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Building a Commercial Kitchen to do it or not!

post #1 of 18
Thread Starter 

I started a wholesale food business about 2.5 yrs ago and it's picking up. The current kitchen I use is grandfathered in so I'm using an electric stove and a convection oven that leaks gas when you turn it on (all state approved). The people who own the place are nice and let me use use it dirt cheap. However, it's time to move on.

 

My question is since there is nothing out there I had the delusion I can buy a small spot and put a commercial kitchen in. However, small spots are expensive. Anyway, I found a place w/ cheap rent about 750 sq ft  750.00 w/ a 5% increase per yr x 5 yrs. I would need to put everything into it. Hood,equipment etc.....I'm thinking a kitchen is about 35k? Than I have to wait for the zoning approvals etc. The other option is to buy a cafe w/ the equipment in place (they are asking 39k),sell off the stuff I don't need and turn it into a production place. It's in a retail plaza so I can retail the food I wholesale to specialty markets. However, the lease is really high 1700.00 per month and there is 3 yrs to go.  I have someone who will sublease but that's 600.00 per month. Which is dirt cheap for someone to store her stuff and come and go. 

 

I was hoping someone who had the experience of puting a commercial restaurant can help me.

 

Thanks so much!   

post #2 of 18

Hi Swedzfish - I'm a refrigeration contractor, so I'll give you that perspective.

35k isn't much when you add up all the demo, design, prep, equipment and install costs.

The 37k could be buying alot of liability. Some of the equipment could be better off recycled and the infrastructure could be in great need of repair. If you have a friend in the refrigeration, AC, plumbing, electrical, etc, trade you would be wise to get their hands on opinion regarding any existing equipment you'd be purchasing.

Good luck to you.


Edited by ekinoderminator - 6/10/10 at 7:52am
post #3 of 18

You're kidding yourself about the cost.

 

I managed to spend at least $45K in an out-to-the-studs remodel of the very small - 8' x 13' - kitchen in my condo.  The costs are a little murky because my son owned a cabinet shop and I got those pretty much at cost, and also I did quite a bit of the cabinermaking myself, covering only the cost of the materials. The appliances are not pseudo-commercial stylish, but just good-quality mass-market units. The installer worked in my son's shop and I got a good hourly rate from him; the granite-counter guy had received a good deal of business through my son, so I got a really good deal from him. 

 

I still went through, as I said, about $45K.

 

Good luck.

 

Mike

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post #4 of 18

Isn't the general rule to estimate total cost.....then double it?

post #5 of 18

Money spent on infrastructure is money spent, lets not get into detail about the actual cost of renovations because that's a separate issue.

 

The big issue, and one that will let you sleep peacfully or worry constantly for the next 5 + 5 years is the lease.

 

Are you getting, or negotiating some kind of a deal with the landlord seeing as that you are sticking in anywhere from 30--60 big bills in infrastructure upgrades?  It's kind of hard to take that stuff with you when you leave.

 

You need a lawyer to read through the lease.  What additional costs are you on the hook for?  Say, in the event of a water main break, is the tenant responsible to pay for "his share" of the repair and damage costs?  Building mainatainence, how much are you paying for?  Lease rate locked in for 5 yeras with no escalation?  What happens after the first 5?  Do you go back to the negotiating table and work with  "Sorry but we have to raise your rent by an additional 44% because the property values and rent have gone up?

 

Who owns the fixtures and chattels of the suite?  Who are your neighbors in the building?  Will they complain about odours or activity in the loading bay?

 

These are all items to consider before signing the lease and before spending one dime.

 

Remember, there is no such thing as a "standard lease",  just as there is no such thing as a "standard woman".  Every lease is unique with unique clauses and situations.  So if anyone ever feeds you with the line "it's a standrd lease" you MUST walk away.

 

If everythig smells right, you NEED to get a lawyer to read through the lease.

