Key Challenges in Running a Restaurant and How to Address Them

One of the main reasons running a restaurant is considered difficult is that it involves significant risk.
When starting any kind of business, not just a restaurant, people usually begin by taking out loans from financial institutions such as banks or government-affiliated finance corporations. This means that in any business, there is always the risk of failure leading to debt.
However, in the case of restaurants, there are additional risks such as food poisoning, customers being hospitalized due to allergic reactions, or fires caused by something like a flare-up in the kitchen.
These issues don’t just cause trouble for people around you; in some cases, they can even endanger human life. No matter how careful you are, you can never reduce these risks to zero.
For this reason, restaurants carry more risks than many other types of businesses, and even people who are confident in their skills and have sufficient capital often choose not to open their own restaurant.

In some cases, compensation for things like food poisoning or spilling oil on a customer’s clothes and rendering them unusable can be covered by insurance.
This kind of insurance is called liability insurance, and there are various types with different coverage details and benefit amounts. Food poisoning is not only a matter of hygiene management in the kitchen; sometimes the problem lies with the supplier, and no matter how careful you are, it is impossible to reduce the risk of food poisoning to zero.

If a fire breaks out in the kitchen, it can be covered by fire insurance. Fires are not only caused by carelessness with open flames; they can also start when leftover tempura batter crumbs ignite in the middle of the night, or when old electrical systems short-circuit and catch fire.
Even if a shop is careful, it cannot completely prevent fires caused by the electrical systems of the building it occupies.
Fire insurance not only covers damage in the event of a fire, but some types also cover losses due to theft or robbery.
Fires caused by earthquakes and similar events are generally excluded from standard coverage and are often available only as an additional paid option.
Japan is a disaster-prone country, and if you run a business for a long time, the likelihood that you will suffer damage from earthquakes, typhoons, floods, and similar events is quite high.
Since such disasters can occur no matter how careful the shop is, it is advisable to take out insurance even if it requires an extra premium.
In rental properties, the real estate company may bear some of the costs in the event of a disaster, so it is important to check this thoroughly in advance.

One reason running a restaurant is so difficult is that it’s hard to find a really good location.
In most cases, when you want to open a restaurant, the prime spots are already taken by other restaurants, and precisely because they’re good locations, those businesses tend to stay there for a long time.
Properties that are currently vacant are places that have closed down for one reason or another, and even if you run a normal operation there, things usually won’t go any better than they did for the previous tenant.
Because owners tend to shut down before their losses grow too large, you should be very cautious about locations where tenants are constantly changing.
Situations where you can secure a good spot include spaces inside newly opened shopping malls, or newly built event venues such as stadiums that draw large crowds.
When a major facility opens and the flow of people in the surrounding area changes dramatically, new prime locations for restaurants can emerge. If you’re thinking about opening a restaurant, you should always keep an eye on what’s happening in the surrounding area.
Also, recently, due to the impact of COVID-19 countermeasures, many businesses have struggled, and even properties in good locations have become vacant more often. In that sense, you could say a good opportunity has arisen to look for a prime location.

Even if you try to find a location that matches your shop’s concept, it’s often hard to find a place that feels exactly right.
In that case, one approach is to secure a location first and then develop a concept that fits that particular spot.
For example, if you find a vacant property at a bargain price near a station close to a university, you can first secure that location and then come up with a concept that makes the most of the area.
You might originally have envisioned a stylish, upscale restaurant, but by keeping the same type of cuisine and shifting to a more affordable, casual place that students can easily visit, you can turn it into a food business that really takes advantage of the location.
Or, if a new baseball stadium is being built, it could be a good idea to open a sports bar themed around baseball in the area surrounding the ballpark.

In order to first find a location and then think about your concept, you need to draw up your business plan and prepare for opening as early as possible.
If you find a good location that will become available in a few months and you can start using it then, you can take your time with preparations. However, when you secure a vacant property, in many cases the rent starts being charged from that point.
In other words, the longer your preparations take, the more you end up paying rent and utilities on the premises just for the sake of getting ready.
On the other hand, if you thoroughly complete your preparations in advance so that all that remains is to find a location, you can start operating as soon as you find a place.
However, if you have already finished your preparations, it becomes difficult to adjust your concept to match the specific location.
Deciding whether to start these initial preparations before you find a location, or to wait and think after you have found one, is an extremely important decision for anyone running a restaurant.

How much you spend on labor costs can greatly affect your restaurant’s profits.
If you’re understaffed, you may end up losing customers even when many people come to your restaurant, because you can’t serve them properly, or they may leave with a bad impression due to service mistakes.
On the other hand, if you have too many staff, operations may run smoothly, but there’s a risk that almost no profit will remain for the restaurant.
Restaurant owners must constantly manage staffing levels while finding just the right balance.
If there are major events nearby, such as fireworks festivals, or facilities that attract large crowds like concert halls or baseball stadiums, the number of customers will change depending on the event, so it’s necessary to forecast staffing needs for each event.
Accurate data and information are essential for controlling labor costs in food and beverage businesses.

