7 Restaurant business plan mistakes new businesses should avoid

If you are a food entrepreneur who has made up your mind to launch a restaurant or cloud kitchen, there are some pitfalls you need to avoid. The F&B industry is a very competitive business, and some of these common mistakes which are avoidable can prove detrimental to any restaurant business. Below are some of the common mistakes restaurants make at the time of their inception and easy ways to avoid them :-

An unrealistic business plan:-

A foolproof business plan is a bare minimum before laying the foundation of a restaurant. A business plan needs to be realistic as to what will be a road map of the F&B unit, the goals the restaurant has laid, and the revenue targets it intends to achieve. It’s crucial that the restaurants follow the target set for themselves, do periodic reviews, and have a backup plan in case of failure. 

A business plan is also vital when a food entrepreneur wants to raise funds to form capitalist and financial institutions. It’s easy to get lost and run into losses for a restaurant without a business plan. Factors like targeted demographics, menu design, location, restaurant theme, etc., are essential in a business plan.

Lack of financial planning:-

Financial prudence is vital for the growth of an F&B business and its survival. Restaurant businesses face anticipated and unanticipated economic uncertainties. Factors like inflation and recession can directly impact the revenue earning capacity of the food outlet. The restaurant must get its floor plans and paperwork approved by the concerned state and civic authority in case any changes demanded will again lead to additional expenses. It takes some time until restaurants start generating profits; hence, it’s recommended that at least one year’s working capital reserve be maintained to avoid disruption in operations.

Realistic budgeting:-

The budgeting you do for your restaurant has to be realistic and needs to analyze all the unforeseen expenditures and costs. No anticipated costs must be undervalued or left out as they can negatively affect the business. After setting up your restaurant infrastructure, paperwork, and licenses, a weekly, monthly, and annual budget must be created. Your restaurant budget should cover all the crucial elements of food, utilities, and other overhead costs. Inventory management services aids a restaurant in analyzing the inventory and overhead cost and even generate reports that give a better picture of the business.

Absence of a marketing plan:-

Not having a marketing plan for your new restaurant is a recipe for failure. A marketing plan should be an integral part of a restaurant business plan, for new F&B outlets, whether high-end fine dining or self-service QSR’s it is crucial to have their website and a social media presence. Social media gives a restaurant an avenue to build its brand; it can get valuable customer feedback, promote new promos, communicate with existing customers, and reach out to new ones. Websites of the restaurant is an addresses in a virtual world where customers can know about you and buy from the restaurant. It is also essential that restaurants update their address and contact numbers in search engines like google and yahoo so that guests can find them if and when required. Online marketing is cost-effective and result-oriented when compared to traditional marketing channels. However, some marketing tactics, like distributing pamphlets in the neighborhood, can also be effective. Restaurants can cherry-pick a marketing strategy that best fits their goal or hire pr agency if they have a budget.

Failing to plan workforce:-

F&B business is a people-oriented business; good food, ambiance, and service make a great restaurant. None of it is possible without a good team of cooks, servers, restaurant managers, and other staff members. The restaurant has to work out how many staff they hire and how they will be allocated in FOH (front of house) and BOH (back of the house). Budgeting the salaries, perks, and other incentives is also essential to know the cost of hiring the workforce. Alas, it’s significant for restaurants to plan and budget the workforce requirement.

Selecting the wrong location:-

The location of a restaurant or a cloud kitchen is another vital factor that decides the success or failure of a restaurant. The list of locations finalized by you should be accessible easily by your targeted demographic. You can get cheap locations, but the restaurant will fail to attract business if the same is not accessible to the potential customer. An effective marketing campaign can generate interest among partons, but an offbeat location will turn them off; the moral of the story is that when it comes to selecting a location, cutting corners is a big no-no.

Underestimating competition:-

Once a location is finalized, the next step is to analyze the types of competition in the area. It is obvious that if two or three restaurants are selling the same cuisine, opening a new restaurant with the same concept has a greater chance of failing. Your competitors, especially the ones who have established themselves in the area, can be a good case study of how to be successful. Based on the competitor’s analysis, find out the shortcomings and then decide how you can fill in this gap and give the customers what they are yearning for. If restaurants have a deep pocket, they can also hire agencies that can do a competitor analysis for them. Opening an F&B outlet has a risk of its own, but a restaurant business blueprint can effectively eliminate a lot of pitfalls. Making a restaurant business blueprint after much deliberation is essential to minimize the risk of business failure.

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