I don’t believe that I know a single professional chef who doesn’t have a deep seeded desire to own a restaurant. Some are more obvious about the desire then others, some hide it pretty well, but underneath the façade of contentment with their current situation – every chef craves the chance to put their name on the front door of a restaurant.
Why is this ownership fixation such a fantasy for so many? Is it simply the American dream of being their own boss, is it a need to have the ultimate creative outlet that reflects their vision, or is it a false sense of confidence that allows a chef to think that he or she has the right formula for success? Maybe it is that sense of danger, the uncertainty of it as a motivational high, or it could just be a gnawing fear that they might wind up nearing the end of a career thinking: “could have, should have – didn’t.”
The majority of restaurant managers and operators come up through the ranks – this is absolutely important since it is such a simple type of business with enormous complexity in execution that can only be understood by those who have been there – done that. Many of those operators were accidental entrepreneurs who either fell in love with the business over a period of time, or spent so much time in operations that it simply became a logical progression. Chefs on the other hand seem to be born with the desire to own and operate. If a survey of culinary school freshmen included a question: “Do you want to own a restaurant some day”, I would dare guess that the overwhelming majority of young “yet to be cooks” would say yes. That desire may be beat out of them over the years, but it only takes a little encouragement, the sight of a perfect location, a few compliments on the quality of their cooking, or a visit to that new instantly successful concept that brings the desire right back to the surface – with a vengeance.
If you have read this far into the article, then I must assume that I have struck a chord and the ideas for the next great restaurant are filling up your head and soul right now. I am coming close to that scary 70-age marker and I still get excited about ideas for my own restaurant. After throwing some cold water in my face I am usually able to wake up out of those crazy dream states.
I know you have heard all of the reasons not to own a restaurant before – but I think that they are worth repeating – this way I might put a temporary damper on those over the top ideas that are floating around in your head right now. I know: a noodle shop would be killer, Native American cuisine is underserved, and Scandinavian food is hot on the world scene right now – so why not open one in Malone, New York? You can’t believe that no one has thought of this sooner – so the market can be all yours. Well let’s just tuck these realities under your arm:
- There are over 1 million restaurants in the United States right now creating 1.5 million new jobs each year (many of them go unfilled because the labor pool is so tight).
- The number one reason why restaurants fail is poor location – so unless you know how to assess demographic flow, population variances, and socio-economic realities within a radius from a site – then be cautious about your site selection.
- The cost of food rarely goes down.
- Customers are fickle and restaurants can be busy one week and empty the next.
- Profitability in restaurants is quite low with the average successful restaurant realizing 4-6% profit if they can avoid mistakes.
- It is unlikely that you will make a profit for at least three years.
- We deal with highly perishable products with a shelf life measured in a few days – you better make sure that your menu moves well.
- Turnover rates of employees in American restaurants are extremely high.
- Rents are one of the next greatest reasons for restaurant failure. If you can’t keep your rent under 6% of sales then you are looking at almost certain failure.
- Chefs make great marketing images for a restaurant and are responsible for producing the food that will help the operation stand out, but at the same time – most chefs are not the best financial managers, human resource managers, and marketing gurus.
- Unlike many other businesses, a restaurant is quite an intense master. Chefs who work hard as an employee will work even harder as an owner.
- Somewhere around 60% of all private restaurants that open today will close in a year, and 80-90% of those that remain will lock their doors by the time they reach year five.
- The list goes on.
Did I do a decent job of throwing cold water on your enthusiasm? I hope so. But, after all of that if you still think that your brilliant idea, and vast experience are just right for creating a successful operation then go for it! Find a partner with the management experience to be your balance. Make sure that the partner is bold enough to tell you NO, to counter some of your enthusiasm with business logic, and at the same time your best cheerleader when an idea is well researched. Make sure that you have investors willing to fund your idea, offer feedback and support, but are not interested in micro-managing the business (good luck with that). Find a location that is proven, through research, to be right for the concept, and ripe with ample traffic able and willing to support the restaurant. Create a conservative budget and stick to it. Create a realistic timeline for profitability and make sure you have the resources to weather the storm until you reach the anticipated point of success. And, by all means, make sure that your spouse or significant other fully understands what your commitment will be and is still excited about supporting you through thick and thin. NOW – take the leap.
The next three articles will cover three hypothetical situations where young chefs took the leap. I will walk you through some of the challenges that they would face, some thoughts on how they might approach those challenges, and the way that they can turn lemons into lemonade.
PLAN BETTER – TRAIN HARDER
And if you want to be an owner – THROW IN A HEAVY DOSE OF LUCK
Harvest America Ventures, LLC
Restaurant Consulting and Training