An Easy Recipe

Opening a restaurant is the classic armchair entrepreneurial fantasy. It is a great business for someone who loves food and enjoys cooking, but should not be undertaken by the feint hearted. Being a restaurant owner is like having another child in many ways. It is certainly not as easy as it may seem to be. Before you sign on the dotted line there are a number of important things you should consider.

If you do not own the building where you plan to open your business, you will have to enter into a lease arrangement with the landlord. Typically these leases require a long term commitment, which means that you had better investigate thoroughly the feasibility of that location. If you select a bad location and try to get out early, you could be faced with law suits or stiff penalties.

As is most frequently the case, opening a restaurant will be beyond your immediate cash reserves, which means that you will probably be looking for alternative sources of financing. Whether starting from scratch or taking a location that was previously a restaurant of some type, your initial capital expenditures can be in the $100,000 to $300,000 range, depending on the size, theme and other considerations. Restaurant contractors are notorious for bumping up their estimates with required extras, so be prepared to spend upwards of 30%- 50% over original budget. After securing the funding for your start up costs, make sure you have sufficient cash reserves to survive through the first 6-12 months of operations. Most businesses, regardless of their nature, fail because of either bad management or lack of working capital. Or a combination of both.

If your idea of fun is constantly worrying about money, hiring consultants, training and managing employees, complying with government regulations, setting up systems, balancing the books, taking inventory, preparing menus, controlling theft and working 18 hour days, then you are a natural born restaurant owner. If this doesnt appeal to you, you might consider the simplicity of owning a mobile food business. Did you know that many hot dog vendors working downtown areas make more money than the majority of struggling to survive restaurant owners? And most of them work only 4-5 hours a day. Talk about a low stress job with a fraction of the risk.

Hiring, training and managing restaurant employees are probably the most difficult tasks that the new restaurant owner must face. If you are an easy going individual, your employees will take advantage and walk all over you. If you are overly strict, they will leave and go somewhere else. The restaurant business is one where your employees, from your cooks to your busboys can either make or break your business. In many cities and even smaller towns, newspaper columnists write articles about the local eating establishments. A great review will usually bring in new business for a week or so at the most, whereas a bad review could ruin your business entirely. An unfavorable report from your local health department could also be devastating.

The restaurant business is notorious for staff turnovers. Pay is relatively low due to the low margins of the business. Many restaurant jobs are usually entry positions filled with people in their late teens and early 20s who usually leave for better positions or to continue their studies. Restaurant owners in areas with low unemployment and few students find it difficult to fill positions.

Keeping your doors open and your seats filled with patrons can be an ongoing source of anxiety. There is a lot of truth in the statement, Opening a restaurant is the easy part, the real challenge is making money at it. Dealing with day to day problems is another aggravating exercise. Equipment always breaks down, usually in the middle of rush hour. Customers do complain, even in the finer restaurants. There is always something that will crop up to put a glitch in your day. Thats all part of the business. If you survive the initial years, in time you will learn how to run the business and cope with all the problems that arise. And in the end, if you are one of the fortunate survivors, you will recoup your investment and begin to reap the rewards.

Opening a restaurant is a daunting task, but no matter what you put into it, in terms of time or money, it will not be successful if no one knows you exist. If you are taking over a location that was a restaurant at some point in the past, make sure you do not make the same mistakes that the previous owner did. Unless it was a management problem or some other obscure issue, restaurants usually fail because of their location or lack of working capital. Or as one restaurant critic jokingly remarked, The restaurant failed because the owner ran out of working capital due to a bad location.