Survival Tips for Small Vegetarian and Vegan Restaurants

When I published The Vegan Tourist: Vienna and the book’s German-language version The Vegan Tourist: Wien, I decided to provide updates about restaurant closings and new openings on my website. I spent a couple of hours yesterday updating relevant information, which you can access here. Since I published the first edition of the guide book in November 2014, more than a dozen vegetarian restaurants have closed. Most of these restaurants were small businesses, and many of them stayed in business only for a brief time, usually between six months and two years. Over the course of the last three years I have become very good at predicting the success rate of new restaurants. If you think about opening a small vegetarian or vegan restaurant, here’s some advice:

DO THE MATH:

I often walked into a small, newly opened restaurant and knew immediately that it was doomed to fail. The restaurateurs simply didn’t do the math. Eight vegetarian restaurants which ceased to do business in Vienna during the last three years were very small; so tiny, in fact, that there was room for just a few tables and chairs. Only ten people (or less) would be able to eat at these restaurants at any given time. How many meals do you need to sell to cover your fixed and variable costs before you make any profit? And if you can only seat 10 people at a time, would it even be possible to ever cover your costs? The obvious answer is “no.”

Seven of those eight restaurants, which all closed after doing business for only a brief time, tried to operate as “traditional” restaurants. They focused on offering sit-down meals. They did offer take-out containers for their soups, salads, and entrees, but they didn’t have sandwiches or other similar food items on the menu, which you could eat on the go and without the need for cutlery.

Only one of those eight small businesses – a vegan sushi place – focused on take-out and even offered delivery for customers who lived in the neighborhood. If your restaurant is so small that you cannot possibly cover your costs from eat-in customers, you need to focus on take-out, run a catering business on the side, offer cooking classes, offer a delivering service for your meals, and sell non-perishable specialty food items through a website. In addition, you need to do a lot of marketing, so people will know that you offer all these services. If you do all that, and more, you might be able to avoid bankruptcy.

You also need to offer competitive prices. The small vegan sushi take-out restaurant, which closed after approximately two years, offered hand-made vegan sushi prepared with unusual and exotic ingredients; I liked the food, but only stopped by twice – it was simply too expensive. The sushi restaurant could not compete with a nearby vegetarian Asian restaurant, where I always ended up eating. When the vegan sushi take-away opened in January 2015, it sold 6 pieces of Maki and 6 pieces of Urumaki for 9.90 Euros – at the same time, the Asian vegetarian (mostly vegan) restaurant located in the same neighborhood offered its all-you-can-eat weekday lunchtime buffet for 8.90 Euros (which included 3 kinds of vegan Maki).

The vegan sushi take-away could not compete on price, because it was too small. It needed to charge higher prices per item to cover its costs; but customers don’t care about that – if they can get more (a bigger variety of dishes, bigger portions) at cheaper prices somewhere else, they will not eat at your restaurant. Bigger restaurants can offer cheaper prices because they are able to service more customers and divide their fixed and variable costs between more meals. It’s called economies of scale. Do the math – research and calculate all costs before you open a restaurant, and allocate them. How much do you need to charge for a meal to make a profit? How many meals do you need to sell before you can lower your prices? And what are nearby larger restaurants charging for a comparable meal? Can you compete, if you only own a tiny restaurant? What makes your restaurant so special that customers would be willing to pay higher prices? Don’t overestimate yourself (or your food) – price matters.

When you calculate your costs, you don’t just have to consider fixed and variable costs, you also need to consider start-up costs – you need to recoup those as well. The girlfriend of an acquaintance of mine opened a (non-vegetarian) Thai restaurant in a location with plenty of foot traffic; but it was small. The restaurant could only seat about a dozen guests at any one time. She paid 80.000 Euros to buy the kitchen appliances and furniture from the previous owner. When I heard that number, I immediately knew she was doomed; the restaurant closed about six months later. How many meals do you have to sell to recoup 80.000 Euros (or dollars) in start-up costs?

Let’s take an even closer look at costs. I got my MBA degree from Woodbury University in Burbank, California. I loved all the finance courses, like business accounting, business finance, or accounting for managers: my favorite class by far was financial accounting, otherwise known as cost accounting. I guess that’s why I’ve been a successful freelancer for most of my adult life; I pay attention to costs and profit.

With cost accounting, you tally up all your costs and then divide them between all the items you sell. It sounds simple, but you must consider all your costs. In one of my previous jobs, as Head of Distribution for the DVD division of a small arthouse film distribution company, I was amazed – and quite shocked – to find out that the previous Head of Distribution only allocated variable costs to calculate “profits.” (The home licensing division was shut down years earlier and later revived by me); no one at the company ever seemed to notice that costs weren’t allocated properly, which shocked me even more. Several years later, when I freelanced as a production manager for an artist, I was also tasked with cost allocation. Production costs for each artwork – which already amounted to several thousand Euros before I took out my calculator – almost tripled after I was done with the cost allocation.

Variable costs are easily allocated, but it’s amazing how often fixed costs are either not allocated correctly or not allocated at all. Do you love math? Bookkeeping? Doing your taxes? If not, you probably shouldn’t go into business for yourself. Yes, you can hire bookkeepers and tax accountants – but you need to be able to understand what they are doing; you need to be able to check their work. You are responsible for everything when you run your own business. And you need to do cost accounting long before you open your business.

