Soup’s On! Turning Challenges in the Restaurant Industry into Opportunities

By Emily Taibl | Apr 25, 2017

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restaurant in Italy

Part 1 by Jason Meersman

Restaurant owners today face more challenges than ever before.  Recent statistics show that 60 percent of new restaurants will fail within their first year- and almost 80 percent will be gone before they turn five. These daunting statistics- coupled with lurking challenges like finding a unique identity that sets you apart from the restaurant down the street, staying relevant and on-trend, tighter profit margins leading to lack of available capital, and making payroll amidst the rising cost of labor- can be overwhelming.  How can a passionate food entrepreneur turn these obstacles into opportunities?  We’ve outlined some of the most common obstacles and provided some hope below.

Joe Schmo’s Diner: Finding a Unique Identity

Just like any other business, restaurant owners must create their own brand.   With hundreds of dining establishments to choose from on a daily basis, it’s essential to stand out from the competition and make the customer remember you (and not just for cold French fries or bad service- thank you Yelp!). The best way to do this is to think about how you want people to feel in your establishment.  Are you trying to be hip and cutting edge, do you want people to kick their shoes off and stay a while, or do you want to be the family neighborhood joint with the great kid’s menu?  Figure out what you do well- and do it the best you can.  Your product will speak for itself- after all, a burger is just a burger until your customer believes it is much more (an experience!)

Pay Your People: The Rising Cost of Labor

One of the biggest challenges restaurant owners face is the rising cost of labor.  Minimum wage is ever-increasing in the Seattle market; in fact, depending on the number of employees: it is scheduled to reach $15 per hour in the next few years!  This rise will without a doubt have a significant impact on the bottom line. To address this concern, restaurant owners must find the balance between increasing menu prices (which can potentially cost customers) and sacrificing menu quality (which could also cost customers).

Add to that the cost of health insurance.  Just like any business, restaurant owners are faced with the increasing cost of healthcare. Finding a group insurance trust to reduce the cost of healthcare is a possible solution for freeing up a little wiggle room in the budget- creating less sacrifice on food quality and price.

Come Back Soon: The One and Done Customer

To be successful, restaurants must make their offerings so memorable that a new customer comes back again and again- and then tells their friends.  In short, repeat customers (and great word of mouth) equals revenue growth and sustainability.  So how do you create a return customer? It’s more than just good tacos.    In order to create repeat business, you have to create a likeable persona and a smooth, welcoming experience.

Start by looking at your establishment through the eyes of the customer- from the moment they walk in the door to long after the meal is finished.   What is the atmosphere like?  Do you greet people as they enter?  Do your employees remember return diners and welcome them back?  Do you use dynamic signage and cohesive design in the restaurant? Do you actively monitor and respond to customers on social media platforms? How about a customer loyalty program? Driving customer engagement and monitoring customer activity could help tip the scale from having negative reviews online to becoming “my favorite restaurant of all time!”

The Corner Bakery: Location, location, location

When the sun is shining, that expensive open air mall real estate might make sense for your restaurant.  But what happens when the weather turns (and it will in Seattle), and you aren’t getting the foot traffic you once were? The delicate balance between location and rent is a battle that isn’t for the faint of heart. Choosing a space that will pencil out through the slow months is critical to making it past the first year.

Beyond the Menu: Keeping Your Eye on the Bottom Line

“I’m focusing on my product- and I’ll worry about the bottom line later” is the quickest way to ensure a timely restaurant closure. Understanding the numbers and analyzing trends can help a restaurant owner get a pulse on how things are really going.  Partnering with the right CPA will not only give you transparency into your business, but help you ensure you have met all the necessary regulatory filing requirements, and are taking advantage of any incentives that could benefit your bottom line.

Check out our Part 2 blog post next week, in which we will discuss a tax credit that most restaurant owners are due, and may not be taking advantage of!

And for all of your restaurant tax needs, contact Jason Meersman, CPA at 425.629.1990 and