knife and fork

The restaurant business is a huge industry in the USA, growing each year because anyone with any idea about food or wine thinks they can do it. But why do 9 out of 10 restaurants fail?

It’s a sexy idea–until you realize how hard starting a restaurant really is. Soon enough, questions will be flying like grains of sea salt. What permits do you need? What are your start-up costs? Where should you buy your produce? What corporate structure should you choose?

Forbes.com have outlined 8 areas in the fundamentals of the restaurant biz:

Legal Structure

You have five basic choices: a sole proprietorship, a partnership, a limited liability company or a corporation–either an S corporation or a C corporation. Restaurants–and most small businesses, for that matter–should choose an LLC structure.

External Threats

Most restaurants don’t offer much in the way of health benefits. Only 61% of employees in service industries such as restaurants are covered and most hourly paid restaurant workers don’t have access to employer-provided coverage–not exactly a draw for talented workers.

Best Role Model

While there are some 660,000 independent restaurants in the U.S., each with its own menu, strategy and clientele, all have something to learn from Starbucks.

Must-Have Technology

Tasty fare will only get you so far without timely, accurate service. The latest generation of software-based, point-of-sale systems from Micros Systems and Radiant Systems can help you cater to even the fussiest of customers.

Important Performance Metrics

Accounting profits are nice, but for budding restaurateurs, cash flow–which tracks the actual dollars moving in and out the door–is more critical. “If you don’t keep an eye on [cash flow], you realize later you’re in a hole and you can’t recover,” says Chris Yeo, owner of Straits Restaurants in San Francisco.

Start-Up Costs

After you snare the right permits, decide whether to start from scratch or fix up an existing eatery. Depending on how fancy your new place is, a blank-slate approach will set you back $100,000 to $300,000 for stuff like industrial cooking and ventilation equipment, refrigerators, freezers, tables, bar stools, shelving and counters with stations for cutting, heating and cooling.

Permits

Depending on the location of the business, you will have to file articles of incorporation or organization. (Approval is quick.) Once established, you’ll be able to secure a Federal Tax Identification Number, which registers your business with the federal government so Uncle Sam can take his cut.

Sourcing Supply

Finding food and liquor suppliers is easy; sizing them up is trickier. Price is important, of course, but so are quality and safety.

If you’re still interested, read on.

The Fundamentals Of Running A Restaurant – [Forbes]

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