A POS register is a type of cash register that can accumulate data such as sales figures and how much of each product has been sold.
POS registers are commonly seen in convenience stores and other retail businesses, but restaurants can also use the capabilities of POS registers to improve their management.
In the case of restaurants, having a POS register makes it easy to analyze sales and clearly see how busy you are on which days of the week.
For example, it will show in numbers how much of what you should prep on which day of the week, allowing you to prepare appropriate quantities. In addition, since busy time slots are also clearly shown in the data, it is very useful for adjusting labor costs.
Depending on the location, weekends are not always the busiest; Sundays may be busy, or weekday lunchtimes may be busy— even among restaurants, the times when more staff are needed vary widely.
If there is a baseball stadium or concert hall nearby, many customers may come in after events.
If you are short-staffed during busy hours, it leads to lost opportunities, and situations can arise where you end up with only a small profit when you could have earned a large one. This makes the role of data analysis extremely important.

In restaurants where serving alcohol is the main focus, it’s often only busy on weekends.
However, whether you open only on weekends or every day, the monthly rent stays the same, and even if there are few customers, you have to keep the place open or you won’t be able to turn a profit.
For that reason, to run the business in a stable way, it’s difficult to keep going unless you can attract a certain number of customers on weekdays as well.
For example, set-meal restaurants located in office districts or student areas can be busy even during weekday lunch hours, and with the right ideas, it is possible to secure a steady flow of customers on weekdays.
A common measure is to lower prices only on weekdays with things like happy hour, and many restaurants struggle with attracting customers on weekdays.

Ideally, it’s best if you can attract customers even on weekdays, but if you really can’t, think about how to make effective use of your weekdays instead.
If you currently spend several hours on prep work before opening every day, try shifting that prep time to the slow hours on weekdays.
By handling your regular weekday orders while also doing the prep work for the coming weekend, you’ll no longer need to secure extra time for prep before opening, and you’ll be able to use your time more efficiently.
Besides prep, you can also use quiet weekday hours for things like developing new menu items and doing tastings, so you won’t need to carve out separate time just for new menu development.
In this way, if you move tasks that you would normally do outside business hours into the slow periods on weekdays, you can reduce your labor cost burden and still stay in the black even if weekdays are a bit slow.
Once weekdays become busy enough that you no longer have time for prep during business hours, you can then start setting aside prep time again before opening.

Even when a restaurant has many customers, it may still fail to turn a profit if the owner’s management is poor.
The main reasons are often that the menu prices are set too low and that too much money is being spent on labor costs.
As a result, some owners end up working every single day without a break, yet their income is not much different from that of an ordinary salaried employee.
Since restaurant owners are not covered by the Labor Standards Act, they do not receive any overtime pay no matter how many hours they work.
So even if the business is slightly in the black, if it only stays afloat because the owner works all day long, there are cases where the owner decides to close the restaurant.
If there are many customers, it means the restaurant’s taste and concept are not far off the mark, so with just a few improvements in how the business is run, it should be possible to generate a solid profit.

If labor costs are so high that you’re not making a profit, you can reduce them by automating part of your store operations.
With mobile ordering, everything from placing the order to making the payment can be done on the customer’s smartphone, so you don’t need staff to take orders or handle checkout. However, because mobile ordering can’t be used without a smartphone, you still need to accommodate customers who can’t use smartphones and those who only pay in cash, so it’s difficult to reduce staff completely to zero.
That said, it should be possible to run the operation with two people instead of three.

By introducing mobile ordering and reducing the number of hall staff from three to two, the labor cost saved from one person becomes profit for the restaurant.
If you then use the saved portion of that one person’s salary to raise the wages of the remaining staff, employee satisfaction will increase and you can create a more comfortable working environment. For example, if the hourly wage is 1,000 yen, you would normally pay 3,000 yen per hour for three people. But if you instead pay 1,250 yen per hour to two people, the total becomes 2,500 yen, allowing you to raise employees’ wages while still increasing the restaurant’s profit.
Securing staff is extremely important for restaurants, so by valuing your employees, you will surely be able to generate significant benefits for your business.
For instance, when opening a sister restaurant, you cannot even proceed with the opening if you don’t have someone among the carefully nurtured staff who can be trusted to manage the new location to some extent.
In this way, by introducing mobile ordering, you can increase the restaurant’s profit, raise employees’ wages, and ultimately connect this to even greater overall profit for the business.

If you’d like to learn more about other things you need to know to run a business, please see “Thorough Guide to Restaurant Management and Opening: Everything You Need to Succeed”.

We have introduced the difficult aspects of running a restaurant business and how to solve them.
Whether a restaurant business succeeds depends not only on the owner’s management skills, but often also on luck.
In particular, whether you can find a good location for your restaurant has nothing to do with how good the owner’s cooking skills are.
For that reason, you need to be able to respond flexibly so that you can seize any opportunities that come your way.
Whether you can respond appropriately to the opportunities that arise, while taking into account the surrounding circumstances, can be said to be a key factor in making a restaurant business successful.