Thread: Restaurant start up costs, sales and ongoing expenses

Hi, I've been thinking a lot about different Fastlane businesses and my best idea IMO is for a certain fast food restaurant that could be franchised. My first step is do some basic calculations of my expected start up costs and then try to determine monthly income and expenses to see if this idea is feasible. If this looks reasonable then I would charge ahead. I have no previous experience whatsoever with working in restaurant, so keep this in mind.

My question is has anyone else here started up a fast food restaurant or taken their previous business and franchised? If so, what resources can you point me towards that would be helpful? Are there any books that document the process? One specific thing that would be useful is a way to estimate daily sales. I was trying to figure out how many customers a fast food place would get on average, but I have no idea, although I'm sure it can vary greatly. Does anyone have a small restaurant and how many sales a day could I expect? Thanks!!

As Steve said, go work in a restaurant, the one closest to what you want to do, do that for 3-6 months and see if you still think your idea will hold water..

Originally Posted by moneymaker

Hi, I've been thinking a lot about different Fastlane businesses and my best idea IMO is for a certain fast food restaurant that could be franchised. My first step is do some basic calculations of my expected start up costs and then try to determine monthly income and expenses to see if this idea is feasible. If this looks reasonable then I would charge ahead. I have no previous experience whatsoever with working in restaurant, so keep this in mind.

My question is has anyone else here started up a fast food restaurant or taken their previous business and franchised? If so, what resources can you point me towards that would be helpful? Are there any books that document the process? One specific thing that would be useful is a way to estimate daily sales. I was trying to figure out how many customers a fast food place would get on average, but I have no idea, although I'm sure it can vary greatly. Does anyone have a small restaurant and how many sales a day could I expect? Thanks!!

I actually have a lot of experience in this area as a few years ago my brother opened up a restaurant and I helped him out with it until he closed it down after a year. He made practically every beginners mistake that you can make, starting from not negotiating the price of the lease. The owner told him that he charges $3,000 a month for that space and my brother accepted it without negotiating for a better price.

When he told me later, I was like, "WTF!!!" I'm no expert on leasing but I know from common sense that they'll always give you a higher price than normal because they expect that you'll try to negotiate them down, and you can meet somewhere in between. After asking the other tenants in the same shopping center, they were paying anywhere from $1200-$500 less than my brother was paying per month for similar sized spaces; the difference is that they negotiated.

So, anyways after failing on that point, he failed in terms of the space that he chose because it didn't have lots of things that a restaurant is supposed to have like the ventilation system, a place to hold the grease interceptor, etc. After totaling up the costs to have all those changes put in not to mention also buying fridges for the food, machines to fry food and a stove, etc. his total costs before even having his first customer came in at over $100,000.

I should have mentioned that in order to get the startup capital to open up his restaurant he and two of his friends went in together on the idea. So, they each contributed 1/3rd of the money and therefore would earn 1/3rd of whatever profits there would be. They never got any of this in the form a contract though; just a friendship/handshake type of agreement.

So, in the first few months a few customers were coming, but mainly friends and family of the three with a few people who were curious and just decided to come in and see what the restaurant was like. They made enough money to cover the costs of the lease and to pay for the food that customers ate, but nothing in addition to that. My brother and his two friends had quit their jobs to work at the restaurant, but when they saw that they weren't making any money to live on, his two friends quit and went back to work, leaving my brother running the restaurant all by himself. Meanwhile, they claimed that they still owned 1/3rd of the restaurant even though they weren't putting in the work to make it successful anymore.

This is why you should always have a clear contract, specifying what will happen in all circumstances, when dealing with other people in a business. So, one term that could have been in the contract is that anyone who walks away from the restaurant loses their ownership stake; that way someone couldn't just leave and still get to share in the profits while another person works hard and gets an equal share.

So, I decided to help him out in my free time because he was running the restaurant all by himself; cooking, cleaning, serving customers, etc. and I couldn't stand by an watch my brother go through all that; when I wasn't at school I would be there helping him out. So, we gave it another 10 months or so before he finally decided to call it quits because the amount of new customers weren't increasing as fast as he thought it would.

This was mostly due to the fact that the space he picked was in a poor location; it didn't face a street; it was in a corner of the shopping center so anyone driving by wouldn't see it unless they were right in that corner area. This made it difficult for him to acquire new customers. He developed a few loyal customers but they weren't enough to keep the project alive so he had to shut it down.

Anyways, I don't say any of this to disparage my brother. He worked very hard and for a beginner he did a lot of things right; but he made beginners mistakes as well. I just wanted to tell you his story in case it would help you out in your quest to open up a restaurant. It's definitely not easy. Make sure you do a ton of research before you choose a location, as that can make or break you. Try to pick a spot that's easily visible from the street, and negotiate every term of the lease, including the landlords obligation to fix up the place before you lease it.

Well I did figure it would be a ton of hard work, so what you guys say isn't that shocking. I appreciate the warnings and the questions I'm asking are precisely what you are recommending, which is "research". So I will take what you say into consideration and hopefully not repeat the mistakes with the leasing and location issues. I'm hoping to avoid a catastrophe by thoroughly researching and calculating potential income and expenses based on what others have experienced and if it looks feasible then I would proceed from there. I most certainly will not dive right into it blindly.

Know what you mean my family owned a restaurant for 11 yrs, 60-70 hr weeks weren't uncommon.

Originally Posted by 458

Restaurants are a very tough business. I have personally worked with the owner of International Restaurant Management Group. He owns and sells franchises of brands such as Kelly’s Cajun Grill, Yeung’s Lotus Express, Suki Hana, Chicken Connection, Latin Grill, Tango Grill, and Gusto’s Pizza and Subs.

This guy is one tough son of a. He words HARD, and I mean very hard. Hes old and still puts in 60-70 hours a weeks.

Heres a good success story about Aaron Kennedy who started noodles and company.

http://www.fundinguniverse.com/compa...y-History.html

Founder of Noodles & Co. Aaron Kennedy talks about launching and growing a successful business - YouTube

Noodles & Company - Broomfield, CO - The Inc.5000

Noodles & Company's business model
Serves globally inspired noodles, soups, salads, and sandwiches as a fast-causal restaurant concept.
Statistics
3-year growth:62%
2010 Revenue:$220.8 million
2007 Revenue:$136.7 million
Employees:5444
Founded:1995
Industry:■ Food & Beverage
Industry rank:#90

Originally Posted by moneymaker

Hi, I've been thinking a lot about different Fastlane businesses and my best idea IMO is for a certain fast food restaurant that could be franchised. My first step is do some basic calculations of my expected start up costs and then try to determine monthly income and expenses to see if this idea is feasible. If this looks reasonable then I would charge ahead. I have no previous experience whatsoever with working in restaurant, so keep this in mind.

My question is has anyone else here started up a fast food restaurant or taken their previous business and franchised? If so, what resources can you point me towards that would be helpful? Are there any books that document the process? One specific thing that would be useful is a way to estimate daily sales. I was trying to figure out how many customers a fast food place would get on average, but I have no idea, although I'm sure it can vary greatly. Does anyone have a small restaurant and how many sales a day could I expect? Thanks!!

Originally Posted by JayKim

Heres a good success story about Aaron Kennedy who started noodles and company.

Thanks!