Should I continue my restaurant even though I have been struggling to meet sales after 4 years of operation?
I've been running my restaurant for 4 years and have been struggling with my sales since the inception. It's been a tough struggle for survival. I have had a few patches where I have made some money. Even after all these years project break-even seems far away. I want to refurbish the place before the season commences and I'm unsure if I should take an additional loan for the same.
Before you sink any more money into your restaurant, decide if being a business owner is even something you want! Not everyone with a good idea or a passion for something ends up being 'right' for business ownership. The answer to this question will guide you into the next question.
Let's assume you do want to be a business owner. Part of owning a business is being able to evaluate why you are getting the results you are. My guess is, you haven't marketed your restaurant very effectively. Without marketing, growing revenue will always be a struggle. Figure out what's missing in this area first.
Next, look at your operating costs. Are you spending money on things that drain your bank account? Are you wasting money on variable costs that depend on how much business you are doing. Do you have employees that are working smart and representing your restaurant in the best light to your customers? When it comes to positive cash flow and making a profit, it's usually the little things that eat up your funds.
Get he answers to these questions and any others that go to the heart of why you are not making money before you decide whether or not to stay in this business. Here's an article I wrote several years ago that might shed further light on how to proceed. http://www.growthsourcecoaching.com/improve-your-business-process-by-watching-reality-tv.html
Before you go and take out a loan Please review the following; (These are in no order of importance).
What type of loss have you had so far?
If you are at a break even point does this include money paying yourself?
Will getting a loan really pull in the business needed?
Are you looking at yourself s an entrepreneur any evaluating your experience and determination?
Are you our your operators effective enough to make this business work?
Are you holding on to a dream that just isn't working? Because we are passionate, and trying to live our dream doesn't mean you will be successful. So many factors count, timing, location, customer base, quality, selection. What are people coming in for can you meet the needs of the masses, and are they returning?
I know from experience that I held on to a dream and was loosing my shirt. It was wrong everywhere. I finally closed it up and re-evaluated my situation. Re-opening in a new location modifying things made it work.
In this process, I really had to look hard at myself to ensure I was right for the task. then look at the surrounding circumstances to see if I and they could be fixed.
If you dont know where every dollar or penny s going you have major issues.
We have to look at our selves and the people around us that make the business. Especially ourselves. Self awareness is so hard yet it makes us aware of who we truly are.
Bringing in new money can gt you started on a whirlwind of spending n frivolous things, bad advertising, poor upgrades, and other unnecessary expenditures. If you can, you may want to have someone look at your operation from the outside in to get a different perspective that what you see.
I wish you the best of success, Gil
Getting a loan will increase your expenses and raise your break even point. Running a business can be fun but it needs to make money and provide a living wage for you. The answer may be in the numbers. You need to really look hard at all the numbers. You need to look at your expenses both fixed and variable. You need to know the exact cost of each ingredient you use to make the food you sell right down to the fraction of a cent. You need to know your margins on each item.
I had a friend who operated a restaurant for about 3 or 4 years. He couldn't make a go of it. He sold it to someone else. The new owner changed nothing about the facility itself but did look hard at his pricing, his costs and his menu. He made sure he had a good staff and food people liked at a cost they could make a profit on but still be competitive. Since the new owner took over the place is packed and has been for the last 8 years. Sometimes it is hard to find a place to park even though there is a big parking lot.
What was my point about my friends restaurant. Well, the answer usually isn't in the building. It is understanding the business and offering things that people want.
Limit your remodeling to what you can do with a few cans of paint in your spare time and work on making sure things are spotlessly clean. Worry about remodeling when you can pay for it with profits and cash flow. Take a walk around the block and then try to take a look at your restaurant as though you had never seen it before. Decide if you would go in there to eat if you were hungry. We are sometimes too close to things to see them. The saying is you can't see the forest for the trees. Learn to look at things through your customer's eyes. That includes your building, your fixtures, your menu, your signs, your service.
I suppose the answer depends on whether the problem is with the idea or the execution.
Do you suspect that someone else (or a better version of you) could be successful with the same business?
Have you been working the phones and networking to attract groups, businesses, salespeople to use your space? Are there businesses around you to market to? Are you marketing to your local residents? Do you offer something (environment, culture, service...) that your diners can't get from other restaurants in the area? Can you set up any referral or JV programs with other local businesses? Is the money you're spending on advertising effective? Do you have any loyalty with your customers? Do you cultivate loyalty? Are there other successful restaurants in your area? What are they doing that you aren't? Is there an opening for a slightly different niche?
