Common Pitfalls for New Restaurants in Singapore 2021

Common pitfalls for new restaurants in Singapore have remained relatively unchanged over the years. However, the food and beverage (F&B) industry landscape is set to experience a huge shift in the way business is conducted in 2021. Read this article to know what to expect in 2021 and be better prepared to face the challenges ahead. 

Setting up a new restaurant is not an easy task, especially not with the changes that 2021 brings. According to CNBC, “around 60% of new restaurants fail within the first year. Nearly 80% shutter before their fifth anniversary”. In Singapore, with preventative measures for COVID-19 still impacting the daily life of Singaporeans in 2021, dining is unlikely to go back to how it used to be.

 

 

First-time restaurant owners are usually caught off guard by sudden changes and issues that appear during their first few months of operation. Even after reading countless articles, it is still difficult to be prepared. This is because many articles may be difficult to decipher due to being written in technical jargon. In this article, we break down the common pitfalls for new restaurants in Singapore in 2021.

 

‣ Not building a strong brand before launch

Restaurants need a personality. They are entities, just like people, and thus need to have a distinct character, values, and way of communicating with customers. A strong concept will make a restaurant stand out from established restaurants and prove tantalising for potential customers. Offer customers fresh and exciting experiences by either providing a new service or rethinking old ways of serving up food. 

 

 

• • • The Singapore context

Singapore is a country where the ‘foodie’ culture is extremely strong. Every few HDB blocks have a food court. Nearly every constituency has a shopping mall (which has an abundance of food options). Ageing estates get a gentrified makeover with hip new coffee shops and restaurants moving in to take over the shopfronts of a different era.

It is clear that in Singapore, a sizeable following needs to be attained first before opening a physical store. This is because there needs to be an organic, local audience that is willing to support the new restaurant. Besides, branding is key to stand out from the crowd of other eateries in the surrounding area. If the restaurant’s concept is not identifiable or strong, then there is little to draw in customers.

 

‣ Wrong target group or location

Office workers, students, and tourists all have different tastes and preferences. It is vital to do thorough prior research or face the prospect of being faced with a harsh reality.

 

• • • Target groups

A restaurant must figure out who exactly they are serving and directly cater to the needs of its customers. Identify the groups of people that frequent the area, and thus identify potential customers. Different people resonate with different types of cuisine and are attracted to different price points. For example, if a restaurant is set up near offices, lunch would be popular. Thus, cater lunch offerings to the needs of the office crowd. Namely, quick service, fast table turnover rates, short waiting time, and filling meals that are not excessive. Additionally, affordable food turns heads, so keep that in mind when starting.

 

 

• • • Location, location, location

Do not underestimate the effects that location has on a restaurant’s prospects. The cliche is true! Singaporeans are willing to go the extra mile for their favourite haunts, but not so much for a relatively unknown business. However, it is misguided to just eye spaces with high traffic, as it does not guarantee an equivalent stream of customers. Instead, take a look at the restaurants around the area and analyse their offerings. What sort of dishes and services do they offer? Make a location decision based on whether you will be able to stand out from the crowd.

 

‣ Overlooking high food costs

Singapore has highly limited land space and thus has a dearth of homegrown produce. According to the Singapore Food Agency (SFA), Singapore imports almost 90% of its food products. Unfortunately, this increases the cost of the raw materials used to create a restaurant’s dishes. New restaurant owners may be taken aback by this realisation, and not know how to react.

 

 

• • • Digital solutions

Utilise online systems and software to fight back against these high costs. Streamline and simplify processes through automation and stock and inventory management. Additionally, minimise the generation of food wastage. This can come in the form of following a standard recipe for each dish, such that the chefs know exactly what quantity to use of each ingredient. For more information on simplifying your ordering processes, read 10 Reasons for an Online Menu for Restaurants to find out more.

 

• • • Menu analysis

Also, regular analysis of the restaurant menu is important as managers can find out which items are the best- and worst-performing. Do not oversaturate the menu with dishes that do not get ordered often, as the ingredients lay untouched, and the chef’s memory of the recipe fades. Through weeding out slower-selling dishes, it is possible to dramatically reduce the number of expired food products due to overstocking. Food costs can plummet by following these tips. 

 

 

• • • Pricing

One final tip for food costs: do not overcharge or undercharge. Prices that are too high will drive away potential customers, and prices that are too low will cause a new restaurant to struggle further. Most new restaurants will likely incur losses in the first few months of operation. According to TheBalaceSB, prices should be around “30 – 35% [of food price]”. Do calculations and find out what price point is appropriate for the cuisine served.

 

‣ Overlooking high labour costs

According to TheBalanceSB, of all profit made, 30% goes to food costs, 30% to labour costs, and 20% on rent, taxes, etc. This will leave 20% of profits left over. 

 

• • • High attrition rates

While Singapore has a booming F&B industry, the industry suffers from a high labour attrition rate as high as 70%. This is likely due to Singapore promoting white-collar jobs to its citizenry, coupled with the high demands of the F&B industry itself. Restaurants can avoid burning holes in their pockets by offering staff higher wages and perks. While this may be difficult as a new restaurant, it is one method of lowering attrition rates. According to research, an average Singaporean restaurant spends around 29.3% of its total expenses on remunerations.

 

 

• • • Retain veteran employees

Older employees have a wealth of experience and knowledge that can be hard to come by in new hires. Be ready to pay more for these workers. They will benefit your restaurant tremendously. As a new restaurant owner, these experienced workers can provide you with tips on running the restaurant. Additionally, their stellar customer service can incentivise customers to keep coming back for more. Also, be prepared to keep their knowledge up to date by providing them with training sessions and refresher courses.

 

Conclusion: Common Pitfalls for New Restaurants in Singapore 2021

Common pitfalls for new restaurants in Singapore can feel insurmountable or unavoidable, and we are here to tell you that no, they are not. Surpass all these challenges and more with appropriate planning and foresight. Overcome these pitfalls and beat the stiff competition in the Singapore F&B industry without breaking a sweat. To find out more about the changing tastes and preferences of the Singapore consumer, read Why Contactless Ordering is Becoming Popular in Singapore for more information.