Over the past year, two of my favorite restaurants have suddenly closed their doors. One was on a Sunday, which I guess I can understand. They were hoping for a good weekend, it didn’t work out that way, so they decided to close the door. The other was just last Friday night, they posted a message on Facebook:
Unfortunately, we’ve had to make the difficult decision to close Pizza Persona’s doors for good. We are very proud of the rave reviews we received on our food, concept, and staff. Thank you for all of the support over the last 15 months.
A restaurant closing on Friday night? The only thing I can think of is that there were bills and/or rent due on the 15th and they closed before that to remove all of the owner’s personal items from the restaurant. From the decor of the place, I’d guess quite a few items were probably important to the owner.
What goes into the decision to close a restaurant suddenly? The threat of the repo man showing up the next day? What happens to all the food that is in the restaurant?
Could be that payroll was due*. Could be that they timed it so they were running out of supplies and (purposely) didn’t have enough on hand for a busy weekend and they didn’t want to or couldn’t run out and buy more inventory. Or, it could be that the bank or landlord said “If you don’t make a payment by [date] you’ll have to clear out by the end of the day.”
Once the decision has been made that a business is closing, priorities shift. Management is no longer concerned about customers and bringing in money but about figuring out how to pay off debts without incurring new debts. One might say “Well, they should have stayed open on Friday night to bring in some more cash” but that means another day’s payroll, supplies, cost of goods sold etc. If they could do that, they wouldn’t be going out of business.
*ETA, by that I mean, maybe it had something to do with starting the next payroll week.
Looking at their FB page, it’s part of a mall type place, so they were renting. If they needed to be out by Monday, they would need the extra day. If the owner has someone coming in that isn’t a pizza place, a lot of the equipment is going to need to get pulled.
It’s possible they had a used equipment guy come and make an offer on all the stuff and start hauling it out. If he doesn’t work on the weekends and they needed the cash sooner rather then later, that would be another reason to close now instead of Sunday night.
Diversey in Lincoln Park, Chicago isn’t a mall area, but there is a lot of traffic from cars and people. But, I can see the idea of getting out as quickly as possible so the owner of this very valuable rent space can rent it to a new business.
It is kind of odd to close on a Friday night. But as others already mentioned there are a lot of possible exigent circumstances that made it happen. Usually when a restaurant closes the owner has known for some time that it can happen on any day. Some factor told them that even one more Friday night wasn’t worthwhile. It’s possible their employees already found other jobs knowing the place would soon be closed, they might have had a visit from the health inspector and closed before they had planned to avoid a citation, maybe they just got fed up.
I am not an expert on the restaurant business, but I eat out a lot, so take what I’m saying with a grain of salt: Non-chain restaurants are probably the type of business that is least likely to last a long time. The only statistic I’ve been able to find offhand says that 60% of all restaurants close within three years of opening. Most non-chain restaurants are run by people with a lot of knowledge of food and insufficient knowledge of business. Far too often the owners don’t seem to think carefully enough about the menu to realize that the type of restaurant they want to run doesn’t fit with the neighborhood or will only do well for a few months before the neighborhood regulars move on to the new thing. My guess is that this is what happened to Pizza Persona.
I’ve had two friends open restaurants that didn’t make it - in both cases, they timed things to close when they’d used up all their perishables, or at least tried to. Payroll wasn’t an issue since most of the employees were family.
My experience, though, is that, if they weather those three years, they stick around for quite a while. Heck, even if they fail, they tend to get bought out by someone who does the same type of restaurant. They don’t fail for lack of customers, in other words.
My brother sells liquor to restaurants, and he says this is not surprising-the last 4 years have been brutal for small restaurants-often the owner is funding the bills from his credit cards. What usually happens is that he (the owner) gets a call from his bank-no more credit-so he cannot pay his suppliers. The restaurant can struggle on for a few weeks, but soon the customers stop coming (when half the menu items are not available). Many places close owning enormous taxes to the state/city…one restaurant here closed-the owner owed $80,000 in unpaid taxes.
Sadly, I thing the next 4 years will see a lot of this.:mad:
There’s a place around the corner that opened about a year ago, I’m watching it die slowly, and we’ve had 3 restaurants within a block go under in the last year; tough times. I’ve read anyone opening a place should have enough capital to last 2 years without any business…
Wendell Wagner has essentially nailed it; restaurants are, if you’ll pardon the expression, hand to mouth enterprises; that is to say, the only real assets they have that are worth anything is the kitchen equipment, which cannot be morgaged for credit or operating funds, and most restaurant start-ups are not sufficiently well capitalized to weather the slow period that follows the initial enthusiasm for a new place. Restaurants are therefore dependent upon two things for steady income; either regular clientele, or an attractive reputation. Customers are unfortunately fickle and it takes only one bad experience to not only turn off a potential repeat customer but for that customer to also sully the reputation with all of his social contacts (a situation that has become exacerbated with sites like Yelp! where anybody can defame a store with impunity for the least slight). Most food suppliers will extend about a two week line of credit (none of this “Net 45/60/90” business that manufacturers and durable goods retailers get by with) and so once a restaurant is out of cash and credit, they’re out of business; they can’t buy food or make the payroll. I would guestimate that most non-corporate restaruants are perpetually within two weeks of failure based upon income and assets versus operating costs.