I haven't run a restaurant, but I did operate in a highly competitive industry in a crowded market. It's typically still possible to do well.
My experience is that success or failure has more to do with the mindset, beliefs, and approach of the owner than the market in most cases. The real problem is we don't know how to tell the difference.
What do you think?
After 4 years, I believe it is time to shake things up or get out.
There have been some good questions suggested here to ask yourself, as well as to get help to build a plan. If money is to be spent, I strongly recommend that you get someone in to really help you reflect and make a plan for going forward. I'm not pushing myself, but I AM pushing someone like me. If a coach is good, they are like adding a business partner to bring an outside, business-expert point-of-view.
Now that's my strategic recommendation. My tactical recommendation is to upgrade your marketing. If you are providing what your market wants, and your market is big enough, but you just are not getting enough of them to come to your establishment, then focus on new marketing.
There are a million consultants out there who will say they can hep you with this. My advice is to recognize that there are tons of no-cost marketing techniques that can work very successfully BUT it requires some introspection, some focused work on fundamentals, and the willingness to make the effort required.
I just completed an online training event last week, which if followed literally, provides all the information you need to make this happen. You can watch it for FREE by going to this link: https://yourbizsuccess.leadpages.co/webinar-3-22-recording-optin/
Your competitors don't know these techniques, since they're the result of a multi-year, multi-million-dollar study on small business marketing. I hope you find it valuable.
You might like to ask yourself the following 3 questions:
1. Do I love my business, or am I doing it because it was the best idea I had for making money?
2. Am I willing to do whatever it takes to make my business successful?
3. Am I willing to be who I need to be to make my business successful?
If you're honest with yourself, you will get a "no" to at least one of these questions. If it's to question 1, you're in the wrong business and might like to ask yourself "what would I do with my life it it had nothing to do with money?" which will help you rediscover your passion, which is a vital ingredient for sustained success.
If it's "no" to either of the other 2 questions, you need to do some "inner work" to eliminate the subconscious roots that create that/those conditions. In my opinion, entrepreneurship is one of the best vehicles for personal growth, possibly only rivalled by marriage ;-) The more you grow, the greater the potential for your business to grow. But it helps a whole lot to be in a business you're passionate about.
Redecorating may help, but I doubt it. What makes you think the decor is the primary reason for lack of business? Most of us, myself included, will eat in any decor if its clean and the food is great. You need to seek some honest answers as to WHY business is slow and prioritize your efforts and spending accordingly.
After almost 30 years with hundreds, if not thousand of clients I see the same patterns over and over and it usually comes down to just a few things in retail and decor is very seldom on of them.
IMHO, the most common reasons for lack of business and the tell-tale signs are:
1. awareness - if traffic has always been low it's probably a lack of advertising or the ads themselves are weak. It's one thing to know you exist and quite another to be reminded of it on a regular basis. Many people blame the media they buy for their ads not working, when in fact it is the ad itself that is failing. Don't try to do your own ad or choose your own media.
2. product - if you have had plenty of new customers but they don't come back, that is a red flag that they don't like the menu and they are not telling friends about you. Talk to diners, but not about what you are serving. (they will almost always tell you its good) Instead, ask them if they have any suggestions for improvement, or what their favourite restaurants are and why. Then investigate those places.
3. location - its not uncommon to have a good store in a weak location. Franchisees will tell you location is everything. The exact same stores can do dramatically different volume based on location alone. Also, people are creatures of habit and it is much harder to get people through the door the first time then any time after that. But that makes it much more difficult to overcome opening in a location of a failed business of the same type - the old establishment passes on their bad vibe to the newcomer. After 4 years, it's too late for a HUGE new ownership sign, but the best remedy for that is still external. Redoing the outside of the store as dramatically different as possible will go further than changing the interior decor. Paint the building, change the sign and make it eye catching. Getting them to come through the door for the first time can be all about packaging your storefront.
Hi Abhishek, 4 years is a sufficiently long time to feel somewhat settled (if not entirely settled). Have you wondered why your sales are a struggle? Is it quality? Is it the menu? Is it competition? Is it the location (low populated area/too far from market)? I mean, you shouldn't simply drop out without figuring what's going or went wrong - you might end up making the same mistake(s) in your next venture. Just in case you are determined to move on, I'll recommend you give a shot at leasing the business out to someone more experienced and willing to run it for you. Hope this helps.
