact attractions rather than high-value ones.
The essential elements which you can use to create the right ambience are:
- Right coat and texture of the paint
- Affordable landscaping
- Different upholstery choices
However, there are exceptions to this rule. If you’re starting a fine dining or a gourmet restaurant, you do not have many options. You will have to spend more to achieve the right decor
A rule of thumb when setting up the decor budget is to keep the meal price in mind and then, determine the taste of your patrons. It will not only help you get the decor done in a budget but also choose it according to the taste of your audience. When it resonates with your patrons, you will be able to get more repeat business.
A few resources which you can use to get such ideas include:
These will help you capitalize on the latest décor trends without having to spend a significant amount of money.
It will help you capitalize on the latest décor trends without having to spend a significant amount of money.
- Food Inventory:
Just to keep things clear, we are asking you not to overspend on the food inventory. We aren’t asking you to spend less on the quality of the food which you’re procuring for your restaurant.
With that out of the way, it is common for startup restaurants to overestimate the demand. In that case, the food and beverages which you procure might be much higher than the actual consumption. Of course, since you need to maintain impeccable standards in your restaurant, you have no other option but to discard the food and beverages which aren’t at their prime. It is not only immoral to waste such huge quantities of food and drinks but also not economically viable as well.
You might be thinking, how to solve this problem?
There are a couple of rules to follow to solve this problem.
- You need to ensure that the cost of food and beverages does not exceed 40% of your projected sales. It will ensure that you can not only maintain a healthy cash flow but avoid excessive wastage as well. The 40% figure is a general ballpark figure. If you are starting a high-end restaurant, it can go up to 50%. On the other hand, if you’re starting a pizzeria which relies on frozen ingredients, it can be as low as 20%.
- Secondly, it is a good idea to invest in a affordable inventory management software. It will ensure that you can monitor the turnaround times and stock the minimum inventory needed to run your restaurant smoothly. Most restaurant inventory management software provides a free trial period as well, which ensures that you can easily find the best one without investing any money.
Thus, you can certainly avoid overspending on food and beverages without compromising on quality. You need to follow the two rules which we have highlighted above.
So, if you want to increase the probability of making your restaurant a huge success, it is necessary to avoid overspending. With our guide, you can easily avoid overspending in the most common departments. As a result, efficient allocation of capital for restaurant expenses is possible, and you will be able to enhance your cash flow as well, which will ultimately allow you to do more for your patrons and scale up your business quickly.