What, Why, And How
The restaurant industry is one of the most competitive and demanding industries in the United States. A lot of this is because it’s incredibly hard to find and acquire a new diner. It’s even harder for restaurants to compete with fellow restaurants, especially when factors such as price, convenience, and location come into play.
If you’re considering opening a restaurant, a feasibility study will help you minimize the associated risks. It will also allow you to estimate your potential sales and expense revenue and get a sense of the competition’s strengths and weaknesses.
Sounds interesting? Read on to learn everything you need to know about a feasibility study and how you can use it to your advantage.
What Is A Feasibility Study?
A feasibility study is a planning technique that estimates how profitable your restaurant idea will be. It considers idea uniqueness, demand and supply, location, investment amount, ROI, legal or technical factors (as applicable), and more.
Why Should You Perform A Feasibility Study?
If you’ve been unable to settle doubts about whether your restaurant would operate economically and within the parameters of your business plan, then a feasibility study is the answer.
It will also help you estimate a realistic return on your investment. Knowing how many resources you need, whether it’s people, technology, money, etc., and when you can expect to break even can help your financial preparation. It will also help when presenting investors with a solid business plan.
That’s not all. A feasibility study can help identify what challenges or obstacles you’ll face, thereby allowing you to strategize potential solutions beforehand.
The best part? A feasibility study isn’t done only before venturing into a new business opportunity. Regular feasibility studies will help you keep track of your progress and allow for the adjustments necessary to ensure that the restaurant keeps functioning economically.
How A Feasibility Study Is Formulated
Formulating a feasibility study is generally a three-step process.
- In the first part, you analyze the competition to determine their main revenue streams and how they are likely to compete against you.
- The second step is calculating your projected revenues and expenses to obtain a business plan.
- The last step involves comparing the business plan with industry data to generate a current value estimate for your restaurant idea.
The process involves an example P&L, budgetary guide, and breakeven analysis to help gauge whether the idea is a profitable one.
Don’t have the time to take on such an extensive yet crucial task? Perhaps you’re not as comfortable around numbers or financial terminology and technology? Whatever your reasons, it might be a good idea to look into experts who can do it for you.
Conclusion
The restaurant industry is not just about the food you serve but also how you will get a customer or customer base to use your venue. A feasibility study will help you understand your industry, competitors, and what brings steady traffic to your location. It can help you determine whether you will likely run a profitable and successful business.
Don’t risk operating at a loss by doing your calculations. A restaurant consulting company like TRG will be able to guide you through the ins and outs of establishing and running a restaurant to ensure its and your success.
