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Old 07-23-2013, 08:28 AM   #1
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Default Owning a restaurant?

So I had a conversation late last night with the business broker who is handling my attempt to acquire a local restaurant, in which we agreed that based on some recent statements and actions, there is a very good possibility that the owner will accept my offer and sell said restaurant to said me.

Today.

My initial elation was followed by a nearly all-night long session of Fear and Crippling Doubt. I mean, I've done my due diligence to the "N-th" degree, written a realistic business plan, assembled an experienced team who are all on board if the deal goes through, and come up with an awesome "brand", but the truth is that I have minimal restaurant experience (at least on the other side of the counter), but that was 30 years ago working shitty part-time jobs. The notion that a morning may come in the very near future in which I have to go and operate a restaurant is suddenly very daunting.

While I have had businesses before that were not spectacular successes, I have never utterly flamed-out at anything in my life, and the real possibility of that happening in a very public and visible way is freaking me out.

While I know that this is *way* removed from Miata Turbodom, I'm hoping that perhaps some of you good people may have some experience either with Restauranting or Crippling Doubt, and might offer some insights on how to successfully manage either or both. They're both completely new concepts to me.
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Old 07-23-2013, 08:56 AM   #2
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there's no chance in hell I'd own a restaurant.
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Old 07-23-2013, 09:18 AM   #3
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there's no chance in hell I'd own a restaurant.
I'm curious why? Have you owned or managed one? While I definitely wouldn't want to *work* in a restaurant for the crap wages they make, owning doesn't seem so bad. Several of my friends own them, and they all seem to think that once you get a decent team working for you it's not bad at all. I'm going "Fast Casual" (order at the counter, food is run out to you) to avoid the hassle of dealing with servers (highest turnover rate, and they bump up what your customer pays by 20%, money that you'll never see..) so staffing shouldn't be the grind it is in a conventional server restaurant. The rest is just basic management of costs and projecting necessary inventory. With modern POS systems both of those tasks have been simplified considerably over the old "hunch" method.

What is it specific, beyond general Curmudgeonry, reason you wouldn't own one?
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Old 07-23-2013, 09:23 AM   #4
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I can tell you as a 20 year vet of the restaurant business -
I've held every position from working in a store for little more then min wage all the way up to corporate office franchise consultant level (all levels of management in between) -
You have no business buying a restaurant or becoming a partner (especially in 2013) in a restaurant business unless you are ready to do all of the following -

work more then 60 hours a week every week forever
fire everyone but a minimal staff and run the place completely on your own
(when i say run, i mean serve, cook, clean, count the money, do the books, file all necessary paperwork for taxes and payroll, calculate your labor cost every day, calculate your food cost at least once a week, make food orders, make schedules, and the list goes on.....
i can tell you in the 5 years i spent as a area franchise coach i saw 50+ people come into the business and loose almost everything because they thought they were purchasing another "investment" that would have a quick "return"
a restaurant is a living, breathing, life consuming beast that is tough to do even for the most experienced person
btw fun fact -
do you know that between now and 2015 you have to either make sure no one (hourly) is working more then 30 hours a week or you will have to buy every single one health insurance
did you know that the average restaurant bottom line is less then 5% on a p&l after it's all said and done
i could rant for a long time, but the reality is that unless you have worked in a restaurant and managed a restaurant for years it's really a bad idea...
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Old 07-23-2013, 09:27 AM   #5
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No, but I watch a lot of TV. I mean in general it's a hard market to make money in, the failure rate is very high.

I'd probably end up firing everyone because if it was my butt on the line I wouldn't expect anything but excellence. And then it just seems like SOOOO much work, even if you're just an owner and the payoff is a complete gamble. I'd want all my staff to have like 6 months of training before they could even interact with a customer, I'd need competent chefs, an impeccable dining room, and I'd expect to work at least 80 hours.

I do have a friend in high school that bought some local bed and breakfast and they are doing quite nicely (so it seems). They just scored the sous chef from "The Inn" in DC, which is rated one of the best restaurants in the area.

What you should do is buy it, then get on Restaurant Impossible so you get featured on TV and have a menu designed by a real chef
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Old 07-23-2013, 09:34 AM   #6
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Originally Posted by Pinky View Post
I'm curious why? Have you owned or managed one? While I definitely wouldn't want to *work* in a restaurant for the crap wages they make, owning doesn't seem so bad. Several of my friends own them, and they all seem to think that once you get a decent team working for you it's not bad at all. I'm going "Fast Casual" (order at the counter, food is run out to you) to avoid the hassle of dealing with servers (highest turnover rate, and they bump up what your customer pays by 20%, money that you'll never see..) so staffing shouldn't be the grind it is in a conventional server restaurant. The rest is just basic management of costs and projecting necessary inventory. With modern POS systems both of those tasks have been simplified considerably over the old "hunch" method.

