Many eatery owners fail to do their homework

MANY restaurants fail simply because of their owners' outsized dreams and inefficient kitchens, experts say.

More often than not, would-be restaurateurs fail to do enough market research before plunging into the business. It is not surprising to hear of young, eager entrepreneurs setting up shop with nothing but their burning passion and deep pockets.

Others run messy kitchens, manage their inventories poorly and rely too heavily on manual labour and processes.

The food and beverage (F&B) industry has a low barrier to entry, said Dr Woon Kin Chung, chief executive officer of the Singapore Productivity Centre (SPC), the national competency centre that provides dedicated assistance to F&B and retail companies.

"This encourages entrepreneurship and innovation, but it also means that many entrepreneurs enter the sector without sufficient preparation and knowledge of the business," he said.

Restaurant Association of Singapore executive director Lim Rui Shan has seen a sharp rise in the number of cafes and ice-cream parlours over the past three to five years. She said: "While this greatly increases the dynamism in the industry, we also hope that many more can be sustainable beyond their first lease renewal."

In fact, almost half of the 369 cafes, coffee houses and snack bars that registered in 2011 have since closed down, showed data from the Accounting and Corporate Regulatory Authority.

Dr Woon said many F&B firms do act to improve business efficiency and grow revenue, but the efforts are often not sustained.

It boils down to companies missing what he calls "a culture of continual improvement" that should run throughout the organisation, from frontline service staff to the top management.

To cultivate this culture, staff at all levels need to understand and be fully aligned with "the value that the company is delivering to the customer", said Dr Woon.

Ways to encourage continual improvement should be supported by productivity initiatives, a measurement system with the right key performance indicators and targets, and adequate training.

A productivity benchmarking study by SPC last year showed that eight out of 10 F&B companies make a conscious effort to assess their customers' needs and the services that they provide.

"However, one-third of them do not measure their productivity. And only less than half of them provide structured training to their staff," said Dr Woon.

rachaelb@sph.com.sg

Additional reporting by Felicia Lee