Building a successful restaurant in 2020 & 2021 is by far my most requested topic, for good reason!
It’s thanks to all you go-getters out there who still want to create something special and share it with others, no matter what’s going on around the world.
This article will give you a quick sense of what it takes to build a successful restaurant step by step. But not just any restaurant, the busy and successful one you’ve been dreaming about for years.
We’re going to dive into the five core principles that I personally followed to build my ice cream shop into a recently acquired international chain.
1. Know Your Customer
The first core principle you must understand to build a successful restaurant is ‘Know Your Customer’.
To create a menu item that they will enjoy, you need to understand their wants and needs. Don’t create menu items that only you would like, create menu items that match your typical paying customer!
This is by far the #1 mistake that a lot of restauranteurs make because you have to shift your mindset. This is what differentiates a struggling restaurant from one with a lineup out its doors.
For example, with our ice cream shop, 720 Sweets, our brand was created with ‘Michelle’ in mind. Now who is Michelle?
Michelle is an 18 year old university student, she loves spending time with her friends, she loves being on Instagram and TikTok and she loves sharing moments with her online fans and family.
Everything that we created is specifically for Michelle, from ice cream flavors, social media image, and customer experience. Because everything is tailored to her preferences, Michelle feels loves the entire business and brings her friends with her the next time she visits.
Thus, we gained traction right from the beginning by identifying and tailoring everything to Michelle’s needs.
Identifying your core customers is the only way to build loyal fans who keep coming back again and again. That’s why knowing your customers and their behaviors is the key to a sustainable business.
Additionally, we need to cater to these new changes in spending habits because of the pandemic. Whether it’s with curbside pickup or online ordering, we need to start implementing and adapting to the ever-changing industry in order to serve Michelle better.
So go out there and identify your own Michelle as your first step to creating a successful restaurant.
2. Keep it Simple
Unfortunately, so many restaurants try to please everyone, but end up pleasing no one. This is why it’s super crucial for to keep it simple.
Michelle doesn’t want to choose between 345 menu items! Human minds can only receive so much information. If your customer can’t make a decision because it’s too complicated, they won’t buy from you.
Have 5-10 different menu options, the core items that you want Michelle to purchase. This helps her pick, but also allows another option to stick in her memory to come back for more. With dozens of options, nothing stands out.
We only offer four flavors for ice cream because we want to make sure customers gets to try every flavor in our rotation that comes out every week. It’s an effortless experience because there’s likely only one flavor that fits her preferences – whether its chocolate, vanilla, or something fruity.
Another benefit of a simpler menu, is that it’s much easier to calculate your costs for each item. You should know your cost per item so that you only keep the most profitable offerings.
This video here teaches you exactly how to calculate you food cost percentage so you’re set up for success right from the start.
3. Know & Love Your Numbers
There’s so much more to knowing your numbers than your major costs and profit margins!
Picture this, your restaurant is five years old and you’re seeing 10s of thousands of dollars coming in every month, so you’re happy. But at the end of the month, you bank account only has $100 because your expenses are costing you almost your entire income!
I see it happen to new restaurant owners all the time.
They don’t know whether they’re truly profitable, or if they’re actually losing money. It’s a very different story between your revenue and how much you can actually put in your pocket. That’s the reason why we need to know our numbers and pay attention to them, so that you know which areas you need improve in.
For example, if you have 40% Cost of Goods Sold we need to figure out why it’s costing us 40%, because typically in the industry, we want to aim for 25%.
One reason could be that your staff is wasting too many ingredients, or they’re spoiling too soon. Either way, it’s something you need to change that you wouldn’t have know about if you weren’t monitoring your numbers.
That extra 5 or 10% could be profit in your pocket to provide for you and your family, which is why you should be the one keeping track of all your financial numbers.
The fourth key element in creating a successful restaurant is to diversify your business opportunities and revenue streams.
As we’ve learned from 2020, if you put all your eggs in one basket and only offer on dine-in service, the unexpected could totally wipe out your business.
There’s lots of ways you could diversify! Things like catering, DIY kits, running different events, or even doing a workshop or courses online are great options.
My friend Kyle owns a bar and has made more than $50,000 just by selling courses on how to make cocktails! If you want to learn more, check out this video here for the full interview.
So make sure that you create different streams of revenue for your restaurant and actually explore ways to provide more value to your customers.
5. The A.C.E. Formula
The final component to building a successful restaurant is my A.C.E. formula. This formula is based on my personal experience building multiple different businesses which have all been successful thanks to these steps.
What does the ACE formula stand for? It stands Align, Connect, Explode.
To align your business you need to identify your mission and your values. By knowing what you stand for, you’re able to attract people who believe in the same thing, whether it be customers or team members.
You also need to align your business concept with your community and your goals. Otherwise, it just won’t work out!
First you have to connect with your staff. Making sure they align with your values is the best way to build your all-star team. These are the people that will help you run your business like their own.
Next you need to connect with your audience, connect with your regular customers so you can start nurturing them into loyal fans. This is the way to build a community of people who will buy from you again and again, who will pay premium for your brand, people who will buy from you over the new guys on the block.
This is the stage where you start doing marketing and advertising to explode your revenue.
It’s all about stacking. Don’t just rely on just one promotion or one stream of marketing, but multiple different tactics to create exponential results. A lot of people fail in their business because they focus on marketing tactics before aligning and connecting with their customers.
It may seem simple and abstract, but this is a really powerful tool that has guided all my major business decisions and helped me build my ice cream chain.
There you go! The 5 key components that separate the struggling restaurants from the ones that actually bring in profit every single month.