What is it specific, beyond general Curmudgeonry, reason you wouldn't own one?
I posted before this comment -
Ha I spent most of my life in fast-casual $10-$13 avg check and currently work in full service
Remember along with the higher avg check comes with higher food cost and a slightly higher expected wage rate for your employees
Whoever told you that fast-casual has a lower turnover rate isn't doing their homework
Pick up a few issues of a mag called QSR and take a read
When you say modern POS - Who radiant micros? What hardware and software is running it? Because there is no perfect ops software - all of it takes maintenance that is heavily involved, some examples of what i mean -
pos is going to calculate labor for your business - well i needs full and up to date info on each and every employee - payrate, hours, etc
and guess what hourly employees suck and clocking themselves out and in when they need to - so that has to be checked every day
how about food cost? the pos needs to know the cost of every item you are selling so if it's a nice one it's going to have a database of every item you need to purchase in order to make things run
said list must be updated (for a big restaurant that's twice a week)
and how do it get inventory info to calculate food cost?
from you
you need to take inventory at least once a week - that's a total and accurate inventory
do you know the math for that?
it's beginning inventory + your purchases = you goods available divided by your sales
if that number is higher then 30% most of the time you can start kissing that 5% profit good bye....
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Old 07-23-2013, 10:37 AM   #7
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^^^. All excellent points, and challenges of which I'm aware, hence the Fear and Crippling Doubt. Here's what I'm thinking to mitigate those risks-

The high failure rate of restaurants is generally for new restaurants who spend all their capital getting open and then find themselves quickly in financial trouble when business fails to grow quickly enough to cover costs, resulting in desperate attempts to reduce food and labor costs, leading to poor food poorly served, and the resulting death spiral. I can imagine as a franchise coach you've seen a lot of these, as every new franchise is a completely new business. I am buying an existing (10 years plus) moderately successful restaurant, which currently serves only French food between the hours of 11-2:30 Monday through Friday. It's in the heart of downtown, surrounded by huge companies and government offices, and I have sat and watched thousands of people walk past his shuttered doors at 8 am and 5 pm, all opportunities which he is missing. I'm also very well capitalized, and can survive any lull that may occur. At lunch the same thousands of people walk past his door, because let's face it, how much quiche can you eat? It's begging for a rebranding, and doing so would certainly attract more diners

My understanding of the new health care law is that it only applies to companies with more than 15 employees, which this 90 seat place will never require.

The record-keeping and management you cite are standard fare for *any* business, large or small. Ignore costs and inventory in any business and you're doomed to failure.

Yes, it's a lot of work, and a lot of hours, both of which I'm prepared for and actually looking forward to. My other investments are all pretty much humming away with minimal time demands, and frankly I'm a bit bored.

The "lack of food service experience" is the one factor which really worries me; you're right, going into a business in which you have little experience is a bit nutty. But I'm hoping to mitigate that a bit by buying that knowledge in the form of a good experienced team of trusted people, which I have lined up and ready to go. It'll still be a huge learning curve for me, but I have a *long* history of tap-dancing myself into positions for which I have no knowledge nor experience and quickly figuring it out. (So much so that I'm willing to bet big money on my ability to do it again.

There's no doubt, food service is a tough business. Yet there are restaurants that somehow make it work. Lots and lots of them.

Having discussed the pitfalls, can you share some insight as to the ones who *didnt* flame out? What are the major factors in their success in your opinion ?
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Old 07-23-2013, 10:48 AM   #8
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<snip>

What you should do is buy it, then get on Restaurant Impossible so you get featured on TV and have a menu designed by a real chef
OMG, that would be so cool, although I think I'd do better punching Gordon Ramsey than Robert Irvine (that dude is pretty stout!) so it would have to be Kitchen Nighgmares. I wonder if they'd actually be interested in a "unprepared noob owner" story line versus their usual "your food is **** and you're a ***** boss" theme? More importantly, I wonder if the exposure is ultimately (three months post production) a positive or negative thing.
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Old 07-23-2013, 10:54 AM   #9
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sounds like the plot of every episode. But if you really want to be well off, by a bar and get on Bar Rescue. Jon Taffer brings the good stuff.
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Old 07-23-2013, 11:12 AM   #10
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I dont think you'll have to worry about high failure rate with an existing establishment in Jax. In a major metro area, you might. Or if you're in a former pizza hut building--those turn over more than women in pr0n.

