Financial savvy needed to keep restaurants afloat

Restaurants need solid financial planning and management to sustain operations – something insurance professionals may be in a position to dispense

Hospitality

By Allie Sanchez

Andre Neyrey, chief executive officer  and founder of boutique consulting firm Blackwood Hospitality, told reporters that restaurateurs need to be prepared to “wear multiple hats” in running a food place.

Foremost among the skills needed to keep a restaurant afloat, he said, is financial savvy. This means that before starting a restaurant, the entrepreneur needs a stockpile of cash that will tide it over during lean times. A few slow weeks, he added, could be financially devastating, thus the need for a financial fallback.

Neyrey added that restaurants cannot expect to get out of the red on the first day of operations. It takes six months to a year to break even and turn in profits.

The consultant also said managers need to know where every cent goes in day-to-day operations. Of every dollar spent on a restaurant, he estimated that 60 cents go to labor and food costs, often excluding rent and insurance. Margins are slim, he said, at 10 to 20 cents per dollar earned.

In an overcrowded market, a unique and compelling concept can sustain a restaurant through the opening hype, Neyrey stressed. He explained that coming up with such concepts involves meaningful research that will help the manager identify the target market for the restaurant, find their location and study behaviors that will engage them into trying out the establishment and becoming regulars.

Finally, he stressed that before location hunting, managers should have mapped out a full strategy for operations.
 

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