Welcome to Reservations!
Stats according to the National Restaurant Association has the odds stacked against your success…But if you do this one part right, you can reverse the odds.
Transcript of the Video: Reversing the Odds Stacked against your Success
Welcome to Reservations. I’m Jeff Harrison and my missing co-partner Andrew McCauley, he is traveling back from the cool mountains of northern Arizona where he spent the weekend with his family. That’s kind of getting out of the heat and enjoying the holiday, I guess. I don’t know exactly how to work that. It’s the pre-holiday or whatever. Anyway, he’s coming back. I think he’s driving back today so we should see him back in the saddle tomorrow.
Speaking of tomorrow, since it’s the fourth of July, will we have a session? Absolutely, six or five days a week. We’ll do it right here. So yesterday, if you missed yesterday’s episode, I had the pleasure of interviewing the young lady or a woman, her name is Ritika Pony. Her husband and another partner opened up a restaurant in Palm Springs. They faced some unexpected challenges and they’ve done some things that maybe some restaurants didn’t overcome and they became a statistic. That’s kind of what I want to talk about today is a statistics.
Statistics
I’ll just kind of pull this over here on my screen so I can see this. I just received this is, according to the National Restaurant Association, there are approximately 1 million restaurants, United States. That’s a lot, plenty of choices to eat, right? Of the seven of 10 or 700,000, there are single unit locations. In other words, they’re just paid one location, not multi. From a high-level perspective, approximately one third or 233,333 of those locations will go out of business, within the first year. Another 1/3 or 233,000 will do well. The remaining one third they call the struggling restaurants. The 233,333 will flounder or struggle until they are fixed, closed or sold. It says every year in the United States alone, two-thirds of 466,000 restaurants will need help to avoid failure or to get past the struggle that’s that 1/3 phase.
This means that all restaurants nationwide, which is just under 47 percent of them have serious and immediate challenges to deal with. As these numbers, hey Maria, thanks for joining us. I appreciate it. These numbers illustrate the restaurant businesses to statistically where most difficult businesses to profitably run. So, I want to give you one reason now. There’s four in this article and I’ll link the article here in the in the comment section.
High-Quality Relevant Business Plan
The number one reason that restaurants tend to fail is that they lack a high-quality relevant business plan before committing to the venture. Now I’m going to refer back to Rita again who is just starting out in this business. Her and her two partners, one of them is just her spouse, decided hey, we’re going to do this. And they brought different key elements in. Like one person was a chef, one person was operations and one person designed. They put together a very solid foundation.
Even though they opened with the end of the season coming and they built it in a location where it wasn’t an existing restaurant, it still is doing quite well. Then if you flip back to another interview we did where somebody has been in business now since 1992, obviously they’ve done something very, very well. But having a business plan who was written by a restaurant professional is significant to the advantage of the business owner when compared to an out of the box plant or written by someone that does not have a restaurant business acumen.
Key Questions That A Good Business Plan Will Answer
Here are some things they say. Some key questions that a good business plan will answer are–What will sales be? Now, I can’t tell you how often we walk into and through our business and we do marketing for specifically for restaurants and we ask them, hey, what’s your average ticket price or ticket sale? What’s the average ticket worth? And they look at us like, well, we have three heads and 14 eyes because they’re not sure, they don’t know exactly how much it is. The other one is how much will this venture cost? Well, you know, a lot of times the business owner will put all their money in for the menus and the business and whatnot and not put anything aside for marketing and advertising. Many, many times, we’ve seen this for years.
Hey Alexandra, thanks for joining us. I hope you have a great day. Speaking of Alexandra, she is a rock star. If you ever want to get something sold in, it’s a real estate venture. She is your Gal. She is a complete rock star. Plus she’s a very lovely lady. She and Seth are amazing. Anyway, back to this. So if it’s one of these things where you’re not setting aside any money to advertise and market your business. We said this many years ago and we used to, we used to present to small business owners for the Chamber of Commerce where we said, if you’re not doing this, it’s almost like you’re building your restaurant or your business out of the middle of the sticks and there are no roads going to it.
Advertising and Marketing Are Avenues
Your advertising and marketing are actually avenues to let people know you’re there and to attract your ideal customer. So if you’re not setting that aside, that can be very expensive. Is there enough operating capital? I think we just follow that. How often, how long can you sustain your business before it starts turning a profit? Is there some working capital? Hey David, thanks for joining me. David. Thanks, David for joining us. You know, many times we open a business, say, well, we have enough business or we have enough money to open that business, but not enough to sustain it.
But by that I mean it’s like, hey, what if you opened a little leaner and said, hey, I have this much money aside, that if we don’t just immediately rock and roll in the first six months, we have enough to pay payroll, keep our staff going, make sure we have plenty of food, do the advertising. In other words, what is that budget? Okay, what should read cost and can the concept handle it?
