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Failure About to shut down my 4 years restaurant business ...

Discussion in 'Lessons from Success/Failure' started by Pharaoh, May 17, 2017.

  1. Pharaoh
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    Pharaoh Contributor

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    " I wanted to be the next Hot chain, I'd even chosen my locations locally and internationally, set price for my franchise to find my self drowning in debt with no profit" ...

    - My father has a small restaurant around the corner which he personally operated for about 25 years. I didn't have the chance to spend much time with my dad while I was young since he was always working, the small restaurant is working just well to get us good education and pay for our bills.
    Then I decided to be the next Gary Vee and expand my family business. We opened another larger restaurant which I operated with no experience in that business, but I depended on my father's experience.
    Unfortunately, his way of managment couldn't allow him to expand, he did everything by himself so I had to choose managers and staff. I've hired and fired a lot of managers, chefs and service staff who can talk very well and do so little and thus my products and service quality was always flactuating. I lost many of the customers I've got and profits were always so little to cover my large expenses and over heads. but I said to myself "That's natural .. it's a part of the process .. improve more and be patient".

    4 years is a long period of time and short as well but anyway I admit that I've failed. Now I'm stuck in the mud with large debt at 29 years old but I'll have to figure out my next step.

    I didn't lose everything though, I've came out with huge experience and lessons which I will apply in my next venture.
     
  2. CPisHere
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    CPisHere Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    You were sold a dream instead of a reality.

    You had no experience, no capital, nothing to help you succeed aside from a father that never did what you wanted to do.

    Start small. Build up. Minimize risk.
     
  3. Ika
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    Ika Too slow Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    I felt weird clicking like - I don't like your failure, I like your honesty. Thank you for sharing.

    4 years is a lot of time to learn.

    What have you learned that you definetly want to avoid in the next business?

    What have you learned that you definetly want to use in the next business?

    Did you come across any specific probelms you can try and solve in a new business?
     
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  4. SteveO
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    SteveO Legendary Contributor FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    I admire your effort. How much debt are you in? Can you negotiate any of it away as you liquidate? Is there any opportunity to sell your business?

    I am assuming that you have a lease on the building. Can you help find another tenant?
     
  5. MJ DeMarco
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    It's too bad we can't see the restaurant to perform an analysis. Did you ever examine why the business failed? I have a hard time believing it was just because your father couldn't micromanage it.

    I can spend 1 hour in a restaurant eating dinner and afterwards I could tell you exactly what's wrong with it. I'm not an expert in restaurants, but I am an expert in the customer experience, and what customers should see, feel, and taste.
     
  6. Gary
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    Gary Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER

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    The upside for your future success is that you've clearly defined where you failed. You were unable to hire the right people. And then you were unable to manage them. Without fail the most significant challenge in this business is successfully managing your front and back of the house staff. Not marketing, not location, not funding.

    I've had to sell venues because they were failing. Basically, they were all asset sales. I think about those failures to this day and have successfully used them to help me take the right actions to avoid a repeat. You're young and sound optimistic. I wish you all the best on that next venture and please keep us posted on your next steps.
     
  7. Pharaoh
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    - Well, the most important lesson I've learned is that I should not go into business in which I have no experience.
    - I can go into business I have little experience only if I have good management and leadership skills and better select an insider partner.
    - In my business, if the staff noticed that you don't have experience more that their's, you'll be eaten alive.
    - The next time I'll start a business, I'll build the system before anything else (location, staffing, marketing)
    - It took more money than I planned and that why the next time I'll start smaller than I think I can (I was sold that I should start big to remain big)
    - I've learned to trust only numbers, contracts, actions.
    - I've learned not to depend mainley on my social network to push my sales. Most of my friends visited my place once or none.
    - Consistency ... consistency ... consistency in everything. what made me fail was mainely lack of consistency in quality, performance, speed and marketing.
    - Marketing comes last, operations comes first.

    That's what comes on my mind now, I hope I will do better next time and good luck to you too.
     
  8. CycleGuy
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    CycleGuy Bronze Contributor Speedway Pass

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    Thanks for the honesty OP...

    My biggest questions is how could you be in your mid 20s with no experience in the restaurant your dad had owned your entire life?

    Most of the people I know who grow up in family businesses have an informal education in their family business well before they are legal adults. They are often competent managers of the business in their early 20s.
     
