Restaurant anyone?

[Talkintoy]

I'd like to know your input on starting a restaurant? What are the things to look for before jumping into it? Lease, employees, location etc...? Anyone here has a restaurant?

 

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[yveskleinsky]

Are you thinking of starting a new restaurant or taking over an existing one?

 

[lightning]

After talking to several people about this type of venture, your best bet will probably be to pick up some books on the subject (although consulting with the members here is probably the BEST first step you could have made!) It seems like the failure rate of new restaurants is very high..so essential research is a must.

 

[Talkintoy]

Are you thinking of starting a new restaurant or taking over an existing one?

Taking over one but need to change the menu a bit. I looked at the numbers and i think it'll be really hard to get this restaurant up and running. The lease alone is $7200 coz its in newer location and built! And PG&E is about $1800 so that's about $9000 already! The place is about 1800 sq ft and was run by absentee owner with employees about 4 to 6 maybe? Price originally was $75k with broker involve, but since i knew the owner he'll let me have it for $30k no broker involve. He was even willing to carry loan after $15k cash up front. I thought about it hard and asked myself if it was opportunity or ? Whatca think?

 

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[tchandy]

I wrote a paper for operating a restaurant a few years ago. Some things to consider -
- who is your competition
- who are you catering to (young kids, family type restaurant, etc
- how much are operating expenses
- where is the restaurtant located
- how can you obtain money for start-up costs/renovations
- who else is on the payrole? are they temporary hires or looking to stay for a long period of time? my brother used to work at a restaurant and just decided to quit one day so you have to be ready for the unexpected
- you may not break even for several years so do you have enough savings to prepare for hard times

Do your research before jumping into the restaurant business. A lot of these businesses fail. Owning a restaurant takes a lot of work. You can forget about your 9 to 5 job. It takes a lot of work. I did research on Lexus/Nexus (I think that's what it was but not sure) and found a wealth of information on starting and operating a restaurant.

I have since concluded that it takes too much much and not what I want to get into.
Best of luck.
Tom

 

[camski]

I have owned a restaurant and still work in the foodservice industry and I would tell you not to. this is the absolutely worst time to start a restaurant. With the inflation that we are seeing many peoples disposable income is eroding and one of the first things they do is to cut down on the frequency that they go out to eat. Not to mention that the last time I looked the national average on profit margin in a restaurant was about 6%. With all the overhead that t costs to start arest., 6 % is hardly worth it.
I closed mine last year because the inflation in the food industry started last year. Fuel is higher (your deliveries come on trucks and your distributors receive their food on trucks). Corn is higher, due to all the new ethanol plants (the majority of corn grown in this country is feed corn not for human consumption. higher feed prices means higher protein and dairy prices). Oil prices are higher because all the farmers have elected to grow corn (due to higher prices they can receive) instead of soybeans. so less supply with same demand means higher prices( this affects all your salad dressings and your fryer oil). Finding help is a nightmare becasue unless you get lucky and find someone who foodservice is their passion you pretty much get the bottomfeeders of the country. unless you hire Illegals, but then you could be dealing with a whole other set of issues.
Now if you are dead set on getting inot the business I would still tell you to wait becasue a lot of them will be going out of business this year and you can get better deal for your dollar when that happens. I hope this helps but if you have any other questions post here and I will answer them for you.

 

[AroundTheWorld]

great feedback from everyone, and I know nothing about the restaurant biz, but...

What is the LONG TERM PLAN here? Does it include PASSIVE INCOME?

Because, I find it very unlikely that a restaurant could ever be passive for the owners. I personally wouldn't ever consider a restaurant for two reasons: too much effort and too much time. There are much faster and easier and less time consuming ways to get to my financial goals.

 

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[yveskleinsky]

I completely agree with you ATW. ...I co-owned a restaurant/bar many moons ago, and talk about long hours! There were many nights that we slept there just to make things easier. Never again!

TalkinToy, if you are thinking of entering the restaurant industry, you really need to either have, or have access to, one year's operating expenses (including salary). Most restaurants go under because they are underfunded.

To see whether or not this place is "a good deal" you'll need to see his sales figures and inventory (at a minimum)- and get someone in business (not him) to review the numbers with you. ...When my partner sold the restaurant, he lied about ALL the numbers, sales, employees (some were paid under the table), the value of the building, inventory (and loss of inventory-which in a bar is generally pretty high), equipment, everything. The new owners have since taken him to court several times, but have no recourse as it really is a "buyers beware" type business, and they didn't do proper DD. Of course, karma being the appropriate force it often is, the IRS is now after him to pay tax on all the proceeds (which he has since spent).

...The bigger question isn't if this is a good opportunity. The question is: What type of opportunity are you looking for?

 

[kimberland]

Haven't worked in family restaurants
(though have cousins that own a few)
but have worked in quick service and nightclubs...

Some great points here.
The major one being that
it is VERY tough to make solid income off of a single restaurant.
You need franchising or product sales or something else...

