Opening a successful restaurant is not as easy as creating a great menu and serving excellent food. If it were, then everyone would be a restaurant owner. But the reality is that an eatery’s viability can be bound to many factors–such as executing a strategic vision, managing costs, hiring competent employees, and so much more.
Grasping these types of elements can make or break success from early on—especially in today’s climate. According to the National Restaurant Association’s State of the Restaurant 2023 Industry report, 47% of operators expect competition to be more intense than the previous year.
Now more than ever, it’s critical for restaurant owners to lay down a rock-solid foundation from the beginning, simply to survive in a fiercely competitive environment. So if you’re curious to explore what makes restaurants successful, keep on reading!
Vital Elements of a Successful Restaurant
Chances are, you can quickly identify a popular restaurant simply by glancing at wait times and scanning online reviews. But as we mentioned above, there are much deeper factors that can contribute to the successful “heartbeat” of a restaurant.
1. Understand the Nuances of a Food Business
It may be said that to launch a restaurant business, it’s important to hold a deep passion for the industry. Intrinsic excitement and curiosity can help you weather challenging times. However, it can be just as critical for restaurant owners to embody a strong business acumen for the food industry and to know the mechanics behind how the industry operates.
Many new restaurants may struggle with operations due to a lack of business skills, dedicated leadership, and a smart and strategic vision. Of course, all of this isn’t learned in the blink of an eye and usually requires education, coupled with hands-on experience.
Students can examine key business essentials, such as cost control and menu design, plus take a deep dive into small business marketing and management. Of course, you can opt to enroll in a culinary arts program, but this entrepreneurship curriculum covers some of the most pivotal fundamentals that could bolster your startup’s long-term viability. So, before you start a restaurant, make sure you have the knowledge to steer your ship in the right direction!
2. Determine a “Stand Out” Concept
Earlier, we talked about how competition is exceptionally fierce, with new restaurants sprouting up daily. Instead of imitating others, it is crucial to dedicate time to developing your own unique restaurant concept. This concept should stand out from others and offer something distinct.
Your concept can determine whether you will attract a large number of clients. For instance, you could open a fast-casual Indian restaurant that transforms into a dance party in the evening. Alternatively, you could establish a plant-based eatery that provides yoga classes and tarot card readings as well.
Investors view your concept as the foundation of your business. It is linked to crucial factors such as the type of restaurant, target market, location, size, and more. The bottom line—don’t cut corners on your concept, as this can be part of your foundational success.
3. Pick an Ideal Location
Where you set up shop can greatly impact the future of your restaurant. The location of your restaurant can influence whether customers choose to eat there. It can also affect your utility, marketing, and labor costs. It’s important to spend enough time looking for the best neighborhoods for your business, based on your goals.
How to Evaluate a Successful Restaurant Location
- Exposure: Will your restaurant be in a high-traffic zone with other businesses? Or is it more difficult to find?
- Target Demographic: Who is your target audience? Does the area demographic align with this or not?
- Parking: Is there designated parking for your location? Is there enough parking for your patrons?
- Competition: Are there similar restaurants in this neck of the woods?
4. Strategize a Dynamic Menu
Although you may be inclined to go with your gut and offer menu items that speak to your preferences, designing restaurant menus go much deeper than this. Successful restaurants can use a menu as a strategic hook to keep customers and increase sales. Along with designing an aesthetically pleasing menu with the right colors, images, and layout, they often use “menu engineering” as a way to ensure profitability.
Many restaurant owners will assess profitable menu items as frequently as once a quarter, making it more of a dynamic rather than a static process. Here are the menu engineering nuts and bolts to consider.
Your “workhorses” are your highly popular but low-profit menu items. When evaluating your profitability, you may not want to remove these essential dishes from the menu, but perhaps find a way to use more affordable ingredients or reduce portion sizes.
If you come across low-profit menu items that aren’t popular, these are considered “dogs.” So in this specific instance, you may want to remove these dishes entirely from the menu.
However, the anomaly might be a kid’s menu item, such as chicken tenders. These might not be too lucrative; however, by keeping this dish, you can keep parents satisfied. It’s up to you to assess whether this might be a smart business move.
Dishes that are highly profitable but low in popularity are considered “puzzles.” For puzzles, you may want to brainstorm ways to enhance the recipes or reposition them in a way that entices customers. You can even ask employees to highlight puzzles while serving customers.