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  9. Pharaoh
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    It's not about my father of course, I take full responsibility for my failure.

    what made the restaurant fail mainely imo is the lack of consistency. consitency in the taste, service, delivery time and that's why after every succeful marketing campaign, we would acquire customers for short time and the sales go up and then we would lose them again.

    also I failed as a manager, I had no experience in restaurant management. I thought it was easy, make some good food using high quality materials and provide a good atmoshphere for your customers and that it. But there were too many variables That I couldn't handle, couldn't choose the right people who can handle them the right way and couldn't manage people to drive them to do their best effort. Specially when your employees see you don't have more experience than them, some will lose their faith in you and others will eat you alive.

    Also I had a big restaurant with a big menu and thus too many suppliers and out of control cost.
     
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  10. Vigilante
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    Vigilante Legendary Contributor Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    I had retail stores once.

    I had my world domination plan figured out.

    I invested a lot of money.

    And I lost my ass.

    We were bleeding cash when I sold the whole mess at a loss.

    Live and learn.

    You will make it out the other side.

    Running a restaurant is like having a job, only worse.

    You work seven days a week, and you only get paid after all the vendors, the landlord, and the staff get paid.

    No way. No thanks. You will be better off getting out of that business all together.
     
    Last edited: May 17, 2017
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  11. BradD
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    BradD Bronze Contributor I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    As other posters have suggested- always important to evaluate your options and don't assume that closing up shop is the only way to go (it may be)-

    When I'd started my business, the first few years were literally hell. I was taking an $800 draw every month, that's it- imagine how my long-term girlfriend felt at the time? May explain why we're no longer together (story for another time!). 3+ Years- almost didn't make it over the hump. Solution, ended up merging with the other major competitor in the space- all the other copy cats dropped off and we became the Canadian leader in our space. Drew the attention of a large US Co from a front page Financial Times article, and 6 months later they'd acquired the business.

    Be honest with yourself- if you think you've evaluated all your options, and it makes good business sense to close the doors, then by all means. At this point, always best to minimize your losses/legal liability as much as possible.
     
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  12. Pharaoh
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    Amen to that, word by word. There were times that after paying my staff, vendors and land loard, nothing remained for my personal expenses and I gave myself a small salary, less than some of my managers. I worked 7 days a week and my social life is basically non existent.
     
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  13. fhs8
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    One of the most successful fast food restaurants is In-N-Out with just fries and three different burgers on the menu. People want quality not quantity. There's minor details such as windows instead of a wall at the drive thru line so that people know it's fresh. Most restaurants die because of low revenue per sqft. Costs rarely have anything to do with restaurants dying.

    Why is there low revenue per sqft? The food is terrible, bad menu item selection, flies everywhere, place isn't clean, furniture is bad/mismatched, clueless employees/management, etc... You're the reason why it failed. MANY mistakes were most likely made.

    Also almost every single restaurateur with terrible food says that their food is great.
     
  14. G-Man
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    G-Man Legendary Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    The dude came here to talk about his mistakes and hard lessons learned.

    How many restaurants have you started?
     
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  15. fhs8
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    fhs8 Bronze Contributor Speedway Pass

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    I started zero but that doesn't mean I can't comment on it. I'm concerned that he didn't learn the right lesssons. Not once did he mention food, furniture, or how clean the place was. If the food was terrible then the next one will just go out of business again. What did other people think of the food? What issues did the reviews mention?
     
  16. MidwestLandlord
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    MidwestLandlord Legendary Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    Actually, windows into the kitchen is the exact opposite of current thinking in franchise restaurant chains, as it as been proven time and time again to reduce sales. People say they want to see that, but in reality they don't, because the kitchen will never be up to standards regardless of how tight a ship you run.

    Costs rarely have anything to do with restaurants dying? Are you for real?

    Ever have your vendor tell you your cheese slices are going from 5cents a piece to $1 EACH??

    Ever have your competitor get desperate for employee's, and beat your starting wage by $5 an HOUR??

    Ever have your bread vendor double your rates, without corporate franchise approval, and then get slapped with a $5,000 fine from your franchiser for buying bread outside of approved vendors...even though you could no longer get bread from the approved vendor because corporate was suing them??

    People want quality, not quantity? Actually, in the fast food biz, they want acceptable quality AND large quantity. It is not an either or, and the quality only has to be high enough to not turn people off.

    Oh, and restaurants typically measure revenue as "dollars per labor hour" NOT off square footage. (only academics with no actual restaurant experience do that)

    Source: I actually owned multiple restaurants. Was a consultant for one of the worlds largest restaurant chains. Ran a 10 state region for another large restaurant chain.

