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80 Seat Restaurant / $6,000 Rent / $30 Per Person Check Average / $600,000 Gross //// What Could Net Profit Be?

post #1 of 23
Thread Starter 

I'm looking at opening a restaurant with the above projected figures. After paying the chef and possibly a manager, what profit would be left? 1%? 2%? 3%? more?

Thanks!

post #2 of 23

80 seats is one of those numbers where there are days you will get 20 covers.  Are you willing to be the chef/prep/dishwasher on those days?  If so, yes, you can turn a profit.

post #3 of 23

According to the "2010 Operations Report" by the National Restaurant Association and Deloitte & Touche LLP

Quote:

Full-service restaurants at all levels spent about 32 percent of each dollar on the cost of food and beverages, 33 percent on salaries and wages, and from 5 percent to 6 percent on restaurant occupancy costs. Profit margins, however, varied according to the cost of the average check per person. Those with checks under $15 showed a profit of 3 percent. Those with checks from $15 to $24.99 boasted the highest profit margin at 3.5 percent. Finally, those with checks of $25 and over had the lowest profits, at 1.8 percent.

 

 

Quote:
those with checks of $25 and over had the lowest profits, at 1.8 percent.
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post #4 of 23

Did the survey mention anything about number of seats there chef?

post #5 of 23
Thread Starter 

5-6% on occupancy costs? Where's that, Duluth? I am in an east coast seaside town where restaurant rents range from 9-11% of gross; water bill is $350-$600 per month; utilities are between $850-$1200/month (gas+electric).

 

I plan on being at the restaurant 40-50 hours a week (and doing administrative work in addition). Am not lazy and am a very good prep and line cook. I'm starting to feel that no matter how hard or smart one works, there is no money in this business as an owner unless one owns multiple restaurants...and that's a lot of work and stress.

post #6 of 23

That's the average for all places, all sizes.  I don't know if you've traveled middle America but there are a lot of shacks with a table, two chairs, and a crock pot calling themselves restaurants.  I kid you not, I walked into one of these places when I visited Hannibal MO.

post #7 of 23
Quote:
Originally Posted by kuan View Post
 

Did the survey mention anything about number of seats there chef?


No, but don't know how that would impact percentages. Gross numbers yes, but percentages, not so much.

 

Strictly my opinion at this point in time, I reserve the right to change it as more is revealed.

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post #8 of 23

Is there a location you could buy? $6000 a month rent seems more expensive than a mortgage would be. 

post #9 of 23
Quote:
Originally Posted by MaxS View Post
 

5-6% on occupancy costs? Where's that, Duluth?

Wise business percentages are not governed by geography as much as they are by gross.

 

 

Quote:
Originally Posted by MaxS View Post
 

Where's that, Duluth? I am in an east coast seaside town .

I would expect the gross to be much larger in an east coast seaside town than in Duluth.

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post #10 of 23
Quote:
Originally Posted by MaxS View Post
 

5-6% on occupancy costs? Where's that, Duluth? I am in an east coast seaside town where restaurant rents range from 9-11% of gross;

Occupancy cost of 10% can be viable, but the 4% difference between 6% and 10% has to go somewhere. In the data previously mentioned from the NRA, the average food cost % was 32 and wage % was 33. Put 2% of the 4% difference on each. Now you have food cost of 30% and wage cost of 31% to balance out the 10% occupancy cost and thereby achieve your 1.8% profit.

 

Percentages are not set in stone and can come in an endless number of variations, they just have to add up to 100%

 

Practical reality is shaped by % and averages, but not a slave of of either. I flew in the face of text book numbers for years and achieved what most pragmatic forecasters would say is impossible, so by all means don't let my posted % deter you from your dream.

 

If I had listened to those practical souls, I never would have opened a restaurant. What a shame that would be and what regrets I would have. Instead today I get to walk ankle deep in warm water and feel the squish of sand between my toes without looking back!

Wisdom comes with age, but sometimes age comes alone.
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post #11 of 23

How many covers a day?  What are you paying for product (food cost) ? Is waste  all but eliminated?  These are just some added factors that play in to profit and lose.

Chef EdB
Over 50 years in food service business 35 as Ex Chef. Specializing in Volume upscale Catering both on and off premise .(former Exec. Chef in the largest on premise caterer in US  with 17 Million Dollars per year annual volume). 
      Well versed in all facets of Continental Cuisine...

