It can be easy to miss the forest for the trees when you’re trying to open a restaurant. Restaurateurs, foodies with too much money, and aspiring business owners can be so hyper-focused on creating a menu they love and which social media account to focus on in their marketing strategies that they miss the bigger picture.
But you aren’t opening your fantastic new restaurant in a vacuum. There’s lots of stuff going on you probably haven’t even thought of that will determine how successful you are going to be.
You NEED to stop what you are doing, take a few hours (or days), zoom out, and take stock of your future restaurant’s fundamental strengths and weaknesses…. especially compared to the competitors you’ve got (who are already in business) and your future customer expectations, desires, and demands. Big-picture-thinking? It’s the only way to position yourself for long-term success.
That’s where a SWOT analysis comes in.
How to complete a SWOT analysis
SWOT stands for strengths, weaknesses, opportunities, and threats. It’s how businesses zoom out to look at their position within the larger environment. A good SWOT analysis doesn’t focus on specific details, menu items, or interior design-y stuff- it doesn’t study just one or two sections of the operation – it’s about EVERY aspect of your restaurant, all at once. Ever hear the saying “the total is greater than the sum of its parts?” This is especially true of restaurants.
Also, a good SWOT analysis doesn’t go into statistics or crunch a bunch of numbers and figures. This should be good news for you, future restaurant owner. You don’t have any of those yet.
A SWOT analysis, on the other hand, is a high-level look at big, common-sense problems. Before you get started, make a list of your direct competitors (restaurants who serve the same type of menu as you) and your indirect competitors (all the restaurants nearby your future location). You are going to need this information as we go along.
Ready to get started?
Here’s how you do a SWOT analysis on a restaurant which doesn’t exist yet.
Strengths And Weaknesses of A Restaurant
The first step is looking at the future, imagined strength and weakness of your restaurant. Gather everyone who is going to be involved – hopefully you will include some representatives of the community! – chefs, line cooks, future waiters, FOH managers, and of course, future customers…. and ask these people to help you build out your SWOT. I’d buy them dinner for their trouble. Maybe a couple of dinners.
A lot of what you and all these people will be talking about is not at all concrete, right? It is sure to be future-casting and creative guessing. That’s okay.
Remember, strengths and weakness are INTERNAL issues – these are the things you will have some control over. If you won’t have any control over a problem, it’s not a weakness (it’s a threat).
Strengths: You’re better than your competition, right?
Most wanna-be restauranteurs are most comfortable with the first part of the SWOT analysis. This is the section that they have been planning for ever since they got the idea to open a place to begin with!
Ask yourself these questions:
- Do you know what will excite customers about your restaurant?
- What’s going to keep them coming back?
- What is going to entice them to give your place a try in the first place?
List everything you come up with. Here are some common strengths that many restaurants believe they have (even if they don’t):
- Menu quality (food preparation standards are high, great deal of variety, customers WANT this kind of food)
- Menu price (items are controlled for portion and priced to generate profit)
- Menu uniqueness (customers can’t get food like this anywhere else)
- Trained and experienced staff
- Trained and experienced leadership team; head chef, owner, managers have worked in the industry for a long time
- Decor, ambiance, lighting, music, and environment are highly desired by target market
- Neighborhood or location (close to a highly trafficked business, waterfront, near a University, for example)
- Outdoor dining options
- Strong ties to community
- Solid relationship with local farmers
HELPFUL TIP: One way you can prepare to open your restaurant is to read online reviews of your competitors. There is at least an even chance that THEIR WEAKNESSES are YOUR STRENGTHS.
Weaknesses: What Are You Lacking?
As you do your strength analysis, if you are honest, you’ll realize that it’s not all good news. Maybe you DON’T have an experienced service manager and you know this will probably lead to customer service issues. Maybe you DON’T have an experienced chef at the helm and you know this will probably lead to food costing issues.
When considering weaknesses, make sure you are looking for INTERNAL ISSUES, things that arise from what is happening (or not happening) INSIDE your restaurant.
REMEMBER: if you can’t fix a problem, it’s not a weakness, it’s a threat.
Make a list of everything that you probably aren’t going to be doing great on day one. Be ruthless, be honest, tear your restaurant apart. Make it cry… then write it all down.
Don’t get upset and don’t freak out. You need to know this stuff. This is good information to have. These are your weaknesses, and the only way to address them is to be aware of them.
