From Food Truck to Restaurant: 5 Questions to Ask Before Launching Your Restaurant
You’ve finally made that decision to add a brick-and-mortar restaurant to your food truck and might be feeling a little overwhelmed about where to start.
Even as a seasoned food truck entrepreneur, nothing can quite prepare you for starting your first restaurant. After all, you’ve probably heard about the restaurant success rate out there.
With just a 60 percent restaurant success rate in the first year, starting a brick-and-mortar is not one for the faint of heart. Restaurants fail for a combination of reasons: a lack of capital, undesirable location, poor concept, ill preparation; the list goes on.
Thinking about the following questions critically will help you avoid a similar fate and ensure you’re ready to turn your restaurant into a profitable business alongside your food truck establishment:
We’ve put together a takeaway checklist to prepare for your restaurant opening, with key insights from Eric Silverstein, founder of The Peached Tortilla, along with other food truck owners such as Curry Up Now, Garbo’s and Halal Bros.
What is my restaurant business plan?
WHY THIS MATTERS: No matter how well thought out it is in your head, you absolutely have to put pen to paper when it comes to your business plan. Doing so will force you to think hard about every aspect of your restaurant, from training your employees to kitchen procedures.
Having a business plan will also prove the viability of your restaurant to potential investors. They’ll want to know that you’ve already done your homework, thought critically about your business and have all the answers to impending challenges. Ultimately it should explain why and how your restaurant is going to bring in the money for them.
WHAT YOU CAN DO: Here’s what your business plan should entail.
Company description: Describe your brand, concept, theme layout and customer experience. This section should explain what sets you apart from other restaurants. You’d also want to keep your branding consistent.
Prior to opening its brick-and-mortar location, Akash Kapoor of Curry Up Now sought to create the same look and feel for his restaurant. “We hired a local graffiti artist to create original in-store murals to highlight the concept’s Indian roots and heritage,” he says. “Almost all of our six brick-and-mortar locations now feature these murals.”
Industry/market analysis: Explain who your customer base is and how you’re going to attract them to your restaurant. Are they “families”? If so, a menu that is family-friendly and a play area might just secure you a loyal following.
Competitive analysis: Detail the competitive landscape. Who are the surrounding competitors with similar concepts? How does your restaurant compare in terms of pricing, hours and menus?
Marketing/branding: Talk about how you plan to promote your restaurant prior to opening and how you intend to build an engaged customer base in the long term. This section covers your marketing strategy such as your advertising, public relations, social media and loyalty programs.
Business operations: Discuss how your restaurant will be operating daily. What restaurant systems (POS, back office and account systems) will you be using? Be sure to also talk about restaurant staffing: Who will you be hiring, and what’s your training plan? Our article “How to Improve Restaurant Service Quality with New Technologies” talks about how to improve service and customer experience.
Financial analysis: Provide a thorough breakdown of how you’ll be spending your investors’ investment in the first year. When do you expect to break even on their investment? Investors will want to hear about your projected revenue, anticipated costs, projected profit, loss statement and expected cash flow.
EXPERT OPINION
ERIC SILVERSTEIN
Founder of The Peached Tortilla
“It’s important to have a business plan to be able to pitch your investors. They need to be able to see a conceptualized version of the concept and also see pro-format. Most importantly, you need to create an outline for how long it will take for them to get their money back. Creating a business plan also helps you flesh your concept out and it forces you to answer certain questions about your business.”
What is my restaurant location?
WHY THIS MATTERS: Location, location, location. There’s a reason why this is a cliche—it couldn’t be more true, especially for a restaurant. Finding the best location can be a major determining factor in the success of your restaurant.
You can have a solid business plan and the most tantalizing menu. But if your location isn’t right, it’s going to be a challenge getting customers through the front door to sustain your business.
WHAT YOU CAN DO: Operating a food truck will give you a good sense of where your customers are coming from, as well as where they live and work. By understanding who your target customers are and where your competitors are, you’ll be able to narrow down your search to where the most profitable locations for your restaurant could be.
