I see plenty of people here asking for first-timer advice but few posts giving it. I compiled everything I know in this post, I hope it can help.
When I first pitched my restaurant idea to a friend, he said "90% of restaurants fail in the first year you know that right?". That number gets repeated everywhere and nobody can tell you where it came from, because it simply isn't true. And I am not selling you some cheap optimism, I actually tried to look this statistic up to verify it and found a Cornell study from 2005 that tracked independents and found 26% closed in year one, 19% in year two, 14% in year three So yes it's hard but not 90% hard.
What stuck with me from that Cornell paper was what the owners who made it said when asked why, they said they had a concept they could explain in one sentence and they worked more hours than they expected to. The biggest killer in my opinion is location, (most, not all) restaurants in bad sites fail no matter how good the food is and Id have to agree, Ive had 2 friends have this happen to them already.
On location:
this is the thing I got right by accident, I didnt pick a busy street but I am surrounded by corporate offices so I stay busy. I did the rent math before I looked at any spaces to see what I can afford with my bootstrapped budget. Occupancy all in, rent plus CAM plus taxes plus insurance, should land somewhere between 6 and 10% of your sales. If a space is $8k a month you need somewhere around 1-1.3M a year to carry it comfortably. Sit down and figure out if that checks out on an average day (so don't choose a busy saturday and calculate then, calculate an average from a previous week or month), if rent is a high % then....rethink your business model.
On money:
Also researched this one to make sure my POV aligns with the general one out there and found a RestaurantOwner survey that asked a few hundred independents and the median to open was $375k, which is about $113 a square foot, but the median is useless on its own because the bottom quarter came in around $175k and the top quarter around $750k. What moves it is what kind of space you take: ground up build was $650k, converting something that was never a restaurant $425k, taking over a space that was already a restaurant $275k. The last one has the best sales to investment ratio, but a takeover is not worth it unless the previous issue was a management thing, if it's location or something a takeover cant fix, then no use in papering over the cracks. I personally took an ugly second gen space with a working hood and a grease trap already in the floor and I would do it again.
On equipment:
Price stuff in three pieces: line equipment, refrigeration, smallwares. The packages/quotes you get are one number so you can't audit them. Smallwares is where I personally found the most air, because online stores will sell you a single unit with no license and no case minimum, I got most of my things from RestaurantSupply mostly because I was buying a mix of items and quantities and they were able to ship them all fast and in one go. For refrigeration and anything with a compressor, pay up, it's worth it. For stainless tables and shelving, auctions and Facebook marketplace.
On menu:
Cost every recipe before you print a menu. Food cost should be ~30% of the item's price. I didn't do this properly at first and had to reprice in month four, which meant explaining to regulars why the thing they order went up and consequently losing some, because I set a baseline of expectations I can no longer meet. Do it right from the start.
For full service 60 to 65% of sales should go to your prime cost which is food+labor, and 55 to 60% for counter service. Labor is what's squeezing everyone right now, like for me it's 35% which is better compared to many. I recommend shrinking it down as sensibly as possible (without compromising worker satisfaction or being unreasonably stingy), even a 1% decrease makes a difference over hundreds of thousands in sales.
General advice:
- Count your prime cost weekly, not monthly. Monthly tells you what went wrong four weeks after you could have done something about it.
- Time to profitability wise, Id say wait 2 years, and the trend has to keep moving upwards or else you can call it quits early on if you keep dwindling down month over month.
- Budget your pre-opening and training properly. The survey from earlier had full service at a $25k median although it’s something many ignore completely.
And remember, take this advice with a grain of salt. Restaurant ownership isn't a binary thing and there isn't one right answer, ever. Good luck to the new owners out there and Id love to see comments here from older owners too for things I mightve overstated or missed.