Tag Archives: owning a restaurant

RESTAURANT OWNERS – WHAT ARE THEY THINKING?

17 Sunday Nov 2019

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The more I travel, experience communities, and try their restaurants – the more I scratch my head and ask the question: “What are they thinking?” The restaurant business is one that is relatively simple in concept, yet enormously complicated to execute. Develop a product that people are willing to buy, prepare it consistently well, make sure hot food is hot and cold food is cold, serve it quickly and with a smile, and provide value for the money spent. Simple right? It would be if customers were not fickle, if vendors were always dependable, if raw materials were always consistent, if competent staff was easy to find and retain, if your equipment never broke down, if the weather always cooperated, and if the economy would stay consistently strong. Unfortunately, all of those factors seem to work against you.

With all of that uncertainty – why do restaurateurs make it all the more difficult by coming up with hair brained ideas without enough research, and without demonstrated feasibility, and why do they lose sight of the details?

Moving into an expensive rent district to sell a single – value product that you happen to like is asking for failure. That cupcake, cookie, soup, salad, or bagel palace will never pay the rent, attract enough volume, or inspire a staff that you are trying to retain. The Lebanese restaurant across from the Alamo in San Antonio, Texas may be located in the midst of heavy foot traffic, but no matter how great the food is, the concept doesn’t fit the environment. When you open the sixth pizzeria in a two-block radius you will struggle to survive on the slice of business pie that you are left with. And when that “authentic” tacqueria opens with two 16-year old white Anglo Saxon high schoolers assembling the “Best Tacos in Town”, some customers will question the use of the word “authentic”. What are they thinking?

There are many reasons why there are a million freestanding restaurants in the U.S. and why a large portion of them file for bankruptcy within 1-5 years – they just don’t think it through. They don’t know what they are getting into and they certainly are not prepared for the reality of executing a restaurant concept.

Now, I must admit – I don’t own a restaurant, nor have I ever owned a restaurant. Even though I have spent five decades in the restaurant business, and even though I have thought about owning a restaurant many more times than I can count – I had either enough intelligence or far too much fear to actually take the leap. I know that as smart as I might be with preparing others to make the right decisions, I could easily fall into the trap of making those decisions for myself on emotion rather than street smarts.

So, what are the problems and what are the solutions?

PROBLEMS:

[]         WE LIKE WHAT WE LIKE, THUS EVERYONE ELSE WILL AGREE WITH US

Fortunately, or unfortunately to some – this is the service business. This means that those who choose to be restaurateurs need to design menus and concepts that address the needs and desires of potential customers, not simply stroke their own ego. The minute the restaurant becomes a vehicle for a chef’s self-expression is the minute that begins to stress the system and drive the train in the wrong direction. Sometimes it works, but more often than not this is the turning point towards failure. If you want the restaurant to be an expression of art, then make sure that your bank account is flush with cash.

[]         EMOTIONAL EXCITEMENT TAKES HOLD

The thought of owning your own, driving the train, making all the decisions, expressing yourself in a manner that was limited when working for someone else, and the thought of your name on the marque is foremost in your mind, is the thought that clouds your realistic business decisions. Step back and do your research – put aside the emotion until this is done.

[]         CHEFS ARE ALL ABOUT THE PRODUCT – OWNING A RESTAURANT IS BUSINESS

Chefs are technicians and artisans – they are rarely great business people. The most successful restaurants are ones where a partnership exists with both skill sets in place. Find a business partner willing to say “no”.

[]         NOT EVERYONE WILL SHARE YOUR PASSION

In the end, whatever your culinary passion – don’t assume that your staff or your customers will be as passionate about your concept. You will need to either draw them in and win disciples, or invest an incredible amount of time and money looking for the right players. The same is true with customers – if your concept depends on rabid loyalists, then you will need to have patience and a big marketing budget to find and keep them.

[]         COMPETITION IS A FACTOR – DON’T IGNORE IT

Every competitor, even the marginal ones, takes away from your business potential. Study them, watch them, respect them, and work like hell to demonstrate why you are better than them. The pie is only so big and the more competition, the smaller the slice.