I've toyed with the idea of owning and running an awesome bar but beyond the fact that I could never afford to do it in the first place, I dont like working nights and weekends and touching sticky bars. I imagine restaurants are similar (dinner peak time ones anyway).

I also get scared away by the very non-constant nature of restaurants. You get very high peaks and very low lulls during a given day. And if a group shows up that you weren't expecting during the lulls, you have to deal FAST or suffer the yelp consequences of insufficient idle staff.

BUT!
if you're looking to bring something great to an area that is in need, you could do well. And if you fail, just turn it into an elevation burger.

Elevation Burger Franchise Information | Entrepreneur.com
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Old 07-23-2013, 11:14 AM   #11
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I am not an expert by any means on this topic but the biggest advice I have for you in the restaurant industry is to not "trust" your employees. You want a good team and you need to let them do their jobs but you also need to be watching them like a hawk. I am an accountant by profession and I use the motto "trust but verify". Restaurant employees are notorious for ripping off the owners. This happens most often with the employees you trust the most. I know you are not inexperienced but you mentioned a trusted crew multiple times and that concerned me a bit. Everyone from managers to servers can steal from you hand over fist if you let them.
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Old 07-23-2013, 11:19 AM   #12
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No, but I watch a lot of TV. I mean in general it's a hard market to make money in, the failure rate is very high.

I'd probably end up firing everyone because if it was my butt on the line I wouldn't expect anything but excellence. And then it just seems like SOOOO much work, even if you're just an owner and the payoff is a complete gamble. I'd want all my staff to have like 6 months of training before they could even interact with a customer, I'd need competent chefs, an impeccable dining room, and I'd expect to work at least 80 hours.

I do have a friend in high school that bought some local bed and breakfast and they are doing quite nicely (so it seems). They just scored the sous chef from "The Inn" in DC, which is rated one of the best restaurants in the area.

What you should do is buy it, then get on Restaurant Impossible so you get featured on TV and have a menu designed by a real chef
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Originally Posted by Braineack View Post
sounds like the plot of every episode. But if you really want to be well off, by a bar and get on Bar Rescue. Jon Taffer brings the good stuff.

Yeah, that generally seems to be the restaurant Kiss Of Death; bad food with bad service in a poorly run, dirty establishment. It's interesting that all of them (Ramsey, Irvine and Taffer) all pretty much stress the same things; a focus on well-prepared fresh food, a boss who isn't afraid of holding employees accountable, including himself, and making a clean and enjoyable atmosphere for diners. Nail those, and the rest is just details.

Anyway, it's actually an interesting idea. One of my buddy's places was on Diners Drive-ins and Dives and had a great experience, but that place just features already great places. The "Disaster" shows are a whole different kettle of fish. Still sort of compelling though. I wonder if its a good or bad idea?
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Old 07-23-2013, 11:23 AM   #13
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I am not an expert by any means on this topic but the biggest advice I have for you in the restaurant industry is to not "trust" your employees. You want a good team and you need to let them do their jobs but you also need to be watching them like a hawk. I am an accountant by profession and I use the motto "trust but verify". Restaurant employees are notorious for ripping off the owners. This happens most often with the employees you trust the most. I know you are not inexperienced but you mentioned a trusted crew multiple times and that concerned me a bit. Everyone from managers to servers can steal from you hand over fist if you let them.
Sage advice, thanks.
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Old 07-23-2013, 11:32 AM   #14
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It's interesting that all of them (Ramsey, Irvine and Taffer) all pretty much stress the same things; a focus on well-prepared fresh food, a boss who isn't afraid of holding employees accountable, including himself, and making a clean and enjoyable atmosphere for diners. Nail those, and the rest is just details.
I'd much rather have Taffer come and help me. He actually uses stats, science, and best practices to get people in the door and stay longer. (e.g., he doesn't like fluorescent lighting like because of the refresh rate of the bulbs which prematurely makes your eye tired, and thus the customer will leave earlier)

but, yeah. You honestly can't fail if the food is baller.

There was a place out here that went under that got HUGE from the president continually visiting. The owner then opened like 3 other restaurants all within walking distance...the quality and service dropped off severely as he focused his efforts elsewhere and now he only has the open still IIRC. I mean you can't get better exposure than that, but it's still so easy to fail if you don't do it right.

