The Restaurant Just Closed! The Food Was Delicious? What Happened?
Recently, a new restaurant that opened abruptly closed. They were open all of 4 months; had built out a historic building, ordered new furnishings, new kitchen equipment, dishware, flatware, glassware, changed executive chefs 2 times and changed hours of operation, in only 4 months of operation!
The restaurant was in a historic building where everything was taken down to the studs and rebuilt up. The before and after pictures are amazing—they look real sharp. Architects, builders, other individuals were all involved in this new enterprise, which took over 3 years to transpire from concept to reality.
Discounts were offered to every type of individual—public safety workers, health care professionals, and spiritual leaders each day of the week.
The web page was superb, the Facebook, Twitter, Social media presentation was outstanding—as was the food—so, what happened?
Well, we’ll never know for sure. However, let’s explore some probable possibilities which, we suspect probably occurred.
A. Lack of understanding of the restaurant business. Just because one is a good cook does not mean that he/she can run a successful, profitable restaurant.
B. Lack of adequate cash flow and business planning. Optimistic sales forecasts not grounded in reality were probably also a causal factor.
C. Great advertising, discounted meals, involvement in the community and charity events, giving the food away as an advertising approach.
D. Staff not fully trained and managers not careful to pay strict attention to portion size or drink pour size.
The failure to use a good business consultant to review and test all of the underlying assumptions that the business owner postulated! Was there a good business plan developed, showing how cash flow would run for 12-18 months? Was there an advertising budget developed to show how to increase overall brand awareness of the firm.
Whenever a restaurant offers discounts to the meal price that is normally a sure sign of business stress. The idea is to decrease price of the offering, generate higher sales and make up the difference. This normally never happens! This is the first sign of failure and the beginning of a downward spiral to overall enterprise failure.
A business consultant’s fee is never better earned than when you are thinking about going into business. Our job is to test all of the assumptions and make sure that you have not forgotten or overlooked some assumptions that could create business failure. This may mean suggesting that your ideas are not robust enough or financially strong to sustain a business. May not be the words that you wish to hear, but the money spent on our advice is well worth it if we find that you can save all of the hard earned money that you were going to use to start the business. Of course, the decision is yours. If after we analyze the data that you have developed, we may suggest that “go for it”. However, we may also identify weaknesses that may cause you to strongly consider rethinking your business enterprise.
If you are thinking about an entrepreneurial activity, a consultation today may save a large amount of money in the near future. Give us a call and let’s have conversation about the possibilities.
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