Starting any business can be a challenge for someone who has little to experience running a company. The food industry, especially the restaurant industry, can be even more challenging because of all of the unique demands in this competitive market place.
New York is one of the busiest and most crowed cities in the United States with more eateries per capital than almost any other city. This volume of choices means only one thing for young entrepreneurs and bookkeepers: lots of competition.
Most new restaurants need to be different enough from their competition in order to survive. The food must be better, the atmosphere must be unique, and the prices must be comparable. This is one of the main reasons why opening a new eating establishment is often more difficult than opening another form of business like a retailer.
Restaurants are also notorious for being a capital-intensive project to begin with. Owners have to purchase large fixed assets like ovens, refrigerators, and dishwashers that usually can’t be rented. Financing this kind of equipment is usually difficult for a newly formed business because the owner’s have to apply for bank loans. Often times the banks will not approve loans unless the owners are will and able contribute the amount of capital required to meet the loan agreements. The owners’ ratio formula for contribution margin generally depends on the structure of the company. For instance, corporations and limited liability companies generally have different debt covenants with banks.
Aside from the general financing of the business, restaurants have unique problems with inventory management that different types of businesses like retailers don’t have. For instance, a retailer usually tends to turn their inventory every three to four months with the changing seasons and fashions. Retailers’ merchandise doesn’t go bad and can’t really spoil. Burger places’ food, on the other hand, has extremely limited shelf life. The food must be ordered to meet the next few days demand and typically can’t be ordered in bulk because freezer space is in short supply. Restaurant owners have to manage inventory turnover and control turns much more efficiently than other forms of businesses.
Bookkeeping can also be a nightmare for eateries that aren’t using more modern point of sale devices. With hundreds of customers a day, counting and adding up receipts can be almost impossible. Many younger entrepreneurs try to do their own bookkeeping, but trust me. It’s not worth your time as an owner. Your time is better spent inside the kitchen and on the dining room floor making sure your customers are happy and making sure the back end is running smoothly.
In short, starting a business is difficult in any industry. Keep your nose to the grindstone and your eyes on your vision and you will be successful. To the future burger places in the city, I can’t wait to try all of the great food that you are going to create. I wish you the best and keep up the good work!