Sunday, November 15, 2015

Investing in a Restaurant or Cafe: 5 Things to Remember

Restaurant businesses have a tremendous influence on the economy in the United States. Sales are expected to total over $700 billion by the end of 2015, according to the National Restaurant Associations. 

It is very difficult for entrepreneurship success without a detailed business plan and research on the market. There are five things future entrepreneurs and investors should consider before investing in a restaurant or café.

The Market of Restaurant or Café Industry

Potential business owners should perform market research and study the trend of the industry. When performing restaurant market research, include statistics, possible geographical locations, and trends. This information is very important and should be included in business plans for prospective investors and financial institutions.

Type of Funding to Operate Hospitality Business

Entrepreneurs fund restaurants and cafes with their own capital or through angel investments. After an entrepreneur has researched the industry, create a budget that covers startup, overhead, administrative, and operational costs. 

While there are successful restaurants, some businesses fail because of lack of research and budgeting. The budget should include a cost analysis of food items and supplies, such as breads, meats, condiments, plates, and utensils. It should also contain a list of distributors, like Klosterman Baking Company who delivers fresh bread items, for an example.

Restaurant or Café Business Structure

Future restaurant business owners have to decide the structure of establishments, including operations. The restaurant or café may be registered as sole proprietor, Limited Liability Company, or corporation. Most fast food, upscale, and casual dining restaurants hire managers, assistant managers, chefs, waiters, and other employees. The information about the business structure is essential for the business plan and budget.

Latest Restaurant Technology

Today, technology is used in the restaurant industry for customers' convenience, online menu viewing, and online order processing. Approximately 70 percent of consumers in the United States use iPhones and other smartphones to view menus on restaurants' websites. 

Amazingly, 79 percent of consumers said restaurant technology improved convenience experience.

Possible Risk

The possible risk of investing in restaurant or café is losing capital because of mismanagement, inexperience employees, and poor service. A detailed business plan and budget should be created and followed to reduce the risks involved in running any type of company.

If future restaurant entrepreneurs want their businesses to be successful, remember to research the industry, funding alternatives, business structure, technology, and risks. Create a business plan and include marketing strategies and budget. 

Also, remember to select reputable distributors and suppliers who deliver fresh food items and quality products.

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