[]         MARKETING ONLY WORKS WHEN THE PRODUCT OR SERVICE CONNECTS WITH YOUR TARGET

Don’t expect to turn customers around to your way of thinking and cooking. All the marketing dollars in the world will never convert a carnivore into vegetarian or vice versa. Make sure your product connects to the audience available.

[]         LOCATION, LOCATION, LOCATION – COSTS BIG BUCKS

Yes, without a doubt – Ellsworth Statler’s golden rule still applies – Location Rules! Keep in mind you can overcome this, but it takes time and money. On the other hand – great locations today demand very high rents. Do your research.

[]         IF YOU ARE NOT PREPARED TO CHANGE – THEN DON’T TAKE THE LEAP

Some may say that it is important to stand your ground and stay true to your concept – great – as long as you have the wherewithal and iron stomach to hold your ground. The most successful companies embrace the need to change and do so before it’s too late.

[]         AUTHENTICITY IS IMPORTANT

In the restaurant business it is critical to be true to form if, in fact, you are promoting an ethnic cuisine, style of cooking, or food philosophy. Research it, build a level of understanding, immerse yourself in a culture, hire people who feel it, and promote real authenticity. Don’t try to be farm to table unless you connect with farmers, believe in them, friend them, and work to help them. Don’t offer a Korean noodle shop unless you can spend time in Korea and learn about the culture, unless you are willing to hire Korean cooks and support them through a true understanding of ingredients, culture, and process. This is your investment in being true.

THE SOLUTIONS:

[]         THE FIRST AND MOST IMPORTANT ADVICE HERE IS TO NOT OPEN A             RESTAURANT

Sounds harsh – but IT IS A VERY, VERY, VERY difficult business with incredible demands placed on those involved, and a VERY high risk of failure. So, if you want to jump in – do so with open eyes and total commitment to making smart decisions.

[]         BUT IF YOU MUST:

If you feel the draw that cannot be controlled – then enter it with the right attitude and a willingness to listen and act.

[]         STUDY THE MARKET

Know the market for customers, know what they like, understand their lifestyle, research the characteristics of the demographic, talk with them, win them over, listen intently, and act accordingly.

[]         FIND REAL ESTATE YOU CAN AFFORD – DO THE MATH

Yep – sometimes you need to walk away. The rent or lease SHOULD NEVER EXCEED 6% of your anticipated yearly sales. If it stretches beyond that – walk away! Rent is funny – it doesn’t care that you had a slow month, it is oblivious to your equipment breakdowns, and need to raise the pay scale for employees – rent needs to be paid on time or the landlord will pull the plug.

[]         BE A PENNY PINCHER

Whatever the purchase- ask first: “Do we really need this now?” Look to see if you can buy something used, learn how to make basic repairs on your own. When it comes to menu – keep in mind that real talent is not in grilling a Kobe Steak – the real talent is braising a chicken leg that is exceptional in taste, and far less expensive to work with. Buy smaller garbage cans for the kitchen – control your waste and make it everyone’s job.

[]         KEEP IT SIMPLE – DO IT WELL

Plan smaller menus, build great flavors, be consistent, change frequently, and be unique within the constraints of what people are willing to buy, offer an acceptable range of prices, and keep your inventory down to a minimum.

[]         BE THERE

Sorry, if you want to own it – you need to be there – all of the time. Train your people well enough so that you could leave, but never assume that it will be the same without you. This is the price of admission.

[]         HAVE ENOUGH MONEY IN THE BANK

YOU WILL NOT MAKE A PROFIT IMMEDIATELY – in fact, it may take you 2-3 years before one dollar of real profit sits on the table. Have enough back up in the bank, or the resources for those funds, to support you through those initial years.

[]         BE FLEXIBLE

Study every day, change your plan of attack, don’t get depressed when it’s not working – be prepared to adjust. The best restaurateurs are able to audible on the line of scrimmage.

[]         KEEP IT INTERESTING

You want guests to come back frequently. You want them to bring their friends. You want them to trust you, but at the same time it is always important to throw in a well thought out surprise.

