Why do restaurant owners have a reputation for being “bad with money”?

Restaurant owners have a bad reputation when it comes to money. When a restaurant fails, people whisper, “they didn’t know what they were doing.” If it thrives, people assume “they must be independently wealthy.”

Of course, there are people who get into this business unprepared. And it’s also true that our industry draws a lot of independently wealthy folks who often want to make a splash in the restaurant community.

But it’s an unfair stereotype for the majority of operators.

The Reality Behind The Reputation

Anyone who has owned and operated a successful restaurant for more than a year can manage a P&L, and probably exceptionally well. Let’s be clear: if you’ve been successful over a long period of time, in a sub-10% margin business, you’re an exceptional operator!

Why Does The Reputation Persist?

Because many owners (including great, successful operators) genuinely struggle to manage their personal finances well. And sometimes, this results in bad business decisions and, well, a bad reputation.

Many will privately admit that their personal finances are not where they want them to be. I’ve had conversations with successful multi-unit independent and franchise operators and the concerns are surprisingly consistent:

“I don’t have the clarity I need”
“I work so hard, I end up living a boom-and-bust lifestyle”
“I want to build wealth outside my businesses, but every time I’m ready I get distracted by another project”

So, If Many Are Good With Money, Why Do They Struggle With Their Personal Finances?

Here’s the truth: There is very little about being a restaurant operator that is naturally conducive to building and managing personal wealth. Just think about the basic steps of personal financial planning, and how each represents a unique challenge for restaurant owners:

Find the time to organize your finances and build a plan? Not possible, you work 7-days a week.
Set aside excess cash flow to invest outside your business? Very challenging, as each new restaurant project is more capital intensive than the last!
Control your personal spending? Let’s be honest: this is hard to do when you work so hard. It’s also hard for the personality types drawn to restaurant ownership.
Create a better cash flow management process? Sure, right after you make payroll for 150 employees.

So What Can A Restaurant Owner Do About It?

A lot actually. Finally some good news! But it’s about setting the right expectations and having a good plan. In a coming post I’ll outline 5 practical steps you can take to get your finances under control, tailored to the unique realities of having most of your wealth tied up in restaurants.