Restaurants are among the most difficult businesses to own, largely because of how easily they can fail and the tremendous costs of just getting started. In addition to furniture, alcohol, and equipment, restaurateurs must spend thousands on liquor, food, and sanitary licenses. Buried under so many initial expenses, it’s difficult for any restaurant to earn a decent profit during its first few years of business.
The key to running a successful restaurant is fulfilling a series of requirements that are often overlooked because the owner is so concerned about budget. But with the help of a small business loan, restaurateurs can devote significantly more attention to each requirement without obstructing cash flow or digging into operational funds.
After all, research has proven that maintaining a restaurant is more difficult than starting one: According to LinkedIn, 60% of independently-owned restaurants fail in their first year whereas 80% fail in the first three to five years of existence.
LOCATION, LOCATION, LOCATION
It doesn’t matter how good the food is. If your restaurant lacks visibility, sufficient parking, and strong openings for foot traffic, it will fail. In fact, several major chains, particularly Domino’s Pizza, owe their success to the locations of their flagship restaurants. The first three Domino’s were opened right outside bustling college campuses, allowing owner Tom Monaghan to open over forty restaurants in just four years. Monaghan knew what kind of people bought his product, so if there was a location available in one such neighborhood, he capitalized on it to maximize business.
Any restaurant looking to rapidly expand should consider location above all other factors, as numerous experts have conceded that location is the No. 1 reason restaurants succeed or fail. With such a make-or-break decision in mind, you cannot just secure the first opening to appear when you have the money to do so. You must conduct extensive research on the area to determine your proximity to your ideal customer, your competitors, and how neighboring restaurants are performing.
Say you have found the perfect location for your next establishment but you don’t have the funds on hand to secure it before someone else. Lucky for you, alternative lenders can approve small business loans in as little as 24-48 hours and distribute funds in a matter of days. It can take time for such investments to produce results, which is alternative lenders offer numerous programs that don’t involve fixed, monthly payments. A Merchant Cash Advance, for example, supplies a lump sum in exchange for a percentage of future credit card sales. You can pay off the brunt of the loan when business starts to pick up, and if you are truly confident in your new location, you’ll have to worry less about paying off debt and more about opening yet another location to satisfy the massive uptick in demand.
TIS’ THE SEASON
A great deal of restaurants perform best during certain times of the year like the summer or holiday season. These seasons, however, follow the worst-performing times of the year, when sales can be so low that paying employees and vendors becomes an issue. And you don’t just need enough money to get by. You need enough money to match a gigantic increase in demand that calls for more ingredients, new equipment, more staff and pre-season advertising. That first expense also happens to be a lot cheaper if you order it several months before you actually need it, and excessive supply provides more opportunities for offers.
Good thing you paid off that first loan on time, because you are now eligible for a second, much larger loan that will get to your bank account even quicker than the first. With a Merchant Cash Advance, you can cover all the necessary investments without jeopardizing revenue. Payments will be negligible as long as sales are down, and the more spread-out your payments are, the lower your interest rate will be. Having sufficient funding on hand during the slow season will additionally prevent you from losing relevance and eliminating the signature discounts that continue to retain customers.
NOT YOUR AVERAGE CUSTOMER SERVICE REP
Aside from location, the most common reason for a restaurant’s closure is poor customer service. Restaurant owners must therefore dedicate 100% of their focus towards hiring the right people. Such dedication is only possible with enough financial stability to account for the slowdown in operations that typically emerges when new hires are being recruited and trained. If you hasten the hiring process due to financial restrictions, you run the risk of paying someone far more than he or she is worth.
So instead of just relying on conventional hiring tools, publicize available positions on social networks like Facebook and LinkedIn while contacting trade schools and attending hiring fairs. You can also utilize creative interview tools, like screen forms, to gain a clearer impression of potential candidates. Posing complex questions to candidates results in complex answers that must be carefully compared to distinguish one good candidate from another. Face-to-face interviews must be thorough as well in order to determine whether a candidate is genuinely nice or “fake” nice.
These efforts take time but after receiving a small business loan, you can afford to be picky and even offer higher salaries to the most qualified or flexible candidates. Paying off the loan won’t be an issue since you just acquired the means to increase business, and if you chose your new hires correctly, they will want to work more hours just to prove that you made a wise decision in hiring them.
NOW THAT YOU’VE EARNED THAT EXTRA PUSH
Alternative lenders like United Capital Source have helped dozens of restaurants expand despite financial limitations. Virtually all restaurants are naturally vulnerable to occasional inconsistencies in cash flow, even if a certain business has attained the performance record and reputation required for growth. Restaurant in these situations simply need a little extra cash to take the next logical step and make the most out of the competitive advantage they have rightfully earned. As long as a restaurant allocates proper time and funding towards the most essential requirements for success, the business owner will maximize the potential of whatever whatever winning strategy or recipe the restaurant was started on in the first place.