[]         INVEST IN THE EARLY ADOPTERS SO THAT YOU CAN GET TO THE EARLY     MAJORITY

The early adopters are more likely to try something new, but they only represent about 12% of the population. They will get bored in a relatively short period of time and drift to the next new thing, but if you manage them well, then they can be used to entice the majority players who will stick with you for the long run.

[]         PRICE IT RIGHT

The right price is not always the lowest price. Keep in mind that it is all about value. Is the price worth it? Whether it is food quality, service, ambience, or ways that you can customize a customers experience – make sure that they walk away feeling like it was money well spent.

[]         TRAIN, TRAIN, TRAIN

No need to say too much about training – YOU CAN’T SAY ENOUGH ABOUT TRAINING. Everything else falls into place when you invest here – everything else falls apart when you don’t.

[]         KEEP YOUR STAFF HAPPY

It was Richard Branson of Virgin Brands who said that happy employees make happy guests. Be a cheerleader, be a supporter, pay them fairly, and invest in training.

[]         IF IT DOESN’T WORK – CHANGE; IF THAT DOESN’T WORK – THEN HANG IT UP BEFORE IT’S TOO LATE

Know when to pull the plug. Most long-term success comes from plenty of failure. Chalk it up to experience, but don’t hang on until you and your bank account are totally drained.

PLAN BETTER – TRAIN HARDER

Harvest America Ventures, LLC

www.harvestamericacues.com BLOG

ON THE THRESHOLD OF A DREAM – A CHEF’S LAMENT

09 Friday Jun 2017

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(So You Want to Own a Restaurant – PART II)

Deep in every chef’s heart is/was a desire to open and own a restaurant. I think that I can say this unequivocally even though many chefs may choose to deny it. Why is it so? The data is pretty clear – the odds of failure are far greater than the odds of success – yet chefs continue to yearn for the chance to have their name on the front door. Some may even scoff at the data and claim that they have the formula for success that has eluded so many others. There are others who feel the pull, but lack the courage or craziness to take the leap, and still others who simply acknowledge the desire but are disciplined enough to say “no thanks”. Still – there are those moments when every chef thinks “Is this my chance?”

There are plenty of stories of those who do well, who make their mark and may even create a level of excitement that makes everyone turn their hearts in acknowledgement. Of course this is the case because no one wants to emphasize the ones who crash and burn taking egos, pride, big-eyed young cooks, and bank accounts with them – there are many. My intent is not to dash peoples’ dreams – in fact, this article is really about those dreams and how important and consuming they are.

This is partially my own lament about that dream that gnaws away whenever given the opportunity. It is a testament to those numerous occasions when sitting in a restaurant, walking through a community experiencing a resurgence, or simply reading about the next great thing and thinking – “Just think if I opened a restaurant in that community…” Here I sit at the traditional end of my professional career while still feeling that twinge of excitement about an idea for my own restaurant. How many times did my wife roll her eyes as we sat at a restaurant table while I searched every corner for ways that I would do things differently? Come on – I know you do the same thing if you are a chef.

Maybe it is being an American with that deeply imbedded feeling that entrepreneurship is in everyone’s grasp, maybe it is the fact that, like most chefs, I worked way too many hours over a career for someone else. Maybe it is the fact that every chef I know is an impatient creative person who must have an outlet for expression, an outlet that affords the opportunity to sign that work and know that it is theirs. In any case, the spirit, passion, aching desire, and sometime unfulfilled need scratches at your inner being now and again; those ideas that wake you up in the middle of the night needing a pen and paper to jot down the perfect concept.

In the late sixties the Moody Blues (for those younger than 45 – an exceptional band that redefined how rock music was made) released an album entitled: On the Threshold of a Dream. This monumental recording has remained with me since then as a reminder that those dreams are important, even if they may not result in anything tangible. So, here are my thoughts on why the dreams are important to a chef, how they might make sense and come to fruition, and even a few cautions as to why you might want to dream, but keep your emotions in check.

A SIGNIFICANT DOZEN:

[]         DREAMS ARE IMPORTANT

The human brain craves an opportunity to create, solve problems, seek the adrenaline that “think of the possibilities” brings, and accomplish goals. When we deny the brain this innate need we start to lose direction and look at our personal situation as a glass half empty. This is brain exercise that tends to energize the body, stimulate positive emotions, and trigger those endorphins that make us feel good. Dreaming about the ideas that we have and the opportunity to take those ideas to fruition is truly the breakfast of champions. Dreams are important.

