ALT-14 Nonprofit Service Sector
The restaurant business is not easy, money is always a problem, costs are high, profit is low. This is a business you either love or hate. If you are going to succeed you will need to love it. There is no other success formula. It is LONG hot hours, (avg owner 80 -100 hrs p/wk); highly demanding customer base (we want it in 5 minutes & perfect every time); and for the most part good help is extremely hard to find.Still interested? Good.Twenty plus years of building restaurants and concepts tells me that it IS possible to succeed in this business.
FIRST: Look at your concept and business plan. Is it really feasible? Are the funds there for you to work with? The property will not become self sufficient for approx 2 years (industry avg), which means that you will continue to invest capital in it for two years AFTER you open your doors. This is the area that causes most restaurants to fail. High opening costs and high overhead are the number one killers of new properties. You CANNOT expect to have your costs covered by your customer base for at LEAST 2 yrs. If it does happen, and I've only seen that occur twice in 20 yrs, you'll be ahead of the game, so count yourself lucky.
SECOND: Location DOES count. Look at the traffic in front of the property you're considering. It should have a traffic rate of approx 10k-100k cars passing per day depending on the size of your city and the location within the city. Is the property easily accessible from the road? This can be a major problem if you're looking at a one way street and traffic must cross over to get to your property. What is the competition like within 5 blocks (all directions) of you? Look at and test your local competitors. What are they selling, how are they selling it, what's their foot traffic like, how do they perform? AND, how much of their customer base do you think you can get? Don't assess this by car. Walk the blocks. Look at the aesthetics of your potential property and your competitors' properties.
THIRD: The property. I do NOT recommend building a new site. Look at existing properties that were previously restaurants first. It will save you tens of thousands in build-out costs, and potentially in equipment costs. Consider leasing as serious option. Most landholders will go for a low rent in the beginning if you are willing to cut them a piece of the pie later. It is important to explain this in lease negotiation. Contemplate a graduated lease, where lease payments build up as your business builds, this can be hooked to a percentage or something similar to a graduated loan with a balloon payment. Property owners are usually willing to work with you so consider options before signing a standard lease. And before you sign anything, find out why the last property failed. The reason may be a factor in your success also.
FOURTH: Equipment. DO NOT buy new equipment. It is as simple as that. Buy used or lease it (possibly from your landlord; if the property came with equipment there may be a clause in your lease for it). Shop before you sign a lease. Look at what you'll need and what is feasible for the property. The other major consideration when purchasing equipment is your menu. You can tailor your menu to your equipment and save yourself thousands. If you're insistent on a particular dish then consider alternative methods of cooking with the equipment you already have. This could very well lead you to a novel and marketable new product (ie- your own signature item)
FIFTH: Menu. It's a lot of work and costing. Food cost should AVERAGE 25-35% on your menu. That means that some items will cost you more to produce than others. Your OVERALL food cost should avg @32%, but it will be higher in the beginning. When designing your menu consider your competition again. What can you offer that they don't, or what can you do better than them? If they have great food but the service sucks, then you could pull form their menu for ideas. If it's just the opposite then steal their staff away and show them how to do it better. This area takes a lot of consideration and is too broad of a topic to discuss here. But INVEST the time in it, and work with someone who has knowledge of the type of menu you want to design. If you are just going to manage, then hire a chef that will work with you to develop your ideas and LISTEN to theirs. Together you should come out with a potentially sell-able product.
SIXTH: Licensing. It varies from state to state and sometimes county to county. Check with local officials for this info.
SEVENTH: Staffing. Good luck. There tends to be a highly unreliable work force associated with the food service industry. Drug and alcohol abuse are standard. Work ethic tends to be particularly low, especially in the southern US. If you find good employees PAY THEM WELL. These are the people that will make or break your business. Hire well and retain them. Initially this seems like bad advice, but think about all the time effort and money you will save by not having to rehire for the same positions over and over. It will also keep your product and level of service consistent.
This is just the basics. There's much, much more. But one last bit of advice: If you think that because you can flip a steak at home that you can open a restaurant, then think again. Don't waste your money.
