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Business  7, Mar 2014

Want to set up a restaurant? Take note of 5 challenges you will face

Jumping into the food biz is a lot easier than staying relevant to break even and profit from it, says Aksvini Kamaran  of imoney.sg

food

Thanks to evolving tastes and diversifying demands, the global food industry has undergone a much-needed renaissance over the past decade. Singapore is no stranger to the gastronomic economy boom as it has been frequently dubbed as the food capital of Asia for its multi-ethnic culinary spectrum. As a result of this vibrant culinary palate, a large number of Singaporean entrepreneurs have jumped into the food industry.

Unfortunately, breaking into the food business is a lot easier than staying relevant long enough to break even and profit from it. It isn’t uncommon to see many restaurant establishments fizzling out and shutting down within a short time period. This is why it’s extremely intimidating for even the most experienced F&B industry professional to face the risks and challenges associated with such an initiative.

Luckily, there’s no shortage of success stories either in the Singapore food business and the market is far from its saturation point. Entrepreneurs such as Eldwin Chua (Paradise Group) and Lyn Lee (Awfully Chocolate) have consolidated their F&B industry empires and shown aspiring business rookies that even though the bar is set high, it is indubitably reachable. The 2013 Singstat report pegged the collective sales value of the Singaporean F&B industry to be around S$603 million (approximately US$477 million) with a promising 2.9 per cent increase in growth over the last year.

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Where there’s a will, there’s a way; where there’s demand, there’s profit to be made. So if you’ve got your eyes set on conquering the F&B industry, let us familiarise you with the primary challenges that you will inevitably encounter when you kick-off your business endeavour.

Labour scarcity and delegation dysfunction
Of all the tests a successful restaurateur must pass, solving the labour puzzle is quite possibly the toughest one. Finding an experienced and compliant head chef to train who can run a tight ship on a daily basis and remain committed exclusively to your business is not an easy task. However, popular F&B entrepreneurs like Willin Low have shown that offering ownership to head chefs is incredibly effective in gaining their loyalty and ensuring your business is stable.

The remaining members of the kitchen staff and restaurant attendants usually comprise Singaporean locals who only prefer working F&B industry jobs on a part-time basis. Due to the severe limitations in foreign hiring quota, restaurateurs must be prepared to take an uber hands-on approach in the start.

Licensing of services
When it comes to securing essential licenses, most F&B entrepreneurs are rather ignorant and end up shelling out a tonne of consultation fees to third parties instead of executing the formalities themselves with negligible fees.

You can obtain a wide variety of operational licenses for your restaurant from the government website EnterpriseOne. Once you have filled out the relevant applications and passed the mandatory Food Hygiene Course carried out by external vendors, you will have to register your certified food handlers with the NEA.

Huge initial capital
The exorbitant real estate costs in Singapore are a painful thorn in the foot of F&B entrepreneurs looking for a place to roll out their services. Setting up a retail space requires tremendous capital investment for material construction, interior décor and equipment costs.

Even a minor food kiosk entails an initial capital of S$80,000 (a little more than US$63,ooo) and above; whereas, a full-fledged restaurant establishment will require a mind-boggling investment of S$500,000 (about US$400,000) and above.

Carving your niche
In a world of abundant formulaic, rinse-and-repeat F&B business concepts, it really is entrepreneurial suicide to follow their footsteps without being able to offer something unique to customers.

Testing new cuisines, designing eclectic menus and offering an unforgettable ambience for diners is all part of building your brand value.

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Location, location, location
Even though real estate prices may be rather discouraging for restaurateurs, one cannot harp enough about the role location plays in the success of your business. Financial success in the restaurant business model is not generally a short-term objective, but rather a long-term strategy.

Although you may save a significant chunk of initial investment by setting up shop in a relatively quiet/inaccessible location, remember that your business is a lot more likely to gain traction in areas with heavy human traffic.

The author is Country Manager (Singapore) of imoney.sg

The views expressed here are of the author, and e27 may not necessarily subscribe to them

e27 invites members from Asia’s tech industry and startup community to share their honest opinions and expert knowledge with our readers. If you are interested to share your point of view, please send us an email to writers[at]e27[dot]co

Aksvini Kamaran

Aksvini Kamaran

Aksvini Kamaran, works for iMoney.sg, Singapore's one of the leading financial comparison website. With background in Economics and Finance from RMIT University, Aksvini believes financial knowledge is the engine of one's wealth.

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