In other words as ATW and Y says,
you have to have a plan.

 

[kimberland]

Oh, and if you haven't been in the industry before,
it is a steep learning curve to make it a success.
It is a tough, complicated business
(from the outside, it looks simple
but it isn't).

 

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[camski]

The absolute biggest rookie mistake I see from people buying restaurants especially ones that are profitable is to not have the seller sign a noncompete. You would be amazed at how many people buy a restaurant from a guy who takes the proceeds and builds a bran dnew one down the street.

 

[Talkintoy]

Great points everyone! Thank you much! I stepped back and decided not to proceed any further. Was gonna go in with my mom as she had a restaurant back before. When i told her just the lease alone she didn't think it was a good idea also. I thought it might have been an opportunity but i guess its a time, money, emotional drain. :nonod:

 

[Talkintoy]

I completely agree with you ATW. ...I co-owned a restaurant/bar many moons ago, and talk about long hours! There were many nights that we slept there just to make things easier. Never again!

TalkinToy, if you are thinking of entering the restaurant industry, you really need to either have, or have access to, one year's operating expenses (including salary). Most restaurants go under because they are underfunded.

To see whether or not this place is "a good deal" you'll need to see his sales figures and inventory (at a minimum)- and get someone in business (not him) to review the numbers with you. ...When my partner sold the restaurant, he lied about ALL the numbers, sales, employees (some were paid under the table), the value of the building, inventory (and loss of inventory-which in a bar is generally pretty high), equipment, everything. The new owners have since taken him to court several times, but have no recourse as it really is a "buyers beware" type business, and they didn't do proper DD. Of course, karma being the appropriate force it often is, the IRS is now after him to pay tax on all the proceeds (which he has since spent).

...The bigger question isn't if this is a good opportunity. The question is: What type of opportunity are you looking for?

Thanks Yves for great advise. When i asked the owner on the numbers he said "only IRS looks at the numbers". That already raised a flag for me. The only thing i looked for was, why it didn't make it? Was there something i can do better if i did took over? What can i change to make it profitable? I know i can handle the work but i guess at this venture im buying a job instead of owning the business.

 

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[Talkintoy]

Now if you are dead set on getting into the business I would still tell you to wait because a lot of them will be going out of business this year and you can get better deal for your dollar when that happens. I hope this helps but if you have any other questions post here and I will answer them for you.

Your absolutely right about this. My wife talks to the employees of the restaurants she buys food from and found out 3 other places where looking into selling thier business. One other we just found out is a video store? I wonder if anyone has info on this type of business? The videos rented at this place is targeted specifically on this type of ethnic, i guess is the right word to use? I just need to do some research on the numbers from owner and why they're selling this. Also im looking into what i can provide people to make it a great place more. Place looks boring and needs more great things into it. Maybe this will be an ideal business for us rather than restaurant. Will keep you guys posted. Please feel free to post if you have any comments on video stores?

 

[camski]

Dont take this the wrong way but it kind of sounds like you are "throwing a bunch of crap against the wall and seeing what sticks". Before you get into any kind of business it might be a good idea to figure out what your ultimate goal is. Do you want to be in business for the money, the perceived freedom, the feeling of being your own boss? Why exactly do you want to own your own business and to what end. That might help you figure out which direction you want to go.
Now having said all of that video is going the way of the buggy whip. Everything is going digital.

 

[fanocks2003]

I'd like to know your input on starting a restaurant? What are the things to look for before jumping into it? Lease, employees, location etc...? Anyone here has a restaurant?

I would probably build a restaurant than purchasing one:smxF:. But what I would have done, and this is just me, would be to find someone clearly experienced in building/managing a successfull restaurant. Especially in the area of cooking and keeping all the customers happy. Because, if you have seen the Gordon Ramsey's series when he saves restaurants from near bankruptcy, the hardest part is the management part. Having people do the right things and not do things that clearly spoils everything (I am refering to fresh food, clean kitchens and a lot of other stuff that needs to be in place). The hardest part in any kind of business is management of people. People almost never do as they are told. You need to look over everyone like a hawk. If you have a manager you need to look over this manager like a hawk. Otherwise you will be in deep shit. Sorry for the "shit" word. Wanted to emphasize the matter.

That is why I usually build and quickly sell for as much as possible. Because it is a hassle running businesses. People on this forum who do run businesses or income properties know this is so. It is not a fun thing to do. It is really a pain in the a$$ to be honest. So the easiest way is to sell out and put the money in a great place earning interest. Some people place it in a high paying savings account, others in other paper products. That is the best place really. Just getting interest cashflow from it.

Me personally, like the starting point of a business. Getting things up and running. After that the fun stops. Because the whole "political scene" begins when the business is up and running. People smoothing the boss in order to be the next top manager etc. Who wants that in their lifes? Not me:smxF:. Less stress is always the best bet. Enjoy when it is fun, dump it when it get's ugly.

 

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