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5 Biggest Mistakes Restaurant Owners Make Them Slip Into Bankruptcy


Restaurants are closing left, right and center.

Whether it’s the pandemic or just bad business practice, the restaurant biz is one of the hardest business models out there to perfect and frankly – survive.

Today you’ll learn the top five biggest mistakes that restaurants owners are making so you can make adjustments in your business and avoid going bankrupt.

Now without further ado, let’s dive right in.

1. Not Knowing Who You’re Serving

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Number one biggest mistake that most restaurant owners make is not knowing who they’re serving.

This is a huge fundamental mistake by not understanding who you’re serving to.

If you don’t know who you’re serving to, you would never be able have line ups out the doors. You’ll never be able to understand exactly what brings in your customers.

If you create food that doesn’t speak to your client and your customer’s problems, then most likely they’re going to come in once and they’ll never come back again.

What you need to do is create a customer avatar that includes what your target customer likes, dislikes, their frustrations, where they hang out, their spending and living habits. That way you can use that information to influence your menu, ambiance, and marketing.

This customer avatar needs to be specific and tailored to one demographic. You then create more avatars based on other demographics that you are serving.

The takeaway is that you don’t want to fall into the trap of serving “everyone”. Because when you try to speak to everyone, you speak to no one.

2. Not Knowing Your Numbers

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This is one of THE biggest fundamental flaws out there.

I know numbers are not fun. It is not exciting.

Hell, I hate sitting in front of the computer looking at excel. I hate weeding through all my receipts trying to figure out and categorize each of the expenses. But this is crucial for you to understand which levers to pull within your business to make it more efficient and find areas you can save costs.

You don’t want to make $10s of thousands of dollars in revenue, top-line every single month, but pay your expenses and everything off and leave with a big fat zero.

No one wants that.

We need to know which levers to pull, which functions of our business is not working at its optimal state, and understand our numbers.

Choosing to ignore your numbers is dangerous since you could be bleeding out a slow death without even knowing it. Whereas being crystal clear on your costs could mean cutting unnecessary tech bills or making staffing more efficient and end up with 10% more money at each month.

That’s money for upgrades or other investments you can put into.

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To give you an example, if our cost of goods sold account to 50%, or even 60%, we know something is not right.

Typically speaking in the industry of food, the cost of goods sold should range around 20% to 30%. This would be the optimal cost of goods sold that we’re looking at.

So if I see that my cost of goods sold is around 50% or 60% – double of what the industry norm is – then I know something is wrong within my ingredients or potentially managing my delivery poorly.

I might be ordering a bunch of meats and then it gets expired and have to throw everything away. It goes to waste and it’s not pulling in revenue. This becomes dead inventory and expenses that I have to pay for.

How can I fix this?

I can make better inventory purchases. Maybe I can have them scheduled to deliver maybe three times a week instead of once a week. Maybe I can order less. I can have less of a bulk discount, but at the very least, I’m not wasting my food and then that way I can have a much more efficient business.

You need to understand your numbers to understand which numbers to pull within your operations to put more money in your pockets. That’s the ultimate goal by understanding your numbers.

3. Staying Complacent

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Sometimes we choose not to adapt to the environment around us. That’s a big blunder.

It is crucial for us as restauranteurs – as entrepreneurs – for us to always adapt to the ever changing landscape.

Today we’re talking about COVID. Tomorrow, it could be something completely different.

If we’re stuck with our playbook, thinking that’s the Bible that we need to stick with until the very end, then we’re going to be left behind as the economic landscape changes.

For example, if I think you only offer dine-in services because it is the best and throughout this whole COVID lockdown, you don’t do delivery or think about diversifying…then most likely, you’re going to be out of business.

Take out is the new norm and delivery will continue to rise in usage. Ignoring it is not an option anymore.

So that’s the reason why adapting and learning is the best way for you to actually stay ahead to make a thriving restaurant.

4. Not Treating Staff Well

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Well, we have definitely heard of customer first as a motto, but I truly believe that employees and our staff is first because they’re the front of your house.

They are the ones that build your restaurants. They are the ones that represent you.

So if you don’t treat them properly, how can you expect them to treat your customers properly?

How can they give your customers a pleasant experience when they feel taken advantaged of, wronged, unmotivated, bullied, or unwell.

Look, yes you need to treat your customer with care.

You also need to love your employees because they are the ones that are actually facing your customers – you cannot penny-pinch them. These people are your moneymakers.

Invest with your staff. Invest in creating proper hiring protocols. Because one bad staff – one bad apple – will poison your whole pool of talented staff. That could lead to a destructive culture and turnover.

This is the biggest problem that restaurant tears face is hiring talented, common sense staff who truly loves your business. So then that way, you don’t need to get stuck working 13 hours in your restaurant. You can choose when to go to work instead of being stuck there because you’re the only capable one. That’s why you need to treat your staff well.

5. Not Working On The Business

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The key difference here here is that when you’re working IN the business, you’re doing all the nitty gritty work.

You’re working 16-hour days, and the business will continue to stay stagnant or may spiral downwards.

It will bleed into your personal life because you’re just so burnt out working 16-hour days, and then you go home, and it affects all your relationships and it just makes you become not the person you want to be.

Working ON the business is super crucial because when you work on the strategies to take yourself out of being in the business and needed in the business every single day, you get to have your freedom to choose when you get to drop into your restaurant.

When you don’t need to be in your restaurant slugging away, you get to actually work on growing the business. You can work on moving the needle, moving one step closer to your financial and locational freedom.

To make that happen, it first starts with hiring staff that can be self-sufficient. That way they can help manage the business when you’re not there.

So there you go, the top five mistakes that’s preventing restaurant owners from achieving success.

Identify the things that are stopping you and causing you mistakes in your business and go something about it, because you’re the boss. Put these thoughts into action.

For more tips and strategies, check out the resources on how to start a restaurant or on restaurant marketing so you can continue to move toward a profitable restaurant business.

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