Friend wants to open small restaurant

[natto fire]

Originally posted by: Dari

Originally posted by: Captain Howdy
Can't help but feel like you mocked my post. The location and what not might seem easy, but in this economy, which will degrade further over the summer, they are tricky variables. Maybe you should help her get a proper visa and an Applebees franchise, tell her to stuff her dream because it will inevitably fail...

Ahhh...there's that 'Can-Do' spirit... Thanks anyway for all your help and advice.

Ok, maybe that reply was a bit harsh, but I am curious if you or your friend have ever worked at a small restaurant and even know where to begin with this. I tried to offer my advice from first hand experience, but it seems like you made this thread with pre-conceived notions and are not going to take any of the posts detracting from it in any way.

Don't get me wrong, good ideas and dreams are what this country is founded on, but you might want to take a reality check from mine, or the many other posts that offer the same warning.

Best of luck either way.

 

[slayer202]

youre a joke. get the hell out of the way. tell her to go back to what she knows. i guarantee if she tries to start ANY kind of business she goes down in flames FAST

 

[alkalinetaupehat]

How about starting with a franchise to build experience and then move on from there?

The owners of the restaurant I work at have a pretty interesting process of buying a restaurant, getting it into prime shape, and then selling it and moving on. There's mucho dinero too with how they do it all, and come to think of it I really should have a chat with them about this since I've been curious as to how to run a restaurant. Its something that's kinda cool since the whole game is VERY do or die.

Oh and yeah your friend should work on getting resident alien status or something if she wants to open a restaurant here.

EDIT: *Some* business classes should help a lot too, just don't get bogged down too much with them as business management is very touch-and-go.

 

[gsethi]

I am in the restaurant industry. Not going into details or trying to discourage but I am just going to give few tips/facts:

1) LEASE/RENT - Most landlord will require security deposit (normally 1-6 months rent depending on your experience) and will require atlteast a 3year Lease (5year is more common)

2) START UP COSTS - Furniture, Fixture, Equipments, Contractor/Remodeling fees. Add time to get permits and approvals from City/County/Health/Fire departments. You will need to have a professional architecture draw up plans and then go go each office and get approvals from each office. Health and Fire guys will inspect the places. Everything has to match the code.

3) LEGAL/PROFESSIONAL/UTILITIES COSTS - Accounting/Book keeping, Payroll costs (payroll taxes), Sales Taxes, Business Licenses, Health permits, Electricty, Water, Sewer, Garbage/Trash, Repairs, Maintainance, Insurance (Workers' comp, Business Liability), Telephone, Advertising, other small misc costs. YES, Every little costs adds up. Also, need to ensure that you have extra resources (basically $$$) to keep the business running. On Average, it takes ~6months to ~1year for people in immediate neighborhood to start notice the place and to get it to stick in their head so that they visit regularly. (This time might be shorter for franchises and higher for private restaurants)

4) EMPLOYEES - Biggest headache of restaurant industry.

5) OPERATION - Have to ensure your place is clean, customer service, food quality is top notch. ALSO, need to know Health department requirements and their rules.

6) True Cost - Remember COGS (Cost of goods sold) is always lot higher than FOOD COST. COGS includes your paper supplies, cleaning supplies, small kitchenware, cutlery, drinks, Wastage, Spoilage, etc etc.

Again, I am not trying to discourage but just trying to help you out with some basic tips. Its not an easy industry and as others have mentioned, you really have to stick with it to see returns (especially if its private and a new concept).

 

[Phokus]

Originally posted by: gsethi
I am in the restaurant industry. Not going into details or trying to discourage but I am just going to give few tips/facts:

1) LEASE/RENT - Most landlord will require security deposit (normally 1-6 months rent depending on your experience) and will require atlteast a 3year Lease (5year is more common)

2) START UP COSTS - Furniture, Fixture, Equipments, Contractor/Remodeling fees. Add time to get permits and approvals from City/County/Health/Fire departments. You will need to have a professional architecture draw up plans and then go go each office and get approvals from each office. Health and Fire guys will inspect the places. Everything has to match the code.

