Many restaurants struggle to make a profit, many restaurants fail, and many restaurant owners find that the dream of running a cozy, friendly little food-service business can quickly become a nightmare. I recently came across an article from Toronto ...
By Gregg Schwartz
Many people dream of opening a restaurant. The idea of being a successful restaurateur has become more popular and glamorized in recent years with the rise of celebrity chefs and TV cooking shows.
However, the reality of running a restaurant is often unglamorous, expensive, and stressful. Many restaurants struggle to make a profit, many restaurants fail, and many restaurant owners find that the dream of running a cozy, friendly little food-service business can quickly become a nightmare.
I recently came across an article from Toronto Life, written by Robert Maxwell, a former restaurateur who says that fulfilling his dream of becoming a restaurant owner almost ruined his life. It cost him his savings, his house, and almost ended his marriage. This article is gripping, well written, honest, authentically human, and highly informative; there are many lessons that other business owners can learn from Robert Maxwell’s experience.
Lessons any business owner can learn from the story of one restaurant that flopped.© highwaystarz- Fotolia.com
Any business owner, no matter their industry, can learn from those who have struggled to run a restaurant. Here are a few marketing and management lessons that other business owners can take away:
Test before you launch
Robert Maxwell was an enthusiastic home cook who loved trying new recipes, watching cooking shows, and reading about food, and he thought that his kitchen skills and his love of food would translate to restaurant success. He even operated a booth at a Toronto food festival to practice cooking and serving his favorite recipes; he served 400 people in one day and he thrived on the adrenaline rush.
This is a good idea for any new business owner: Do a test run of your business idea. Do a proof of concept. Start small and see if you can make money first on a small scale before you go all in on starting a new business, making bigger investments and taking bigger risks.
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Get the price right
Unfortunately, even on his first day at the food festival, Maxwell lost money. He served food to 400 people, but it was more of a labor of love—he didn’t actually turn a profit on his first day in the “restaurant business.” This lack of pricing acumen later was a problem when Maxwell opened his restaurant, The Beech Tree. Even though Maxwell’s restaurant was serving critically acclaimed, complex, ambitious cuisine, he wasn't charging a high enough price to turn a profit.
This is a major mistake that many new business owners make: not charging enough for their products or services. You need to make sure you’re making money every day. Sure, sometimes you can have lower-priced products or introductory services that serve as “loss leaders,” but your business needs to be profitable, and a smart pricing strategy is one of the most important ways to make this happen.
Being an entrepreneur and manager are different skill sets
Maxwell eventually lost his restaurant. The business is still operating and succeeding today, but under new ownership. Maxwell lost a lot of money on his dream of restaurant ownership; he quickly became overwhelmed by debt, started drinking too much and taking anti-anxiety pills, and eventually had to sell his house and cash in a retirement savings fund. Today he’s in a better place emotionally and his family is intact, but he’s still going to be in debt for a long time. It’s a sad, hard lesson, but it’s true: Passion is not enough.
Many new business owners think that just by being a creative visionary with a passion for the business, they can somehow power their way to success. But it’s not enough to love your business; you also need some technical business management skills. Maxwell might have been too hasty in getting into the restaurant business—he should have spent a year or two working in a restaurant to really learn the nuts and bolts of how to build a profitable restaurant, before going all in as a first-time entrepreneur.
Many business owners like to focus on optimistic attitudes and success stories, but failure is part of the business world as well. Robert Maxwell has generously and bravely shared the story of his business failure, and other business people—regardless of industry—can learn from it. We all need to remember to look before we leap. Test, test, test. Price our products and services in a way that generates maximum profit.
The restaurant industry is one of the most competitive, risky, and cost-intensive industries of all, but no matter what industry you're involved in, the sacrifices of entrepreneurship can be worth it if you have a sound strategy, if you go in with your eyes open, and if you understand how to manage your weaknesses and compensate to overcome what you don’t know.
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I am the director of sales at Strategic Sales & Marketing, a leader among appointment setting companies, providing lead generation consulting to hundreds of businesses. To follow the latest discussions in best-practices for lead generation, join my Linkedin Group with over 6,500 sales professionals and business owners, Manage Your Leads. Read all of Gregg Schwartz’ articles.
This article was originally published on AllBusiness.com.
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