    OP,

    Restaurants are a BITCH to get right. Even with the backing of formal processes and systems from a franchise they are difficult, I can't imagine doing it without that, or any experience at all.

    For example, having too many seats in a dining room can drastically reduce sales, which is counter-intuitive, but how would someone know something like that without experience?

    Sounds like you gave it your all though...bravo. Also sounds like you learned where you went wrong, which will help with future projects.

    Hopefully the debt isn't too bad.
     
  17. G-Man
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    Dude, don't try to pass your constant negativity and criticism of people that actually try to do things as genuine concern. You're concerned he didn't learn the right lessons?

    I'll make a deal with you:

    You've started a business, yes? Start a thread detailing all of your mistakes and failures like OP did. The day you do that, I'll transfer you all of my rep.

    Until then you're just the guy that hijacks the threads of people that know and do things with 3rd hand half-accurate "facts" you read online somewhere.
     
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  18. MidwestLandlord
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    One of my most successful restaurants was FILTHY.

    2-3 miles from a coal mine. Coal dust EVERYWHERE.

    'C' rating with the health department. I didn't care. Good enough to stay open haha.

    Oh man, did I make SO MUCH money out of that place.

    Wrong side of town, horrible help, no one could speak English, filthy, shit food...but every customer made $80k - $150k a year and spent it like there was no tomorrow. I mean, one of my assistants was snorting coke off the back of the toilet tanks. Quality employee's for sure.

    Good times right there. Loved it.

    But, keep telling us how to operate restaurants. You're very knowledgeable.
     
  19. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    BOOM! :praise:
     
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  20. ZF Lee
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    With all that cold dust, won't customers or employees get sick? Sickness cases that are traced back to the restaurant might be quite fatal, you know?

    What kind of restaurant did you run? Takeout? Buffett? Family diner? That might tell a lot about the type of customers who might be willing to accept the grit in the restaurant and quality of food....

    And on your being a consultant, what problems did you have to deal with? I had assumed the food business was pretty hands on, relying more on the ground-managers rather than admin executives...
     
  21. MidwestLandlord
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    Totaling derailing the OP's thread here.

    The kitchen was clean enough. I'm aware of foodborne illnesses for sure. Most are from PHF's (potentially hazardous foods. i.e. beef, chicken, milk, tomatoes)

    A little coal dust never hurt anyone.

    It was a fast food franchise location.

    I was an FBC (franchise business consultant) that operated as an independent contractor. I was responsible for franchisee orientations, setting up vendor accounts for new franchisee's, mediation between franchisee and vendors, new store interior layouts, new store openings, new store management training, state level food safety certifications and training, pricing and margins, menu board layouts, P.O.P (point of presentation materials), labor and wage guidelines, food cost guidelines and tracking, hiring processes, safety/security and cash handling processes, franchise agreement compliance, etc.

    Essentially I took clueless new franchisee's and made them not clueless. Everything from making sure the new restaurant had enough lettuce pans, all the way to making sure the new owner had cash set aside to pay his help. (I was a babysitter lol)

    Handing the customer their food and saying "Thank you!" is just the end of a VERY long process.
     
  22. ZF Lee
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    Sorry, I didn't mean to derail. But I'm hoping to see if the restaurant business isn't as bad as it seems. And I had assumed that the USA might practice stricter health laws. I guess this ain't the case. IMO, I might prefer selling stuff to restaurant owners rather than be the restaurant owners, as there must be lots of things needed like admin tools, cookery, marketing etc.

    I might add though, besides 'thank you' that waiters should be alert enough to spot that there are newcomers or customers wanting the bill, as people are mostly in a hurry. It's more of efficiency. But I have been to restaurants which used touchscreens or electronic bells.
     
  23. MidwestLandlord
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    I wouldn't wish restaurant ownership on my worst enemy.
     
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    When I think about the restaurant business, I see so many violations of control it makes my head spin. What's to stop some jabroni in your kitchen from dropping a deuce and not washing his hands--congratulations, 3 people are dead from hepatitis. But hey, I think there are lots of fastlane ideas that can be applied to the restaurant industry to control various problems, eg. the guy who invented the electronic bottle spout to control overpouring.
     
  25. CPisHere
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    Restaurants are considered the WORST businesses to own for a reason. Second would probably be brick & mortar retail (which I own).
     
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