Opening a restaurant can be a rewarding but complex undertaking. It is a responsibility with many different pieces of a puzzle that the new owner must skillfully put together. For many, it is all about learning an entire new business from inside out, and doing so in a relatively short period of time. Regardless of your prior job experience or education opening a restaurant is a huge gamble for anyone, anywhere in the world.
If you do not own the building where you plan to open your business, you will have to enter into a lease arrangement with the landlord. Typically these leases require a long term commitment, which means that you had better investigate thoroughly the feasibility of that location. If you select a bad location and try to get out early, you could be faced with law suits or stiff penalties.
Unless you are taking over an existing location, the build out costs for leasehold improvements, equipment, seating, flooring, lighting and related capital outlays can easily exceed $150,000. These are what some in the business call sunk costs, meaning they are expenditures that take years to recover assuming your business is able to survive that long. Either way these are upfront costs you will incur, and if you are fortunate enough you will be able to amortize these expenses over a period of many profitable years in the future.
In the initial 6-12 months or longer, be prepared to spend long hours and weekends away from your friends and family. If you are fortunate enough to make it, it will be due to a combination of hard work and dumb luck. If, on the other hand, your efforts prove futile, be prepared for the inevitable, specifically, you ending up as another statistic in the food industry, without friends, family or savings to fall back on.
Hiring, training and managing restaurant employees are probably the most difficult tasks that the new restaurant owner must face. If you are an easy going individual, your employees will take advantage and walk all over you. If you are overly strict, they will leave and go somewhere else. The restaurant business is one where your employees, from your cooks to your busboys can either make or break your business. In many cities and even smaller towns, newspaper columnists write articles about the local eating establishments. A great review will usually bring in new business for a week or so at the most, whereas a bad review could ruin your business entirely. An unfavorable report from your local health department could also be devastating.
The restaurant business is notorious for staff turnovers. Pay is relatively low due to the low margins of the business. Many restaurant jobs are usually entry positions filled with people in their late teens and early 20s who usually leave for better positions or to continue their studies. Restaurant owners in areas with low unemployment and few students find it difficult to fill positions.
There are a number of other factors to take into consideration which will be covered in detail in subsequent articles. The list includes city ordinances and Health Department rules and regulations; advertising and marketing; menu selections; working capital reserves; inventory control; waste; bookkeeping; incorporation; income taxes, payroll and more. Running a successful restaurant is not a one-man job. You need a team of professional dedicated people and even then it never runs smoothly.
Opening a restaurant is a daunting task, but no matter what you put into it, in terms of time or money, it will not be successful if no one knows you exist. If you are taking over a location that was a restaurant at some point in the past, make sure you do not make the same mistakes that the previous owner did. Unless it was a management problem or some other obscure issue, restaurants usually fail because of their location or lack of working capital. Or as one restaurant critic jokingly remarked, The restaurant failed because the owner ran out of working capital due to a bad location.
If you do not own the building where you plan to open your business, you will have to enter into a lease arrangement with the landlord. Typically these leases require a long term commitment, which means that you had better investigate thoroughly the feasibility of that location. If you select a bad location and try to get out early, you could be faced with law suits or stiff penalties.
Unless you are taking over an existing location, the build out costs for leasehold improvements, equipment, seating, flooring, lighting and related capital outlays can easily exceed $150,000. These are what some in the business call sunk costs, meaning they are expenditures that take years to recover assuming your business is able to survive that long. Either way these are upfront costs you will incur, and if you are fortunate enough you will be able to amortize these expenses over a period of many profitable years in the future.
In the initial 6-12 months or longer, be prepared to spend long hours and weekends away from your friends and family. If you are fortunate enough to make it, it will be due to a combination of hard work and dumb luck. If, on the other hand, your efforts prove futile, be prepared for the inevitable, specifically, you ending up as another statistic in the food industry, without friends, family or savings to fall back on.
Hiring, training and managing restaurant employees are probably the most difficult tasks that the new restaurant owner must face. If you are an easy going individual, your employees will take advantage and walk all over you. If you are overly strict, they will leave and go somewhere else. The restaurant business is one where your employees, from your cooks to your busboys can either make or break your business. In many cities and even smaller towns, newspaper columnists write articles about the local eating establishments. A great review will usually bring in new business for a week or so at the most, whereas a bad review could ruin your business entirely. An unfavorable report from your local health department could also be devastating.
The restaurant business is notorious for staff turnovers. Pay is relatively low due to the low margins of the business. Many restaurant jobs are usually entry positions filled with people in their late teens and early 20s who usually leave for better positions or to continue their studies. Restaurant owners in areas with low unemployment and few students find it difficult to fill positions.
There are a number of other factors to take into consideration which will be covered in detail in subsequent articles. The list includes city ordinances and Health Department rules and regulations; advertising and marketing; menu selections; working capital reserves; inventory control; waste; bookkeeping; incorporation; income taxes, payroll and more. Running a successful restaurant is not a one-man job. You need a team of professional dedicated people and even then it never runs smoothly.
Opening a restaurant is a daunting task, but no matter what you put into it, in terms of time or money, it will not be successful if no one knows you exist. If you are taking over a location that was a restaurant at some point in the past, make sure you do not make the same mistakes that the previous owner did. Unless it was a management problem or some other obscure issue, restaurants usually fail because of their location or lack of working capital. Or as one restaurant critic jokingly remarked, The restaurant failed because the owner ran out of working capital due to a bad location.
About the Author:
About the author: Michael Stadneck lost his white collar job due to corporate downsizing and out of necessity became a hot dog vendor in New York City. He later bought a mobile food concession trailer and now travels around the country setting up business at local fairs and at special events. He currently enjoys time with his family, makes a decent living, all without the stress.