Some considerations for when you’re scouting around for locations:
What are the demographics of the neighborhood? You’d want your restaurant to appeal to people living in the neighborhood. For example, opening a health-conscious restaurant near a young and fit demographic is likely to draw crowds. A pizza and burger place? Not so much.
What’s the competition? You don’t want to be right next to your competition but staying away from them isn’t always ideal. Your (successful) competitors are located where they are based on the demographics and demand in the area. Restaurants with similar concepts and cuisine will also bring diners who are seeking a similar experience.
What’s the visibility? Considering a location that’s tucked away in a back alley? Be prepared to work hard at getting people through the door in the early days. Owning a restaurant that isn’t getting noticed immediately is an uphill battle you don’t want to fight as you’re getting started.
What’s the cost? When you do find a location, resist the urge to jump at the first opportunity. Make sure to take time to run all the numbers. Think hard about whether it’s well within your budget before signing the papers for a ten-year lease.
EXPERT OPINION
ERIC SILVERSTEIN
Founder of The Peached Tortilla
“Ultimately you should be familiar with the area you are looking at and understand what kind of demographics are within a 2-3 mile radius. Is there lunch traffic? Dinner traffic? Also, can you afford the rent? You need to run your rent calculations for the year, and then back into what you need to do in sales. Then take those yearly sales numbers and break them out by week, then by day.”
EXPERT OPINION
“Quite simply, the best place to be is as close to your biggest competitor as you can be. Foot traffic is obviously important, but landing the ‘perfect’ customer is far more crucial. By being in close proximity to your competitors, you can benefit from their marketing efforts.”
—GREG KAHN
CEO of Kahn Research Group who counts the likes of Arby’s and Subway as clients
What is my restaurant menu?
WHY THIS MATTERS: Every customer who walks through your front door will interact with your menu. More than just a list of food and prices, your menu should be an accurate reflection of your food truck and restaurant’s brand, concept and vision. In putting together your menu, it’s worth bearing in mind a common customer predicament: “I can’t decide what to order!”
WHAT YOU CAN DO: Besides staying true to your food truck brand, start with a small and focused menu while “slowly adding on new items” over time, advises Mohammed Attal, founder of Halal Bros.
Keep it simple. You can’t be everything to everyone. Make your customers’ decision-making easier with a simple and compelling menu.
Doing so enables you to focus on honing and perfecting every dish on that menu, says Heidi Garbo, founder of Garbo’s. “It’s really important that everything on the menu is uncomplicated and something I can cook,” she says. “That way I know everything will always be done to my specifications.”
Keep it short. Long menus are more costly. Food inventory also ends up being higher and your chefs may not be able to focus as much on quality. The longer your customers take to make a choice, the more that increases your table turnover time, which leads to less profits for your restaurant.
“Your time, money and kitchen has limitations,” she adds. “Don’t do something if you can’t give it 110 percent. That is why my menu is small.”
Talk to your loyal customers about their favorite dishes and trim out the ones that aren’t ordered as much.
According to the Washington Post, 500 largest restaurant chains in the U.S. have cut more than 7 percent of food items on their menus. With a shorter menu, you’re cutting the excess costs while ensuring that your most popular menu items taste great all the time.
Put your menu to the test. Prior to the opening of your restaurant, Attal recommends “practicing the menu and monitoring the workflow.”
Doing so will help test and scale your food truck’s menu to that of a brick-and-mortar and ensure your kitchen staff operates like a well-oiled machine when your restaurant’s doors are finally opened.
EXPERT OPINION
“You can start small and simplified, like the menu offered on the truck and expand as you see what items are the most successful.”
—AKASH KAPOOR
Co-founder of Curry Up Now
Who am I going to hire at my restaurant?
WHY IT MATTERS: Fun fact: customers love great service. The dining experience is all about hospitality. To deliver the best experience, you’ll need to hire people who are just as committed to the vision of your restaurant.
Hiring a strong crew (your sous chef, general manager, bar manager, hosts and servers) at the launch of your restaurant will set the tone that will attract customers time and time again.
