How to Reduce the Risk of Opening a New Restaurant

For anyone evaluating the feasibility of opening a new restaurant, whether it's your first or your hundred and first, there's one key financial factor that points to success or failure in this business probably more than any other. It's referred to as the sales to investment ratio. That is, how many dollars of annual sales can you reasonably expect a proposed restaurant to generate for every dollar of invested capital it will take to take to open it.

The sales to investment ratio is calculated by taking the projected annual sales of a proposed restaurant and dividing it by the total projected startup investment required to open the restaurant and get it operational.

As the sales of a new restaurant increase relative to its startup investment, so too increase it's chances for profit and financial success. It's no secret that the chain restaurants with the highest sales to investment ratios are consistently among the industry's most successful profit performers too.