By: Barry Skown
Senior Associate – Portland
You dream of becoming an entrepreneur…owning your own business where you call all the shots and have total control of every decision. Your secret desire is to open your own restaurant. Why not, you ask? You enjoy food, you’ve eaten at thousands of restaurants in the country, and you even waited tables in college. You know your way around a restaurant, that’s for sure, and you have researched current dining trends. You believe you have hit on a “can’t–miss” concept that will surely be a success! And you even have some investors lined up who support your vision and dream.
Now what? How do you turn this dream into a reality and a successful one at that? What are the top five “ingredients” you should have to start your restaurant off on the right foot?
Have A Plan
Starting a business requires planning. Your first step is to create a solid Business Plan. This Plan defines the restaurant’s characteristics, concept, operating parameters, marketing strategy, and includes detailed financial models and projections for daily customer counts, average checks and staffing levels. The Business Plan is typically used to solicit interest from potential investors. It should be detailed so that the reader can envision what the restaurant will look like and how it will operate.
Describe The Concept
Every restaurant has a concept…a menu, décor and operating theme that tells the customer what kind of experience he will have when he walks through the door. You need to determine what the concept of your restaurant will be. Every element of the restaurant’s theme, style, décor, size and operating hours should be defined. For example, if you want to start a traditional family-style Italian restaurant, the concept description might include listing menu items such as spaghetti with meatballs and chicken parmigiana served on large serving platters. The décor style and method of service should also be described, along with even the uniform style the employees will wear in each position. Don’t forget to think about the number of seats you want to have and your vision of the perfect location for your restaurant. You want people to think of your restaurant as the “Go To” place when they think of family-style Italian food.
Location, Location, Location
The old adage “Location Sells” holds true for selecting a location for your restaurant. But finding the ideal location for your new restaurant might prove more difficult than first thought. Depending on the depth of your funding, you may be able to build a new structure for your concept, which prevents being saddled with existing facility challenges in terms of structure or flow. Or you may choose to take over a space previously operated by a different restaurant. Taking over an existing space provides certain advantages; including the fact that expensive building items like exhaust ducts, ventilation and fire-suppression systems, refrigeration, and plumbing may already be in place. But remember, there is a reason why the previous restaurant went out of business. So it pays to do your homework to determine why the previous restaurant failed before making your selection.
Whether the location is new construction or existing facility renovation, site selection requires you to research key items such as the surrounding demand generators, the competition, accessibility just to name a few. Knowing your potential market is essential to the success of your location and ultimately your restaurant. Your “Go To” place is great only if the potential market actually wants family-style Italian, knows where you are, they can get to you, and there aren’t other similar restaurants on the same block.
A Great Team
You are the owner, but realistically, you cannot be on site every hour of every day the restaurant is open. So you need to hire a great management team to manage the restaurant on days you are not there. These should be people of high integrity, honesty, and communication skills…people you would trust with this key asset – your livelihood. Be sure to use very thorough and careful interviewing and screening processes for hiring the management team. Perform all background and reference checks, and have the person interview with as many different people as possible so you receive all perspectives. What one person sees and hears from a candidate may be different from another.
It is strongly recommended to have cash reserves available to fund your restaurant for a period of 9-12 months regardless of how many customers come in on a daily basis. Under capitalization is the number one reason why many restaurants fail in their first year of operation. Having insufficient capital reserves available to pay fixed and variable operating expenses such as rent/mortgage, utilities, labor, and food costs is the quickest way to post “Out of Business” signs on your front door. Oftentimes a new restaurant owner has only 1 months’ worth of capital reserves available, leaving him unprepared to pay his expenses during what could be a 2-4 month slow down, or if the business is seasonal.
Starting a new business is never easy and, in the restaurant industry, certainly never a guarantee for success. But with these five “ingredients” in place before you open the doors to your dream, you will certainly have a decided advantage over the rest of the competition. Your reality can be your success as a restaurant entrepreneur.