Did you know, that over 60% of the restaurants shut down within the first 3 years of starting their business!
Did you know, more than 50% of the restaurant owners earn less than the rent they pay to their landlords!
1. Staff Stay Costs and Food Costs
Unlike other industries, it’s difficult to get local staff in the restaurant industry as it involves long and tiring working hours. Working in a restaurant is one of the lowest-paid jobs! Since it’s difficult to source staff locally, generally restaurant owners bring staff from small towns and villages.by promising them food and shelter
While calculating your cost of operations, you generally miss out on such costs. But when calculated for sizeable employees, the become pretty huge in number eating a big portion of your profit!
2. Rent keeps increasing every year but sales fails to catchup!
Rent is a big portion of your fixed costs! The problem is, on an average, it keeps increasing every year at least by 5-7% in most cases Whereas sales trends in the restaurant/cafe business shows spike in the first one or two years and then in majority cases, it fades away!
3. Interior cost calculated in building up the restaurant!
The cost estimated at the beginning during the interior planning stage of the restaurant and when the restaurant is setup is not the same! Usually, it shoots up b 40-50% delaying the Return on investment in the business!
4. Finance Costs involved in setting up the restaurant!
Most zealous people start the restaurant business with borrowed money from friends/relatives or banks! The problem lies in the compounding effect of the interest! Initially, during the gestation period of 3-6 months, the rents, staff expenses, and restaurant running costs are the same but there is hardly any sales! Repaying the loan and paying interest on the loan becomes burdensome and many shutdowns within first 1-2 years of business!
5. Costs involved in shutting the restaurant
Opening a restaurant involves heavy investment in kitchen equipment, interior decoration of the place, branding and promotion. But in case you have to shut down the business because of low sales, Also interior expenditure becomes a total dead investment!
6. Costs incurred in Hiring Staff!
Don’t make the mistake of thinking that staff hiring is a one-time activity! Gone are the days when people used to work for years and years at only one place! Retention of staff in any business is one of the biggest challenges entrepreneurs of today’s generation are facing! If you’re depending on a recruitment agency to hire people for you. That cost is not going to be a one-time activity! Don’t forget to budget this in the operating cost while making your business model!
Before planning to buy a restaurant franchise business, estimate all these costs in a detailed and rational manner so you can save your capital and stay afloat for another business bet if need be!