Archive for April 23rd, 2007
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People like to eat. People like to go out to eat. According to restaurant.org, the overall economic impact of the restaurant industry is expected to exceed $1.3 trillion in 2007, including sales in related industries such as agriculture, transportation and manufacturing. In 2007, the restaurant industry is expected to total 537 billion dollars in sales.
Playing with numbers
Obviously you’re not going to become a millionaire overnight opening a restaurant in a country town in Alabama where the average household income is $20,000. In fact, to become a millionaire in a relatively short period of time operating a restaurant, you’ll have to be operating a pretty exclusive establishment and catering your services to people who think nothing of dropping five thousand dollars on a meal. In that case you need serve only 200 $5K meals per year to gross a million dollars. Your restaurant wouldn’t necessarily need to be thriving, although, if you don’t have a reputation for being the hot spot you’ll probably have a hard time getting the patrons; but to gross a million you would only need about 17 people per month to dine at your establishment.
Of course, you’ll have expenses to consider. You couldn’t operate a high-end restaurant in a low-end location. The location itself would be part of what makes your restaurant high-end, and it would obviously come with a high-end rent. Then there’s the high-end salaries you’ll have to pay for the highly sought-after chefs you’ll need to employ to justify your $5000 charge, the assistants for your chefs, the beautiful people to serve your patrons, the people to keep your restaurant shining with high class, equipment to service et cetera. So technically, even though you would be able to gross a million per year with just 17 diners per month charging $5K per meal, by the time you were finished paying to prepare the meals you feed your diners and serve them their meal in high style in a high-end restaurant in New York City, you would probably find yourself in a serious hole before too long.
Besides, it wouldn’t be easy to start a high-end restaurant in the first place, unless you have the money to finance such an ambitious project. Usually you’ll find that restaurants catering to the rich and famous are started by the rich and famous or people acquainted with the rich and famous. So if you’re thinking about starting a restaurant as a possible way of increasing your net worth to a figure that qualifies you to call yourself a millionaire, you need to begin by coming up with a realistic plan for a restaurant that is catered to regular folks.
These resources might be useful to you in finding out how to start a restaurant, the steps you need to take, the legal requirements, determining if you will start a restaurant from scratch, buy out a restaurant that’s in financial trouble and has filed Chapter 11 bankruptcy, how you will finance your restaurant, what kind of restaurant would be best for you to start in the first place and everything else you might need to know about starting-up a restaurant business:
1. "How To Start a Restaurant" guide with tips and resources to help you get started in your own restaurant business - this is a pretty comprehensive resource covering everything from choosing the restaurant concept, name, location, design and layout, lighting, music, calculating start-up costs, financing, leasing, business plan, taxes, hiring an accountant, hiring a lawyer, hiring employees, food safety and pretty much everything you could possibly need information about.
2. Starting a restaurant business
Buying out a restaurant that has filed for Chapter 11 bankruptcy is probably the least expensive way to get into the restaurant business, but this method has several disadvantages. There is probably a reason that the restaurant has been financially unsuccessful, such as bad management or bad location. The restaurant may have a poor reputation in the area. Therefore, before buying out a bankrupt restaurant, one should investigate the circumstances of the restaurant’s bankruptcy.Purchasing an existing restaurant’s lease is another method to getting started in the restaurant business. Many restaurant owners want to sell their restaurants for any number of reasons, including retirement or they are just tired of the restaurant business. In such a case, the buyer would probably have to pay the "good will" that the previous owner earned as a result of his or her development of the restaurant’s business. The new restaurant owner would have the benefit of having an already established customer base.
Another way to start in the restaurant business is to lease an empty space and turn it into a new restaurant. This method gives the potential restaurant owner wide latitude in designing and developing a restaurant as his or her own "creation." This method requires substantial financial investment including hiring an architect, contractor, plumber, as well as purchasing equipment, making renovations, etc. Goodwill will also have to slowly be developed. Also, the length of the term of the lease is an important consideration. In New York City, there is no commercial rent control. A restaurant owner may face serious problems when, after his or her lease expires, the landlord decides to dramatically increase the rent. Moreover, the longer the lease, the easier it is to obtain a business loan.
Perhaps the most expensive way to get started in the restaurant business is to buy land and build a restaurant "from the ground up." In New York City, this method is the least common. Depending on the size, location and concept of the restaurant, this method could be extremely expensive, including costs such as purchasing the land and constructing a building.
3. Restaurant statup & growth
It takes lots of planning, capital, hard work, perseverance, and a little luck doesn’t hurt either, to launch a new restaurant that hits the mark and becomes a financial success.
4. The Ingredients of Restaurant Success
The restaurant basics you need to write your own recipe for success.
An additional resource is the restaurant resource group
Making a profit in the restaurant business is a challenge!
We know first hand, having created and operated many restaurants over the last twenty-five years. Adequate sales, experience, and capital can help, but without solid financial and operational controls in place, long-term success is not assured. That’s why the The Restaurant Resource Group was created…. to empower restaurant operators by providing these "controls" in the form of simple, yet powerful, financial and management products and services.
The below third party article might also be of some use to you:
Tips for Entrepreneurs Opening a Restaurant
As entrepreneurial enterprises are concerned, opening a restaurant is by far one of the hardest endeavors to undertake. While the rate of restaurant failure isn’t nearly as bad as it’s purported to be, restaurants do fail at a much higher rate than many other types of self starter business. For that matter, even franchised restaurants (usually the smaller "fast food" variety) have a failure rate just a few percentage points below self starters.
So what, you may ask, can entrepreneurs do to increase their chances for success?
Here are three tips to succeeding in the restaurant business that successful owners adhere to. The first of these is location. Yes, there are some restaurants located in out of the way areas that do succeed on word of mouth, but those instances compared to the instances of restaurants failing because they are in bad locations are miniscule by percentage. The safest bet is to always make sure there is plenty of traffic where you want to open up. Established areas are best, but consequently, most expensive. Don’t get in over your head with a lease that will bury your chances for success from the get-go, but don’t choose an out of the way location because it is cheap. Try to find some middle ground.
The next tip is to concentrate on solely on the things that will make people want to come in, and more importantly, want to come back. I know this sounds a little too simple, but it involves a lot more than just good food and a nice atmosphere. The key is to turn out great food, provide a great atmosphere and to have exceptional customer service, day in and day out. Whether you run a sandwich shop or a high end bistro, getting these three elements together and doing so consistently is paramount to success.
The third tip is to find and culminate good business relationships with your suppliers. Having a supply chain you can count on will allow you to concentrate on what’s important, which is running your business while at your business. You’ll need to find food distributors and a restaurant supply distributor you can count on. Food distributors that are able to deliver on time and are committed to bringing you quality products every time will help you to produce consistently good food that your customers want and eventually come to expect. A good restaurant supply company can make all the difference between having a smooth operation that allows you to run you’re back of house effectively and having to deal with subparts equipment.
Of course, there is a lot more to the restaurant business than these basics, but in the end, the basics are what separate successful restaurants from failed restaurants.
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