 

In almost every new kitchen application, the most expensive infrastructure upgrade is the ventilation system, figure anywhere from 5 -30 big ones.  A hood is just a s/s box with filters, but it's the shaft, the extraction fans, the make up air system, and installation  that cost.  Other things like relocating sprinkler heads cost too, as does a grease trap and additional plumbing/  If you start with a clean slate, consider remote compressors for your refrigeration needs,--it doesn't cost that much more. and the benifits are enormous.

 

Let us know how things work out.

 

...."This whole reality thing is really not what I expected it would be"......
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...."This whole reality thing is really not what I expected it would be"......
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post #6 of 18
Thread Starter 

thanks everyone! Iwill keep u posted.

post #7 of 18

2.5 year history isn’t much time to base on an expansion unless every one of those months has been profitable. If losing your capital investment won’t crush you then no big deal. If losing the money could put you into severe financial hardship then step even more cautiously in these Obama times.

 

Taxes are going to skyrocket in 6 months!!! Dividend taxes are being raised from 15% to 39.6% which is one of the highest tax rates in all industrialized nations. Companies are frontloading as much profit into 2010 to avoid the tax jump in 2011 which means 2011 is going to get punched in the face just when you are starting your new venture. This doesn’t include all the other destructive issues going on with this administration.

 

A ton of this countries expendable income is going to evaporate and even the food industry is going to feel it. If you’re selling low cost food (McDonalds) or your customers flock to you to lower their overhead, you could benefit however. Those in the know are predicting major problems in 2011 with cash in short supply. Keeping overhead as low as possible right now could be a wise decision. If your current situation is not hurting you, holding on to your cash could save your butt!!!

 

Not crazy about retailing the food as there will still be overhead costs and store time required. Those stand alone retail establishments have a very high failure rate if you look around. Retailing the food also will likely be more expense then income. It can drain your time and energy and distract from focusing on your core business. Retail space is also far more expensive.    

 

Depending where you live, 35K is low to build out a commercial kitchen. If permits are required, you’ll likely need stamped architectural plans with possible changes for bathrooms, ADA requirements, fire sprinkler systems and health department inspections. Not to mention NSF kitchen equipment is costly even though there is a ton of used out there.

 

I have done commercial build outs for $50.00 a square foot but that was general office space and much of my own time and sweat. If you’re going forward, I would double that 35K figure for budget purposes and still have a 10% fudge factor on top of that. If you can still afford that, estimate the work with a sharp pencil, get many estimates, research everything and figure in the time you'll lose in running your business to focus on the new place and the move. You'll be shocked how much time this takes.  

 

Tenants are in the driver’s seat right now when it comes to negotiating leases. Don’t be afraid to negotiate hard with the lease, suppliers, contractors, etc. etc. etc. Good luck, entrepreneurs are special individuals and make America great but you need to watch your back right now!!!!!!!!

post #8 of 18

You can do it, just start shopping now for your equipment equipment is cheaper then dirt right now. My first bakery cost me 15K and took me 2 years to acquire the gear. I purchased 2 mixer 6 months ago, 20Q and a 140Q for 5K both are about 6 years old. Call the manufactures and ask to speak with the sales dude. They all want to move equipment and most have returns, freight damage etc. Go for it, life is short and sooner then later this buyers market is going to go away and a darn hobart is going back up to 10-15?k of a used one.

post #9 of 18

 

Venom has some very good advice, but probably the best is to "research everything".

 

This means to go down to yoru City Hall, and see what the respective Dept.s (plumbing, electrical, enviromental, Health want for a commercial kitchen, an dwhat it takes to get your occupancy permit.

 

9 times out of 10 It is cheaper to take a p.o.s. clapped out restaurant and bring it up to code than it is to start with a clean slate.  Like I said above, the single most expensive piece of infrastructure is the ventilatio system, and then plumbing and electrical installs.

