opening a restaurant

[Brittany]

So I have decided that I would like to open my own restaurant. Probably in the next 3 years. I have to start planning now. I have opened restaurants, on th kitchen side, but never the whole kit and kabodal. I have the investors. Some clients I use to cook for. Now, these are some of my questions for those of you out there that have done this.
What do I have to concerned about with my investors?
What sort of things become main problems and issues?
In your first year of service, what sort of issues came up?
Is there any good literature out there that I should maybe read?
Basically, any advice?
Thanks guys.

[cookingwithfat]

It would be far too easy to say my advice is to don't do it, so here goes. ..

Investors. Make sure that they understand that the failure rate in the industry hovers in the mid nineties and they will more than likely lose their money. Make them clear that just because they are investing they do not get to roam around like movie stars and pretend they own the world. They are money people and not chefs, GMs, etc... they need to know that they are investing in YOU and not a restaurant. If they do not have full and complete faith in you then you will all be unhappy very quickly.

The main problems that comes up in any start up food or otherwise is the time it takes to experience a return on investment. Investors get worked up when they find out the business is not a gold mine. Also, you are comfortable with getting a pay check... as an owner when the money is short you take the hit, not the employees and that can be tough. You and your investors are going to make yourselves critical to the lives of a number of people and that can be a **** of a burden.

First year the biggest thing that will come up is capitalization. You MUST... and I can not say this enough... have enough money to get through the year even if no one walks through the door. If you do make money, it is gravy. Assume you will not make a single dime in the first year.

Make absolutely sure that the staff, front and back, is prepared for opening day, opening week, opening month, and opening year. There is no time when you are better positioned to put your best foot forward than right from the start. Too many new places take the position of, "the public will understand that it is our first week and we are still working out the kinks." Let me tell you, they will not understand. They will lambaste you to everyone and anyone they can to make themselves feel better if you are not 100% right out of the box.

Do not comp anything to friends, and make sure your investors know they do not have that right either. This is one that people forget all the time and think , "oh one steak does not matter." It matters.

Here is one last thing, and it may sound lame, take incredibly good care of your customers. They will love you for it and make your place their new home, and that is what you want.

[emhahn]

I could go on and on with wonderful advice, but I'll limit it to just a few key points:

1. Be ready to take on a new marriage.

2. Be ready for long hours, low pay, and hard work.

3. Be ready to compete.

4. Be ready to be a babysitter (being a boss).

5. Be ready for the unexpected.

I know this all sounds vague, but anyone who has 'been there, done that' will agree these five points are just a beginning.

Not trying to discourage you, just pointing out some simple facts ahead of time!

Eric
http://www.restaurantedge.com

[Brittany]

What you are describing Eric is the job of each and every chef. That much I have a vast amount of experience at. I can keep the kitchen in line and I did work in the FOH before I learned cooking. I am more concerned about any common errors that a restaurant owner might make besides the obvious.
When we are training a new apprentice for a position in the kitchen we start with the basics. Organization, mise en place, ect. Then we start teaching them the tricks of the trade. Technique, science of food, ect.
I know the basics, what I want to know are the tricks of the trade for not just running the kitchen but running the whole thing. Is it better to control the entire opporation or is it better to micro manage? Are there computer systems out there that cost a little more to enstall, but in the end can save you money on product inventory, food cost reports, who's your best server vs. the one that needs to get fired.
You see what I want. I want to hear the stories of the successful and well ... sorry ... the failers.

[thedessertdiva]