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Chef EdB
Over 50 years in food service business 35 as Ex Chef. Specializing in Volume upscale Catering both on and off premise .(former Exec. Chef in the largest on premise caterer in US  with 17 Million Dollars per year annual volume). 
      Well versed in all facets of Continental Cuisine...

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post #12 of 23
Thread Starter 
Quote:
Originally Posted by chefedb View Post
 

How many covers a day?  What are you paying for product (food cost) ? Is waste  all but eliminated?  These are just some added factors that play in to profit and lose.

This is a hypothetical restaurant I'd like to open...but not at 1.8% profit.

 

So the # of covers is on my spreadsheet and varies from season to season and at $30/cover adds up to 600K.

 

I have the added problem of not wanting to pay my cooks less than $14/hour because 

a) that's not fair and b) at that rate, where I am located, you could never keep someone for more than a year.

 

So in my locale rent is high (around 10-11% of gross typically) and wages are high. Food costs are probably the same as the rest of the country, but I don't know that for sure.

 

ChefLayne, when you say "occupancy cost" does that include utilities?

Thanks

post #13 of 23

In the NRA report, occupancy cost encompassed rent, taxes and insurance.

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post #14 of 23

One of my concerns with your hypothetical restaurant is at 80 seat, $30 check average, sales of $600,000; that is not even a full turn per day but in order to insure that your service doesn't suffer if you get surprised and do three turns one night, you would have to staff with that triple turn scenario as a possibility which would make it hard to hit a reasonable labor cost. I would be scared of any 80 seat restaurant with a $30 check average that did sales of less than $1.2 mil.

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post #15 of 23


Or to be in the right spot at the right time with the right concept and product.  Then a place might make money not  being a chain operation.

Chef EdB
Over 50 years in food service business 35 as Ex Chef. Specializing in Volume upscale Catering both on and off premise .(former Exec. Chef in the largest on premise caterer in US  with 17 Million Dollars per year annual volume). 
      Well versed in all facets of Continental Cuisine...

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Chef EdB
Over 50 years in food service business 35 as Ex Chef. Specializing in Volume upscale Catering both on and off premise .(former Exec. Chef in the largest on premise caterer in US  with 17 Million Dollars per year annual volume). 
      Well versed in all facets of Continental Cuisine...

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post #16 of 23
Thread Starter 

Yeah, I'm probably being too conservative with my projections of customers. Any restaurant with the right concept and the right price point ought to do 80 covers even on a slow day (I suppose). But even if we did do that many covers, at 1 million in gross, there's only $18,000 in profits...just seems stupid. Even if I pay myself as chef $60,000, I would only get $78,000 before state, federal and self-employment taxes. I'm 52 years old and a damn good chef, but what's the point? Body will wear out and not enough income to save for retirement. Any suggestions on how to use my cooking/creative talents to break $100K?

Thanks

post #17 of 23

 I am not trying to be a jerk, just trying to keep it real for you

 

Quote:
Originally Posted by MaxS View Post
 

Even if I pay myself as chef $60,000,

 

 

Could you do this with the numbers being projected? I think you are way high on your estimate.

 

 

Quote:

Originally Posted by MaxS View Post

 

Any suggestions on how to use my cooking/creative talents to break $100K?

 

 

Private Chef

Executive Chef for hotel, casino, etc (but you won't be cooking)

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post #18 of 23

I'd say your projections are off. We have 40 seats, a $13 check average (breakfast and lunch only) and will gross $600,000. Rent is half your number, insurance adds another 350/mo. Your gross should easily exceed twice mine.

post #19 of 23

You mention working 40 - 50 hours a week AND doing the paperwork. Try 80- 90 plus and you are getting warmer.

post #20 of 23
Sales are too low and rent is too high. Rule of thumb is that your rent should not be more than 10% of sales. Yours is 12%, not the end of the world. However, I'm sure you will have other debt in the form of a loan (maybe not). I would try to get at least in the 800k-1mil range.

The goal of your profit is to be also around 10% of sales, which is very difficult. If you can get 5-7% which is the average then you'll make money, but probably not enough to make a large salary. Also like the others said, 40-50 hours won't cut it.....maybe after a few years.
post #21 of 23

Adjusting sales is a good way to start.right now you're looking at 55-60 covers a day. 25 lunch, 30 dinner.