Most owners think that being near a lot of traffic–especially foot traffic–will guarantee business, but I’ve seen many restaurants fail despite being literally in the way of a less accessible but more appealing joint. One of the most popular burger joints in Flagstaff, AZ can only be reached by acutally walking through the seating area of another restaurant, and often has a half-hour wait on line. There is a certain j’en est c’est quoi to being successful in the restaurant business, and I’ve never seen anyone come up with an unbeatable formula to ensure success.
I haven’t looked at the statistics lately, but when I looked at this about ten years ago while providing some advice to a friend-of-a-friend on writing a business plan for her restaurant, I found that the most successful non-chain/franchise restaurants are fast food-type establishments that are located to take advantage of a lunch clinetele. The most brilliant setup I’ve seen was a soup-only place in Milwaukee called “The Soup House”; it was open for quick breakfast (coffee, oatmeal, muffins) but was primarily a lunch trade place; for ~$6 you got a pint of one of four or five rotating soups (usually a couple of vegetarian options and chicken noodle/rice) and a chunk of fresh baked bread. It was located downtown within walking distance of the “financial district” such as it is in Milwaukee. The line would wrap around the block, and they would continue serving until out of soup (technically they closed at 2:00 pm but they rarely lasted that long). The store had a few nominal tables but most of the trade was take out. This meant that the working day was ~5:00 am to 2:00 pm, including prep and clean up, with little additional staff (I think they had a dishwasher and a college student who would work the register during breakfast while they were prepping and setting up the day’s soups) and I imagine very little wastage or loss, which is where the profit usually goes in most restaurants.
I would guess that their profit margin per unit meal was decent–probably something close to 50%, maybe more–and the volume is such that they can routinely clear a profit over and above operating expenses and salary, all of which comes at ~50 hours/week with evenings and weekends off, which is essentially unheard of in any other type of restaurant management. (Most GMs and exec chefs I’ve known work well in excess of 60 hours a week as routine.) They’ll never make a fortune off of this business (unless they sell out and franchise) and taking an extended vacation is probably not an option without a lot of planning, but I’m morally certain they make a comfortable and steady living wage. That is the model I would follow if I were considering opening a restaurant.
We used to have a Dairy Queen in my area. Why it closed, I have no idea, but it did and was turned into another place that I thought was pretty much the same kind of place, but with a different name. Anyways, it recently closed after having this other name for about a year and according to what was written about it in the paper, a whole bunch of the equipment had been stolen from the place.
God bless you always!!!
Holly
P.S. To me, the reason why it should have closed up is because of how slow they were the last time that I had gone through their drive thru. I had to sit there behind this other car for literally 20 minutes if not longer and it was because there was no way that I could get out because of the way that the place’s drive thru was. As of right now nothing has been done with the building yet. To me, it should have been kept a Dairy Queen like it had been for years. What I would like to know is if all Dairy Queens have closed or if it was just the one in my area. The same thing goes for the place named Fazoli’s. We used to have one of them too and then it closed and about two months became another place named The Cookout which to me has been absolutely awesome so far. their wonderful food couldn’t be more fairly priced!
Often times when you see that, it’s because some employees said “We can do this better then the owner.” or “This is easy, let’s buy him out” or “Look how much money is in the register every day, he’s making so much money and he pays us jackshit, we should take this place over” or they see a copy of a bill and say “We serve 200 burgers a day for $2.00 each and they only cost 50¢ each, that means he’s taking home $300 just in burgers, we should do this”, so they buy him out, and he’s too happy to sell. Then a year later, they’re exhausted, out of money and having the bank breathing down their necks and they close up shop.
I’ve seen it happen before and I’ll see it happen again.
So many people just have no idea at all what running a business costs. They didn’t know about payroll taxes, they didn’t know how much the electric bill was going to be. Hell, they didn’t know that it would $5000 to replace the giant DQ sign out front with their sign. They didn’t know that every time the freezer breaks and the nice HVAC guy came in the that the owner always chit chats with…that runs an average of $1200 per visit. They had no idea how much handy work the owner was doing around the place by himself to keep it up and running.
In the end, they didn’t realize that at the end of a day when they brought in $3000, the owner, ultimately put about $150-$250 in his pocket (that’s 13¢ on the $2.00 burger). Sure, it’s more then they were making, but they didn’t realize that he was working 70+ hours a week. They didn’t really realize that he was always there when they started their shift and he was still there when they left and he rarely had an off day.
I could go on and on.
Also, it’s possible the first place sold it to the second place on a land contract and whey they couldn’t make the payments anymore they robbed the place before they took off.
It could also be that the Health Department’s deadline to exterminate the kitchen’s roaches or fix the leaking sewer line is coming up, and the restaurant doesn’t have enough money to fix the problems.
They likely closed when they did because the place was about to be locked by the mall owners for non payment of rent. When your tenant stops paying, you start the evict/seizure process, and it falls on whichever day, doesn’t matter, Friday or Tuesday, so many days after you file the papers. The time period is determined by the local codes.