I would only get financing for a refurbishment if I was sure that the reason for the low sales was the look of the place. I'd be checking the other things like location, advertising, marketing efforts, cleanliness, customer service, menu, and so on very thoroughly before I invested more money in any one thing -- and I'd want to be absolutely certain I knew what the root cause of the low revenues was before I spent any further money on anything.
Analysis of all this isn't fun -- but then neither is going broke riding a dead horse down to the ground because you didn't realize you had to tap a nail in on one shoe.
Generally business fail to make money because of a lack of appropriate knowledge of one or more areas, pour execution of a good plan, or just because it's never going to work for one reason or another.
The first question I would ask myself is why I opened the restaurant in the first place?
If you did it because it's something you always wanted to do it's not a great sign, but neither is it a reason necessarily to shut up shop! The really question is how much are you willing to change? I've seen small shabby little eateries in almost tumbledown accommodation make a lot of money, and build a loyal clientele, but they all have one thing in common! A good product that people who want it!
Personally the first thing I would do is de sentimentalise you view of what you're doing. Stop thinking in terms of how long you can hang on, and start thinking in terms of why customers come to your establishment, and what keeps them away!
Revamping a restaurant that has a tired chef won't change anything, but hiring a new chef could make all the difference.
I can't tell you what's stopping you from succeeding, but one thing I can tell you is that you need to start looking at this as a business first and not just a personal project. Break it down, analyze everything, do market research, and if after all of that if you can show that there is a viable business beneath your dreams, then make a viable plan that's broken down into achievable steps, with goals and deadlines, and stick to it!
It doesn't necessarily need more money, it might just need more commitment, talent, and hard work, and not necessarily on your part..
This is when you have to go back to your initial goals. When did you plan to reach your balance?
Take into account the mid term corrections and value. You only know the details, if all/ part of the business has a positive Roi.
Hope that this will help your decision.
Abhishek, Sorry to hear about your issues involving your restaurant.... My suggestion is to develop a business plan with a Score Counselor (or someone like them), firmly understand your own personal mission statement and does it coincide with what you think about your restaurant, and work on a vision statement, if you refurbish where will that put you? Also what is USP or Unique Selling Proposition, makes you different from your competition? Have you analyzed your competition, and are you in a tough competitive climate?....You may wish to learn how to zero base budget as well and look for a Point of Sale System that tells you when you made money, when you did not, and you may see a pattern.... Loo for a tagline that makes sense with mission and vision statement
I would look at a few details about the businesses current state first. With all brick and mortar businesses Location is a main concern. Is it easy to find you. If not, how much can you change things to improve finding the building.
Are you consistently advertising the business in at least 3 different media (Print, radio, direct mail ). If not, you're failing because of inconsistent audience reach.
Are you talking with local businesses to get into their business either by posters or in the newsletter? All of these areas are important to building and growing the business.
How complex is the menu? Is it simple to use or so cluttered that I can't find what I want to eat. To me that is a common problem with restaurants. Serve the 20-25 things you do best.
When these areas are properly addressed then you can consider the updates you are looking at to get better.
Frankly, this is not about "Make great food and they will come", its a business and needs business approaches to succeed. And..ads are not the answer to pulling in customers nor keeping them long term.
How do you know that enough of your customers actually want what you serve?
Do you know how you fair in yelp and other reviews since potential patrons check the reviews before they try you out?
Are you positioned well with visitors bureaus, local hotels so folks get recommended to you?
Do you understand marketing, how to get noticed in the neighborhood, how to partner up with the business community so they have meetings and business dinners at your place?
What do you do, say that lets you stand out amongst your competition so folks want o come to your restaurant and not another?
Hvae you offered up your restaurant as a meeting place for meetups, groups?
Honestly answer these questions before you go any farther down the spending/remodeling line.
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Sorry to hear! Business is a full contact sport.
1. Avoid any loan before you can get a free business counselor through your local government (try the Small Business Administration)
2. Get some friends or non-friends you trust to tell you why they would not work with you. From there pick the top 2 or 3 things to address
3. If you can identify 1 or 2 areas where money will help, you can try for a zero-interest loan through KIVA
I would suggest you reconsider this business or location. Majority of times these two are key factors in your business success and breakeven.
If you are not even at breakeven after four years don't put money in this business. Just try different location. Try different business as in the Asian community to run this type of business is not so easy. Our Asian people are picky and very conservative for spending money.
You should try different location or different alternative for thus business.