 

Don't even start to think about equipment right now, there is plenty of stuff out there, but when the time comes, follow this golden rule:

NEVER BUY USED REFRIGERATION, 

 

-By all means buy used sinks, dish tableing, shelves prep tables, smallwares, cutlery, etc. But make sure the sinks are NSF approved, or you'll catch it from Health

-Stay away from used mechanical appliances like dishwashers

-In general, used gas equipment is good bet, nothing much goes wrong and it is easy to fix

...."This whole reality thing is really not what I expected it would be"......
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...."This whole reality thing is really not what I expected it would be"......
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post #10 of 18
Thread Starter 

I was told on several occasions not to buy used refridgeration. I went to a couple of Rest suppliers and thought they were expensive. I'm looking on Craig's List for prep tables but they go real fast. Anyway, thank you everyone for the info. I need to REALLY research this before I move forward. 

post #11 of 18

Some say that buying used refrig. is like buying a used car.  Many do so, and if you're a competant mechanic or have a 2nd car as back up, that's just fine.

 

When you park your car, it's "OFF".  nothing's running, nothing's moving.  When you leave your kitchen, the fridge is still running 24/7, compressor cycles on and off, defrost cycle kicks in and out, cabinet fan constantly going.

 

The fridge is your "vault", if you like.  Not only have you got raw ingredients in there, but finished goods and  semi-finished goods--tomorrow's sales.  You have a lot of money in terms of labour and potential sales behind that door.  If the fridge goes, you loose money, not just in throwing out ingredients and products, but time lost in procuring new ingredients, time lost in making new products, time lost in  mucking out the cabinet.  Then there's the repair costs, usually around $65/hr not including transport time and no guarantees that they will have the parts.  It sucks. 

 

You'll find used equipment at auctions, at restaurant equp. dealers, and in the papers.  Get to know the sources around your area.  One method of measurement is the warranty period a used equip. dealer will give you.

 

Hope this helps 

...."This whole reality thing is really not what I expected it would be"......
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...."This whole reality thing is really not what I expected it would be"......
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post #12 of 18
Thread Starter 

thank you Foodpump! was wondering if a fryolater is a whole other issue as far as installation,ins cost?  

post #13 of 18

You can't cook and sell at a home based kitchen in some states like Texas!

post #14 of 18
Quote:
Originally Posted by Pbj Sweets View Post

You can't cook and sell at a home based kitchen in some states like Texas!

impressive...

 

your first post is OT on a 3 year old post...

 

welcome - nowhere to go but up from here !

----

 


"Plus, this method makes you look like a complete lunatic. If you care about that sort of thing".  - Dave Arnold

 

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----

 


"Plus, this method makes you look like a complete lunatic. If you care about that sort of thing".  - Dave Arnold

 

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post #15 of 18
Quote:
Originally Posted by Pbj Sweets View Post

You can't cook and sell at a home based kitchen in some states like Texas!

Hm, not according to: http://homebasedbaking.com/knowledgebase/rules-regulations/cottage-food-law-states/

 

They list the following as the only states NOT permitting home based baking:

  • Alaska
  • Connecticut
  • Delaware
  • Hawaii
  • Idaho
  • Kansas
  • Montana
  • Nebraska
  • North Dakota
  • Oklahoma
  • Rhode Island
Chef,
Specialties: MasterCook/RecipeFox; Culinary logistics; Personal Chef; Small restaurant owner; Caterer
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Chef,
Specialties: MasterCook/RecipeFox; Culinary logistics; Personal Chef; Small restaurant owner; Caterer
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post #16 of 18
Quote:
Originally Posted by MichaelGA View Post

impressive...

 

your first post is OT on a 3 year old post...

 

welcome - nowhere to go but up from here !

bUT WAIT! There's more!

 

The o.p stated in his first post (albeit 30 mths ago) that he was working out of an inspected, commercial kitchen, just that it was too small. ici

...."This whole reality thing is really not what I expected it would be"......
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...."This whole reality thing is really not what I expected it would be"......
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post #17 of 18

This is not true in all cases.  Texas has passed Cottage Food Laws that allow you to bake certain things in a home kitchen as long as you make less than 50gs a year. 

post #18 of 18

This thread seems popular with new posters :D .. two years in a row!

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