Entrepreneurs

Insider reveals the mistakes that sink most failed restaurants

Source: Blackwood Hospitality

Andre Neyrey knows a thing or two about how to run a restaurant. He's managed divisions of Popeyes, Steak and Ale, and Johnnie's New York Pizzeria and opened multiple restaurants of his own.

That's why in 2011 Neyrey decided to launch his own consulting firm, Blackwood Hospitality, to help others in the industry.

Blackwood Hospitality has worked with several well-known New York restaurants, like the Cake Boss Cafe in Times Square, to increase their business. Over the past 12 months, its nine clients posted a combined $20 million in revenue, Neyrey said.

With high failure rates in the industry, building a successful restaurant is as much about what you do as what you don't do. "There are things that people don't really realize that are really challenging about this business," he said.

Andre Neyrey, founder of Blackwood Hospitality, got his start in the food industry as a kid helping his mom run a cafe in New Orleans.
Source: Blackwood Hospitality
Andre Neyrey, founder of Blackwood Hospitality, got his start in the food industry as a kid helping his mom run a cafe in New Orleans.

Neyrey shared the six biggest mistakes restaurant owners should avoid:

1. Thinking it will be easy

Contrary to popular belief, running a restaurant is not very sexy.

"There's this delusion of grandeur people have that they're going to open a restaurant and drink wine with their friends on a Thursday night," Neyrey said. "They really don't know how demanding it is."

He recommends asking yourself some tough questions at the start.

"Are you ready to commit the resources?" he asked. "There are weekends, holidays when everyone's off that are your busy times. You have to ask yourself: Is your family behind it?"

2. Not having enough capital

It's important to stockpile enough cash so that you can sustain the business through the slower times.

"Overhead is expensive," he said. "If you have a couple of slow weeks, it can be financially devastating."

Neyrey designed and owns Gentilly Kitchen + Bar, a Louisiana inspired eaterie in Greenwich Village, New York.
Source: Blackwood Hospitality
Neyrey designed and owns Gentilly Kitchen + Bar, a Louisiana inspired eaterie in Greenwich Village, New York.

3. Expecting cash right away

Many new restaurant owners make the mistake of thinking they will turn a profit on day one.

"People think you open up and then start making money. That's not the case. You lose money for the first six months to a year," he said.

4. Not having a specific concept

The restaurant market is extremely crowded, so make sure you have something that sets you apart.

"Really hone your concept," Neyrey said. "What's going to be different about your place than any other place out there?"

Figuring out what makes your restaurant unique involves a lot of research.

Ask yourself: "Who are you going after? Where are they at? How are you going to get them into your restaurant?"

"Have all that strategy done before you go look for a location." -Andre Neyrey, CEO and founder of Blackwood Hospitality

5. Staying in the back office

Managers shouldn't be afraid to loosen their ties and get in the kitchen, if the restaurant needs it.

Do you know how to make drinks and step in and cook if you need to? According to Neyrey, "The best operations managers are the ones who came through the business and know all the aspects."

The Whiskey Social, pictured here, is one of several p;aces Blackwood Hospitality has worked with.
Source: Blackwood Hospitality
The Whiskey Social, pictured here, is one of several p;aces Blackwood Hospitality has worked with.

6. Not knowing your costs

If you don't know your numbers, you're doomed, he said. "You have to know that 60 cents out of every dollar goes to labor and food costs, and that doesn't include rent or insurance. You're lucky to make 10 cents or 20 cents on the dollar."

And it's not something you should try to figure out on the fly.

"Have all that strategy done before you go look for a location," he said. "Be prepared to wear multiple hats."