Having been around literally thousands of food businesses from large scale food manufacturers, restaurants of all sizes, food trucks, and even convenience stores, I often found myself wondering why would anyone start a food business.  It’s not that these food businesses were horrible, the majority were run by honest, hardworking people who served wonderful food.

 

The key there is HARD-WORKING!  If you’ve ever owned a food business or even worked in one you’ll probably have an appreciation of what I’m saying – the inventory is perishable, employee turnover is huge, and the overhead is insane –  running a successful food business is HARD!

 

Then there is the nostalgia factor – Sir Terence Conran, British famous designer and restaurateur once said; ” I have a completely unsubstantiated belief that 92 percent of the population have at one time or another entertained the notion of owning and running their own café, restaurant, tea shop or pub.  And in most cases, I am prepared to bet, those dreams have been inspired by the unique sense of well-being that comes from a really good experience of eating out”.  I tend to agree with Sir Conran on this point – it’s a combination of the atmosphere, the calmness, the socialization, the food, the drinks, the relaxation – what’s not to love?

 

What about the profits – I think there is a general misconception that food industry is inherently not very profitable and that’s just not true.  Caveat here – run a food business that is well researched and hit your target audience and you can rack in the cash, don’t do your homework and it can be an expensive experiment.  So exactly how profitable can operating a restaurant be?  Well according to the Canadian Restaurant association the average sales for a restaurant in Canada is $598,000.  Here’s a snapshot of potential cash returns;

 

Average sales $598,00
Average cash flow $43,000 (typically calculated after paying operator salary)
Average cash invested $149,000
Cash-on-cash return 29%

From <http://www.restaurantcentral.ca/Makingmoneyintherestaurantbusiness.aspx>

 

An almost 30% cash-on-cash return is an impressive return for any industry.  It’s no surprise then that there is over 81,000 restaurants in Canada.

 

What about the failure rate – don’t 90 percent of food businesses fail?  – the myth that 90% of food businesses fail is just that, a myth.  According to Chris Muller of the Cornell University School of Hotel Administration approximately 33% of all restaurants in the U.S. fail in the first year of operation.  That’s a far cry from 90%.  Another 33 percent of those remaining fail in the second year of operation, but once past that critical period 65% make it to the 10 year anniversary.  There are many industries that have a higher failure rate such as apparel and furniture businesses who have abysmal success rates.

 

So should you start a food business? – well that depends.  It depends on many things, but I believe these three things are the most important;

 

  • Are you passionate about what you want to do?
  • Do you have an amazing concept?
  • Do you have the local flavour, i.e. have you considered your location, competition and customer preference?

 

 

If you are passionate about this type of work and are willing to put in the long hours, have an amazing concept and have done your homework – go for it and don’t let the naysayers stop you!

 

I really believe these are the most important ingredients in starting and running a successful business – honestly, even if you don’t have the cash to start, all it takes is a ton of passion, a pound of concept and an ounce of local flavour, the rest will come.