restaurant start-ups

Restaurant start-ups: Is the struggle real?

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By Doug Radkey

Starting a restaurant is an exciting, stressful, nerve-wracking, but often rewarding endeavour that is not for the faint of heart. It takes sacrifice, systemized thinking, social skills, creativity, stress management and a lot of passion to lead a restaurant to success.

However, if you’re already living and breathing in this cutthroat industry, it should be no secret that there seems to be a constant rise of concern, especially for new or aspiring restaurateurs. Outside of the required personal development traits you should have as a new owner/operator, there are a handful of variables that from afar, simply look like they’re now out of your control.

Some have recently stated the restaurant “bubble” is about to burst. With over 94,000 restaurants, bars, and foodservice businesses across Canada, which many will argue is a great thing, it does pose its challenges for start-ups.

Challenges and opportunities

The silver lining? Every challenge presents a solution and an opportunity. Knowing and understanding these challenges beforehand should be a part of any start-up’s planning stage, resulting in both quick and long-term success by creating a concept that is also not only unique, but something the market wants and needs.

This market saturation of restaurants has quickly developed a shortage of chefs and cooks. Further, the demand for high-quality, local product at your neighbourhood independent restaurant has created a need for highly trained chefs and cooks. This has produced an employment gap, which is also mirrored by the stigma that cooks work long days, in often physically and mentally demanding environments, and quite frankly, are underpaid for the highly skilled job they do.

The government is doing its part to create a solution by introducing a variety of training programs and incentives across the country in an array of industries, including foodservice, with a focus on culinary education. The goal is to rejuvenate the passion for creativity and sustainability within the commercial kitchen space. It’s going to take time and it’s going to take a collective effort within the industry to reduce this gap, but we seem to be on the right track.

Planning for success

Rising wages are a concern for many but really shouldn’t be. It’s important that restaurateurs plan for and create a sense of place by developing value, vision, mission and culture statements within the concept’s development plan. Pairing this with a structured liveable wage plan, a positive working environment, and a sound concept that drives creativity, reward, and community involvement, is positioning a start-up for success while reducing high turnover costs in the long run.

The rise in energy costs is continuously escalating across the country, where some current restaurant owners have seen upwards of 14-per-cent year-over-year increases in their hydro bills. In an industry with extremely tight margins, utilities such as energy are reaching a breaking point for some, resulting in dreams becoming financial nightmares.

During the planning stage an aspiring restaurateur can also plan for these increasing energy costs. For starters, it’s important to research and source energy efficient equipment, install LED lighting throughout, and create very detailed standard operating procedures to maximize efficiency throughout your property.

Costs on the rise

Construction costs for start-ups are also becoming uncomfortably high, and have actually risen for the first time since 2014, mainly due in part to the increases in labour costs among construction workers. A shortage in trade-related workers over the past decade has created higher demand and wage growth (four per cent, year over year), which restaurateurs will pay for in their renovation plans in addition to rising material costs.

Start-ups are also in a position to save on renovation costs by sourcing the materials themselves (resulting in the elimination of third-party commissions), renovating an existing restaurant instead of choosing a build-up project (there are enough empty locations to meet your needs), and also looking for energy efficient government grants.

Restaurant food costs continue to rise at an average of 2.5 per cent and the average Canadian family is estimated to spend $420 more at the grocery store in 2017 according to Canada’s Food Price Report, released by Dalhousie University. This can easily result in less restaurant spending across the country or force some restaurant owners to offer unrealistic value in an attempt to draw in customers.

Overall consumer spending is still fluctuating on a month-to-month basis, often creating a sense of un-ease among independent restaurant owners. Despite the rise in food and energy costs, restaurant sales are projected to grow by four per cenr over the next year according to Statistics Canada. It’s safe to say, no matter the personal circumstances, going out to a restaurant is still the number one preferred activity for spending time with friends and family among Canadians.

Research is key

Working through a feasibility study will allow a start-up to truly know and understand the targeted, most ideal customer in any market space. A start-up can plan for and account for fluctuations in food costs and consumer spending by creating balance within the food and beverage menu and developing both take-out and delivery methods, catering to a variety of financial and time-based challenges targeted consumers face on a day-to-day basis.

Starting a restaurant is a dream for many and though it will always be hard work, it shouldn’t be a struggle. Completing a feasibility study, concept development plan, and strategic business plan will force you to think of and answer all of the correct questions while creating a brand that is not only scalable, but sustainable, profitable, consistent, and memorable.

In addition to the issues mentioned above, surrounding yourself with the proper supporting cast, choosing the right location, creating the right amount of buzz, managing your financial budget and being prepared for hidden costs (among many other aspects), will successfully position you and your start-up endeavour.

The results are up to you, your planning efforts, and your execution. The old adage remains true today and it’s the hard truth — “Restaurants don’t fail. Owners do.”


About the author:

Doug Radkey is the principal owner of Key Restaurant Group, a global restaurant/bar start-up development agency based in Ontario, Canada. Being in the food and beverage industry for over 17 years has allowed him to become a leading voice in the development of feasibility studies, unique concepts, business plans, marketing plans, memorable menus, guest experiences, and financial management systems. Continue the conversation with Doug on Twitter @KeyRestaurants, on Facebook @DougRadkey, on Linkedin, or by visiting keyrestaurantgroup.com.

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