Why did I decide to go into the food/restaurant business, one of the toughest businesses there is? It is a conventional wisdom that 90% of the restaurants fail in the first year*. So, why the restaurant business?
I will talk about the demand, market trends and so on in the next posts. But here I just want to share a few thoughts which I had after an idea to enter the restaurant business appeared on my radar.
Last year, I spent several months in Dubai, doing nothing in particular, having a lot of free time and spending it at the air-conditioned malls. There, I was amazed by the number of different fast-food and fast-casual concepts, which were clearly thriving. Anything from Indian to Italian to Middle Eastern cuisines was packaged into the tight fast-food concepts and chains and catered to the public. And the public loved it, judged by the queues in front of the majority of the establishments.
I had three thoughts:
First thought: Restaurants do fail often, but can it be that the majority of them fail because they lack a systematic approach to business? The kind of an approach I’ve been seeing in the Dubai malls? I am aware of the survival bias, but Dubai showed me that there is clearly a lot of space in the market for many different concepts, which do work. Can it be that the majority of restaurants fail because their owners think emotionally and lack systematic approach? What I mean is that people are very often attracted to the idea of opening their own restaurant. Everybody likes to eat, and everybody thinks that through eating they have some sort of an understanding of the restaurant business. Restaurant business is probably one of the most underestimated businesses in terms of complexity. We all know the stories of how some retired dentist decided to open an Italian place and then lost all of his life savings in one year. Can it be though that if you enter the market with the very well thought-through concept and systematic approach, you can win?
Second thought: people love variability. No matter how successful McDonalds, Subway or Operation Falafel are, people still seek new fast-food places to eat and are eager to try new concepts. If you come into the market with a cool differentiating product, people will be eager to try it. And if your product is good, they will return.
Third thought: outside of Russia, I have not seen any good Russian fast-food concepts. Has anyone anywhere in the world ever said: “Let’s order Russian for dinner”? It’s usually Italian, Chinese, or whatever – but nobody ever orders any Russian. So, I thought, could I potentially create a Russian fast-food concept which would be interesting for the Western/global audience?
These 3 thoughts later evolved and transformed into more detailed thinking, but on this – later ☺️
*just to be exact on the statistics, the failure rate for the restaurant operations is high, but not that high. The real number is somewhere between 17% and 26% (See Parsa, Self and Njite. Why Restaurants Fail. Cornell Hotel and Restaurant Administration Quarterly, 2005 or Stark and Luo Only the Bad Die Young: Restaurant Mortality in the Western US. Department of Statistics, University of California, Berkeley, 2014))