Overview

This essay sheds light on the top reasons why you should never invest in opening an independently owned restaurant business nor franchise restaurant business and also elucidates the advantages and disadvantages of being an independent restaurateur or franchisee restaurateur. Moreover, how to make the money in order to afford to buy your own restaurant business is delineated in this essay. There are ample reasons as to why you should desist from ever investing in opening a restaurant business that go beyond succumbing to enormous start up costs, operational complexities, and high employee turnover rates. First and foremost, independently owned restaurants are more prone to being defunct than other types of businesses since they face high competition in oversaturated markets comprised of ample recognizable brand name restaurants which you will likely never be able to win market share from. Restaurant businesses emerge all the time with tens of thousands of new restaurants opening up each and every year. The high volume of competition restaurant businesses face has caused restaurants to substantially lower their menu item prices in order to retain their fickle customer base. Securing the lifetime value of customers is more arduous for restaurant businesses than ever before since customers now essentially have unlimited restaurant options to choose from. Customers are also more inclined to buy from recognizable restaurant chains than independently owned restaurant since they know what they can expect in terms of menu item prices, service quality, and speed of service. By investing in opening up an independently owned restaurant, you ultimately place yourself at a grave disadvantage since you will not be able to win over market share from recognizable restaurant chains and successful independently owned restaurant that already have established massive customer bases. While customers can be fickle, their loyalty will not lie with dining at your restaurant over more affordable and robust restaurant to choose from. Second, another calamitous issue with investing in opening up a restaurant business is that you face the salient issue of having exorbitant costs as a restaurant owner. In other words, paying rent, employee wages, and purchasing food will erode profits out of each and every sale (Crawford, 2015). Opening a restaurant business requires exorbitant start up costs in the hundreds of thousands of dollars and these cost prohibitive start up costs are almost always financed by debt financing. Moreover, restaurant businesses have enormous overhead expenses and restaurant owners can do very little to reduce their operating costs without comprising the quality of their products and services. In other words, just like a boat that remains in a dock and is hardly utilized, owning an unsuccessful restaurant business is essentially the epitome of a sunk cost in all facets since it drains your wealth and is unprofitable to operate for the majority of restaurant business owners. Third, restaurant businesses that are successful have eminently thin profit margins relative to other types of businesses. This deters most investors from ever succumbing to ever considering investing in opening restaurant businesses due to its precariousness. If you manage to be successful as a restaurateur and attain a measly 5% profit margin than any slight change in customer preferences and the economic climate can render your business unprofitable. Customers are fickle and are quick to cut back on eating out during a recession or economic depression. Moreover, customers will also migrate to new restaurants in droves or existing restaurant that have ushered in innovative menu options, especially if they perceived your restaurants menu options to be dated and overpriced. As an independently owned restaurant business owner, it can be extremely cumbersome to maintain profitability when you are at the mercy of a fickle customer base and have low profit margins

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