Despite the glamour of television chefs, inspiring Michelin star stories, and the rise of cooking shows, prepared food remains a cut throat industry. Between an abundance of options, rising mandatory minimum wages, and changes in consumer behavior, the profit margin in the restaurant industry remains slim.
Approximately 60% of new restaurants fail within the first year and 80% close before their 5th anniversary (from CNBC). Restaurants remain vulnerable due to high labor costs and, whenever the economy downturns, people stop eating out. High rents and the proliferation of online reviews can sink new ventures. I happen to know most of the successful restaurateurs in my area own their building.
In my own neighborhood, in the few years I have lived here, a new restaurant seems to open and close every week. Plus, how many times can someone dine out?
Enter the BBC/Netflix show Million Pound Menu. In this show, food entrepreneurs attempt to secure investment to either open a restaurant or food truck. Most of the investors look for brands with growth potential.
Every episode of Million Pound Menu opens with a group of well-known British restaurant investors sitting around a big table reviewing business plans from prospective restaurateurs. Think Top Chef meets Shark Tank.
Out of a group of three, one idea goes forward into a test run. The hopeful restaurateurs operate a pop-up space in Manchester for two days. They run a half-priced “soft opening” dinner and a full service lunch the next day for anyone who shows up. After this test concludes, the restaurateurs wait in their empty dining room hoping one of the investors walks in to make them an offer. Not everyone receives a happy ending or takes the offer.
What I appreciate is that the show does not sugarcoat the hardships of the restaurant world and the cost behind building a successful brand. Making food takes a lot of hard work, dedication, and other people’s money. Consumers are quite fickle and with so many options to choose from, not everyone will receive a chance to become the next Gordon Ramsey. The investors make decisions based upon overheard, labor costs, and the widespread appeal of the idea. Sometimes this requires moving out of London to a different city to succeed. People in Liverpool seek out different experiences than diners in London.
While the show received a second season, I do not know if it will debut a third time. Based upon other reviews, people do not seem to enjoy shows that discus the economics of food. We enjoy shows about food and the talented celebrity chefs we all admire. But behind every chef chopping away on television lies a field of hard working men and women trying to make their food truck the next big thing.
Million Pound Menu strips away the “sexiness” and glamour of high end food and shows the financial and economic factors behind every successful restaurant business.
Fast-casual and sustainable dining trends currently dominate the industry. Consumers want cheap, organic food with minimal food waste in the kitchen.
One interesting takeaway, the main reason a majority of the founders do not secure funding is lack of vision. A business plan lays out the brand, the goals of the company, market segmentation, closest competition, the target market, and the financials. Without a clear vision, an investor has nothing to go on. Lack of truthful financial projections also makes investing risky and unlikely. In an industry with razor thin margins, a strategic and well structured business plan becomes imperative. A majority of the people appearing on this show have passion and a great product but lack a strategic vision. Without this vision, no matter how good the product, the investors always shy away from entrusting money to the founders.
If you are at all curious about the business side of the restaurant world, this is an interesting show. Currently available on Netflix.