There Are 3 Types of Restaurant Owners. Which One Are You?

By Donald Burns, Foodable Industry Expert

When you work with an average of 300 restaurants a year, it's quite easy to see emerging trends and patterns in the behavioral dynamics that make up what could be defined as a restaurant owner DNA.

To better understand these three types of restaurant owners, we must first look at two unique theories. While worlds apart, they are necessary in understanding the complex psyche that goes into someone who decides to open a restaurant.

Theory of Evolution

First, let's look at Darwin's Theory of Evolution. More precisely, we are going to look at natural selection. We know that things change. And human beings have known that, in order to survive, they must change and evolve as well or risk becoming extinct. Restaurant owners also need to adapt to this philosophy. Markets change, sometimes rather quickly. More and more restaurants open every year, making competition tougher and market share smaller. Restaurant owners that fail to adapt quickly will get a firsthand look of the natural selection process.

Hierarchy of Needs

The second thing we need to look at is Maslow's Hierarchy of Needs. Sometimes in psychology this is also called the theory of human motivation. A lot of business schools teach up-and-coming MBAs how to use this hierarchy or pyramid to understand the motivation of employees. 

We can use the same thing to understand restaurant owners. Now we're going to adjust this a little to fit our restaurant model:

The first level or base of the pyramid is the physical or material elements that compose a restaurant — logo, decor, tables, chairs, menu, staff and even the food make up this foundation. 

The next level would be sales. In Maslow's pyramid, it’s called safety. A restaurant without sales is like a boat without a motor. Sales provide security and when sales are down, it provides a ripple of uncertainty throughout the restaurant. 

The third level would be social needs. We have a human need to connect and share our restaurant’s story. This is where connecting on social media is so critical to the growth and evolution of the brand. 

The fourth level gets into that area where many restaurants get into trouble… It's called publicity. At this level, all your hard work starts to bear fruit and you start getting recognized and acknowledged for the brand you created. This is also where a lot of restaurants make a bad turn. You start getting a little positive attention from food bloggers, Yelp reviews and maybe your picture in the local newspaper. These are all great things. The problems begin when restaurant owners start believing their own press. Their egos and pride become a roadblock to growth. Without growth, restaurants are very easy prey for Darwin's Theory of Natural Selection.

The fifth level in our Restaurant Hierarchy of Needs is the same as the one Maslow uses, self-actualization. Here, restaurant owners have hit the Promised Land. The ego has been replaced with a desire for growth — not only of themselves, it now spreads to the restaurant, the staff and the community. Restaurant owners who can hit this nirvana of needs have a well-oiled machine of a team working with them, building a very solid and profitable brand.

Maslow only had five levels to his hierarchy of needs, but we are going to add a sixth. The top level is taken from Stephen Covey's book “The 7 Habits of Highly Effective People.” Habit #2: Begin with the end in mind. We're going to call it exit strategy. An exit strategy does not necessarily mean that your restaurant has to end. You could be building your brand to pass along to your children or family. You could be building your concept to franchise or you could build up and sell it. As Kenny Rogers once sang, “Know when to hold em’, know when to fold em’.”

3 Types of Restaurant Owners

Now let's look at our three kinds of restaurant owners and you can see how far up our Restaurant Hierarchy of Needs they get.

1. The Enthusiast

You thought it was a good idea based on the fact that you dine out a lot, think you could do a better job, or want to build a business around your great home cooking (like momma’s meatballs). Most have never worked in a restaurant. The rest have waited tables or cooked while in college…more than 10 years ago.

This owner can usually only survive through the first two levels of our pyramid. If they have adequate cash flow and are willing to learn, they might survive. It's a very rough road and the school of hard knocks has very few graduates. Chances of survival go up dramatically if they elicit the help of a business coach or mentor. Most will never ask for help because they're too embarrassed to admit they got in over their head.

2. The Idealist

These people have a vision that they will not vary from no matter what. Even if it is losing money, they would rather go down with the ship. They do not ask if their concept is right for the market nor do they care. They think they know what the customer wants. Driven by ego and pride. Denial usually brings it all crashing down.

If this owner starts his restaurant with this attitude, then with deep pockets and perhaps luck they might be able to hold out for a few years. However, their chances for long-term survival are very narrow due to the fact that they are just not open to change and, most importantly, do not feel they need to. 

In the 1970s, there were a thousand Howard Johnson's restaurants. By 2005, there are only eight. A combination of no vision, no reinvestment of capital, aging restaurants, a stale menu, lack of marketing and failure to change brought about the demise of a once great brand. That's natural selection in action!

3. The Realist

These owners look at the restaurant as an investment. They have a clear plan to build a brand and an exit strategy for getting out. These owners hire top talent and let them play to their strengths. They are constantly learning and improving their business.

Lest we forget, most people open restaurants to make a profit. These restaurant owners make it to the top of our pyramid. They seek out advice from coaches, consultants and other like-minded, successful entrepreneurs. These people are the Danny Meyers of our industry. These owners create concepts that challenge the status quo and build brands that create raving fans.

So, which kind of restaurant owner are you?