So You Want To Open A Restaurant?

So, you want to open a restaurant…

For most operators, opening a second site feels like the natural next step - more seats, more revenue, and more presence. But for those opening a site for the first time, it can be an excitingly overwhelming experience.

In reality, most sites don’t fail because of location or concept. They fail because either:

1.       Their first site wasn’t truly scalable. We see a lot of operators who try to open a new site when the first site isn’t working so well. They ultimately believe that the additional revenHow much does it really cost to open a restaurant in the UK?ue from site number two will help to prop up site number one- they don’t work on the issues that are stopping site one from becoming profitable before trying to repeat the process again a second time over.

2.       There was no plan. Well, there might have been a plan, but it wasn’t the plan- the one that covers just about everything you need to consider before opening a new restaurant. Yes, I know that some concepts and locations don’t work, but a proper plan would’ve revealed this long before £000s had been sunk into the new venue.

One of the main things that I love about my company is that a lot of our clients are constantly expanding and looking for new sites, and as such, we deal with the projections and forecasts for a fair number of potential locations. It’s always exciting to see a new concept come to life and to be an integral part of our clients’ lives.

It’s our job to put together enough (financial) information about a new site to allow our clients to make an informed decision- breakeven analysis, expected revenue based on spend per head and number of covers, how many staff they’ll need to employ and what their cost will be, and so on (I’d estimate that only 20% of potential sites that we evaluate are worthwhile taking a punt on- but it’s our job to be pessimistic and to look at the worst case scenario).

We can spend anything up to 20 or 30 hours putting a financial forecast together for something that doesn’t (and may never) exist. But that workload pales in comparison to the amount of research that an operator needs to take on to a; make their determination, and b; provide us with enough information to create a solid financial model. Whilst existing clients wholeheartedly value this service, we do often receive enquiries from first time restauranteurs who want us to put this together for them- but they’re typically gobsmacked that the service can cost £1000s compared to the few hundred that they’d envisaged- especially when our findings may point to “yeah, don’t do that”- but in my experience, spending a few thousand pounds to avoid spending tens of thousands on your “never-before-seen” breakfast concept is a worthwhile investment.

I had an email from a new(ish) client a few weeks ago- they are trading (very successfully) from a horsebox at the moment, but their dream is to have a bricks & mortar store. They emailed me a while back asking for some management accounts for the current set-up with a sort of “and by the way…” at the end of it where they then went on to ask “I was wondering if you could give me a rough idea of what it might cost to run a shop with 5 staff, alongside a yearly rent of £57,000”.

That was it. That was the overall level of thought that had gone into potentially diving into a 10-year lease with a personal guarantee. Unfortunately, this isn’t a one-off.

We have a line in our terms and conditions- it’s something that I quote religiously to current and future clients; “the information that we give you is only as good as the information that you give us” i.e. you can polish a turd, but it’s still a turd.

One of the biggest self-misconceptions that we see is when an operator has what appears to be a very well-run first site. They then decide “this site works, so we can definitely do this again”. Site two opens, and site one starts to crumble. The reason behind it? The owner-operator has stopped working 5 days a week in site one - they have no processes and very little training in place. The business still relies heavily on their presence. When we speak with clients about opening another site, we always ask them; “who is going to take over site number one?” and “how much of a buffer do you have in the account for when something goes wrong?”

We intentionally spend so much time building a forecast (for something that may never open) because it’s far cheaper to kill a bad idea on a spreadsheet than it is after signing a lease. When you properly model the numbers, the margin for error is reduced.

Before we even start modelling a site, we need clarity on things like:

·       How many covers you can realistically turn

·       What are your opening hours?

·       Do you have a fully costed copy of the menu?

·       How much are you going to invest as working capital?

Most operators haven’t fully thought this through. Not because they’re inexperienced, but because no one has ever asked them to.

So we built a checklist.

Not as a tick-box exercise, but as a way to pressure-test whether a site is actually viable. You can download the full checklist here.

Fair warning: if you go through it properly, you’ll probably realise that opening a site is far more complex than you initially thought. If you do come to that realisation, just reach out or book an appointment and let's chat.