Going into business is always a major financial risk.  More than half of new businesses won’t survive the first five years of operation, even under the best of economic backgrounds.  When the economy hits a slump, the risk of opening a new business is even greater.

Does this mean that going into business during an economic down period is necessarily going to be a disaster?  Not at all.  Going into business can be a sound financial move even when others around you are handing in the towel.  Some investments are simply stronger than others.

As a general rule of thumb, though often more costly to get into, franchises tend to have a higher success rate than independent businesses.  Restaurants also tend to weather economic hard times better than many other industries.  After all, people still need to eat and those who can’t or won’t cook for themselves aren’t inclined to learn just because times are lean.

That being said, it is important to understand that not all types of food-service establishment do well.  It isn’t so much a matter of food style (though if you are going after something that appeals to a small niche market, you may not do so well).  What matters most is the type of establishment you get into, itself.

There are four distinct classifications of restaurant, each with its own genres, subsets, etc.  The four basic types of restaurant are fast-food, fast-casual, casual and fine dining establishments.  Each has its own merits and weaknesses, especially in time of economic hardship.

Fine dining establishment tend to weather most economies fairly well, by virtue of catering to those who are well off enough to not have to make major sacrifices to their dining habits.  If you are a frequenter of fine dining establishments, you may have noticed the distinct lack of fine dining franchises, though.

The lack of fine dining franchise options means that if you want to get into fine dining, you’ll have to go it alone.  Independent ownership is a significant risk, even in good times.  Trying to build the reputation of a new restaurant during a time of hardship could well put you in that 50% of disastrous failures rather quickly.

So what is the safer bet for franchising in a down economy?  You might suspect that the wise choice is in fast-food.  After all, the well known fast-food franchises all do fairly well across the board.  However, the demographic groups targeted by fast-food franchisors are also the groups most inclined to drop dining out from their budgets and start cooking at home more often when the economy tightens up.

Casual dining establishments also take a hit.  People stop being willing to pay extra for table service when they can get comparable food elsewhere for less.  Where can they get comparable food?  At fast-casual establishments.

Fast-casual establishments provide all of the quality of casual dining at prices closer to fast-food.  This appeals to those who are less inclined to drop dining out from their budgets, but are more than willing to forgo table service (and tipping) to save money.  This makes fast-causal establishments the safest restaurant franchising option during a slow economy.

The best restaurants out there offer not only a consistently good food at a reasonable price, but also, great service. With most businesses, you find that there is a similar line of thought- the greatest asset the business has is actually it’s workforce, and for a restaurant, this is everyone from the wait staff to the dishwasher. Improving your staff’s productivity is important and a key element in making sure that you have the best possible experience for your customers. The key to increasing profits happens before the customer steps in the door and begins with your staff. If all staff are not working together in tandem to create a better dining experience, you may find that your patrons go elsewhere.

The best thing that you can do to promote productivity happens well before the staff is actually out on the floor full time. Make sure that your staff is adequately trained. This means being able to have a clear sense of exactly what is expected of them, and encouraging them to follow procedure as they are instructed from the start. Mentoring is a good thing, yes, but more often than not without a good, reliable training up front- having a newer staff member follow or shadow a senior staff member may cause problems as the older staff member has ways of doing things that the new one may not be ready to pick up.

Making sure that your staff is prioritizing customer service is key. If you notice that you have some servers that do not pay attention to their customers while still giving them some space- it may be time for a training refresher course. For newer servers, the key is in not allowing them to get to that level of comfort in service- from the start, make sure that they are well trained, and doing the best that they can.
Insofar as your kitchen staff goes, there needs to be a level of team work and camaraderie between kitchen and wait staff. This needs to be so that the kitchen staff makes sure that orders are correct, but also quick and efficient, and so that the wait staff is doing all they can to be sure that orders are actually brought to the back of the house the proper way. This is another area where a great training program can help, because a uniform way of ordering may enable better communication. In cases where a point of sale terminal is used, this is generally circumvented, but even then, problems can arise.

The key to better customer service may well lie in having a very solid, very uniform means of training. Better service not only makes sure that customers are coming back, but that they are also recommending your restaurant and that word of mouth is very important, especially in food service. This may take time to get all staff on board, but when the economy is uncertain and every little bit of loss is noticed- it may mean all the difference in the world for your restaurant.

When economic times are good the food-service industry can be pretty brutal in its competitive nature.  When the economy hits a slump, that competition can become downright bloody.  Never before has this been more apparent than in recent times.

As consumers cut back their spending, restaurant owners become increasingly frustrated in trying to bolster flagging profits.  Many continue to look for better ways to do business, while others collapse and shut their doors.  Others, in their frustration, may even resort to less than scrupulous marketing tactics.

I drive past a prime example of this latter case on a regular bases.  In area in which I reside there are two well known fast-food hamburger chains on either side of the street, directly across from one another.  One of the franchises is from a slightly more successful brand and has weathered the economic decline fairly well.  The other seems to be declining rather rapidly.

As the frustration and panic of the owner of the less popular franchise escalates, there has been a degenerative quality to the blurbs on the franchise’s marquee.  The statements began as vague innuendo about “the other guy across the street”.  Over time, as the less popular franchise’s parking lot become increasingly less crowded and the “other guy’s” parking lot remained fairly consistently packed, the adds got worse.  Before all was said and done, the owner of the less popular franchise had accused the “other guy” of almost every conceivable crime against food, taste and humanity in the book (and a few I’d never considered before).

Obviously, this rather aggressive and distasteful tactic was ineffective.  The “other guy” continued to prosper while the less popular franchise was forced to eventually shut its doors to the public.  What made the difference and why does mud-slinging fail?

The difference, quite simply, is value.  The “other guy” is well known for providing a substantial value of food per dollar.  In fact, they have an entire section of their menu dedicated to just such value.

While the less popular franchise across the street was engaging in low blows, was the more popular franchise reciprocating?  Not at all.  The owner of the more successful franchise was using his marquee to consistently promote the franchise’s value items and special promotions.

The community honestly didn’t care what was said about the franchise on the competitor’s sign.  What the community did care about was getting the best value for their already stretched tight dollar.  This is exemplary of where a successful restaurateur needs to turn his or her focus when the economy begins to slip.

When people are scaling back their budgets and cutting back on how much they dine out, it is no time to go on a campaign against what the other guy does or does not do.  Rather it is time to look internally and start focusing on giving the public what they want most:  more bang for the buck.  Perhaps if the failed businessman had realized that the “other guy’s” customers were there for the prices rather than how much better the food was, he or she would have altered their tactic and promoted their own value items.  If so, then that franchise might still be open today.