Introduction
Restaurant industry involves high-risk business operations. Almost everywhere around the world, restaurants face a high level of local and global competition. It is difficult to establish a restaurant business that differs distinctly from its competitors. According to several research studies, about 60% restaurant businesses shut down within the first year of operation. The restaurant industry has the second-lowest rate of success only behind technology startups. There are many problems and issues faced by restaurant operations. Often ignoring these problems aggravates the situation leading to the closedown of the restaurant business. Five most common problems faced by restaurateurs are an improper menu, poor customer service, management, hiring and training staff, capital, and marketing. Some of the factors such as menu and capital from the basic fundamentals of restaurant operation and are the basic requisites to a successful restaurant business, whereas other factors such as customer service and marketing contribute to differentiation that helps in the long-term growth and sustainability of restaurant business. This essay will discuss the top five operational issues using current research studies and provide a framework for successful restaurant operations.
Analysis
Operating a restaurant successfully is not an easy task and over the years, researchers and industry experts have come up with a variety of issues faced by restaurants and potential success factors. However, there are a few fundamental factors cited by almost all the researchers.
J. P. Harrison (2014), an SNU-Tulsa operations professor, identified management skill, food safety and quality, diversity, employee training, and customer service as the five top factors affecting the success of a restaurant. Harrison validated his assumptions based on the actual market data and interviews of a group of restaurant managers. His research found that customer service and management skills are highly correlated to the success of a restaurant. He concluded that restaurant managers should not only be passionate about food, but should also have substantial experience and desire for learning. Restaurant managers should act more like a coach or mentor and continuously be involved in self-professional development (Harrison). Harrison found customer service to be the most important factor for restaurant success, especially true for high-end restaurants. His study found that even if a restaurant serves average quality food, it can ensure higher chances of the customer returning by providing greater customer service than a restaurant serving great food but offering poor customer service.
Parsa, Gregory and Terry (2011) of Dick Pope Sr. Institute for Tourism Studies conducted a comprehensive study on this subject. They found a host of micro and macroeconomic factors affecting restaurant operations and its long-term success. Macroeconomic factors cannot be controlled by restaurant owners, but macroeconomic factors can be addressed by restaurateurs for long term success. The study found “The Menu” and “Use of Working Capital” to be the two most important macroeconomic factors among others. The study of Parsa, Gregory and Terry (2011) concluded that menu creates one of the most common problems for restaurant owners. Designing a good menu is not a cinch. Many restaurants end up with a long menu. Large menus take longer time for the customers to decide on orders. This increases the overall turnaround time, thereby reducing the restaurant’s capability of serving the total number of customers during its operational hours. Delivering large menu also involves purchasing a large variety of ingredients. This increases the overall inventory that locks huge amount of money. Since most of the items used in the restaurant business are perishable in nature, if the inventory is not cleared on time, it creates waste. Large menu further increases the average serving time, as chefs need to cook a variety of items simultaneously. This decreases the overall serving rate. Parsa, Gregory and Terry (2011) also found that capital is a big issue for restaurant owners. Lack of capital forces many restaurant owners to close down their businesses, even when the restaurant is doing fairly well. Though the restaurant owners plan for capital to open a restaurant, they often do not plan for working capital.
A study sponsored by Avaya and conducted by AsiaTech Directions (2011) on the restaurant industry touched upon the modern day challenges faced by small and medium-sized restaurants. Although the study found that the fundamental factors such as the proper size of menu, food quality and customer service are important, but those factors are becoming less important with the increasing standardization of food quality, menu management, and customer service. Therefore, marketing can create a perceived differentiation for a restaurant among a host of similar sized and similar types of restaurants. The study concluded that marketing efforts should focus on creating advertisements based on research on guest profiling, feedback and competitor positioning. Asiatech Directions (2011) research also cited the importance of management of social media. According to its study, between 2010 and 2011 in the USA, on an average 20 restaurants closed down per day due to poor reviews by customers in social media such as Facebook and Twitter. It is important to keep a track on and manage customer feedback in social media and act accordingly.
Harrison (2014), Parsa et. al. (2011) and Asiatech Directions (2011) all concur that the most underrated factor for success is employee training. Poor customer service or poor quality often stems from poor and irregular employee training. Kimes and Collier (2014), professors of Hospitality Business Administration at Cornell University, also voiced the same concern. Kimes and Collier in their study found that those restaurants where the servers do not have knowledge of or training on using the recent payment technologies such as mobile wallet, tabletop boxes, and remote payment options fare poorly than their highly trained counterparts.
Conclusion and Recommendation
It is difficult to provide a single success formula for restaurant operations. The analysis shows that different researchers emphasize on different operational issues in their researches. However, fundamental operational factors such as customer service, menu, marketing and employee training appear in almost all the research.
The layout is an important factor when designing menu cards. The menu should not be too large or too small and should be easily readable. It is extremely important to keep the menus clean. To enhance the customer experience, it is important that the staff is thoroughly trained on the menu and is able to answer any question raised by the customers. To ensure this, the regular training of the restaurant staff is important. Traditional advertising is important for attracting customers, but the online presence and an attractive website with easy access to the menu can help lure additional customers. Restaurant owners along with restaurant managers should regularly review the working capital requirements and plan well in advance to remain prepared for any increase in input cost or price reduction. These suggestions can certainly help improve the restaurant operational performance. However, overall long-term success will depend on macroeconomic factors as well as the performance of competitors.
Works Cited
Parsa, H.G., Gregory, A. and Terry, M. Why Do Restaurants Fail? Part III: Ana Analysis of Macro and Micro Factors. The Dick Pope Sr. Institute for Tourism Studies. 2011. 16 May 2016. <https://hospitality.ucf.edu/files/2011/08/DPI-Why-Restaurants-Fail.pdf>
Kimes, S.E. and Collier, J. Customer-Facing Payment Technology in the U.S. Restaurant Industry. Cornell University School of Hotel Administration. 2014. 16 May 2016. <http://scholarship.sha.cornell.edu/cgi/viewcontent.cgi?article=1075&context=chrpubs>
AsiaTech Directions. The Top 4 Challenges Facing Hospitality Today. Avaya. 2011. 16 May 2016. <https://www.avaya.com/usa/documents/top-_4_challenges_facing_hospitality.pdf>
Harrison, J.P. Operating a Successful Restaurant. SNU-Tulsa Research Journal, Volume 3, Issue 1. 2014. 16 May 2016. <http://home.snu.edu/dept/tulsa/snuie/Harrison.pdf>