[]         EMOTION IN BUSINESS CAN BE DANGEROUS

The first target of our dreams is emotion, excitement, and those all-consuming positive feelings that we crave. As great as it feels to have that “incredible idea” people must understand that emotions sometimes react much faster that analytic reasoning.

[]         THINK BEFORE YOU LEAP OVER THAT THRESHOLD

Those interested in following their dream of owning a restaurant should take a deep breath first. I am not saying that you should avoid taking the leap, but rather take the time to look at all of the challenges as well as the opportunities. Even if you dismiss the statistics concerning restaurant failure and the meager profit margins associated with the food business, you must at least consider one very simple and ultimately important assessment piece – the cost of your rent or lease should not exceed 6% of your expected yearly sales. If it appears that you cannot meet this threshold then walk away from that site and look for another. Rent or lease can make or break even the best restaurant idea.

[]         SOMETIMES YOUR GUT FEELINGS ARE RIGHT

Your gut feelings are typically based on your experience or that of others. Sometimes data isn’t enough to drive a proper decision. A good rule of thumb is “If it doesn’t feel right – walk away.” If your gut gives you a “thumbs up”, then step a little closer to the edge of that threshold.

“There is a certain mindset, prevalent in the business world, that cannot deal with or give weight to emotions and intuition. People in fear are afraid of intuition. They think it is witchcraft — and maybe it is, but a powerful and healthy kind of witchcraft that anyone can tap.”

-Liz Ryan – Forbes Magazine

www.forbes.com/sites/lizryan/2017/02/25/how-to-trust-your-intuition-and-listen-to-your-gut/#753be3df5918

[]         SOMETIMES YOUR GUT FEELINGS ARE WRONG

Still keep in mind that your gut feelings are based on emotions as well as experience. Listen to your gut, but it is always wise to support it with data whenever possible.

[]         SOMEONE ELSE’S CUISINE IS NOT YOUR OWN

Every chef has a driving need to put his or her signature on the cuisine of a restaurant. Sometimes this signature is a leap of faith that an owner other than the chef may not be willing to take. Good or bad, this reality chips away at a chef’s independence and innate creativity. The only antidote for this dilemma is becoming an entrepreneur.

[]         BEING A RESTAURATEUR IS MORE THAN MAKING GREAT FOOD

One of the great gaps in a typical chef’s resume is being able to turn on solid business sense when food creativity is his or her passion. As I have stated in previous articles – restaurants are businesses and unless a chef can build a financially successful business his or her dreams of culinary excellence will be quickly dashed. When that internal need to open a restaurant rises to the surface make sure that someone is involved who possesses the business acumen to support the dream.

[]         FAILURE IS NOT ALWAYS A BAD THING BUT STILL HARD TO SWALLOW

Those who do take the leap may be successful and sometimes it doesn’t work out. Business failure is only a true failure if the entrepreneur chooses not to learn from the experience. Losing your dream is a tough pill to swallow, but a chef should always keep in mind that many of the greatest successes came from previous failures. Just ask Thomas Edison who supposedly failed at around 1,000 attempts to make the light bulb before he finally made it work.

[]         SHOULDA, COULDA, DIDN’T

This is one of the most difficult things for a chef to accept. When all of the skills are in place, when the opportunity knocks, when the capital is there to bring a restaurant to fruition and he or she backed away from the opportunity. This decision will likely haunt the chef for years to come. The solution is – if all of the planets are aligned then take the leap.

[]         INTRAPRENEURSHIP IS A CLOSE SECOND TO ENTREPRENEURSHIP

There is another solution to the Threshold of a Dream – the solution is intrapreneurship. You know that a chef has grabbed the opportunity spoon when he or she refers to the place of work as “My kitchen”. Intrapreneurship is the feeling of owning without the legal assignment of assets, the opportunity to act like an entrepreneur with the support of the actual owner, and the connection between employees, owners, and customers that support your sweat equity as if it meant ownership. This is realization of the dream without the financial liability associated with legal ownership.

