Restaurant Success: The Main Ingredients
Eileen Figure Sandlin | Entrepreneur Magazine
From poultry to pirogi, steak to grits, Americans are hungry for good food and unique dining experiences. The National Restaurant Association says that in 2005 (the latest year for which statistics are available), the average household expenditure for restaurant food was $1,054 per person, or $2,634 per household. And considering the 300 millionth American was born in late 2006, it’s clear there will be plenty of customers both today and in the future. That makes owning a restaurant a good business opportunity for aspiring food-service entrepreneurs, even during economic slowdowns and when consumer prices are rising.
“Food dollars spent outside the grocery store are higher now than ever,” says former restaurant consultant Kenny Lao, 30, co-owner of Rickshaw Dumpling Bar in New York City, an eatery with 2006 sales of $1.3 million. “So if you have a strong concept and have your execution and operation strategies down pat, any time is a good time to open a restaurant—even now.”
The Cornell University School of Hotel Administration confirms that the most successful restaurateurs have a clear concept and the ability to implement it consistently, as well as the determination to succeed and the flexibility to adapt to changing market conditions (including economic downturns). At stake is an estimated $537 billion in industry sales projected for 2007—and your chances of success are better than you might think. A survey commissioned by Restaurant Startup & Growth magazine suggests that the failure rate for independent restaurants is 23 percent – a far cry from the 90 percent that has been the conventional and largely unsubstantiated figure exchanged in business circles and famously emphasized on the reality show The Restaurant. That’s significantly lower than the failure rate for all new businesses – only 50 percent remain operating after four years – so you have reason to be optimistic.
The key to success is service, says Randy Smith, president of Bottomline Hospitality Group in Scottsdale, Arizona, a restaurant corporation projecting $6.2 million in sales for 2007. “This is really a wonderful time to go into business,” says Smith, 33. “One survey I saw said that more than 70 percent of respondents believed service was the number-one reason they frequent and return to a restaurant, even if the food isn’t quite what it should be. If you can master the service and commit to selling good food, you have a good chance of success.”
Here’s how you can slice off a tasty piece of the restaurant profit pie.