3) LEGAL/PROFESSIONAL/UTILITIES COSTS - Accounting/Book keeping, Payroll costs (payroll taxes), Sales Taxes, Business Licenses, Health permits, Electricty, Water, Sewer, Garbage/Trash, Repairs, Maintainance, Insurance (Workers' comp, Business Liability), Telephone, Advertising, other small misc costs. YES, Every little costs adds up. Also, need to ensure that you have extra resources (basically $$$) to keep the business running. On Average, it takes ~6months to ~1year for people in immediate neighborhood to start notice the place and to get it to stick in their head so that they visit regularly. (This time might be shorter for franchises and higher for private restaurants)

4) EMPLOYEES - Biggest headache of restaurant industry.

5) OPERATION - Have to ensure your place is clean, customer service, food quality is top notch. ALSO, need to know Health department requirements and their rules.

6) True Cost - Remember COGS (Cost of goods sold) is always lot higher than FOOD COST. COGS includes your paper supplies, cleaning supplies, small kitchenware, cutlery, drinks, Wastage, Spoilage, etc etc.

Again, I am not trying to discourage but just trying to help you out with some basic tips. Its not an easy industry and as others have mentioned, you really have to stick with it to see returns (especially if its private and a new concept).

I imagine the lease/rent thing would be cheaper nowadays considering the economy... i've seen so many businesses go out of business on my main street these past couple of years it's not even funny. Commercial leases should be a buyer's market nowadays.

 

[gsethi]

Originally posted by: Phokus

I imagine the lease/rent thing would be cheaper nowadays considering the economy... i've seen so many businesses go out of business on my main street these past couple of years it's not even funny. Commercial leases should be a buyer's market nowadays.

It all depends on the local market. In some locations, you can get very good terms while not in others. again, LEASE negotiations is very YMMV and can run into months.

 

[KevinH]

Originally posted by: Dari

Originally posted by: Captain Howdy
After personally knowing two people who have had restaurants fail, one of them being my father, I learned a few things. The location is very important, even if you have a great idea it has to have a demographic around to support it, especially with so many people just settling for chains or fast food. The second is that they inevitably have HUGE amounts of overhead and run on very thin profit margins. Depending on the type of restaurant she wants to run, there are the possibility of shady employees, lot's of insurance crap, and liquor license woes. Obviously the sagging economy adds a bit of twist to this as well.

The best advice I could offer is to be prepared to know when you should cut your losses and move on. My dad was trying so hard not to let his place go into the ground that he and my stepmom would sometimes work 90+ hour weeks doing everything from the janitorial to the paperwork. It really wore my dad down and I was glad to see him finally call it quits. It is a very exicting and fast paced industry, and not for the faint of heart or easily offended. It taught me loads about work ethic and provided me with cash and appreciation of food.

Yes, the location and customers are the easy part. Anything else? She may have to hire the chiefs, right? Insurance as well, correct?

He already stated it but it needs to be reiterated. I did the books for a huge restaurant So-Cal a few years back so I got to see all the #'s that went through it. Bottom line is a cash business means you need employees you trust. That is HUGE.

 

[KevinH]

Originally posted by: kranky
I would imagine she'll need to sit down and figure out how much rent will be and the cost of setting up the restaurant. Will she have to remodel a place to turn it into a restaurant? If she thinks she can find a place that used to be a restaurant that she can just take over, will she be smart enough to ask "Why is it no longer in business?"

Does she have enough money to pay her suppliers in cash until she gets established? Enough for an advertising budget? Plates, cups, flatware, cooking utensils, dishwasher, freezer, refrigerator, shelving? Accountant to do payroll and business taxes?

My uneducated guess is she'll need to have at least $25,000 on hand to get things rolling.

If she knows nothing about the business, she's doomed, unless she plans to hire an experienced restaurant manager or consultant and that won't be cheap.

25K isn't enough even in BFE. I was considering opening up a restaurant in LA with a pretty big promoter and the #'s we were looking at was closer to 600K w a year in reserves. Mind you, this was a VERY conservative sized establishment with the liquor license included.

I can see it being a cheaper based on rent/payroll in other locations but nothing remotely close to 25K.

 

[KevinH]

Originally posted by: JS80
Kind of hard these days you're competing against investor groups with "celebrity chefs."

Lol. Please fool. You're in LA too? Don't front boss.

 

[KevinH]

del

 

[Dari]

Thanks guys, keep them coming (the criticism and the advice).