The Restaurant Group Blog

Why You Should Have a Feasibility Study Before You Start a New Restaurant – Reducing Risk

Feasibility Study

According to Restaurant Startup & Growth magazine, close to 25% of restaurants fail in their first year of operation. One way to mitigate the risk of restaurant ownership is to conduct a feasibility study before the business opens. A feasibility study examines an idea, identifies potential issues, and attempts to determine if you should proceed with the project or abandon it.

A carefully thought out business plan paired with a subsequent feasibility study will increase the likelihood of success. The key elements of a typical study are below.

Location analysis

A location can make or break a business, especially a restaurant. A proper site analysis includes potential issues and solutions, demographic information, current and potential competition, advertising options, etc. Even detailed statistics like traffic data (foot, road, and public transportation) are used.

Labor analysis

A business owner relies on staff to keep the operation running smoothly. A combination of demographics data and a favorable location increases the probability of attracting the right employment candidates for your business needs. And hiring the right person the first time reduces turnover and training costs, while freeing up the owner’s time to focus on strategic planning instead of the daily restaurant operations.

Cash flow projections

Cash flow projections are an important element of any business’ feasibility study, as without adequate income the operation can quickly succumb to debt and fail. Evaluating potential roadblocks and ways to overcome them before the business is open will greatly reduce the amount of stress on the business owner.

No business owner wants to fail, and careful planning ahead of time can reduce that probability. A quality feasibility study is a complicated task, requiring expertise, precision, and experience. You might not have the time required to complete it, so outsourcing this job to the experts is a wise choice.

 

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