Thinking of trying to break into the restaurant industry? You aren’t alone. Americans have more restaurants than ever to pick from on nights they don’t feel like rummaging around the fridge and finding something to cook. In 2017, The Atlantic compared the “golden age” of restaurants to all the TV options viewers have now. More shows are produced, but more shows also end up getting canceled. Similarly, more restaurants are opening, but there’s so much competition that they have to really push themselves to stand out from the crowd. So the idea that now is the best time ever to get into the food business is only sort of true. Here are three other myths worth examining before you invest heavily in a new restaurant.
You can crowdfund your way to success
Having trouble raising enough capital to get the restaurant off the ground? Is the bank refusing to work with you because they don’t think you’re a good enough risk? The idea of crowdfunding the restaurant is appealing, especially if you look at successful campaign write-ups in the press. You might think, “If they can do it, so can I.” But crowdfunding offers zero guarantees. It’s not an easy way out of a financial hole.
Here’s the problem: Everyone and his neighbor is crowdfunding these days. They’re crowdfunding for surgeries, adoption expenses, and even funerals. One expert told the New York Times, “This is an indication of where we are as a society. We are seeing the modern equivalent of the car wash and bake sales.” The people helping people with limited funds often have limited funds themselves, and that means they’re going to donate to the causes that seem the most urgent. Helping you open an artisanal bakery is not going to feel urgent in comparison to, say, helping a neighbor pay for a kidney transplant. For every restaurant crowdfunding success, countless others fail, like the guy who wanted to open the “world’s first hamdog restaurant” in New York City.
When it comes to suppliers, cheaper is always better
You’re looking at food suppliers, and you’ve narrowed it down to the final two contenders. One guy has a detailed food safety plan, while the other guy just shrugs and says, “We’ll figure it out. No one’s died yet.” The second option is significantly cheaper than the first, so you should hire them, right? Well, no. In general, you should never hire anyone who goes around saying things like “No one’s died yet.” The National Restaurant Association says low food costs won’t necessarily result in larger profit margins. They suggest focusing on the profit each menu item earns rather than the percentage costs.
By the same token, you don’t need to buy 5,000 sets of dinnerware if you only need 1,000. Don’t fall for the idea that buying more is always going to save you cash in the long run. Find a restaurant supplier such as Vegadirect.ca who will listen to your specific needs, not just encourage you to buy really high quantities. You should buy what you’re going to use. Wasting product won’t help your profit margin.
90 percent of restaurants fail immediately
It’s repeated so often that it’s taken as gospel: nine out of 10 restaurants will crash and burn within the first year. In this case, the reality isn’t as grim as the myth. Economists found that only 17 percent of restaurants actually went under in the first year. That may not sound amazing, but even if you round up and call it 20 percent, a 1 in 5 chances of failure is a lot better than 9 in 10.
The study did find that smaller restaurants tend to fail more often than bigger ones. So if you have fewer than 20 employees working at your restaurant, your odds are worse than places with 25 or 30 employees.