[]         NO REGRETS – JUST DREAMS – LIVING VICARIOUSLY THROUGH OTHERS

As I look back on my career I can’t even count the number of ideas that came from personal dreams of ownership. There was always that twinge of desire to take the leap knowing that if I really made the choice I could probably find the investors to support it. I never did take that leap and although I still have those dreams of ownership I know that my opportunity has passed. I don’t have regrets because I live those dreams now through the efforts of individuals that I helped to train and teach. I thrive on their success and whenever possible offer advice and assistance as they navigate the many challenges that parallel ownership.

[]         100 IDEAS AND ONE IS BRILLIANT

One statement continues to support my theory that dreams are important and should never be discouraged. A good friend spoke of her husband once by stating that “He has 100 ideas a year and one of them is brilliant”. Ideas can lead to even better ideas and if you throw enough darts at a target eventually one will hit the bulls eye. Dream on, pass through the threshold if everything fits the model of success and through careful thought try and avoid those that are destined to take you down the wrong road.

PLAN BETTER – TRAIN HARDER

Harvest America Ventures, LLC

Restaurant Consulting and Training

http://www.harvestamericaventures.com

 

SO – YOU WANT TO OWN A RESTAURANT

26 Wednesday Apr 2017

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The life of a restaurateur: “Work all day in preparation to work all night.”

-Gabrielle Hamilton – Prune Restaurant

Every chefs dream is to own a restaurant – this is, after all, everything that a chef works for. Being in control, controlling the decisions, becoming one with the operation, being in charge of your own destiny, becoming the face, heart, and soul of the operation and knowing that any profits are yours to hold is the dream of any chef with an entrepreneurial spirit. I get this – in fact, I have had the same dream for decades, but fortunately I never took the leap. What is most confusing is when a person without the background of living the restaurant work experience for decades chooses to become an owner; “It ain’t easy” – as one in the business will likely tell you.

There are numerous motivations for making a decision to find the funds, the backers, and the loans to buy or lease a piece of real estate and convert it into a factory for food, a destination for diners, and a home to the owners whims and fancies – a signature if you will. The least likely reason to own a restaurant is the desire to make lots of money. Profit margins in restaurants are quite low in comparison to other businesses so owners must take the leap for other altruistic reasons. Here are some of the reasons to own a restaurant and a taste of the challenges that accompany a decision to jump in:

REASONS TO OWN A RESTAURANT:

  1. You love to cook (not just as a hobby) and have done so professionally for at least a decade.
  2. You have been working in restaurants all of your life, have paid your dues and now want to provide a home for others working their way up the restaurant operation career ladder.
  3. There is a need in your community for a meeting place where people can leave their troubles behind, break bread, clink glasses, toast to friendship, laugh out loud, and feel the rewards that a great restaurant can bring.
  4. An acquaintance that is familiar with your cooking at other restaurants and raves about your unique culinary touch wants to invest in you as a silent partner. You put in the sweat equity for a sizable share of the business; he or she covers the cost of building out the space and subsidizing initial year losses, and has no desire to tell you how to operate.
  5. You have a partner (not a good friend – almost always a bad decision) who has very strong business skills. You are a crazy good cook with lots of restaurant experience but don’t know Jack about running a business. The two of you form a perfect business marriage. He or she leaves the cooking to you and you leave the business to him or her. Funds for opening and covering the first couple years are not a problem, the location is perfect, and there is plenty of anxious front and back of the house workers in your area to fill every position in the operation.

THE CHALLENGES OF OWNING A RESTAURANT:

  1. THE HOURS ARE RELENTLESS

As Gabrielle Hamilton stated – “You work all day in preparation to work all night.” It will be a rare situation when the owner can take a day off, come in late, or leave early. Even if you can – you won’t want to. This is your baby and it thrives on your attention. Those who think that it will be easier to own the business than to simply manage it are in for a surprise.

