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RED FLAGS FOR NEW RESTAURANTS

Bulletin posted by Kallas on May-19-2017

After 40 years advising new restaurant owners, I have come up with 10 of the most common red flags that, when present, increase the risks of failure:

  • Not having a good idea of the type of customer you want to draw and the corollary; not providing an appealing experience for that customer.
  • Having multiple partners with roles and functions not clearly documented. Misunderstandings between partners are more common than you may think and can ruin an otherwise successful project.
  • Underestimating what it costs to open or take over an existing restaurant and the corollary; being under-capitalized.
  • Not having prior restaurant experience in at least a general manager capacity.
  • Not having prior restaurant experience and thinking you can hire people to do everything.
  • Thinking you are going to save money being your own lawyer or accountant and the corollary; having poor legal or financial records.
  • Do-it-yourself accounting. This may be self-serving but if you ask any consultant, the absence of well organized and implemented accounting systems is a big factor in failures.
  • Not enough sales. You can fix just about any problem in a restaurant but if the sales is not there, your chances of success go down significantly.
  • Over-leveraged and the corollary; paying too much for what the restaurant is capable of producing.
  • Not having weekly reports and paying attention to prime costs (labor, food and beverage).