Hello, Been there! Done that! (twice)
I think I explained (unloaded) in the introduction area. I had a Catering co/Cafe' was great! Keep the Restaurant side small, this will allow your comfort zone (catering) to survive. I found the catering kept the restaurant alive in slow times, I got in over my head opening an additional very large (7000 sq ft) place (finer dining)which we remodeled at great expense I didn't have enough liquid assets to float long enough in a low economy (because too much was spent on decorating) so it took down my other place because I had to "go for it" to try to make the new place prosper. However I would do it all again, in fact I kept the catering co and will be opening another place not as large.
The biggest problems? Payroll (large), Employees I should have been choosier, trained longer, and should have been more strict as to duties, and sending home at slow times etc..
I was running between 2 cities with 2 places and catering so I could not adequately supervise everything, I could have taken on a manager which would have eliminated a great deal of these issues, because I was back of house cooking on the line there was a lot I missed. I also had a full service martini bar and in hindsight believe there were a few employee losses there.
Bottom line the only regrets I have are the things I wanted to do but didn't.
The fact that you are looking 3 years down the road good for you! Save as much as you can to fall back on, and the biggest piece of advice I can offer: only take on a partner if you don't want to be "in charge" anymore, I am a control freak and I found that was the worst problem I had, I went from sole owner of a successful business (10yrs) to partner of a sinking ship where I was drowning in someone else's decisions (too many employees etc).
Hope that wasn't too depressing! The experience was still better than an office job any day!
YAY for you!!! and best of luck!!!!

[thedessertdiva]

Hi Brittany,
I just read your latest post and need to add I adore cooking!! that was the problem, I should have been supervising everything in addition to a general manager, but I couldn't be near the kitchen and not hog the whole thing, I love the full ticket wheel and thrive on the chaos! Which unfortunately created more chaos, I should have hired a great Chef to supervise the line and I could have cooked now and then on slow times.
I just never enjoyed foh because I alway wondered what was going on boh
I did pick up a pos register that would print tickets to boh and if I had time to have it programmed I think it would have helped a great deal, now it's in storage, also I was lucky in the respect that I bought a lot of equipment at auction and business closing and it saved me a huge amount, I still own 90% of the equipment(also in storage) and it is available for me at my new place and I will, and have sold some of what I don't need.
One other problem I can think of right away is that we remodeled a 112 year old historic building that had been a restaurant previously and did not realize that it was tapped out to it's highest capacity for it's electricity, which kept me from using some of my good equipment and shorted out the power on three different occasions, the first being lunch on opening day, we figured out we couldn't run both heat lamps at the same time or the toaster and the microwave at the same time I think it was an omen.

[Brittany]

Thanks dessertdiva. That was great. I own a catering company now and I also had the idea of keeping it in existance with the restaurant. Nothing beats those low low food costs. I have a question though. This partner that you took on, did they have experience in the industry? The people that want to act as investors, I've been cooking for over a long long period of time. They swear they want to remain as silent partners. I'm a little concerned over this. I too am a control freak.
The other question is, would you hire a FOH manager. Do you think that it would have saved you money in the long run?
Thanks again.
Britt

[tcapper]

First of all congrats on deciding to go it alone.

My first restaurant went tits up because lack of capital. Let me explain. Found a wonderful place 13th century did it all up and took of to a roaring start, second year we won restaurant of the year (lake district UK) then foot and mouth disease hit the farming community. Overnight the tourist stopped coming, then the locals and local business buttoned down the hatches (mini recession).I did not have enough capital / cash flow to carry me for the following year of ****.

This was obviously not my fault, however having learnt from that, in my next venture (hotel) I had the cash flow to alwayse carry me for one year. This has stood me in good stead ever since.

This article may also be of interest ;
http://www.chefsworld.net/chefs_foru...=1&FTID=eVk%3D

all the best.

www.chefsworld.net

[panini]

Take the next three years and use it for education. Get as many business courses as you can.
Develope a good relationship with a CPA that specializes in business developement.
Develope a good relationship with an Attorney.
Protect whatever you own now.
The main thing is not to let anyone or yourself talk you out of your dreams.
Business owners like to exaggerate! It can't be that bad if they are doing it.
ALWAYS build your business for acquisition!!!!
besides that, it's a no brainer. Don't listen to "The hard hours".. It's like any other business, you have to work at it. Hours don't count if you are doing something you like and your counting the till at the end of the day.
pan

[Free Rider]

I'll add to what Panini says by adding that there are many resources that ignored by small business people that include economic forecasting of the local area. Many universities and colleges have such business resources that can help you guage the near-term economic climate that you will have to either suffer or enjoy. Take a look at what the economy is doing and what you will have to weather. Develop a good relationship with an economist.

