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Sector spotlight restaurants

Sector spotlight: restaurants

Can an entrepreneur reap rewards and joy in the restaurant industry? Absolutely.

Starting a restaurant has a romantic mystique to it. It can be glamorous, exciting, and incredibly fun. But, it's also going to be a tremendous amount of work, and a very costly undertaking.

Can an entrepreneur reap rewards and joy in the restaurant industry? Absolutely.

Is it going to be easy? Not at all.

First, the good news...

A statistic has been thrown around a lot over the past few years that simply isn't true:

“Ninety percent of new restaurants fail in their first year.”

While this myth makes reality-TV chefs seem more impressive when they “turn around” a failing restaurant in front of millions of viewers, the facts show that starting a restaurant is no more risky than starting any other small business, with failure rates hovering between 50-60 percent in the first year.

See how being embarrassed by Gordon Ramsay on national TV turned out to be a PR dream for one restaurant owner!

As is the case with any entrepreneurial effort, realistic strategic planning is key to long-term success when opening a restaurant. From the initial concept and name of your corner cafe or urban hotspot, to the design of the menu and the color of your tablecloths, everything needs to be considered in advance if you want to avoid dealing with costly hassles down the road.

While every entrepreneur considering opening a restaurant has some kind of concept, name, or gimmick well in mind, there are other practical issues to be considered that some aspiring restaurant owners overlook.


Of course, the figures are going to range as widely as the sizes and styles of potential restaurants, but the fact is, starting a restaurant is going to require some significant funding up front.

The initial purchase — or, more commonly, lease — of an appropriate location, any necessary renovations or upgrades, the purchase of supplies, and having enough left over to cover operating expenses, food purchases, payroll, and the inevitable unexpected expenses during the first several months after your grand opening, generally require anywhere between $200,000 and $500,000 or more.

A smart business plan with an eye on intelligent cost savings can do wonders in keeping that cost down, as can hiring an accountant with experience in the day-to-day operations of a restaurant. But, at the same time, you don’t want your restaurant to start off on the wrong foot just because you wanted to save a few dollars. Spend where you need to in order to create an appealing, welcoming, and enjoyable atmosphere with great food and service, or the whole effort will be worthless.

Unless you have that level of funding available to you personally, you will need to include financing and/or locating investors as part of that business plan.


While your concept for a new restaurant may seem foolproof in your mind, it's the dining public that you need to convince, and it’s their positive online reviews and word-of-mouth advertising you need to earn.

Consider very seriously how you're going to market your new restaurant quickly and effectively so you can start bringing adequate crowds in before your buffer fund disappears.

Click here to learn how four top restaurants have learned to successfully market to millennials!

Here are some vital questions you’ll need to ask yourself, preferably long before your grand opening:

Basic marketing

  • Who is your target market, and how can you reach them?
  • What does the dining public actually want or need in the area? And what are they tired of?
  • How are you going to differentiate yourself from all the other restaurants in the area?
  • How are you going to entice passers-by or pedestrians to choose your restaurant when they're wandering around looking for someplace to go?
  • How will you encourage first-time customers to become regular patrons?

Marketing tech

  • How are you going to encourage customers to leave you positive reviews online?
  • How will you mitigate the risk of negative reviews?
  • To what extent will you be able to take advantage of the Social/Local/Mobile (SoLoMo) environment and engage your customers where and when they’re most receptive?

Food trends

  • Will you have ready access to locally-produced food?
  • Can you market some or all of your menu as healthy fast food?
  • Will your restaurant be making use of technology in a trendy/memorable way?
  • How do you plan to effectively stay on top of popular trends influencing consumers in your area? And how will you decide which trends to follow and which to ignore?

All these questions (and many more that are niche-specific) weigh heavily on how successful your opening phase will be, as well as your long-term prospects.


Few, if any, first-time restaurant owners expected to work as long and hard as their opening months or years required. Seventy- to 100-hour weeks are very common, especially for chefs who own their own restaurants and need to fill extra shoes day in and day out. While hiring skilled personnel can make a huge difference, you should expect to be working a lot of hours to get your restaurant off the ground in its early stages.

Remember, running a successful restaurant involves far more than serving great tasting food. It requires a solid handle on financing and balancing the books, marketing is a huge factor, and all the day-to-day details involved in keeping the operation moving—from food safety to personnel challenges to sweeping the floor at 2:00 a.m. — play into this potentially thrilling and profitable experience.

As thousands of restaurant owners have learned, however, with good planning and a strong work ethic, it can be a deliciously successful venture.

The  Skinny on the US Restaurant Industry in 2017:

  • There are over 1 million restaurants currently operating in the United States, 70 percent of which are privately owned single-location operations.
  • These restaurants account for over $2.2 billion in average sales every day.
  • That's about 48 percent of the total amount of money Americans spend on food.
  • Over 7 million Americans work in the restaurant industry, or about 10 percent of the US workforce.
  • Half of all US adults have worked in the restaurant industry at some point in their lives.

Statistics via The National Restaurant Association

Bruce Hakutizwi

About the author

USA and International Manager for, a global online marketplace for buying and selling small medium size businesses. The website has over 60,000 business listings and attracts over 1.5 million buyers to the site every month.


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