Why I Like Restaurants as a Business Opportunity

In my last post I talked about a Wall Street Journal article on restaurants and SBA loans. Today here are some of my thoughts on eateries.

Restaurants can be highly successful and profitable. The business model deals with some of the most basic human desires - to eat, to be entertained, and to enjoy the social atmosphere of a group of people. A restaurant combines all these under one roof, and this makes owning an eatery fun and entertaining as well.

The rock-solid business strengths of the popular chains in this and other countries are a tribute to the entrepreneur's realization of the 'people' factor that is intrinsic to the theme.

These three factors (food, entertainment, and the group experience) make restaurants one of the most popular and profitable enterprises in the country. The rock-solid business strengths of the popular chains in this and other countries are a tribute to the entrepreneur's realization of the 'people' factor that is intrinsic to the theme. Just opening up a place where someone can get a meal is not nearly enough, though. Nearly all of my most consistently successful clients were in businesses that revolved around these vital factors and expanded on them to the nth degree

But restaurants do fail, and the reason that some fail is that the owners did not systematize their business model. They neglected to take into account the many and varied factors that contribute to the success or failure of the model. Tasty food, a popular location or friendly people do not assure success; bringing them together under one roof is only the first step.

The factors that contribute to the failure of a restaurant are exactly the factors which make for its success.  Hiring of first rate people, rigid cost controls, a meticulous eye to the bottom line and serving food people really like - not necessarily 5-Star quality, but certainly worth the money - all go into making a restaurant a viable business. The enjoyable food experience and a location that brings people to the door are also vital measures in the recipe for success.

This post is too short to account for all of the elements (another WSJ article provides some insights from a restaurateur) but be assured, if you want to start or buy a restaurant you must do your homework and know what you are doing. You need to live, breathe, eat and sleep the business. You must embed yourself in the industry for years. It is not for the faint if heart or those who are afraid of long hours. It requires enormous research, but it is worth it. Time invested is time that yields success.

Eateries are one of the top 5 most profitable businesses in the country.  A SINGLE location can  net its owner more than a doctor, lawyer, accountant or architect. And take note how long it took these professional to get to their level of income.

Time is on your side in developing a restaurant concept or ramping on to an existing successful concept. What's more, a good concept restaurant can be expanded easily once the basic location proves itself (again, look at East Village Tavern & Bowl which now has locations in South Bay and North County as well). Look at any successful chain that you enjoy. They are nearly identical in any corner of the country or the world. What you eat today is the same as you ate yesterday - period. On the other hand, if innovation and novelty are your thing and you want to WOW the people, that is completely available, just as is the more common, mundane eatery serving burgers and fries.

It should also be noted that the iconic McDonald's just hired 62,000 employees in April 2011 after receiving 1,000,000 employment applications. Why is this business expanding when others are failing? What are they doing right?  Why do people want to work there?  Because Mickey D's works. You would do well to take a page from that success story. More on that another time.

Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.