Restaurants and restauranteurs get a bad rap in the startup world. The prevailing wisdom is that “restaurants are hard” and that food businesses fail more often than other startups. Not true. According to every study I’ve read food businesses actually have the exact same failure rate as any other business, ranging from 60-80% depending upon the time frame. So why the bad name? Most likely because the failures are so much more obvious. Everyone either knows someone who has tried to get into the food business or has had one of their favorite restaurants close on them.
No, restaurants are no harder than any other business to start, but they can teach tech and other entrepreneurs a lot about the right way to go about starting a business. Having gone from starting two restaurants of my own to advising tech and other industry entrepreneurs, I’ve been shocked both by how the lessons I learned translate into the online world, and how by much they are not being practiced. I know that starting a restaurant is not as sexy as starting an iOS app – I’ve seen people’s face deflate when I explain what my previous startups were – but if half the entrepreneurs I see practiced what is commonplace in kitchen offices across the nation we’d see a lot better startups and a more robust entrepreneurial corps.
Menu Testing – For a (successful) restauranteur, it would be inconceivable to launch a new restaurant, dish, or even ingredient without thoroughly testing both internally and externally. A successful restaurant often begins as a menu first, a business second. The chef or owner will then test this menu on themselves, then friends and family, then friends of friends, and finally complete strangers. In this way they can continue to iterate on their recipes as the get ever increasingly honest and unbiased feedback. My own personal roadmap for launching my first restaurant was as follows: Cook for myself first to make sure I could feasibly and reliably prepare the dishes. Next I’d invite a large group of friends over for a dinner party and illicit their feedback afterward. After tweaking following these two steps I would accept “friendly” catering gigs – a friend’s wedding or a university function with my alma mater. Lastly, to get in front of true strangers without sinking too much capital I opened a stand at the local farmer’s market. In addition to getting unbiased feedback, this provided me with invaluable experience meeting deadlines, following health procedures, and dealing with negative feedback. I also made enough money to make the experiment profitable.
Friends and Family Night – Once the tested menu is “scoring” high enough to satisfy the chef, the restaurant proceeds to launch. Before opening night, however, smart chefs have what is called a Friends and Family Night. This is the restaurant equivalent of a beta. Sometimes free, sometimes full price, friends and family night is a way to work out the kinks and problems on a friendlier audience than the public. These typically take place anywhere from a week to only a night in advance of the grand opening. Another tried and true method is to have a “soft opening” – just turning on the open sign with no fanfare and seeing who comes in organically. This is done for a limited time and most patrons are informed that the restaurant is still playing around with things so expectations are not unduly high. While beta launches are common in the tech community, many times I have seen loudly advertised and marketed. For me this defeats the point of trying to fix the problems while they are small. Lesson – keep your betas or soft launches contained and small until you are ready for attention, and the scrutiny that brings.
You Can’t Be Everything to Everyone – Have you noticed that the best restaurants are not the ones with sprawling 18 page menus? That is because good restaurant managers know enough to keep their offerings down to the few things they know they can do better than anyone. They know exactly who their customer is, who they are not, and what they want most. In restaurants, the top 20% of your customers contribute 80% of your business – both through repeat visits and through referrals. I urge you to concentrate and distill down to what you do best and only register feedback from your core group of customers.
Test Kitchens – If you want a Michelin star or to produce any kind of world-class cuisine you have a test kitchen. This is generally a stand-alone kitchen where employees and chefs only do innovation. They experiment with new dishes and document every step, permutation, and failure. They create a knowledge base and institutional learning here that transfers to the main unit when ready and tested. These innovation engines keep the chefs and employees at the cutting edge of their field and provide a stream of new products. Any kind of test kitchen or skunk works, if carefully implemented, can improve your organizations creativity, retention, recruiting, and product output.
Sell Sell Sell – I respect that restaurants live or die by the quantity of food they can sell. I have never seen a food-related business plan that revolved around giving meals away for free until the business achieves “scale,” then selling advertising on the plates. Perhaps I’m biased because I come from the restaurant world, but I love that it is a business where you MUST sell from day one, and continue to sell every day after that ad infinitum. Yes, there are businesses where having the public facing component be free is advantageous and even necessary. However, lately “getting to scale” – whatever that means – has become an oft-repeated excuse for poor business planning.
Restaurant work is hard and dirty, believe me I know. It is exhausting and largely looked down on. But if the worlds of restauranteurs and techies could intermingle a little more I believe we would all be better for it. Web entrepreneurs might actually begin selling products, and perhaps restaurants would finally stop having such terrible websites – really, what is it about the restaurants that make them such easy targets for terrible website designers? But alas, that will have to be the subject of a rant another day…