The Facts | Why a Restaurant Startup Succeeds or Fails
Written by David Hopkins
Half of our time and efforts at The Fifteen Group are devoted to helping our clients develop and launch new restaurant brands.
Over the past 18 years of business, our team of industry-leading experts have lead the launch of over 75 original restaurant concepts. Through dedication, passion, and strategic efforts, The Fifteen Group can take great pride in an 85% success rate, approximate, with the hospitality concepts that we have helped launch. However, what about the projects that haven failed—why haven't they launched to consumer adulation?
As one of North America's leading full-service hospitality agencies, we view new restaurant failure as a result of three factors:
Underfunding
The majority of the restaurants that we helped launch, which ended up failing, did so because of a lack of initial funding. Attempting to launch a restaurant without proper funding is a big mistake. We work hand-in-hand with our clients to suggest an appropriate opening budget and funding requirements. However, some clients end up proceeding with the launch without the proper financial resources in place. Restaurant success is contingent on every single factor, from operation to staffing, to marketing working flawlessly together. Restaurant consumers are very unforgiving, and this is especially evident when introducing new concepts to the market.
When a restaurant is underfunded, corners inevitably get cut. Underfunding is a critical misstep, especially during the launch phase, when all components of operations and optics need to be perfect. Due to a lack of funding, restauranteurs tend to shorten proper training schedules before opening. Other things start slipping as well; dry runs are halted because the business cannot afford to giveaway product, the space isn't finished correctly in an attempt to open sooner, proper inventory isn't stocked, and staffing is not at the service level required.
If you are going to open a restaurant, you must have the funding to do it right.
When Leaders Don't Understand the Unique Business of Hospitality
We are in the hospitality and service industry. If one wants to be an entrepreneur in this space, you need to have a solid understanding of what hospitality is all about. A key component of restaurant success is a positive guest experience. If the leader of the business isn't a hospitable person, to begin with, it is hard to have a team culture that carries strong hospitality values through to guests. Previously, The Fifteen Group has helped launch a café client, with two proprietors incapable of positively leading a team. Upon launch, these stakeholders would argue in front of guests, speak with friends on their mobile devices while guests waited for service, not open on time, and so on. They then wondered why they weren't busy four months later, after a busy launch month.
“A key component of restaurant success is a positive guest experience”
Lack of Planning
The previous two factors of failure can be attributed to almost all of the non-successes that we have seen. Lack of planning is a serious issue with new hospitality ventures. However, we have been strategic enough to ensure that this does not happen with the clients that we work with at The Fifteen Group. Our team diligently supports our clients to ensure that their launch is appropriately planned and efficiently executed.
However, over the past two decades in business, we have seen many other restaurants fail because there were not proper planning tools in place before launch. For a restaurant to ‘work,’ everything has to be in sync. Concept, brand, menu, décor and service style all have to be operating collaboratively to build a new hospitality brand. A properly planned concept, which is thoroughly thought-out has the potential to deliver an exceptional guest experience for the consumer. All of these components must work in unison with a proper financial model, to be successful.
At The Fifteen Group, we are often requested to help existing restaurants after the six-month mark. Unfortunately, in some cases, there is not much we can do to support a turn-around. Sometimes the concept cannot operate successfully; the kitchen is poorly designed, there isn't enough storage space, the brand concept and menu don't work together, etc.
If you have a desire to open a restaurant, the concept alone will not be enough; everything—absolutely everything—needs to be adequately planned and work together to develop a successful brand.