Not All Business Ideas Are Good Ideas

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I heard this funny story yesterday which I thought I would share and it involves a small rural community and a new restaurant. The small community is in the Drakensberg region of Natal and when I say small community it is around 3000 people. These types of communities everyone knows each others business as there is not much else to talk about so having a new fancy restaurant is a hot topic.

One person opened a high end "French" restaurant 6 weeks ago and is already regretting opening his new business as the numbers are just not there. Relying on your community or friends to support your business is never going to end well because already the friends are feeling the pressure of feeling obliged to dine even when they wouldn't normally.

The problem is the prices are not cheap and the owner insists on using Duck fat which costs him around R1000 every few days. The overheads are high and this reflects on the menu with an evening meal costing R500 ($28) per head which is roughly double the norm in South Africa. This is without drinks as the premises is unlicensed so this is R500 per head with you taking your own bottles of wine.

My friend was telling me the locals are talking and he over heard them saying how expensive the breakfast was and that they cannot afford to dine out weekly. This is a problem as you have limited customers and if you are relying on those customers there is a monthly budget everyone works on. The food apparently is exceptional, but the prices is what is going to kill the business.

The restaurant has been open 6 weeks and my friend has visited 4 times already and mentioned this cannot go on and if he doesn't go he feels bad for his friend. The community is all feeling obligated to support this new restaurant and at some point the honeymoon period is going to come crashing down.

The owner was already regretting opening the restaurant as he had failed to calculate that during school holidays everyone disappears and those are his loyal patrons. The problem is they do not get much throughfare so this business solely relies on the locals which is rather short sighted.

When you plan a business the first thing is you check if there is a demand and will the business be able to be sustainable. There may be wealthy people in the area, but they are wealthy for a reason as they are frugal with their money and does not mean they will just spend.

My friend was telling me he gives the restaurant a few months before it shuts down as this is a train wreck taking place. Personally I do think the owners ego created this as he has owned successful restaurants in the past with the only difference they were not in small communities. This was just a very bad idea with no thought or planning thinking the community could support his dream. This is another one of those moments where you understand that not every idea is a good idea and this is a costly financial mistake.

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