Interesting and tough times at present in the Irish Food and Beverage Hospitality industry; extreme pressures on businesses with relentless inflation, sky-high costs of insuring and doing business, changes to VAT Rates, imminent increases in national minimum wage, increased paid sick-leave allowances, reduced Trips and Spend from customers, and more all adding up to a picture of doom and gloom in many parts. However, for every business assessing their trade in to 2024 there are as many owners considering expansion and opening new premises. I meet people all the time who ask me “I want to open a Bar / Restaurant, what do you think?”
I believe that there are five critical areas new hospitality business owners, or owners expanding in to new venues or territories, need to consider before taking the plunge. So, instead of making or not seeing a bad decision, let’s explore the five mistakes that new owners make.
Poor Market Research:
Market research is way more than just knowing the local competition and getting a few sweeping generalisations about an area. People fail in their market research because they simply don’t do it or do enough of it. There is no substitute for getting out there, doing site visits – day and night, walking the streets, and observing the traffic (vehicular and people). Get out and understand the demographics and economics of a potential new business location. Do you know the income levels of the area you are looking at? Do you know the foot traffic per day? Is there all-day trade, or just night-only? What is happening in other business around, what types of people are they drawing? When are they busy and when are they quiet? When are they closed, when are they open? What are menus like, what are the price points, are they all-day Food outlets or Bev-only? Opening up in a new location you should know as much as someone who has lived locally for 10 years.
Not Understanding Your Position:
So now that you have a strong feel for what is going on around you, now you have to figure out how you can show your differentiation and attract people in to your premises. What is your Unique Selling Point, what is your reason for being? This would be an all-encompassing fact or position that covers every touch point in your business, from the first internet or social media search, all the way through to your bartender, all the dots have to join up. Consider your new business as a person and create a personality around that person. What type of music would that person listen to? What sorts of things are they interested in? What would they eat? What would they drink? How would they talk? The more of a personality you can build, the easier it will be to own a space for your new business. This is important to have before you open, and as you decide what types of events to run, images to post, and products to sell.
Too Much Space:
Space does not equal sales! In many corners of the hospitality industry, we have a habit of viewing space as an asset. We like to think that the more space we have, the more people we can accommodate, and the more money we can make. The reality of the situation is often more different, particularly for first time owners / first time second-venue owners. Can you find the Team for a venue with 150 seats? More importantly, can you fill those seats consistently through the week and afford that Team over the long term? Can you power, light, heat, and insure that space? Hopefully you have done your market research at this point and know what your footfall and covers should / could be. This will help you set realistic sales expectations, especially after the novelty of being the “new place in town” has faded. Make sure you are staffed enough to provide great service in the beginning, while also being able to maintain that consistent service level year after year. Without doubt, this is one of the hardest things you will do as a new owner.
Not Knowing Where to Compromise:
A new business opening will always go over budget. Don’t panic, most projects go over budget. Where new owners get into trouble is reaching the opening day with no, or severely reduced, cash left over. So be smart, and don’t blow all the budget before you open. This is not to say you should open with a venue that you are not proud of. But instead spend slowly, carefully, and wisely. As you are progressing prioritise spending on two areas; those that enhance the customer experience, or those that will benefit your Team. Spend your budget on things that your customers will directly engage with, touch, see, or that makes the experience more enjoyable for them. The same goes for your Team. Put yourself in their shoes and create an environment for them that makes their jobs easier. Ultimately, no matter how well you plan, you will have to compromise at some point along the way. Put spends into three categories; Need, Want, and Wish.
Not Knowing Your Profitability Week To Week:
The doors are open, and you have had your first successful couple of weeks. Now what? But has it been successful, how do you know, what is success anyway? Now is the time to get a stocktake plan and schedule in place; get on top of your margins and understand how much you have left to pay the bills with after your suppliers are paid. Not only hospitality businesses, but businesses of any variety where goods are bought / sold / processed / transacted at a rate of frequent occurrence, ought to seriously consider employing the services of a stocktaker to support the senior management team and report at regular cyclical intervals on key performance indicators.
As part of our same-day service, and post-stocktake analysis and consultancy we can provide you with clear actionable advice to immediately impact your Gross Profit and Cash Margin. If you’re interested in total visibility of your margins, total control of your inventory, and total security of your investment then talk to Total Stock Control today. Irish owned and operated since 1993 Total Stock Control is your trusted nationwide partner for all your stocktaking and stock management needs. Serving large and small customers in Ireland and Northern Ireland, we work with single and multi-site operators of Hotels, Bars, Restaurants, and Off Licences on a weekly, bi-weekly, and monthly basis. We support hospitality business of all varieties and locations, from private members clubs, to high volume transit hubs, through to large late-night music venues and fine dining restaurants. Don’t just take it from us, contact us directly for any further questions you may have.
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