Starting a restaurant

Miscellaneous and Personal Stuff I Must Share
1

I’m thinking of starting a restaurant. I’ve looked at two chains* and thnk one of them might be right for a certain neighborhood. That area of town has new commerical properties opening, along with lots of stores around and heavy traffic. There is some competition within that ethnic cuisine around, but not much and the style is different, even though the food is similar.

(* Kinda. Both have only two stores, but I think have very strong growth potential.)

Am I crazy? I know it’s a risk, but how do I evaluate it? Should I just walk away and forget it? I’d have to borrow the money, and my credit may not be up to snuff for business loans. The restaurants have some established business in other towns, which makes them new to my locale, but I could “borrow” some expertise. This particular restaurant has fewer staff needs (no servers), which may keep costs down. I can see a strong lunch demand, although that may not be remotely as profitable as dinner.

The restaurant I have in mind is a mid-scale limited service restaurant featuring pan-asian cuisine (which, naturally enough, only appears in America :smiley: ). Prices and service are like Panera Bread, but they rbing the foodstraight to you. I can’t much mch for their decor, but that can be upgraded a bit to make it more cozy. Sushi is becoming more popular, and it gets served; I’m thinking that adding alchohol at least in the evenings would be good.

There’s a lot of competition is general, but the area continues to draw more and more people (and people are moving in) mid-scale and upscale services continue to grow, and people are liking ethnic or specialty restaurants.

2

Are you trying to start a restaurant, or buy one?
Either way:
Slow down and take your time, this is a HUGE decision. You need to fully understand what goes into it.
My biggest (and easiest) suggestion is to get the book E-Myth Revisted and read it, then read it again.
If you still want to do this, start by making friends with some other business owners so you can understand costs and responsibilites of owning a business.
For example, you mentioned that you where thinking about serving alcohol. Do you know what is involved in that?
In Milwaukee, that requires a Liquor Licencse. I’m not sure off the top of my head what a Class B licencse costs, but a Class A is $10,000 (luckily, our business is in a suburb and it’s only $450. Then you have to put a couple of employees through a responsible bevereage class and get them bartenders licenses (those are cheap, $25 for the four hour class and $25 for the licensce) and one of them has to be on the premises at ALL times).
Also, I would suggest taking a 101 or 201 basic accounting class at your local technical class so you get feel for the business side of things.
There’s about 19 million other little things you should really get a feel for before you dive into this that I’m not thinking of right now.
Also, what industry do you work in at the moment, you might want to try and get a book keeping job at a restaurant to familarize yourself with all the ins and outs of doing this, and just to get a feel for how a restaurant operates. It’s a whole hell of a lot more then just buying and selling food.
And don’t forget Emyth Revisted, it’s a quick easy read and really worthwhile.

3

Actually, I can’t even begin to know that. I dont’ know whether the site falls within the city or the country or the other city. :slight_smile: They all have different regulations. If it’s in the city limits, I wouldn’t bother, although I believe I can get a lesser license just for beer there. No need for bartenders or anything with that.

4

Do you have lots of restaurant experience? Lots of managing a restaurant experience?

5

It’s just called a bartenders/operators licensce. Not that they actually are bartenders, but to sell liquor someone with a licensce needs to oversee the sale.

6

I don’t believe that’s true, if you sell only beer, in this particular town.

7

I’ve been involved in a restaurant startup.

I hope to hell you have a lot of experience working in a restaurant. Like, you’ve been managing one for ten years. If not – run the hell away from this notion and go get some experience (read: let someone pay you to make mistakes).

But if you’re still thinking about it, you can expect:
-to run through employees faster than you ever thought possible (some will be gone in 3 hours)
-people to steal from you without you realizing it (cash, food and everything that ain’t nailed down)
-fist fights between employees
-growing insurance rates as employees get injured on the job (either cutting themselves or repetitive stress)
-customers who will plant rusted nails in your food so they can get a free meal

etc…

8

Most franchises will not lend their name out to people with no experience. I looked into a few and most want 5+ years of restaurant management before they will even look at you.

9

Wiser words have rately been spoken. Plan on losing money for several years and still be able to stay afloat. A customer of mine had to close her establishment after 9 months when of all things the dining room air conditioning unit failed. The repair/replacment would have cost $14,000 and pretty much left her with little if any ability to continue operating if she paid it. Since this was in august, and in Fresno, CA, 100+ degree days are common. No AC, no business.

10

…kia ora smiling bandit .