WHAT YOU CAN DO: Developing a hiring strategy to recruit the right employees and intentionally working at maintaining that culture will require a lot of time and effort, but the consequence of not doing so will cost you unsatisfied guests, uninspired employees and a high turnover. Here’s what you can do to ensure you’re bringing on the right people.
Be specific about what you’re looking for in your job ad: Use keywords that describe your company culture, concept and service style, as well as your ethos and vision. Your job ad should clearly communicate what your restaurant is about and what’s expected of the employee.
Have at least one other person (other than yourself) interview the candidate: Make sure you’re taking on more than one person’s opinions and using each other as a sounding board. Doing so addresses any concerns and ensures buy-in from all hiring managers.
Have candidates interview you: Make your interviews a two-way street and encourage candidates to ask you questions. Doing so gives them an opportunity to understand what they could potentially be getting into and gives you an idea of what’s important to them.
Define the qualities needed for your company culture: Skills can be taught but values like hospitality are near impossible to teach. Hard work, preparation and integrity are qualities that Silverstein looks for in a potential employee.
“You can teach people how to manage certain things in an operation, but they need to be leaders first and foremost,” he says. “Leading by example is huge, and that is a byproduct of hard work, preparation and integrity,” he adds.
Always conduct background checks: No matter how good of a rapport you’ve got with a candidate, always be sure to request at least three professional references. The last thing you’d want to deal with is a dishonest employee. Thirty percent of restaurant failures are caused by employee theft, according to the National Restaurant Association Restaurants, with over $9 billion dollars a year lost to theft.
EXPERT OPINION
ERIC SILVERSTEIN
Founder of The Peached Tortilla
“In this industry, you have to have people that are genuinely hospitable. I ask myself this question when hiring. Would you want to go over to this person’s house for dinner or invite them over? If the answer is no, you probably don’t want to hire them.”
How much capital do I need for my restaurant?
WHY IT MATTERS: Opening a restaurant is an expensive venture. The average cost it takes to open a restaurant varies from a few thousand to a couple million.
According to RestaurantOwner.com, the median cost to open a restaurant is $275,000. Add the cost of owning the building and that comes up to be about $425,000. Most survey respondents estimated that their median costs were 15 percent above their expected budget,
Capital is crucial to the long term success of your restaurant. Two types of capital you need to know about:
Capital is the cash you’ll need to purchase equipment, supplies and products
Working capital is what’s needed to keep the business operating daily
Having enough cash on hand enables your restaurant to cover general operating expenses while providing a safety net for any surprise or unplanned costs. Without sufficient cash-flow, your restaurant is at a high risk of closing down for good.
WHAT YOU CAN DO:
Be prudent about new equipment costs: Buying equipment for your kitchen can easily rack up a huge expenditure. Instead, consider second-hand options at reduced prices and buy only what’s needed now. You can also consider loan options and equipment leasing/financing.
Research different types of restaurant loans: Another quick way of accessing capital is through the different types of restaurant loans in the market.
Traditional commercial loan: This route provides lower interest rates of between 6-8 percent and potential access to higher amounts of capital. However you must have a high credit score and be prepared to wait up to six months or more for approval.
Business line of credit: This method allows you to get approved for a maximum credit amount but only pay for what you use. The interest accumulates only when you borrow the money while you continue to have access to capital. Standards of lending are higher and you typically aren’t able to borrow as much compared to other loan types.
Working capital loans: Designed to meet your daily operating costs, these loans are intended to give you an immediate lifeline, by handing you cash in hand to deal with urgent cash flow issues.
EXPERT OPINION
ERIC SILVERSTEIN
Founder of The Peached Tortilla
“I estimate you need about $200-$300 per square foot all in for a restaurant build out, including your furniture, fixtures and equipment. That covers everything inside the building. Then you need to raise additional capital for your professional fees (architect, lawyer, designer, marketing) and working capital.”
First Steps to Ensuring Restaurant Success
As we’ve covered above, restaurants are a different animal from food trucks. By following the guidelines in the checklist below, your restaurant will stand a better chance of survival and actually be profitable.
If you’re looking for restaurant software, get in touch with our software advisors at (844) 687-6771 for a free consultation to find what’s best for your needs in under 15 minutes.