Intro 0:01
You’re listening to The Elevated Entrepreneur Podcast. A podcast designed to help retailers, restaurateurs, and entrepreneurs simplify business operations, and use modern technology to elevate their business. Here’s your host, Dhiren Bhatia.
Dhiren 0:18
Hello, hello, and a very big welcome to the second episode of The Elevated Entrepreneur Podcast. My name is Dhiren Bhatia, and I’m your host, and also the founder of Cloudscape Technologies in Dubai. Today, we’re going to talk about things you need to do before you open a restaurant. Having worked with numerous restaurants over the last three years, my team and I have learned so much about implementing not only the right technology in the restaurant business, but also the things that make a restaurant successful. If you have a passion for cuisine, cooking, and community, owning a restaurant may be a dream of yours. But to make that dream a reality, you will need to prepare thoroughly. You must be thoughtful and deliberate about your future restaurant’s market appeal, finances, and operational plans, if you want its doors to remain open for the long term.
Whether you hope to open a casual coffee shop, or a fine dining establishment, here are the three things that I’d like for you to keep in your mind. Number one, establish your place in the market. Everybody needs to eat, but we all have different tastes, budget levels, schedules, and even aesthetic preferences. If you try to appeal to too many groups in your restaurant, you’ll likely end up alienating most of them. To get a strong foothold in the dining market, and stand out from your competitors, you’ll need to carve out a clear market niche for your restaurant right away. You might already have an idea of what kind of food you want to serve, what kind of atmosphere you want to create, and what kind of schedule you want to run. But, your focus should start with analyzing the type of person you expect to be a regular customer.
Customer personas can help you get detailed about your ideal customers habits, lifestyles, and budgets. I’ve heard this saying so often, “Riches are in the niches.” If you are niche enough, you’re able to attract a really small subset of the market. Then you’re going to make a lot of profit, because there are many other customers just like that. Thinking about these factors and researching who lives and works in the vicinity of your potential restaurant, will affect what kind of menu, aesthetic, and procedures you develop. For example, if you’re interested in opening a breakfast and lunch spot, locating yourself in a business district might mean that you’re best off trying to attract the corporate crowd, who might prioritize speed, efficiency and convenience.
You might not need to worry about keeping prices as affordable as your competitors as long as you deliver superior service and quality. If you’re locating in an entertainment district, ideal customer might be more likely to come in for allegedly we can brunch or a family celebration. This type of restaurant may need to focus more on aesthetics deco and details to create an environment ideal for the customers who want to relax. Number two, nail down the costs. Once you’ve started to clarify your restaurants market fit, it’s time to get a handle on the costs that will be necessary to bring your vision to life. Here are some of the major expense In opening a new restaurant, first and foremost, rent and utilities. Begin by researching potential neighborhoods. Look for ones that fit your perspective brand, appeal to your ideal customers and have a favorable competitive landscape. That what I mean by that is maybe not have too many competitors in that immediate area.
Then make educated guesses about what is pays with your desired square footage could cost in rent and utilities each month. The second big cost is equipment and technology. Your restaurant will need industrial kitchen equipment, furniture, utensils and dishes and obviously a POS system together with an inventory management system. The third cost is construction and decor. Most restaurant owners must pay to redevelop a space before it opens. Although you won’t know how much is necessary until you narrow down your search for a space to specific sites, you can assume that some cash should be budgeted for these changes. You’ll also need to put the finishing touches on your space with art, flowers and embellishments and other decor upgrades.
The fourth costs that you should be aware of, and keep in mind is staffing. Hiring needs like managers, chefs, cooks, servers, bartenders hosts, and runners will vary with your restaurants size and niche. Research what the competitive pay rates in your area are, and be prepared to beat them. If you want to include the best talent also include the cost of any benefits and paid time off, and other extra expenses like insurance, and so on and so forth. Other than your on site staff, you also need to create what I call a restaurant expert team that helps directly manage and plan the big picture For your restaurant. This team can include an accountant, a lawyer, architect, and some restaurant industry, consultants and specialists. The next cost that you should be keeping in mind is legal fees and taxes. Restaurants need to make sure they’re in compliance with all applicable laws and regulations, including hiring and wages, food safety, and permits and licenses such as a liquor license. Getting your restaurant compliant with all zoning and property laws will require for you to hire an attorney and pay fees to local municipalities.
The next one is marketing. You need to account for having a few different marketing expenses, the initial marketing push leading up to the grand opening and the expenses of the grand opening and then ongoing monthly marketing efforts. Monthly marketing costs may include everything from the cost of your email Marketing, CRM programs to the cost of the online reservation system, and social media on Google, and also promotional discounts that you’re going to be offering to bloggers and influencers. coming to visit your restaurant. You may want to consult with an expert to assess just how much marketing you need, as needs will vary widely depending on your location and your restaurant type.
The last cost that I want you to keep in mind is insurance. insurance requirements will vary based on where you live and your restaurant needs. Restaurants often require several policies such as liability insurance, property insurance, and even workman’s compensation insurance. And some of these policies require a deposit upfront research all of these costs early in your planning process to understand how they will affect your bottom line. Okay, so So far, we’ve covered two of The three items that I want to give to you. One is finding your niche and establishing your place in the market. And second is nailing down the costs. And we’ve gone through a lot of the different types of costs that you should be aware of.
Now, the third, and the most important piece that I’d like to share with you, is projecting sales and profitability. Once you’ve had a basic understanding of your potentials, restaurants estimated cost, you can start to estimate how much money your restaurant could make. well researched sales projections will help you build a strong roadmap for profitability. To estimate your sales you need to know several things. How many customers can fit into your restaurant, what percentage of the restaurant will be full at any given time, average meal time, average generated per customer per meal? how long your restaurant will stay on? Each day. To keep your guesses as accurate as possible, you can hire a consultant and look into the numbers for similar restaurants in the same area. Some experts also suggest budgeting for three to 4% in compensation so your employees can compensate guests and reward them at their own discretion.
Once you have your sales projection, you can take a harder look at your numbers and see if you can expect to operate at a profit. Finally, as we come to the close of this episode, I want to leave you with one calculation that I feel is really handy for all restaurant owners. 75% of your projected sales should go towards major expenses. We’re talking about real estate, labor, and the cost of food and drinks that you’ll be preparing at the restaurant. 15% of your projected sales will go towards the other expenses that we talked about earlier which is marketing permits, fees Software costs, equipment costs, and etc. And finally, what you’re left with is profit. Of course, these numbers are just guesses. Projections should be adjusted and re-calculated frequently as you start to nail down the details of your location, and then opening expenses. And then once again, as you open to account for new realities, establishing these goals will put you on the right track from the very beginning.
Outro 10:27
Hi, everyone. I want to thank you so much for listening to the episode and staying with me till the end. I hope that you enjoyed this episode. I also want you to know that we have some amazing guests, and content lined up for the future episodes of The Elevated Entrepreneur Podcast. So if you haven’t already, please consider subscribing by going on to ElevatedEntrepreneur.FM or subscribing to wherever you are listening to this episode. And finally, please consider leaving The Elevated Entrepreneur Podcast a five star review if you’ve enjoyed the episode, so that you can make easier for other entrepreneurs and business owners to find this podcast.