  1. THE OPENING COSTS ARE SUBSTANTIAL

Even if you are taking over an existing operation there will be sizeable costs. If you are renovating or converting a space into a restaurant – the costs will be very substantial. Kitchen space can be as high as $400-$500 per square foot and the dining room – depending on décor and furniture can cost nearly as much. A turnaround cost of $500,000 to $1million is very likely. These funds do not include cost of start up inventory and enough financial backing to cover expenses during that first 6 month – 1-year period of growing pains.

  1. STAFFING IS ALWAYS A PROBLEM

Ten years ago, this was never an issue. Today – finding chefs, cooks, managers, and service staff is one of the more challenging pieces of the puzzle. Much of this issue is related to the restaurant industry’s inability to pay reasonable wages (a result of low profit margins), a lack of benefits, and the commitment of unpredictable time that an employee has to invest in a restaurant career.

  1. PROFIT MARGINS ARE WAY TOO LOW

Profit margins of 5-6% are only realized in restaurants that do most everything right. It is very easy to lose your grip on the narrow profit margins that restaurants provide. On rare occasions the bottom line can be larger, but in most cases it washes out at far less than 5%.

  1. VENDORS ARE NOT ALWAYS DEPENDABLE

If you find vendors who are always on time, always able to provide ingredients to your specifications, willing to listen to your challenges, able to help with solutions, and fair with terms of payment – then HANG ON TO THEM. In many cases your vendors will let you down – be prepared.

  1. CUSTOMERS ARE FICKLE

It would be nice to say that customers are predictable, that if you do a good job they will always knock on your door for a table, that their needs will be clearly stated and easily met, and that they will see the value in the food experience that you offer. As is the case with any retail business- customers are unpredictable, change their minds, and vary their patterns of support.

  1. FOOD IS PERISHABLE

Unlike other retail businesses – your supplies have a very short shelf life. In most cases the ingredients you buy will maintain their quality for 3-5 days. There is little margin of error in operating a business of this type. What you purchase must be sold or it becomes a liability.

  1. EVERY DAY IS DIFFERENT

Good analytical data may help to remove some of the mystery from operating a restaurant, but for the most part each day will bring surprises. Challenges with product, marketing, cost of goods, staffing, customer patterns, impacts of weather, and fluctuations in the economy will constantly challenge your ability to predict and manage the business.

  1. TOO MANY REQUESTS FOR DONATIONS

This may seem like a minor issue, but from my experience – every charity, school, or community organization thinks that restaurants have buckets of money and product to donate for a worthy cause. Unfortunately we (restaurant folks) have big hearts and oftentimes say “yes” when we should say “no”. The best advice is to budget a reasonable amount each year for donations, have a thorough application process for funding or donating, and stick to it.

  1. IT IS NEARLY IMPOSSIBLE TO LEAVE THE RESTAURANT

At least until you are firmly established (maybe 5 years in) or unless you choose to close the operation each year for a few weeks, you will not want to leave the operation. Vacations are not real for most owners. “What will happen if I am not here?” Anxiety will ruin a well-planned vacation for most restaurateurs.

  1. GUESS WHO HAS TO SIGN ALL OF THE CHECKS

A good friend of mine who owned a business for a period of years told me that this was his biggest wake-up call, the thing that kept him up at night for many years: every week he had to look at his account balances and personally sign checks for vendors, landlords, and employees. Fearful that one-day there would not be enough funds stuck terror into his life.

  1. YOUR LANDLORD OR BANK DOESN’T CARE THAT YOU HAD A FEW SLOW MONTHS

Restaurants have ebbs and tides in business volume. Many operations are seasonal in nature, but even those that are not will find that every week produces swings in volume. It would be reasonable to assume that when business is slow your landlord or bank would cut you some slack and let you falter a bit with timely payments. This is NOT the case. The pressure of FIXED costs will eventually be the demise of many restaurants.

After all is said and done, those who are successful restaurateurs are able to make a profit, small though it may be, that is able to keep them afloat while stoking the joy of entrepreneurship, making people happy, and breathing life into their innate creativity. This is the carrot that many seek, but some can never grasp. If you can balance your passion for food with the business savvy to operate efficiently and make good decisions then take the leap.

PLAN BETTER – TRAIN HARDER

Harvest America Ventures, LLC

Restaurant Consulting and Training

www.harvestamericaventures.com

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