[Frayedknot]

Brittany, planning a new venture is an exciting time. You have already got some great advice, and if you tally most of the responses most have had the bad experience. (I know how that feels) I have started a couple of businesses myself (not in the food industry) that turned into quite successfull ventures. Still going strong in a couple of cases. I retired @ 42yo three yrs ahead the goal I set in College. A good word of advise is to surround your self with great people ie: accountants, FOH or BOH, which ever, folks you can trust and trust they can do well. Mebbe a they can earn a small piece of the pie, gives them "ownership" feeling. I have given small pieces before and found that with the right people it has help wayyyy more than the small percentage ownership I have given up.


A couple of things that are critical (already mentioned) control, total understanding with partners/investors, PROTECT THE RANCH (you don't want to loose the house in the deal) and always, always make business decisions with your head not your heart. If an employee is not cutting it (your son, sister etc) have ONE meeting to get it right. Keep in mind your training may come into question here. THEN if the do not get it right sorry but it just did not work out for either of us.

Set the business plan such that your personal assets are protected. Maybe a LLC or Sub S Corp. what ever. The local chamber can put you on to the SCORE guys, uh..Society of Retired Exectives.. these guys can be a great sounding board. They can help with the business plan, and financial advice and even help with a small business loan etc. FREE!

Investors are just that, not partners... ALWAYS keep control, or 51% of the voting stock...your decision is ultimate and final, when put to a vote. Never wiaver on this. Frankly, a good business person will appreciate this.

Then ALWAYS have the "what if" strategy, no one wants to talk much about this part when the excitement of a new business venture is planned. But I have found that a some point reality sets in and the NOW WHAT questions are being asked. Just have a plan.

As Pan said, if it is a dream go for it, jump with both feet, put the dream together with great care, and understanding and then it will succeed. IT HAS TO..

Best of luck

[Tanasy]

Congratulations on your decision to open your own place.
Are your investors also partners? Big Difference, if they are partners as well as investors you’re for sure looking at problems down the road. If your investors are providing funding for the project, make certain that they have the necessary funds available and then some. Example: If your plan need’s $100,000 make sure that they have at least $150,000 or better. Never think that you know all the answers, you can’t nobody does. If you take any advice, take it from people who are there or have been there. Don’t take advice from costumers, if they knew anything about operating a successful restaurant they would be doing it for their selves. The biggest problems will be employee issues. Don’t hire friends. The first year should be working on a plan to get through another year. Probably the best advice I can give you is this: Do not be an employee in your own restaurant. Once you become the chef/owner, the cashier, or carry any other position in your own place, you’ll be hindering the progression of growth. You can only get to the next season if you work on taking the restaurant there doing things like advertising, promoting and anything else that brings in more revenue. You can’t do this if you’re working behind the line all day. I’m not saying that you should pack away your whites, by no means. You have to lead by example and frequently walk through the line to assure the quality and standards you put into place when you opened. I’m simply saying that once you take on the roll of working a position in your restaurant, you then become an employee of your restaurant and you are no longer in a position to take the restaurant where it has to go to be successful. Don’t make that mistake, many do and many loose. They start of believing that they could save a salary by doing it their selves. The salary their saving will cost more down the road and could possibly contribute to the restaurants frailer. Be The Boss, Not An Employee.

Tanasy

[bluedogz]

I have no restaurant experience except for waiting tables at a Friendly's in college, so I'll stick with what I know: banking.

I've seen many a financial situation go completely tits-up because a principal tried to do something themselves or cheap out. For example, do you own your share of the business jointly with your spouse, or not? Who will personally guarantee any loans? These aren't decisions to be made via an article in a magazine, yet business owners do it every day.

Interview your professional advisors like any other employee, and understand that no one of them knows everything- a CPA cannot advise on real estate purchases, just as your FOH staff can't advise on kitchen design.

[sweet pea]

Such good advice from so many people!

Congratulations on your decision to take the leap! There is no better feeling of accomplishment than planning and opening your own place. To be your own boss and celebrate your own victorys is a wonderful feeling. That being said, it is definately hard work - and lots of it.

A solid business plan is so important. The financials have to be well thought out. Once you have thought them out - subtract half the sales, and add on twice the expenses. If you can still make it add up, you're on the right track.

