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Watch Out for These Big Problems When Starting a Restaurant

The food industry is notoriously known for risky business models. As a new restaurant owner, you might be worried about creating a business that may flop in a couple of months. COVID-19 has only amplified the weak legs of the industry.

There are many factors you need to be aware of when starting your restaurant—many of which can be devastating to small businesses. Before you open shop, you should consider which ones are important to you. Ensure you have as favorable a market as possible. With careful planning, you will set your business up for a higher chance of financial success.

Startup Costs

The major costs you will be taking up at first are usually what tanks a business’s chances up front. Startup costs involve proper permits, building rentals, and equipment purchases in some cases. Get an estimate with a financial advisor to see how much this will cost you.

Look for more cost-effective appliances that work well, but reduce your startup costs dramatically. You may also be able to work out of your home and remove the cost of rent as a factor entirely. This has become increasingly common with COVID-19 causing businesses to focus on pick-up orders. Think about your current situation to reduce these costs.

Low Margins

Not only is there a lot of up-front cost in the food industry, but your profit margins are also often razor thin to keep customers happy. Low margins are common, especially in the early days of a restaurant’s opening.

To stay competitive, many restaurants must keep their prices low. The problem is that ingredients for the food you make can make up a huge share of your weekly costs, so there needs to be a balance. If you are hiring other employees, you should know many employees for restaurants are seeking higher wages, which you might need to incorporate into your budget.


You also need to analyze what kind of restaurant you want to be, and compare it to what is in your area. Competition is crucial to your business success, and if you do not strategically focus your business on what your likely customers want, they will go elsewhere.

Becoming competitive as a business involves heavy advertising, reviews from the community, and slashing your prices when necessary. Offering a good product (or a better one) than other restaurants will keep your customers coming back for more—especially if it is unique. Before you open, think about these issues.

Customer Service

Making sure your customer service is in peak condition will ensure a return in customers. Customer service workers are seeing a rise in online presence, but in-person assistance will likely never go away.

In order to speed up customer service, it’s best to avoid the problems of a complicated POS system. Older systems generally require more input and lead to more conflict. Fortunately, there are plenty of intuitive platforms that make it easy for employees to operate quickly. Square and Clover are two popular ones right now. You can easily program them to show your menu options and prices.

Advertising Methods

One of the most difficult things for new restaurant owners to do is advertise. Commercials and billboards are expensive, and they are not guaranteed to be successful in attracting new customers. Since they do not have a physical product that someone buys at a store, it can be difficult to know how to market small restaurants.

There are plenty of advertising methods that can help you get your business out there. Online social media platforms can be your primary method of exposure and reach. Reach out to your people on your community page and let them know about your restaurant. Buy social media advertisements for your location—these are better methods than older methods.

Employee Turnover

Hiring new employees is a lot of work. Restaurants tend to have an extremely high turnover rate compared to other businesses. As an owner, you must take time out of your day to look at resumes and perform job interviews.

This potentially high turnover rate takes time out of your day to advertise, cook, and ensure you have good customer service. Make sure the people you hire can stay with you for a long period of time. Talk with your employees in your interviews, and get the jobs set up before you open the full operation.


Surprisingly, the location of your business matters a ton in driving customers to your doors. You should nail down the perfect spot for your restaurant. While you may think you have an excellent building, there are some disadvantages that you may face that should be considered.

Accessibility is essential to business (despite what some say). If a driver feels like your parking lot is too hard to get into, they will likely pass up on your restaurant. Medians blocking access to your business, buildings near competing restaurants, and a lack of a clear parking are specific examples of poor location. If you see these qualities in a potential rental space, turn the other way.

Innovation and Identity

New restaurant owners need to find original ideas for their small business. People are attracted to innovation and excellent food. Creating a solid identity based on your ideas will continue to promote what you stand for and keep your brand in the customers’ minds.

The problem most new restaurants face is they do not carve a professional identity for themselves. They rely entirely on their food, but do not promote any new ideas to help them stand out. This is why community support is so essential. If you start strong in your town or city, you will likely grow. Not getting the word out will remove from your business’s success.

If you are worried about starting a restaurant, it is okay. It is not an easy industry, and it can be overwhelming. However, if you work hard at planning out your strategic plans from a community building and financial standpoint, you will be in a good place down the road. Your dreams can become reality so long as you plan in a smart way.

To help your restaurant’s success, it’s a good idea to have a professional website. We can help you make one! Contact us to get started.

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