In addition to doing the math, you must also:

CHOOSE THE RIGHT LOCATION:

Quite a few of these small restaurants which closed after just a few months chose a bad location; rents are cheaper in bad locations, but location makes an enormous difference to your success. The restaurants were in streets with little (or at least not enough) foot traffic. One restaurant was located right next to a train station – but it was located at the side of the train station, where very few people passed on foot. Most people just cut across the small piazza in front of the train station, and there were shops and restaurants inside the station and right in front of it. Fifty meters or so made all the difference in the world. The restaurant also only had three or four small tables and a very short menu – it really had no chance; I knew right away that the owners – a mother and daughter team – would not be able to operate it successfully, and it closed after only a few months.

Two small vegetarian restaurants (very limited menu, seating only for a few customers), were located right off one of Vienna’s busiest shopping street; but there are so many restaurants on this shopping street, customers are spoilt for choice. Most people will not consider a detour; they’ll eat anywhere. Most people also aren’t vegetarians – why should they chose a vegetarian restaurant in the first place? Why should they take a few extra steps, only so they can eat at a very small vegetarian restaurant (so small that everyone can listen to everyone else’s conversation – which is a huge turn-off for me and the main reason why I don’t like tiny restaurants)? And why should they choose a restaurant which only offers a few dishes? Customers like choice, myself included. Vegans and vegetarians will occasionally frequent your tiny vegetarian restaurant, but you also need lots of foot traffic and many non-vegetarian customers to survive financially. Non-vegetarian customers have no reason to choose your restaurant (located in a side street) over another one which is located right on a major shopping street, has a large menu, plenty of tables and chairs for patrons and enough space between those tables so they can conduct their conversations in private.

TABLES AND CHAIRS:

Most of the restaurants which closed after just a few months did not have proper tables and chairs for their patrons. They offered counter seating and high tables with bar stools, or benches without back support paired with coffee tables (you had to bend forward to eat). These kind of seating options are often installed with purpose in restaurants – they are meant to prevent patrons from getting too comfortable and spending too much time in the restaurants. A higher turnover of customers means more business; but uncomfortable seating also means that customers are less likely to return for future visits. If you don’t have proper chairs and tables at your restaurant, older people will avoid it, as will people with physical disabilities. No one would ever dream of meeting up with friends for lunch or dinner at a restaurant which doesn’t have comfortable seating. Even vegans like myself, who want to support small vegan businesses, won’t enjoy themselves at your restaurant. Most people work hard, and they want to relax and recharge their batteries during their lunch break or after work. Bar stools are uncomfortable – when I go to a restaurant, I don’t want to perch on a bar stool; I want back support, and I don’t want to eat my food hunched over a coffee table. You’ll get me in and out of your restaurant quickly once – but I won’t come back a second time.

CONSIDER THE MENU:

Most of the small vegetarian restaurants which closed after just a few months offered lunch specials. They would usually prepare one kind of soup, one or two different entrees, and one dessert. Such lunch specials are actually very popular in Vienna – about a dozen organic grocery stores and health food stores successfully own and operate small in-house vegetarian bistros where they offer a very limited selection of dishes during lunch hours. But these businesses make most of their profit from their stores – not from their bistros. Most of the small vegetarian restaurants which went bust within a few months of their opening tried to replicate the bistros’ business model, and offered a limited selection of lunch specials. But the small stand-alone restaurants didn’t have any additional income to fall back on – and they weren’t able to survive financially. They chose a business model which didn’t work for their circumstances.

At the tiny restaurants, the entrees would often consist of vegetable stews, served with a side order of rice or some other grain, and maybe a small side salad. Vegetable stews are one-pot meals, they are easy to prepare. They also usually contain legumes – important sources of protein for vegans. Legumes are cheap ingredients, which is another reason why they are so popular at vegan restaurants. Vegetable stews can be prepared in advance, and be kept warm for several hours. Someone who owns a tiny restaurant – where owners often cook themselves – can prepare a vegetable stew in the morning, and serve it to customers all day. That’s why vegetable stews are always found on the menu at small vegetarian restaurants. As a vegan customer, I am sick and tired of them. I can easily prepare a vegetable stew at home, thank you very much. When I eat at a restaurant, I want dishes that I can’t or don’t want to prepare for myself. I want something special. If you own a tiny vegetarian restaurant, and you frequently offer variations of vegetable stews, you will lose even hard-core vegans like myself as customers. You need to make more of an effort; don’t put dishes on the menu just because you can prepare them quickly, cheaply and yourself (even though you are not a professional chef). That simply won’t cut it. If you want my money, you need to offer me something special.

A FEW FINAL WORDS:

Many restaurants go bust within the first year. Don’t sign a multi-year lease, or insist on a clause that lets you break the lease by paying a small fee. Make sure you have enough savings to support yourself for a couple of years. Think long and hard before you open your small vegetarian or vegan restaurant (or any restaurant, for that matter), so you won’t lose your life’s savings on a dream. Do the math, consider the competition, choose the right location, make sure your patrons feel comfortable at your restaurant, hire a professional chef, and pay attention to detail. Good luck!

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