The Top 5 Problems Facing Restaurant Owners Today

Five problems facing restaurant owners

Becoming a restaurant owner is one of the most challenging yet fulfilling tasks. Setting up and managing your business until it becomes a success in the neighbourhood is a continuous process of complex decision-making and fruitful rewards. As a restaurant owner you are required to be skilled, self-disciplined, dedicated, and focused. Here are the top five challenges you will face and tips on how to overcome them.

1. Financial Problems


Finance plays a notable role in any business venture. Finance may refer to the initial capital or the capital required to run an already established business. Alternatively, finance can be categorized as fixed capital and working capital.

  • Fixed capital is the money needed to purchase fixed assets.
  • Working capital refers to the funds required to keep the business running day-to-day. This includes rents, licenses, salaries, electricity bills, water bills, and other operational costs.

For most restaurant owners, whether launching a new eatery or a franchise, finances are the major issue. Financial problems are broadly classified into the following types:

Access to capital for entrepreneurs


For most individuals wishing to become restaurant owners, the biggest obstacle is sourcing funds to jump-start your venture. Sources of financing include:

  • Capital from personal savings

  • Contributions from family members and friends

  • Outsourcing from lending institutions like banks

  • Retained profits plowed back into the business

  • Equity

  • Leasing of assets

  • Angel investors

Whatever the source of your income, you need to verify it legally in order to avoid litigation. Also, you need to inquire about the risk versus benefit of the source. Some sources, like loans from banks, may impose exorbitant interest rates. In the long run, you may find yourself paying much more than what you bargained for.

Male Vs Female funding gap


The challenges faced by female entrepreneurs when sourcing initial capital are far more acute compared to their male counterparts. Female entrepreneurs should seek funds to start their businesses from financial institutions tasked by the government with providing favorable interest rates to women.

As of the date of publication, there are 12.3 million women-owned enterprises in the United States. In fact, women own 40% of all firms in the United States. Women-owned enterprises in the United States create $1.8 trillion in revenue per year. Despite this massive figure, only 25% of female entrepreneurs seek company funding. Compared to their male counterparts, female entrepreneurs ask for roughly $35,000 less in business financing.

Cash flow management


The challenges associated with financing do not stop after opening your restaurant doors to your first customers. Cash flow management is the make-or-break factor in most food and vverage establishments. It would be best to keep a ledger of how money comes in and goes out of your restaurant. This entails keeping a detailed record of your sales, deals, and expenses.

Additionally, such records act as excellent support when you want to acquire loans to expand your restaurant. That's because your lender will want to see that your restaurant will work within its budget.

Increasing the profit margin


The primary aim for most restaurants is to maximize profits. These profits are then reinvested in the enterprise to promote your restaurant's expansion.

Increasing profit margins means optimizing your menu pricing, updating your menu layout, improving your table turnover, as well as a host of other factors. (Check out our Complete Guide to Restaurant Profit Margins...coming soon!)

2. Upping Your Tech Game


Restaurant technology is being used by your competitors in a bid to snatch your hungry customers.

Advanced technology is no longer deemed a luxury in the food and beverage sector. With greater access to data analytics, online marketing, and market trends, more restaurant owners are investing in modern tech to get an edge over other eateries in the neighbourhood.

Technology is important in:

Communication between staff (placing and confirming food orders between waiters & cooks)

Maximization of production (automated reordering of depleting stock)

Easing of operations (communication to deliverymen on when and where to deliver)

Efficient management (digital dispertion of info to staff)

Data analysis (what customers order often)

Improved security (inside and out)

Problem solving (high-level entrepreneurial strategy and implementation)

However, most restaurant owners find it difficult to invest in technology for a number of reasons. These are the top 3 fears from new restaurant owners when upping their tech game:

  1. It's expensive. The cost of purchasing the latest software and the personnel to operate it is costly especially for new restaurant owners.

  2. Implementing new technology is time consuming. Learning how to use the new software and then training personnel to use it takes up time that could otherwise be used to bring in more customers and increase profits.

  3. The risk of a security breach. The downside of automating data in your business is that you run the risk of a cyber-attack. That said, POS devices are commonly used by restaurant owners to guard against security breaches.

To protect yourself and your restaurant from cyber-attacks, consider taking out cyber liability insurance.

3. Hiring and Managing the Right Staff


Sourcing the ideal workforce for a busy restaurant is a daunting task. It involves interviewing them to see if they can carry multiple plates to kitchen, cook delicious dishes or keep the accounts in order.

Even after finding and hiring the right team, you have to train them to ensure they meet the high expectations of your customers.

It is crucial to agree on the terms with potential employees to ensure that they will fit in and stick around. This includes adaptability to accept a shift at short notice (when an employee calls in sick the night before).

As their manager, you'll need to be physically present on most days, be it actively in a management role, or passively by supervising them. This will establish a business culture that will trickle-down to the customers and how they perceive the restaurant.

4. Government Regulations on Eateries


Local public health officials audit restaurants and other food retail outlets on a regular basis to ensure that they are following safe food handling regulations. The frequency of these inspections, as well as the precise items that inspectors look for, are governed by local rules.

Environmental health inspectors look for protections to protect food from contamination by food handlers, cross-contamination, and contamination from other sources in the restaurant. If you run a restaurant, check out our guide on Restaurant Inspections per state (coming soon!)

5. Decision Making


Decision-making is part and parcel of a restaurant's risk management process. You will need to decide when to hire or fire employees, if the expenses incurred are justified, whether to expand or remain in the same position, or whether to take up insurance policies to safeguard against uncertainties.

The importance of insurance


It is natural for entrepreneurs to find themselves in a state of self-doubt, especially when it comes to critical decisions. When faced with challenges, it's important to remember why you started the enterprise.

For aspects of the business that you can't control, it would be best to get insurance for restaurants to safeguard yourself and your business against these uncertainties.

An insurance policy is an agreement to reimburse an insurance policyholder against a risk they had previously taken a cover for. An insurance company is responsible for the reimbursement. On the other hand, the insured — in this case, your business — will pay a small annual fee.

Marketing


Each restaurant is unique; however, the unifying factor for most is that each tries to employ marketing strategies. The decision on which marketing method to use solely depends on the restaurantowner.

How can restaurant ownersfind their target market? This is done via identification of the target market and enacting proper marketing techniques. Marketing aids in sourcing potential clients and maintaining existing ones. The various techniques of marketing available are:

  • Internet marketing

  • Point of purchase marketing

  • Email marketing

  • Conversational marketing

  • Paid media marketing

  • Social network marketing

  • Social media marketing

The type of marketing technique chosen depends on the cost, target audience, outreach, and availability. As an entrepreneur, you should factor in each aspect listed above when selecting a marketing strategy.

The process of establishing and running a restaurant isn't an easy task. But know you're aware of the top 5 problems facing restararant owners and how to overcome them. Implement these to get an edge over your competitors and grab those hungry customers in your neighbourhood.

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