9 Risks With Launching a New Restaurant
A successful restaurant involves much more than the ability to create and prepare great dishes. With a high rate of failure during the first year, owners must understand and plan for the significant risks associated with starting a new restaurant business. Taking actions to protect against these potential hazards can increase the chances of success. These are nine common risks to be aware of when launching a new restaurant business.
1. Food Safety
Sickness and food poisoning outbreaks related to tainted ingredients, unsafe storage methods or cleanliness issues are a major risk for any restaurant. Customers can hold the establishment accountable. Likewise, failure to accommodate your patrons’ dietary restrictions and allergies could set up a costly legal challenge or result in reputational damage.
2. Equipment Damage
A new business invests heavily in expensive, high-quality restaurant equipment to store, prepare and cook food. The risk of interruptions from damaged or broken equipment is high. Not only will the business have to cover the expense of replacing or repairing the appliances or machinery, but they also must cope with the impact of downtime.
3. Employee Accidents and Injuries
There are numerous opportunities for employees to hurt themselves while working in a restaurant. With sharp utensils, hot cooking surfaces and other complex food preparation equipment, the kitchen is one of the most likely places for accidents to happen. Unloading and stocking supplies in heavy boxes can cause muscle strains and back issues. Servers may sustain injuries if they trip or slip while on the job. Any employee injury can create serious legal and financial problems for a restaurant.
4. Customer Injury Liability
There is also liability risk associated with customer injuries that occur while dining in the restaurant. Steps, a wet surface, uneven floors or other obstructions create hazards where someone could easily slip and fall. A customer injury may not even be the restaurant’s fault, but they can still incur blame. Even if the establishment does not suffer a monetary impact from the accident, it can be damaging to its public image.
5. Fire Hazard
Restaurants are at considerable risk of fires. The biggest threat occurs in the kitchen with the constant use of heat and flames for cooking. Highly flammable grease is commonly found in restaurant kitchens. Other flammable materials are also stored in restaurants, increasing the risk of fires.
6. Property Vandalism and Theft
Any business is susceptible to break-ins and theft. A successful business is even more vulnerable because it is assumed the reward will be greater. In addition to cash, other restaurant assets that may be a target for burglary include payment and register devices, TVs and high-quality commercial kitchen equipment. Restaurants are also threatened by the potential for vandalism. The costs of repairing damage and replacing the loss incurred from vandalism and theft can be significant.
7. Lack of Liquidity
Restaurants are cash-intensive businesses. They require steady liquidity to pay for labor, supplies and other unexpected operating expenses. It can take years for a startup establishment to generate positive cash flow. Failure to plan and secure capital or lending needs for this initial development phase is a huge risk for new owners.
8. Digital Security Vulnerability
Few restaurants can operate outside of today’s digital realm. However, the pervasive acceptance of credit cards and the use of point-of-sale systems, along with providing customers with Wi-Fi access creates hacker and malware vulnerabilities. A data breach can do irreparable harm to customer trust.
9. Seasonality and Market Demand
If demand were easy to predict, there might not be any restaurant failures. Even a business with an excellent menu understands the market and plans for all the above risks runs the possibility of not generating enough sales. Without the ability to control economic conditions or predict changing customer interests, low sales due to seasonality and market demand fluctuations remain a huge risk.
Risks are a reality that every business must confront. A new restaurant that recognizes the major problems they may face and implements safeguards to protect against them has a better chance of survival in the extremely competitive environment.