Firstly, be very, very careful about starting a business with other people’s money. If things go tits up, you need to have a plan to pay the money back. Nothing will loose your friends faster than loosing all of their money. Although you do not think a bank will lend to you, your business needs to be strong enough that a bank would consider lending to you. Banks don’t lend to people that are poor risks. Do everything within your power not to be a bad risk.

Plan you business carefully. Do you know how to write a business plan? Make sure you write one, and don’t rush it. Do your market research, do your financials, develop some cash flow forecasts. Be prepared to know what your business is inside and out before even spending a a penny on rent.

If you haven’t run your own business before, read up carefully: there are lots of fantastic books on running your own business, find them and read them. Find a couple of mentors-people who have run their own successful businesses or restuarants, and spend some time with them.

As part of your business plan, you will need to cost out exactly how much it will cost to get the restaurant up and running. Whatever figure you come up with at the end of this process: (costing out the ovens, the rent, the freezers, the licences and fees, a bit of cash for your reserves, and all of the many other things!) double it. Cost over-runs, unanticipated costs, and possible lower than anticipated cashflow can all hit you badly if you don’t plan for it.

Do not be afraid to pull out before you get things started. You might spend a year developing a business plan, getting forecasts done, telling people what you are doing, etc, but if you get to the point where it is time to put a deposit down on a site, if the financing isn’t quite right, or your gut tells you there is something wrong, then pull out. Nothing hurts more than loosing a couple of hundred dollars belonging to somebody else: I tell you this from personal experience.

Don’t always trust your mates. They will tell you your business plan is the best thing they have ever read. It will cost money, but seek out independent advice where possible. Also be careful about getting friend involved with your business: do your due dillegence, research them like you would a prospective employee.

I was going to write a bit more, but I pulled a fifteen hour shift today, and I am absolutely buggered, and I am a bit worried that what I am writing doesn’t make sense!

But what I will say is that before committing to a venture like this, make sure you know that this is what you want to do. This is an enormous risk, and it sounds like you don’t have a lot of experience in the industry, and you need to be able to comprehend exactly how bad this could end up if things go wrong.

But if you do decide to do this, make sure you do it right. There are few things more rewarding than working for yourself. The freedom, the lack of a boss, the ability to have your own destiny in the palm of your hand is something that once experienced, is hard to let go of. I loved working for myself but unfortunately things went badly: I have spent the last year and a half developing a new business plan for a new concept, and I will be launcing that in November. Once the business blood get in the veins, it is hard to let go!

To summarise, plan properly, forecast appropriately, learn the things you don’t know, raise more money than you plan on needing, spend as little of other people’s money as possible, know your market, get your product right, know your customers and hire the right people. Prepare for failure but plan for success. Watch your bottom line: it will be the overheads that you might forget to factor into your pricing that will destroy your business. Buy a decent Point Of Sales system. Train your staff well. Have a system for everything, and I mean everything, from ordering to how to close down a shift.

I wish you the best of luck smiling bandit. :slight_smile:

11

Both my husband and myself have worked in the business most of our adult lives and I’m here to tell you that playing the lottery is less risky.

We used the money we made to do a lot of traveling and when people heard what we did they would always ask, “So when are you going to open your own place?” We would both answer, never.

Why? It only takes three simple things for a restaurant to succeed;

Good food, good service, nice atmosphere.

On the other hand there are literally thousands of ways for it to go wrong, even with those three givens in place.

Do you have experience? This is the key question for me.

I have worked in several restaurants which were running along like a well oiled machine and sold to a wannabe restaurantuer with no experience. Within six months, without fail, they were all run into the ground and closed their doors.

One time it was the accountant who bought it. Now he could see the books and the money being made, and thought it was a no brainer. Not so. He was an accountant who admired the owners and how comfortable they were with the customers, how friendly and casual it all seemed. It looked like hanging out in a nice bar/restaurant, buy some drinks for your friends, joke with the staff, pile up the money. It wasn’t. An accountant, he severely lacked the social skills required for the job.

This happens a lot, people who wish they had it, but don’t. Wrangling staff can be just as challenging, they are very different from secretaries and store clerks. What is your level of experience?

Proceed with caution, like everything in life, it’s not as easy as it seems.

12

While I’d like to do this, and bet I could get a bank to lend to me, I certainly don’t have any experience in this directly; I’m personable and I can keep track of money, but I’ve just never done this. I’ve actually thought about trying to get a restaurant job, but at this point in my life I really can’t go be a waiter in the hopes of makiing some contacts. I need to live on a bit more than that gets me.

Theoretically, I could find someone with experience, but why would they want me in on it? And I have some money, but nearly enough. Granted, it was 2-store company, but I see some real growth potential there. I just wish I could take advantage of it (queue story of my life).