A big difference will be had depending on wether you buy an existing place, or start from scratch. There are certainly pluses and minuses to each way. If you are going to start from scratch and build out - do your homework! Codes and permits, restrictions and zoning issues should be well researched prior to choosing a location. If your buying an existing business, that legwork may already be started for you - but double check everything. Location, Location, Location - it's importance cant be stressed enough.

Make due on the bare minimum to start. Buy only what you absolutely need to get your business off the ground. Once your up and rolling, you can continue to invest in your business. So much of the opening expense can get tied up in what you "want" rather than what you "need".

Don't stretch yourself too thin. You can't do it all yourself - even if you are a control freak. You will burn out. It is so important to hire key staff that you can train and trust so that you can get away from the place once in a while. After two years, I can finally walk away for a weekend with confidence and know my staff has it handled. I probably could have, and should have done it sooner, but the control freak in me wouldn't let me. I definately have my hand on everything being done in my restaurant, but I also have key people in charge of both FOH and BOH. This is the only way you will have time to do the things an owner must do as well.

Hire a qualified Accountant. If cooking is your forte - not accounting, hire someone who knows the ropes. They can handle the taxes, payroll, monthly books or other things that they are trained to handle. Nothing is worse than getting a call from the IRS because you forgot to file some quarterly report. Most new business owners are not experts in this feild, so hire someone who is. THey can also help you get your Busines identity set up and make sure you are protected should the unexpected happen.

Have realistic expectations. So many others have commented on the financial expectation. They are right on. Staying in the black during your first year is very difficult to do. Many, Many unexpected things will come up, and you may find yourself without a paycheck. Be prepared for this, and have plenty of resources to cover yourself should this happen. Stressing about finances will take over your world if you let it.

Enjoy yourself. In everything you do, find joy. This will be the biggest rollercoaster ride you have ever taken! There will be days when your want to poke your eyes out, tear your hair out and hide in a closet and scream. There will be other days when you cant stop smiling about what you have accomplished, the rush you pulled off without a hitch and the adoration from your customers makes your head swell. Take the good days with the bad and know they will even themselves out in the end. Put the time into your decision to make sure your family can handle life without you. You will be married to your place for quite a while - and the honeymoon is several weeks of stress. Soon enough, the place will get on an even keel, and you might even start enjoying it.

Being an Owner, after so many years of working for someone else has been my greatest joy. It tears my heart out to be walking away from my business so early in the game, but health issues in our family make it impossible for me to do anything else. I envy your enthusiasm as you get started on your trek - there is truly no better feeling. Good luck to you!

Joanna

[mochefs]

I don't know a friggin thing about running a restaraunt. Having been in venture capital for 4 years in the internet boom though I do know a thing or two about getting a business off the ground.

The only items that I think translate properly to a restaraunt would be;

a) Put your money into your product (food and people) and not your infrastructure (building, decoration, computer systems, etc, etc.). People will buy a great product, even if they have to sit at a table covered in paper and peeling paint on the wall. In my woefully under-informed opinion the low success rate for restaraunts is partially due to people wanting to walk into a business instead of building a business. There's a big difference. *Grow* your business, don't expect to step in day one with everything exactly like you dreamed. Business great? Expand. Getting even better? Raise prices and expand more. There's always this notion that you can only serve a certain type of food in a certain type of atmosphere, I don't buy it. I know far too many successful restaraunts (now) that started out as tiny, cramped, poorly decorated places....that served great food. They didn't have a big media splash when they launched, that's for sure...but they were also still in business a year later because the low overhead allowed it.

b) Be personally financially secure. I don't mean you can't take out loans,investors, etc. I mean regardless of the source of the money you should have enough *personally* that you can go at least a year without paying yourself. If you have a spouse or SO tell them to expect that. Lots of folks end up having to walk away from what will one day be successful simply because they can't personally afford to not have a paycheck, or because of the pressure from spouses, etc. when they weren't making any money. Where investors, employees, etc. are concerned the only way they are going to willingly take a financial hit and stand behind you is if they know you are taking a bigger one.

My .02 cents