We have a local "chain" here that I compare every other restaurant I dine in to. I call it my Sweetwater Scale.
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Old 07-23-2013, 12:57 PM   #15
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I've have thought MANY times about opening a resturaunt. I look around and see so many getting run into the ground it is disgusting. Crap workers, crap food, crap service. Every non-chain that opens here suffers the same fate. They open strong and quickly drop off in terms of quality

In the end I will never do it because a) our service industry work force here is garbage and it is only a job to them and they do the minimum to get by that hour til they get off. They aren't even trying to get through the day, just the hour. b) Oversight that is required that includes the required hours. Nights and weekends. c) Capital investment. I have none.

But my dream restaurant is a high end burger place. Low light, fancy modern decor. Think complete opposite of a Five Guys inside. It seems to be the trendy thing to do, but I like to think i'm a high-end burger hipster and have had the idea going on 7-8years now.
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Old 07-23-2013, 01:19 PM   #16
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There was a place out here that went under that got HUGE from the president continually visiting. The owner then opened like 3 other restaurants all within walking distance...the quality and service dropped off severely as he focused his efforts elsewhere and now he only has the open still IIRC. I mean you can't get better exposure than that, but it's still so easy to fail if you don't do it right.
I know I know, let's make a restaurant cash only so that we exclude 90% of paying customers!!

hashtag #derp
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Old 07-23-2013, 01:21 PM   #17
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you don't think opening the same restaurant literally next door, but allowing CC/Debit, but sit-down-only was a good idea?

or opening another restaurant across the street from both of them that offered more or less the same menu -/+ a few options was also smart?


I think this Yelp review sums it up:

Quote:
It is obvious that fame has gotten into the owners head. We started eating at Rays in Sept. 2012 and quickly fell in love with what my boyfriend deemed the best burger in DC. However, within a few short months (beginning of Dec 2012 actually!) we have seen the service and quality decline. We received our burgers in paper bags and were informed that rays no longer offered plates for dine in customers... really for a $8 burger NO PLATES?! On top of that their staff is not friendly in the least bit and way over staffed. And one of our burgers was not seasoned at all.

We read reviews of people who used to come to Rays before POTUS did and they missed the old times when the staff was nicer, prices were lower and burgers were bigger. Rays will no longer be getting any of our money if it continues down this path to McDonalds.
The guy started so many projects and couldn't pay his bills:

http://www.arlnow.com/2013/01/16/ray...enant-dispute/
http://dc.eater.com/tags/ryse

Quote:
Shott reports that a general contractor has filed a series of lawsuits "charging the restaurateur with unpaid bills totaling a combined $348,483, plus interest, for construction work at three locations, including Retro Ray’s and Ray’s to the Third in Arlington, as well as the restaurateur’s yet-unopened D.C. bakery called Ryse."
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Old 07-23-2013, 01:28 PM   #18
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I know I know, let's make a restaurant cash only so that we exclude 90% of paying customers!!

hashtag #derp
On a related note, I noticed that his reported gross sales each month are 100% all credit cards, when you extrapolate it out based on merchant fees. Yup, not a penny of cash, honest injun Mr Tax Man. Curiously, his food costs are really high compared to his gross, but he uses cheap ****.

My CPA says CC sales are generally 80-85%..

Interesting, huh?
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Old 07-23-2013, 01:31 PM   #19
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On a related note, I noticed that his reported gross sales each month are 100% all credit cards, when you extrapolate it out based on merchant fees. Yup, not a penny of cash, honest injun Mr Tax Man. Curiously, his food costs are really high compared to his gross, but he uses cheap ****.

My CPA says CC sales are generally 80-85%..

Interesting, huh?
Sounds like when I waited tables. Those jerks who paid in cash never tipped
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Old 07-23-2013, 01:34 PM   #20
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But my dream restaurant is a high end burger place. Low light, fancy modern decor. Think complete opposite of a Five Guys inside. It seems to be the trendy thing to do, but I like to think i'm a high-end burger hipster and have had the idea going on 7-8years now.
IT'S RAWWRRRRRRRRR!!!!

Welcome to Gordon Ramsay BurgR

and welcome to the bandwagon; within just a few miles of each other in Arlington:
Elevation Burger, Ray's To the Third, (2) BGR the Joint, Five Guys, Big Buns, Burger 7, Burger Shack.

I'm sure I'm missing a few.
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