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Garlic Shack, Lounge on 20, Red Lotus, California Pizza Kitchen, Hangar 17 and Brew it Up! are all restaurants that have closed in the central city in the past few years. Meanwhile, others thrived, celebrating 10- and 20-year milestones.
The Sacramento Press talked to local restaurant consultant Andy Soto, owner of Spectrum Restaurant Consulting, and asked what he thinks are some of the mistakes restaurants make that cause them to shut down.
While Soto said there are many reasons restaurants fail, he sent us his top five.
Why resturants fail, by Andy Soto:
Not connecting with the community. Things like participating in events like Make a Wish Foundation, Grape Escape, etc. Those are just two examples, but those types of events give people the chance to get to know the restaurants and their offerings in a very casual atmosphere. Partnering with local charities or participating in charitable events also goes a long way. De Vere's Irish Pub’s St. Baldrick's event is a wonderful example of an event meant to bring the community together for a worthy cause and enjoy the company of others while getting to know a particular venue.
Finding the right social media formula is important as well. Things like Facebook and Twitter are great ways to connect with your customer base, and people love to "like" things. It is crucial to find the balance where you aren't chasing away your guests with too many posts or losing your audience by posting too little. Social media has proven to be a great way to let people know about events, community outreach, specials and restaurant giveaways. Those restaurants not using social media outlets to reach the masses have an archaic way of thinking and should consider joining the rest of us in this century.
Not listening to their guests. One thing I recommend is the use of comment cards. When I say "the use of," I mean the proper use. This means doing something with the information provided. Some restaurants don't see comment cards for the true gifts that they are. These are opportunities provided by the guests telling owners exactly what they would like to see done differently. Like anything else, you need to filter through these things as you can get inundated with people's personal ideas on how to run the perfect restaurant. Within that sea of comments there are some very valid and valuable pieces of information owners can use to improve their business. If you are just using them to collect email addresses, you are missing the big picture.
Not doing research on your concept. Before opening a new restaurant, owners need to look at what they want to do, where they want to do it and how they are going to execute it. What types of concepts are doing well? Is there a concept the neighborhood is lacking? Do they want to follow in the footsteps of something popular? Do they want to do something new and cutting-edge? Do your prices fall in line with that of your neighbors and similar concepts? There is a tremendous amount of risk involved in this business, so doing your homework is vital.
Training and education. Of course, staff members should have a specific level of knowledge that meets or exceeds the needs of the restaurant. Restaurants need to take this a step further and continuously test and challenge their staff. Managers and owners need to write and administer tests on alcohol, food, service, etc.
Some places need it once a month, perhaps at a mandatory staff meeting. Other places in need of more help should test their staff members on a weekly basis before or after their shifts. There should be tests to further the education of every staff member: hosts, servers, bussers, runners, cooks, etc. This obviously means management needs to customize the exams to fit specific job descriptions. The more information you provide your staff, the more they can provide the guests.
Proper funding/finance. This goes for new owners mainly. I can't begin to tell you how many people I've met over the years who wanted to take their life savings and open a restaurant because it looks like so much fun. These folks are in for a rude awakening 100 percent of the time.
If you are opening a restaurant and are close to the date of your soft open and see the money running out, make no mistake, you are in trouble already. I highly recommend having enough in reserve funds to keep the business going for at least a year. This means payroll, vendors, repairs and many other unforeseen instances we all know can pop up in life.
Some folks with a good plan and strong business model can make it work with six months’ worth of cash, but this is not always the case. If it sounds impossible to have that much liquid cash on hand, perhaps you might want to consider a different business. This is of course not set in stone, but common sense will tell anyone you need money to operate, and (most) restaurants don't generate profits in their infancy.
I have also witnessed the opposite effect, which is where an owner has deep pockets, spares no expense on décor, artwork and furniture with little focus on having the right team members in the right positions. In these situations things tend to fall apart sometimes before the restaurant is even open. Generally these turn into very expensive life lessons.