At that rent you should have enough traffic to turn twice. That gets you up in the 1.7 range.

is the rent triple net? or 6 total

paying yourself 60k, you're buying a job. Might as well get a roach coach,

FOR YEARS I LIVED TO WORK! NOW I WORK TO LIVE!
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post #22 of 23

Looking at the numbers you gave I am guessing that you are looking at renting/leasing a place about 2800-3000 square feet?  This would mean you are at $26 sqft a year, so i would hope this is a high traffic WALKING area.  I mention this because that rent seems high, I have been contemplating a place in my town and in the little down town for a place that size I would be looking at $1800 to 3500 a month (thats 30k right there).  So have you done a traffic survey and for that rent the walking vs the cars is more important, moreover are there a few other restaurants around you!. However quite simply put its rare for an owner to take any profit with in the year or so unless they are working with in the restaurant, which is not profit but a wage. The averages here are quite accurate as well from everyone.  The first 3 years you will be looking at 1.8 to 3% than you may be able if all goes well to break a 5% (thats why so many open multiple locations 1.8% at 3 places starts to add up).  The biggest mistake I see is that at the end of a month or year I see new owners take all the "net profit"  as just that net profit or their salary and that is a sure fire way to go under at that 3-5 year mark.  3-10% of sales should be set aside for renovations, repairs, etc.... Right now I am planing that I may open my joint in about 4-5 years (personal finances will be debt free), however I am looking that I will have a salary of $25-40k for the first 3 years as the Chef/Owner.  

post #23 of 23
It just boggles my mind that in this current economy why would anyone would want to show a profit? Since 2008, profit is just one small calculator, and that's only if you plan to sell your business Other than that, it's quite useless and obsolete.
40 yrs. ago, the concept of ownership was to get it off the ground, work your buns off (usually unpaid) increase gross sales as much as possible. Your payday came when you sold your business and used gross sales X current market multiples. After 2008 everything has changed.
Businesses are sold on market multipliers of net profit. 'hello tax man'!
That's the main reason I changed my business concept to keep the puppy going as long as possible and continue to draw on it. I've been in the same location for 18 yrs. and just signed another 10 with a 10 opt. I'm grooming my niece to keep it going when my wife reduces her work week or
leaves all together (with continuing compensation). I already burped out 4 yrs. ago and perform all of the business accounting needs from home (but still retain a paycheck). My Pastry Chef of 24 yrs. will be the next to go. and so on.
I used to be true blue and invest in retirement accounts for employees and myself. Forget that. no interest, taxes, Give me a constant paycheck till i'm 80 and I'm happier than a pig i sh.
BTW all those calculations above. Throw them out the window. Calculate in buying insurance to insure your insurance policy. Rent? ya 2000. month sounds great calculated into covers. leases without triple net are becoming an anomaly. While your enjoying you 2000. mnth. rent, some yahoo investment group full of ignorant professionals decided to build a 4 story bank at the end of the block. (just for a piece of market share) and add two stories of townhouses.Now your building appraisal goes from 750,000. to 2.2 million. Now your taxes exceed your 2000. monthly rent.
The word profit is right up there with the word passion. You know, the word people use in this this industry as an excuse to let themselves be labor abused, physically abused, mentally abused, sexually abused, etc. It's hard to find a skilled profession where most employees are not passionate about what they do.
DISCLAIMER: Just my own personal opinion with possibly no credibility. Only that I have owned businesses my whole adult life.
Successful Business. Forget all the micro calculating and forecasting! Flexibility is the key to success. You can spent 3 yrs. planning the most wonderful brownie business. If your customers are coming in and asking for lemon squares, you better change to the most wonderful lemon square business.
Most like businesses usually offer the same product. What separates the good company from the bad, is customer service, an open conduit of communication for the customer, actually listen to the customers wants and needs, and consistency. Simple. also a qualified referral practice for things you don't offer.
Two lessons: 1. The most important part of a partnership/investment agreement, is how to dissolve it. 2. Cut yourself a paycheck from day 1. OMGoodness, let me jump down from this soapbox.
FOR YEARS I LIVED TO WORK! NOW I WORK TO LIVE!
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FOR YEARS I LIVED TO WORK! NOW I WORK TO LIVE!
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