Common restaurant weaknesses are:
- Decor, Ambiance, Lighting, and music are not creating the kind of environment customers want
- Brand new restaurant / unknown and untrusted by locals
- Inexperienced staff (which leads to poor customer service, poor food quality, waste, and turnover)
- Not enough seating
- Slow cook times on popular items (which translate to long wait times for food or seating)
- High prices
- Limited resources/ Low marketing budget
- Insufficient parking
- Nothing for guest to do while waiting for a table
- No TOGO/ pickup & delivery area
Opportunities And Threats
Strengths and weaknesses are the internal forces that you have a decent amount of control over. On the other hand, opportunities and threats are the EXTERNAL factors that will probably affect how well your restaurant is going to perform.
Are you going to make it to the end of your first year without losing everything? Be ruthlessly honest about this part of the SWOT analysis and find out.
Opportunities: It’s all about market analysis
Opportunities are areas where your restaurant can grow and each opportunity comes directly from one of your weaknesses. You should also take a close look at your competitors, consider food trends and cultural forces which might come into play, and study your target customer’s dining behavior.
Remember, the difference between an opportunity and a threat is this: opportunities are things you can do something about. For example: if your venue makes it impossible to have patio seating, then outdoor dining isn’t an opportunity. Its absence can be a weakness, but if it can’t be reasonably implemented, it’s not a good opportunity.
Frequently, taking advantage of opportunities can increase your profit margin and make you more money.
Let’s do this!
Take your list of weaknesses and study each one. Then try and see if you can find a way to turn that weakness into an opportunity.
- Got a problem with your menu pricing? Do some study or hire a professional menu designer or consultant
- Got a problem with a low marketing budget? Research free or low-cost marketing ideas
- Got a problem with limited menu options? Dig into your target market and see if they want you to provide vegan, alternative protein, paleo, gluten-free, or trending menu items.
- Got a problem with inexperienced leaders? Set up a training plan. Be open and honest with your staff about these challenges and create an increasingly rigorous quality standard.
- Got a problem with an interior design which doesn’t take into account wait spaces, TOGO food, or outdoor dining? This is a great one to have (you haven’t opened yet. You can fix this).
- Got a problem with community engagement? This is another great one to have, because you and your staff can start doing things with the community LONG before you are open.
Threats: Who are your competitors and what’s going on you can’t control?
Threats are the external version of weaknesses. As in, they’re weaknesses, but you can’t identify them by looking inward. They are (more or less) out of your control. These are the things which can have a negative impact on your bottom line, but which you can’t really prevent or control. You can only be ready for them.
First, think about your competitors. Scan their strengths try to figure out what makes them popular. This can be done by visiting the restaurant in person, talking to people in the community, or by studying your competitor’s online reviews.
Some common threats that come from competitors include:
- A popular national brand moving into your area and flooding the market with advertising
- Any new restaurants in your neighborhood opening.
- Any new restaurant that directly compete with your customers opening (anywhere in your city).
- Competitors offer big promotions, discounts, and specials
- Competitors lower their prices
Next up, use your imagination and experience and consider every BIG CHANGE which might negatively impact you and your business. Here are some of these common threats:
- Rise in home delivery options
- Increase in fixed costs like rentals, kitchen equipment, repairs
- Increase in variable costs (like food or supplies); vendors raise their pricing
- Industry-wide threats to the restaurant industry (think COVID outbreak, a drought in Ohio causes the price of flour to double, a chicken and egg shortage due to a poultry disease…. basically any Act of God)
What do you do when you’re done?
Consider the following example:
As you can see, the owners who put this SWOT together focused on what they see as the BIGGEST issues and were fairly exhaustive.
Once you are done, most people like to arrange their SWOT analysis in this kind of visual format, a two-by-two matrix, in which strengths and weaknesses are listed in the top row, and opportunities and threats are listed in the second row.
Some people prefer to limit what they put on the SWOT to THE MOST IMPORTANT THINGS. These are usually smaller lists but they are certainly very, very targeted. Notice that this SWOT analysis is not in a grid, but in a cross format .
Your SWOT analysis has probably turned up quite a few things you haven’t considered and will more than likely ALTER or SHIFT some of your roll-out plans. This is quite normal. Get ready to do some adjusting… you’re going to need to counter those weakness with new opportunities; you’re going to want to take advantage of those strengths. This is how a good SWOT shows it’s worth: it almost always informs and laser-focuses your marketing plan.
Now go put this into action and get ready to make a million dollars.