13

So here’s an innoncent question: if it’s so hard to make a go of it in the restaurant business, why are there so many restaurants? Why do so many people seem to want to take what looks like a sucker’s bet?

14

Then don’t do this. You are nowhere near prepared, nice personality aside. Sure, it looks like fun from the outside. It’s a hell of a lot different on the inside.

You have to deal with high staff turnover, staff that doesn’t even bother showing up to work, customers who will bitch and moan at the drop of a hat, ordering supplies, etc etc etc.

You’re not ready for this.

15

If you are the type of person that loves food for food’s sake and loves to throw nice dinner parties for friends and family…then the restaurant business is certainly to for you because it is almost but not completely unlike that. If you have never worked in a restaurant before, I think you will be surprised at how hot, physical, tense, frenetic, and aggressive it is. If you don’t have significant restaurant experience I dont think it is possible for you to be prepared to handle everything that goes on. The back-side looks nothing like the front-side. Even things like hiring quickly and having realistic expectations of servers takes skill and most experienced people don’t even pull it off well.

16

This is for a reason.

Sorry, smiling bandit, but I have to weigh in too as a “no”. Read Kitchen Confidential; Anthony Bourdain talks about how experienced restauranteurs cannibalize the staff of other restaurants, and watch them get driven to bankruptcy, then buy all their shiny new equipment at a cut rate. It’s a vicious, vicious business and certainly no place I’d go in without experience unless you have a whole lot of money you don’t mind losing.

17

Because it’s a sucker’s bet. After all, how hard could it be to cook and serve food? Housewives and gourmand hobbyists do this all the time. The problem is, cooking and serving food is about the least difficult thing to do in a restaurant, and many of them fail within a couple of years. You might not notice because failure often means just switching owners, or installing a new restaurant where an old one was, but it’s hard to make a go of it for all the reasons so far offered and several more. (Nobody has yet mention the problem of fluctuating food prices, liability and insurance, drug and alcohol abuse by key employees, et cetera, but you can go on almost without end on the potential pitfalls awaiting a restauranteur.)

To properly run a restaurant, you need to be skilled in every job within, from waiting tables to prep and line cooking to reparing equipment, lest you be at the mercy of others. 10 years experience is probably a minimum, and even then, there’s a certain amount of luck in having everything come together just so to be successful rather than just making bank payments. Also, the o.p.'s plan seems a little…confused. It sounds like a lunch place–which can be profitable if done with an eye to keeping food costs low and throughput high–but then he talks about wanting to offer dinner as well. With a restaurant concept you really need to know what demographic you’re catering to and tune your business model to that; if you’re running a lunch store, your menu should consist of items that can be quickly prepared, ordered to go, and have a staff that will hustle and not panic during the lunch rush. If you’re in a bar/afterhours neighborhood, you’ll want to have late hours and greasy food for the drunks.

It all sounds simple until you get into the thick of it, and then you realize how thin the margins can be if you don’t control your costs, keep any eye on employees and stock, and plan for unexpected expenses (like the afformentioned air conditioner failure in August). Also plan on spending a minimum of 12 hour days, 6-7 days a week, 364 days a year, babying your business into profitability.

In short, this is not a job for a rank amateur, or even someone who has a little bit of experience.

Stranger

18

The smartass answer is: Buy a boat. You’ll lose money just as fast, but have a hell of a lot more fun.

Listen to those who tell you to get experience before even considering opening a restaurant. It’s retail, but the inventory is extremely volatile. You need to turn it over every 2-3 days to make money.

19

People that open restaurants come in two types*
1)They know it’s a suckers bet and know exactly what they’re in for and do the best they can with it, some do great, some don’t
2)The people that don’t know it’s a suckers bet, they think it’s more like
1)buy and sell food
2) ???
3)Profit
The problem is they don’t know what step 2 is, they don’t know that step two is actually about 8000 steps and what they really don’t realize (and here’s something to remember) they owner takes home about 1 or 2% (more if you know what you’re doing)at the end of the day. That means if you’re restaurant makes $10,000 per day you’ll take home about $40k** per year. If you don’t know what you’re doing there’s easier jobs out there that pay better.

*I made that up
**I know that’s a low ball figure, but I wouldn’t expect to do much more then that the first few years.

20

That’s another thing, you need to learn to cut deals, you need to learn to buy in quantity for exacty what you need before it goes bad. Sometimes you have to take more then you need and throw someaway to get a better deal. But then it snows for three days and you wind up losing a ton of money. It sucks, it’s hard work, but if you can make it work, it’s very possible to (as my dad once said when business was REALLY REALLY good) make so much money it’s scary.