Why the restaurant business

1
Week 2

• Why the restaurant business?

2
Why are Restaurants Important?

• Why are restaurants important to us as consumers?
• They play an important role in our lifestyles
  dining out is a favorite social activity
• Today, more meals are being eaten away from home
  than ever before
• Phyllis Richman, Washington Post Food Critic,
  says, Restaurants are one of the primary ways we
  fill our bodies, occupy our social lives, spend
  our money, learn about the world and conduct our
  business.

3
Why Open a Restaurant?

• People open restaurants because it is interesting
  and challenging, and it has the potential to make
  investors wealthy, but it is not for the faint of
  heart.
• Some reasons people have gone into the restaurant
  business include
• Money can be highly profitable (but no
  guarantees)
• Potential for a buyout early retirement?
• Place to socialize satisfies a need for
  socialization
• Challenge few businesses offer more challenge
  to the competitive person
• Opportunity to express yourself allows the
  artist to emerge
• Successful restaurateurs need considerable
  experience, planning, financial support, and
  energy.
• Restaurant owners cite steady hard work and the
  ability to work well with people as the two major
  keys to their success.

4
Liabilities of Restaurant Ownership

• Possibility of excessive fatigue from long hours
  working in the restaurant jeopardizing a persons
  emotional and physical well being.
• Typically little job security for managers
  working for others, since a change in ownership
  often means management will be replaced.
• Potential restaurant owners and managers must
  consider their personality, temperament, and
  abilities when considering the restaurant
  industry.

5
Advantages of Buying, Building, Franchising
Restaurants

• Before deciding whether to buy, build, franchise,
  or manage someone elses restaurant, it is
  necessary to consider a host of factors,
  including economic conditions, potential market,
  competition, and capital available from
  investors.
• Buying an existing restaurant can reduce risk, if
  the weaknesses of the existing business can be
  overcome.
• However, it may be exceedingly difficult to
  overcome a poor reputation acquired by the
  previous owner.
• Building a new restaurant requires the largest
  financial investment. At the same time, it offers
  the greatest potential for self-expression and
  personal fulfillment.

6
Advantages of Buying, Building, Franchising
Restaurants

• Franchising has the least risk, since the concept
  has already been tested, but it offers owners
  little flexibility.
• Managing a restaurant for an owner involves the
  least financial risk, but can still be
  emotionally draining if the restaurant fails.

7
Characteristics of Restaurants and their Owners

• Restaurants are broadly classified as
  quick-serve, family, casual, dinner house, and
  fine dining.
• The types of restaurants are constantly changing,
  and todays market leaders may not even exist in
  the future.
• The most successful leaders in the restaurant
  industry usually are hardworking, willing to
  learn from their mistakes, and take full
  advantage of their natural public-relations
  skills.
• Quick-serve restaurants aim to serve the maximum
  number of patrons in the least amount of time.

8
Characteristics of Restaurants and their Owners

• Regional burger chains can compete successfully
  against multimillion-dollar advertising campaigns
  of the big, multinational chains.
• Mexican-style food is relatively inexpensive
  because of the small percentage of meat used,
  reducing food costs.
• Despite higher than average food costs,
  steakhouse owners often choose to open this type
  of restaurant because it offers a limited menu
  and caters to an easily defined market.

9
Characteristics of Restaurants and their Owners

• Customers in fine-dining establishments expect
  all food, drink, and service to be of the highest
  quality and are willing to pay extra for it. The
  entire dining experience must stimulate the
  visitors visual, auditory, and psychological
  senses.
• Historically, ethnic restaurants were small and
  family owned, but over the past ten years some
  have grown to become national chains.
• Theme restaurants are built around an idea
  focused on fun and fantasy. They have a short
  life cycle and often earn a large portion of
  their profits from merchandise sales.

10
Characteristics of Restaurants and their Owners

• Chef-owned operations benefit from having a
  highly experienced and very motivated person in
  charge, but often suffer because the chefs do
  not have enough business knowledge to manage the
  financial side.
• A number of women have succeeded in the
  restaurant business. According to the National
  Restaurant Association, women held 68 of all
  supervisory positions in 1997.
• The internet is expanding home delivery from
  pizza and ethnic food to include dinners from
  upscale restaurants available for homes and hotel
  rooms.