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Boiling Point?

The restaurant industry is feeling the heat.
August 1, 2007
URL: http://www.entrepreneur.com/article/181636

Across the country, restaurateurs are cooking up a storm, but the industry might be facing its own storm of sorts. Rents are on the rise due to a commercial property squeeze. Labor costs are on the brink of increasing as the federal government recently approved a minimum wage hike and more states propose living wage laws. Food prices are rising, with consumers wanting organic and high-quality products. Will this perfect storm cause a major shakeout?

"This is not the first time our industry is facing business climate hurdles," says Hudson Riehle of the National Restaurant Association, who reports that this year, the industry is posting its 16th consecutive year of real sales growth. Nor are entrepreneurs being deterred by the challenges.

Take Christine Iu, who opened KitchenBarin New York City in March 2006: She found an up-and-coming area where prices were still reasonable to open her restaurant/cafe/bar; she maximizes productivity by engaging employees in multiple tasks; and she changes the menu seasonally to stabilize food costs. Iu, 37, projects about $750,000 in year-end sales.

Lloyd Gordon, founder of restaurant consulting firm GEC Consultants, predicts that the winning ingredient will be efficiency. Riehle agrees and recommends using conserving equipment, exploring local suppliers to minimize shipping costs and get the freshest ingredients, and investing in staff development to retain employees. Doing so will help you steer clear of the chopping board.