Growing up in the early 80s I used to watch the American sit-com, Diff'rent Strokes on an early Saturday evening just after the football final scores. For the unfamiliar, it was the story of two orphaned black kids, Arnold and Willis from the Bronx who were adopted into a rich family; namely widower Mr Drummond and his daughter Kimberley and in some ways it was very much a precursor to The Fresh Prince of Bel-Air which turned Will Smith into a household name. In fact there is actually a small crossover segment in Fresh Prince where Arnold and Mr Drummond turn up in Bel-Air.
While it's legacy is somewhat mixed, especially with the embodiment of the "Great White Saviour", but also concerning what happened to the actors themselves. Gary Coleman (Arnold) was plagued with health issues and got caught up in a number of toxic and damaging relationships and died early, Todd Bridges had issues with addiction and was arrested multiple times even for attempted murder, but has managed to clean himself up in recent years. Most tragic of all was what happened to Dana Plato, who played Kimberley. She became a drug addict and when she couldn't get any regular acting roles she turned to taking roles in pornographic movies to feed her habit. She died aged just 34 and what made it even more shocking was that in Diff'rent Strokes her character was so sweet, charming and endearing.
So, what's this got to do with running a restaurant I hear you ask?
Well, I vividly remember one episode in which Arnold decided to sell hamburgers to raise money and he was so proud of himself when he announced to Mr Drummond that he had made $5 after charging just 5c for a burger. Mr Drummond congratulated him on his endeavour before pointing out that by raiding the food store he'd actually spend 50c on each burger, leading to a net loss of 45c per burger or $45 overall. What Arnold had failed to grasp was the impact that overhead and costs had on profitability and this is where many restaurants fall down too.
It can logically be assumed (and that is half the problem) that selling a £3 bowl of pasta for £15 guarantees massive profits but this is a blindly naive figure. This mathematical illusion comes from miscalculating prime costs. Beginners frequently price their menu based on competitor pricing rather than their own actual expenses. They fail to meticulously track the combined total of cost of goods sold (food and beverage) and labour. In a healthy restaurant, these prime costs consume between 60% and 65% of turnover. Once rent, utilities, staff costs, insurance, credit card fees, and paper goods are subtracted, the actual profit margin is often just 3% to 5%. Without rigorous, weekly tracking of these metrics, a cash flow crisis is inevitable.
Inexperienced restaurateurs also fail due to the "everything to everyone" menu. They want to capture every possible demographic, so they create a sprawling menu spanning burgers, pasta, tacos, and seafood. This immediately creates an inventory nightmare. A large menu requires buying a huge variety of perishable ingredients in small quantities, driving up purchasing costs and leading to massive waste when obscure items do not sell. In the kitchen, it destroys efficiency. Line cooks cannot establish a rhythm when every ticket requires a completely different set of pans and prep stations, leading to long wait times and inconsistent food. Too much diversification causes more problems than it solves. It may even slow down customers decision making which will affect the throughflow and turnover of customers during a serving period.
Look at how fast food joints run their operations and even what I would called not so fast fast food places like Pizza Hut. I worked for Pizza Hut many years ago and the approach is algorithmic, simple and efficient.
The choice of location can also ruin many first-time owners. They fall for a "cursed" location because the lease is cheap. A space located in a darker more seedy part of town with poor visibility and awkward parking might save £1,000 a month in rent, but it costs tens of thousands in lost walk-in traffic. Beginners assume their food will be so good the location will become a destination. In reality, convenience dictates a massive percentage of dining choices.
A good friend of mine experienced this in Czestochowa, one of Poland's more conservative cities and the centre of Polish Catholicism. Being of Indian origin he naturally opened his Indian restaurant just 150 metres away from Czestochowa's primary street, known simply as the Aleja to locals, although it does have a longer more complicated name. I shared a picture of it recently in a post looking towards Jasna Gora - the monastery. The article described when I turned around a situation after I got punched in the eye during a night out. The problem his restaurant faced was that there wasn't enough footfall and being such a conservative place, very few were prepared to be adventurous with their food choices, although that is now changing. Later, he had to close down his restaurant and it subsequently became a Da Grasso (a popular Polish Pizza chain) and the place was packed out all the time which was particularly galling for my friend.
Having said that, the most common killer, is undercapitalisation. A new restaurant rarely turns a profit in its first six months. It takes time to build a regular clientele and smooth out operational inefficiencies. Amateurs often spend their entire budget on the physical build-out, equipment, and opening-week inventory. When the initial honeymoon period fades in month two and sales drop to their true baseline, the business lacks the working capital needed to cover payroll and rent while word of mouth slowly builds.
So if you are ever considering getting into the restaurant trade, think again or at least make sure you think it through first.
As always stay safe and well my friends
