Restaurant Business Model Review | Israel Positive

By admin | Published August 1, 2012

As with any entrepreneurial endeavor, starting your own restaurant can be one of the most satisfying and rewarding ways to earn a living. Any successful business incorporates, and is a variation of, one of a few business models. While the strategies discussed here are applicable among virtually every industry, here they will be discussed as they apply to the restaurant and food service industries only. As with any business venture, the strategy you use in your business should be adopted only after careful restaurant market research.

The first and most widely recognized strategy is the low-cost, high volume strategy. As with any product, the more you can make of a particular item, generally speaking, the cheaper it gets to produce each item. In the case of restaurants, the more food you can make and serve in a day the less expensive each meal served will be. Because the food and labor to make the food will cost less, you can pass the savings on to your customers and sell more food than your higher priced competitors. The prerequisite of this is a large market with lots of people who will buy the food you are trying to sell. If there is not a large enough market to support a low cost competitor, this option will generally not work and you should look into starting a highly differentiated establishment.

Differentiation is the antitheses of the low-cost, high volume strategy. Here, given that your restaurant market research?rules out a successful low-cost option, you try to find ways of making your restaurant noticeably different from all other competitors, but in a way that adds value to the consumer. This could mean a more exotic menu, more investment into restaurant ambiance, better customer service, etc. The key to this approach is finding the right combination of all the extras so that you can charge as high a margin on your products as possible. Using this strategy, you should never be the lowest priced option on the market. You will serve less food, but make more money on each serving. There are few successful examples of these restaurants on a national scale, primarily because in order to differentiate itself, the business model must change significantly from market to market. This is naturally prohibitive of a national, large scale differentiated, restaurant franchise. Although, this is not to say that they are less profitable than the national large scale competitors on a per-capital basis.

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