Find out why your sales are dismal . Determine if you can fix it, how long it will take, and if the additional debt to do so is worth it and sustainable.
I worked at a gelato parlor about 5 years ago and it was hard to break even. Most people nowadays can't afford luxuries like eating out. Mainly we served rich people's kids sent 'rampaging' through malls like ours :-)
I think you should downsize. Here in Malaysia, in hard times, a shop front became split in 2. With the savings on rent or by sub-letting, you could do a fancy take-out, minus the service tax. I had a fancy fried rice & chicken take out and enjoyed it a lot. Just a nice tray and bag and people will talk.
There are way too many variables. to be giving you specific advice.
1st thing I would do is to get a honest friend, Someone who will tell you as it is. If no one pay for 2 or 3 people to become a secret customer.
Give them a letter as a gift certificate to cover their meals for 2 people each.
Have them come on different days, so that their experiences are not all on the same day.
If possible it is better to have people who have never been before.
Meet with each person separately, and then together.
If 3 people then 3 separate meetings. Then a few days later 1 meeting with all of them together.
Find out from them in their words all about the experience the good, the bad and the ugly. Do not ask them for any suggestions on the first meeting.
On the second meeting when you have them all together, you can recap all that has been said, to see if there is anything else that they want to add or confirm. Then ask them for the top 3 things they would do to improve the business.
Let fresh outside eyes help you.
At least this will give you a much better understanding as to how you are operating compared to how other (similar) restaurants are operating.
First I'd like to say that the fact you still have a Restaurant Business up and running for 4 years so far means you're doing a pretty good job despite what challenges you're facing. You should be proud because there's no possible way for you to meet the challenges you stand face to face without working hard enough to build your way up to this point. If you walk away from this challenge now, you'll have to wait another 4 years of hard work with your new venture until you get back in the position to face it again, so you might as well face it now :).
First, I'd like to say !!!!!!DO NOT TAKE OUT A LOAN!!!!!! I say this because if you're Business isn't generating enough money, it's because the mechanics of it aren't yet properly set to do so. Pouring more money into it will just be fueling the current processes which aren't providing sufficient benefits. I know you're thinking "It takes money to make money" but that's not always true. It takes GREAT IDEAS that people love so much they're willing to pay for it to "make money". The money they pay should pay for product twice AND put a chunk of money in your pocket.
The fact you've been going for 4 years tells me you have some degree of steady business. I also see you've gotten in tune with your Business's "personal seasons" as I call them. If you sit back and reflect on the past 4 years you'll see that you have all sorts of valuable information in your memory just from experiencing 4 complete cycles of your Business living in the economic world.
The first thing you should do is start writing down everything about whatever "personal seasons" you've noticed with your Business and what characterizes them. Writing this down is a huge help because when you're able to look at your own thoughts without having to think and remember them at the same time; that clears space in your brain where new ideas can bounce around in response to what you're seeing. You'll even notice connections to different things that you never realized even though you consciously knew it every day for the past 4 years. The brain is just magical like that lol.
Next you need focus on the customers who come to you regularly and find out what they like about your Business. There's tons of ways you can do this from surveys and questionnaires to simply walking up and having a conversation with them. Too often people get absorbed with trying to get new customers that they forget about the ones they've already acquired. This means you have a developed culture under your roof who've decided to make you a part of their world for a reason.
Find out what those reasons are and where you fit into each of their worlds and let your imagination play with that info so you can start generating newer ideas that will be more effective and valuable to your customers. Also use this info to generate ideas for things to do during each "personal season" your Business transits through to make sure you eliminate the negative influences while beefing up the positive ones to produce more beneficial results.
As you're doing this you'll start noticing what ties all of these people together in terms of why they like your Business and they'll naturally fall into their own unique groups that you'll have to create names for as you unravel them and understand them enough to define them. Once you have them organized you can start creating specials for each group catering to whatever it is that group enjoys at your establishment.
Overall you have a Business running and you have Customers, that's pretty good. Your next step is to organize and maximize the existing situation so your Business starts expanding in those Customer's worlds giving them more reasons to come there more often. I don't know how you price your food but of course you should make sure that's making a decent profit per ingredient used. Just get that in order and you'll be amazed at how much it can turn things around for you. Once everything is going forwards and you still feel like taking out a loan to make improvements, or even open another restaurant, go ahead. But until you get a grip on things and tweak your Business's mechanics to yield more bountiful results, you shouldn't touch a dime of ANYBODY'S money because your Business will just gobble it up and keep going.