The success of any business depends on a basic mathematical calculation – how much does a good or service cost to produce – and based on this, how much does it need (and can) be sold for in order to provide the seller with a viable profit margin.
This alone can give you a pretty good indication for the fundamental reason that over 70% of start-up restaurant businesses fail! These are cold, hard stats and pretty depressing if your dream has always been to open up a little café, pizza place, or Belgian beer hall.
The problem with the café and restaurant business is that not only do you have to worry about fixed costs such as rent, utilities, labour and costly equipment, but also you have to deal with fresh produce and turning that fresh produce into something that makes money. Dealing with raw foodstuffs is obviously volatile. You are swimming in a sea of uncertainty – massive fluctuations in supply, sudden price hikes of basic foodstuffs (eggs, milk, flour etc), questionable quality … Not to mention wastage (this encompasses a few dimensions) – parts of a cut of meat that you can’t use, but is still factored into the wholesale price. Or on the other hand – perfectly good bits thrown away, lazily under-utilised by the inattentive apprentice preparing them. And then there’s spoilage – over ordering (whether through oversight, or through unforeseen quiet periods) means literally throwing money away. The list goes on ad infinitum – incorrect storage, refrigeration not at correct temperature, power outages.
Depressingly enough, that’s just before the food actually gets cooked. There’s another multitude of things that can go wrong here too! Dropping, burning, incorrectly cut … And that’s before the food goes out to the table, because once it gets there, it can always be sent back – asked for no sauce, food is drowning in sauce, asked for medium rare, it’s well done. Asked for steak, got salmon instead. It’s an absolute minefield!
This is why a successful restaurant needs to be run with military precision. There is no room for mistakes of any kind to eat into already precarious profit margins. Kitchens need to be managed with an iron fist (move over Gordon), with chefs possessing commercial skills as well as impressive knife skills. Food costs need to be calculated with absolute accuracy before any particular dish appears on a menu – and that means EVERY ingredient weighed, factored in and exactly portioned every time. 30 grams of butter, 5 grams of chopped continental parsley – it’s all part of it, and every little bit adds up.
So it’s no wonder that many start-up restaurants fail, and often they fail amazingly quickly, too. Amidst the cutthroat competitiveness inherent in major cities, it almost appears that restaurants barely open their doors (clothed in lavish opening parties and media fanfare) – momentarily basking in the sunshine, before the grim reality of day to day trade sets in and the shutters are pulled across one final time.
Extravagant fitouts replete with Italian furniture and custom-designed lighting, celebrity executive chefs romanced and brown-nosed to stamp their crowd-pleasing names on a venture, seemingly vanish overnight over a pile of unpaid invoices and livid suppliers.
To begin any type of restaurant venture requires a major leap of faith, but the grander the dream, the further the plunge to the bottom is – creating an impact of enormity in failure. Even operators with many years of experience under their belt and a string of successes on their resumé can fail spectacularly. The difference between these and the first-timers is that they are more likely to get back on their horse and try again.
With this kind of capacity for lack of success, it seems quite clear that anyone who boldly immerses themselves in this industry has got rocks in their head (and in other places too!) Well I’m the first to admit it – restaurant owners have more than a touch of nuttiness about them. After all, placing your resources in a basket gives you less than a 20% chance of success, while placing you in a position of intense public scrutiny … Hmm, maybe it’s worth hitting the pokies after all.