Should You Open a Restaurant in 2024?
Congratulations!
You have an awesome concept for a restaurant, have decided on a name, and have secured just enough funding to set out on your restaurant ownership dreams.
Yet, unfortunately, the challenging parts are just beginning.
Running a successful restaurant is hard in the best of times. And let’s just say that it’s not the “best of times” when we’re battling a slow economy, rising labor wages, and an uncertain market.
So, is it a smart idea to even open a restaurant this year?
Our answer is yes… it’s still possible to be very successful, as long as you’re willing to roll with the punches that are coming to the industry.
Here’s what we mean.
Adapt to ongoing industry changes
We’ve made no secret about the fact that changes are coming to the restaurant industry over the next few years.
Most notably, the removal of the tip credit system, that’s already starting in select cities across America.
The Tip Credit allowed restaurants to pay lower wages to servers who earned tips.
As a result, restaurants in major cities, like Chicago, are now facing the daunting task of increasing the wages they pay to tipped workers by a staggering 67% by July 2, 2028.
With the removal of the tip credit, labor costs for restaurants are set to dramatically increase, a tough change for businesses already operating on thin profit margins.
We wrote a lot about the removal of the Tip Credit in another blog, if you’d like to read more.
But the bad news is that restaurants are currently fighting the rising labor costs in various ways, leading to confusion and frustration among customers.
Some restaurants have begun adding a 20% service charge to the bill. (If you’re regular readers of ours, you know how we feel about this.)
But in the end, it may be inevitable. Either, every restaurant will have a 20% fee tacked onto the end of the bill, or the price of food will go up across the board.
As a restaurant owner, this is just one of the decisions that will ultimately fall on you.
Closely monitor your costs
If labor costs are going to jump, it’s only inevitable that you’ll need to be more efficient with costs.
The days of casually managing food costs are gone. It is imperative that restaurant owners start tracking the cost of every single receipt made, and every meal that goes out the door.
However, the good news is that there are tools that can help with this.
At U-Nique Accounting, we recommend MarginEdge.
A system like MarginEdge can help you track your food costs, identify waste, and optimize your ordering process. Which can save you tens of thousands of dollars in the long run, and free up your staff to focus on other tasks.
With a good inventory management tool, you can monitor and adjust plate costs immediately. You’re able to see food cost percentages by recipe, which update continuously as costs change. MarginEdge’s menu analysis feature even allows you to see costs based on real-time ingredient prices and pinpoint profitable and high-volume items.
You can compare menu items within a specific category, like appetizers, entrees, or desserts, to see which plates are contributing the most to profitability and which aren’t.
Pretty cool, right?
Inventory cost tracking is going to become a non-negotiable for restaurants opening in 2024 and beyond.
Be nimble with pricing & business model
This brings us to our next point: you have to be willing to adapt your pricing, menu, and business model when needed.
Because it’s not only restaurants that are hurting; consumers are too.
Consumers have less money to spend than in previous years, and we’re only likely to see that gap increase in 2024.
This is why we think that value and affordability will become a trend for the food industry in 2024.
Whether that’s taking it back to basics with your recipes—goodbye to truffle oil for now. Hosting community-style events that focus on large batches of good, simple food. Or simply making sure your menu is priced more reasonably than your neighbors. Check out our restaurant pricing guide here.
You will need to get creative with ways to appeal to a rising sector of consumers who value “value” and affordability in their dining experiences.
Need more guidance to open a restaurant in 2024?
If we had to summarize our feelings about opening a restaurant in 2024, it’s this: you’ll need to have a lot of energy to be successful.
Being a restaurant owner that does not constantly monitor and update their pricing just won’t cut it anymore.
You have to stay ahead of industry regulations & changes, meticulously track costs, and be willing to change your menu and business model if needed.
But that’s not to say it’s not doable.
We recommend checking out a few of our recent guides:
- The Financial Checklist for Opening a Restaurant in 2024
- The Ultimate Checklist for Opening a Restaurant
- How to Increase Pricing In Your Restaurant
If you’d like more guidance, you can book a call with one of our experienced restaurant accountants by using the calendar below. We’re also here to help!
Until next time.
By MATT CIANCIARULO