“Star” items are self-explanatory in a way—these are the high-profit, high-popularity items you want to keep! Although you may be tempted to “spice up” these offerings to keep them fresh, do your best to keep the recipe the same and only slightly tweak the ingredients if necessary. Your staff should do everything in their power to promote these items and marketing efforts should focus on showcasing them on social media.
5. Know Your KPIs
What are some of the key performance indicators (KPIs) restaurant owners use to know if their business is in great health? Although it’s encouraged to hire a financial team who can analyze and report on key metrics, restaurant owners should familiarize themselves with the most telling stats, which could include the following.**
Net Profit Margin
One of the most valuable ways to get a pulse on a restaurant’s health is through net profit margin. This looks at how much profit is yielded as a percentage of revenue. It’s also likely that investors and stakeholders will turn to net profit margin to see if restaurant operating and overhead costs are stable.
Cost of Goods Sold
Referred to as COGS, this success metric looks at the exact costs to deliver food and beverage items on your menu. Understanding COGS, inside and out, is vital, as it usually represents the most substantial restaurant expenses.
If you want to examine the pure operating costs of a restaurant, the exact metric to do so is called prime costs. Usually, you can find this information as a line item in a profit and loss statement.
Restaurant Revenue Per Seat
Referenced as RevPASH (revenue per available seat hour), this metric measures the exact income received from each seat in the restaurant, per hour. By analyzing this, you can assign the most profitable seats to customers during specific windows of time.
6. Ensure Employee Satisfaction
Minimizing employee turnover and finding ways to keep restaurant staff satisfied is a key ingredient to the long-term viability of a restaurant. Of course, this ultimately starts with onboarding highly-motivated, team-driven employees from the infancy stages of your restaurant. But once you get them through the doors, it’s imperative to retain them.
So how can restaurant owners keep employees happy and satisfied, while hopefully reducing turnover? To better understand this, let’s take a closer look at why restaurant employees may leave an establishment.
- 32% lack of growth opportunities
- 22% pay/benefits
- 20% poor job fit
- 17% workplace culture
- 7% scheduling issues
- 2% job security
7. Uplevel Your Marketing Game
As we mentioned earlier, location can certainly increase foot traffic…but another major component to landing loyal customers is your marketing strategy.
According to this study that evaluates customer restaurant choice, word of mouth is the second most important decision-making criterion when choosing a restaurant! Although word of mouth isn’t exactly 100% in your control, you can certainly encourage it by directly asking customers to leave online reviews detailing their positive experiences on platforms such as Yelp.
When you take a step back, you may quickly realize your customers can do a good portion of the marketing for you, which can be a win-win. But you shouldn’t completely rely on reviews to turn your restaurant into a success.
You also don’t want to forget the power of email marketing to send your customers exclusive discounts or special news that could inspire them to book a reservation. Keep in mind that the beauty behind marketing is that it’s not black and white—YOU hold the power to create a mix that resonates best with your customers.
8. Instill New Technology
To run a successful restaurant, you can’t be too resistant to adopting technology, especially now, in a world increasingly driven by artificial intelligence. Are you using predictive analytics to decipher what item(s) a customer will order? Or are you employing chatbots to initiate conversations with guests about any restaurant updates?
At the very least, you’ll want to consider implementing an online ordering system, inventory management, point of sale, and other technology to streamline your operation as much as possible. Using the newest technology helps you stay successful and stay ahead of your competition.
Don’t Leave Restaurant Success Up to Luck
As you can tell by now, a restaurant’s success can depend on myriad elements, and as a restaurant owner, you certainly don’t want to leave prosperity up to sheer luck. Escoffier’s Food Entrepreneurship program can help you make informed business moves that can contribute to your restaurant’s long-term success! Yes, education is an investment, but it can give you the confidence to ignite your passion and turn your dreams into a reality.
Contact us today to learn more about this program and financial aid options for those who apply and qualify!
Looking for more entrepreneurial articles? Try these next!
- 8 Career Paths If You Want to Be a Food Entrepreneur
- How to Start a Food Business From Home
- What Licenses and Permits Do You Need to Start a Restaurant?
**Note: Auguste Escoffier School of Culinary Arts does not provide financial advice. Always consult with a professional to determine what is best for your situation.