Now, this was something that when I spoke to, I guess it was Monday or last week, and we talked to a business owner and she said one of the things that she says, some business owners she notices they fail is they have this concept about a particular kind of food is real nichey. They open it up thinking, well, we love it and we know a few friends who love it, but there’s not enough support in that community to support that business and actually have it run successfully.
Set Your Expectations Properly
So take a look at that. If you have something that’s a little unique, a little like as an example, let’s say for instance you opened up and just because there are so many people out there that are more into that are gluten-free. They need or they’re gluten intolerant and so your whole menu is gluten-free. Well, are there enough people in that environment who will support that and make your business successful? If not, you have to realize that what size should the premise be? What will the labor, food, occupancy and operating of the other expenses be? Is the projected amount of profit worth it considering the cost?
Now, I remember years and years ago when I was in the in the golf industry and we said, you know what the return on that investment from that club before we got started was, was like two or three percent ROI. The owner would have been better to take their millions of dollars and just, in this case, stick it in an IRA and they could get a five or six percent return. You have to look at that and say what is the expected return so that you can set your expectations properly and if it’s too low, take a look at your total operating expense and say, are there some things that we can offer or do to increase that ROI.
It Can Be A Game Changer
These are just some of the tips. Again, like I said, I’m going to leave this link. In fact, I’ll do it right now. I’m going to leave this link in the comments section and I challenge you. I’d love you. I’d love for you to want to read this through and share with others that are thinking about opening a restaurant and see if you can help them. Here it comes in the section there. There you go. Check that out. That is from the restaurant consulting service and this is an article in there that talks about the four things, the four reasons most restaurants fail.
The number one is not having a business plan. You know, the others are just as important, but this one is the key. If you get off on the wrong foot with this, it can be a game changer. In fact, it is the saddest part for us and probably anyone is we see this restaurant open and we know they had to sink a lot of money into it, a lot of money. Then six months or eight months later they close and you’re like, wow, that could be devastating. What does that do for those people personally and the people who financed it, or maybe the people who support it as investors, that’s huge.
Step Back And Create A Business Plan
So take that first step, step back and say, hey, let’s create a business plan. Let’s look at the pieces that are important to help me be successful. Now, is this true only in restaurants? Absolutely, not. Hey, Larry when did you come back to the desert? I’ve missed you, my friend. Take a look and say, is this a viable option because it works for all businesses.
The biggest thing is, hey, is there an audience for your business? Does the price meet your ideal customer? Are you going to be able to sell enough of whatever it is you’re doing to make it work and have an ROI? Is there enough capital? Is there enough operating capital to say, hey, what if it took me six months to really create a brand and awareness with this new market that I can now turn a profit? If those things are not addressed in the future, boy, it can make for some very scary time. So you just standing there hoping someone will come in.
This Is An Interactive Program For You
Oh, Larry, It’s not too hot. I’m feeling it right now it’s like 79 degrees at my house. It’s not too hot. Where in the world are you? Last time I heard you were in Hawaii, which is not so bad unless you’re near the lava. So anyway, so this has been Reservations. Now I want to invite you in and also if you’re watching on a replay, click in there or hit hashtag replay and let us know.
If you’re interested in learning more about what we do to help businesses, restaurants become more successful. We run a webinar every Thursday, 9:30. All you have to do is go to our website, swingpointmedia.com. It’s right on the front page and you can just sign up right there. It’s a very small, intimate group. The reason is that we’d like to maybe 7 to 10 at any one time because we want to address every one of the questions. It’s not the typical webinar where you know what? It’s just a sales pitch, sales put sales pitch. This is an interactive program so that you know you can get your questions answered and the worst thing and the worst thing is if you come and you get all your questions answered and you’re successful, we would love that to be the worst thing.
We Are Here To Help Customers
So, anyway, I’m Jeff Harrison. Tomorrow, I think we’ll be back with Andrew McCauley here on Reservations. I want to thank everybody for joining us and thank you for sharing this with others who you think we can help with. Also, I encourage you to go to our website, swingpointmedia.com. Check out what we do. If you’d like to see, we do automated bots or I should say bots with an automated communication sequence to help our customers–Restaurants get more business.
One of our customers, we’ve got to return on investment already. It hasn’t cost them a dime because in the first 30 days we already returned more money than it costs him to advertise with us. Now it’s just pure profit and it just gets better and better and better because we build their database. Go check it out, and go to swingpointmedia.com/demo. All right, that’s it. We’ll see you tomorrow. Thanks, everybody for showing up. Larry, what can I say? Hey, have a great day everybody. Thanks for joining me.
SwingPointMedia is a marketing company focused on using content marketing, such as written articles, video and podcasts, to attract their customers ideal audiences. This approach has proven to attract higher quality customers while simultaneously reducing the sales cycle by as much as 70%.
SwingPointMedia serves local businesses in Southern California and can be reached by calling 760-422-5176.
You are invited to also attend a free weekly presentation, providing you the tools and strategy to roll out your own content marketing program for your company, or see exactly what SwingPointMedia does for its clients to achieve success. It can be viewed live on SwingPointMedia’s YouTube channel, at 11 am pst.