Harvest America CUES BLOG

Having worked in the restaurant field for more than four decades, I have often wondered why it is that people take the leap into restaurant ownership. There are numerous documented reasons why this is not a good idea, yet thousands of people each year choose to plop down their life savings, convince family members to chip in and somehow manage to take out a bank loan (banks typically shy away from restaurants) because: “they have an idea for a restaurant” that can’t fail.

At last count there were in the neighborhood of 990,000 free standing restaurants in the United States. This does not include Business and Industry operations (offices, plants, hospitals, schools, etc.) or catering companies that dot the American landscape. Total freestanding restaurant sales in the United States last year topped $475 billion with another $205 billion from those B and I segment operations. 70% of those freestanding restaurants are single-unit operations.

(data from the National Restaurant Association – Pocket Fact book)

Click to access Factbook2014_LetterSize.pdf

What few can seem to agree on is the failure rate for those restaurants. Some figures are as high as 66% failure rate in the first year, but that is debatable. In any case, the failure rate is significant. From my experience, those who remain in business tend to struggle and depend more on positive cash flow than they do on actual profitability. So, the question remains: “why do people own restaurants”? I felt that it would be important to look at some of those reasons: a few are admirable, some are funny and others just plain sad. Since I have spent many years preparing others to enter this field I felt that it was only fair and right that these realities be placed squarely on the table.

First, let’s keep in mind that every serious cook and chef that I know, in his or her heart, would love to own their own restaurant. In fact, I have wrestled with this urge for the full length of my career, but have never taken that leap (maybe the smartest thing that I have NOT done). This may be part of that “American Dream” to own your own, be your own boss, answer to no one except yourself and hope that anyone can create the next “big thing”. We admire those who make a go of it and do so with great success and feel for those who try and fail. What are people thinking when they jump to become a restaurateur and what is the formula for success?

These are my observations (un-scientific):

WHY DO PEOPLE OWN RESTAURANTS:

1. OWNING A RESTAURANT LOOKS LIKE A QUICK WAY TO GET RICH: well, those of us who live it day in and day out know that this is a pipe dream. Some may look at the prices on menus and the cost of that steak in their local grocery store and come to an immediately conclusion that restaurants make money hand over fist. The truth is – if a restaurant is on their game, controlling costs, training staff and managing vendors they might make 5-6% net. Unfortunately, most restaurants are not that astute. Restaurants are faced every day with waste, spoilage, theft, rising prices of raw materials and a struggle to convince their staff that every penny counts.
2. IF I OWNED A RESTAURANT I COULD ENJOY HAVING MY FRIENDS VISIT AND BE DAZZLED BY MY HOSPITALITY: Owning a restaurant is where you are able to clearly separate TRUE friends from people who are looking for an opportunity for a “deal”. “I know the owner” are four words that every server, bartender and chef dreads hearing.
3. I LOVE COOKING AND HAVE BEEN TOLD BY MANY PEOPLE THAT MY FOOD IS SO GOOD THAT I SHOULD OPEN A RESTAURANT: wow – there is a significant difference between cooking for family and friends and bumping those numbers up to 100 plus every night of the week. If you are the owner – no matter how much you like to cook, you will not have the time to do so, nor should you. Cooking is the fun part – you are an owner now and must dedicate your time to running the business (marketing, accounting, hiring and evaluating staff, customer relations, problem solving, training, etc.).
4. IT WILL BE SO MUCH FUN BEING A HOST AND WELCOMING GUESTS TO MY RESTAURANT EXPERIENCE: Yes, hospitality can be enjoyable, but first and foremost it is hard work. You must be bright, positive and understanding every minute of every day. Most guests are nice people who appreciate what you and your staff do, but there is a 5% group that will eat up most of your time and energy. These are the ones who always find fault, know more than you, start with a negative attitude and leave with an even greater one. They still need to be served with a smile.
5. I LOVE FOOD AND WILL HAVE AN OPPORTUNITY TO EAT LIKE A KING OR QUEEN EVERY DAY: You might for a short period of time until you see how much that food is costing the operation. A month into it and you will be happy with rice and beans with the rest of the staff. Besides, after a while you won’t even want to look at those beautiful items on your menu.
6. I AM A PEOPLE PERSON AND WILL ENJOY HIRING AND WORKING WITH PEOPLE WHO HAVE DEDICATED THEIR LIVES TO FOOD AND SERVICE: There are many who are those dedicated disciples of the restaurant business. These are the people that I have always tried to hire and develop, but finding them is not always easy. Additionally, no matter how focused a person is on food and service – they will have bad days and guess what: their attitude becomes your problem to solve. As a restaurant owner you will spend as much if not more time on human resource issues than you do on serving the guest.
7. OWNING A RESTAURANT IS A PUBLIC SERVICE THAT GIVES GUESTS AN OPPORTUNITY TO ENJOY AN EXPERIENCE THAT MIGHT NOT BE AVAILABLE OTHERWISE: well, yes – you are in the business of creating an experience and this is what people do seek out. It will be that “experience” that brings them back and builds your reputation as a restaurateur. This is a noble objective, but never lose sight of the fact that you are running a business, not a non-profit organization. The experience is your responsibility, but so is maintaining a financially successful business that allows the experience to continue.

The restaurant business provides ample opportunities for creative people, individuals who love to serve, passionate cooks, budding entrepreneurs, food and wine lovers and gracious hosts, but the restaurant forum for these activities must be treated as any other business if it is to support those dreams and aspirations.

Like many others I follow the great success stories: Alfred Portale and his staff are celebrating the 30th anniversary of Gotham Bar and Grill in New York City. This has consistently been rated one of the top restaurants in America and one that continues to dazzle guests with wonderful food and hospitality. LeBernadin is a Michelin rated restaurant in New York that recently made the list of the best restaurants in the world. Chef Eric Ripert runs a tight ship that ensures that this is consistently the case. Thomas Keller is world renown for the “finesse” offered at The French Laundry and Per Se and his warm “down-to-earth” offerings at Bouchon and Ad Hoc. His relentless pursuit and insistence on perfection is common knowledge among those in the field. Mario Batali has elevated Italian Cuisine and the “fun” connected with dining in his catalog of restaurants from Babbo to his collaboration with Eataly in New York and Chicago. Restaurateurs like Drew Nieporent from the Myriad Group, Danny Meyer from Union Square Hospitality Group, Richard Melman from Lettuce Entertain You and Jean-Georges Vongerichten from Jean-Georges Restaurants continue to reach new pinnacles of success. So what is their secret?

Most restaurateurs would agree on a simple list:
INCREDIBLE WORK ETHIC
THE RIGHT LOCATION
CONSISTENCY
SUFFICIENT CAPITAL
SUPERIOR STAFF
INVESTMENT IN TRAINING
A GREAT PRODUCT
EFFECTIVE MARKETING
TIGHT CONTROLS
A SERVICE MENTALITY
and… A LARGE DOSE OF LUCK
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**NOTE: The picture in this article was taken using the “Waterlogue” app

PLAN BETTER – TRAIN HARDER
Harvest America Ventures, LLC
Restaurant and Culinary School Consulting, Training and Coaching
http://www.harvestamericaventures.com

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