You Want to Open A Restaurant There is

You Want to Open A Restaurant ? There is a Lot to Know!

The Growing Restaurant Industry • Look at the Handout with Industry Trends • In the U. S. , the restaurant industry employs the second most employees only behind the government. • In 2006, estimated sales from restaurants in the U. S. should reach more than $511 billion. • The total economic impact of restaurant sales is more than $1 trillion in the U. S. , largely because every dollar spent in a restaurant generates more than two dollars in business for other industries. • People Eat Out a lot. It is estimated that of the dollars an individual spends on his total food consumption – over 50% will be spent at restaurants by 2010.

The Benefits To You n What is the Allure to this Business? n Whatever it is, it would explain why, even though they have exciting and glamorous careers, and all the money they can handle, so many stars own restaurants. n Being a restaurant owner is all about being creative and being in charge.

Outline for the Day 1) 2) 3) 4) 5) 6) 7) 8) Introduction by all What are the skills necessary to do this job successfully Conceptualize, plan and develop your restaurant Writing a good Business Plan (BP), Forming a company, Build a leadership Team Getting ready to Open Day to Day operations Budgeting for Success Q&A

Skills Needed to own a Restaurant n You must be Organized and Aware n You must be Flexible n You must be Creative n You must have People Skills n You must be Business – Minded n You must be a Restaurant Fanatic

What a Restaurant Owner Does n He/ She does or oversees: n n n Greeting of guests, accepting compliments and handling complaints Staffing of the kitchen, dining room and bar Working on Promotions and special events Ordering Food, liquor, beer, wine, general supplies Dealing with repair and maintenance issues Doing the daily books and paying bills

Ways to Develop Your Skills n Visit Other Restaurants n Have a template to fill out when you go n Work in a Restaurant n This is a Must n Find a Mentor n Keep informed about the Industry n Trade magazines, Trade Shows, NRA n Specialty Restaurant/Hospitality Mgmt Programs n www. restaurant. org/careers/schools. cfm n Certification Programs n www. americanfoodsafety. com

Conceptualize/ Design your Restaurant n The Type of Restaurant- franchise or independent n n n n Elegant 5 – star Casual and/or trendy Fast-Food Steakhouse Pizzeria Sports Bar Italian Family Style n Think About n n How you would change the idea to make it new and interesting What image do you want to project What props will be needed to set the visual look you want How big should the restaurant be: seats, wait staff, bars etc. .

Take Over or Start New ? n Take over an Existing Restaurant n n n The quickest and easiest ways to get into the business. Be aware that just because it was successful before, does not mean it will be successful with you It needs to be a place you love You will still need a Business Plan Be cautious about any outstanding liabilities, do not buy their legal entity - only the business.

Start a New Restaurant n Choosing the Location n There is no exact formula for finding the right location n Factors to consider: n n n n What is there now What is the area like What does the future look like for that area How do similar concepts do What are the demographics of the people and how many are there Parking Crime

Starting a New Restaurant n Buy or Lease n n n Recommend buy the location and for tax benefits and liability reasons set up a separate company to own the business If you can not raise the money or it is not for sale, get a first right of refusal into your lease If lease, always push for landlord to contribute dollars towards build out and/or get free rent months

Building and/or Renovating n How the space is laid out is vital to the flow for customers and staff n There are laws and suggested rules to follow n The Entrance: n n A transition Area The area for the host/hostess n The Bar Area: n n n Away from the dining room in a place where you don’t walk thru dining area to get to the bar Distance from the back wall to the front of the bar counter needs to be at least 8 ft. Back bar is typically 2 ft deep and 42 inches high. Counter area, front bar, is typically 3 feet deep and 42 inches high

Building or Renovating n The following items are useful or required for bar area: n n n n Hand sink with towel and soap dispenser Three compartment sink for glasses or under-counter dishwasher Reach in or beer coolers for wine, bottled beers, mixers Ice bins Soda/ juice dispensers Under counter cabinets for storage of liquors, paper goods, misc. items Floor drain(s) Ample shelving

Building or Renovating n Restrooms n n Building codes are very important to follow Keep the entrances out of the dining room view Lighting is important, especially for ladies Depending on the type of restaurant, baby changing stations are also important. n Kitchens n n Dimensions are the same as the bar. You need 8 ft from the back wall to the front side of the line. For Health Inspection Reasons: n n Washable walls (mylar, stainless, satin or enamel paint finish) Mop sink (18 inches square)

Building or Renovating n n n Grease Trap - clean them regularly Covered lighting – recessed fluorescent is preferred. Open floor sink (drain) under both the dishwasher area and three-compartment sink Hood system above all cooking equipment with make up air and fire suppression system- this also needs regular cleaning Hand Sinks (specific codes) n Dining Room n Only use comfortable chairs and bar stools n Do not skimp on lighting fixtures n Have strategically place service stations

Business Plan n Executive Summary n Organizational Plan n Market Analysis n Marketing Strategy n Financial Plan

Executive Summary A one or two page outline of the entire business plan: Introduction-name, location, concept n A description of the management n Growth plans n The competition n Financial Plan n

Organizational Plan n The “Set-Up” or “Inner Workings” of the restaurant n Concept and Theme n Legal Structure n Type of food and service n Location and Size n Management and personnel n Concept and Theme: n Detail on the type of restaurant you are creating n Show examples of other similar successful restaurants n Physically describe what the restaurant will look like n Describe the type of service you will be giving

Organizational Plan n Type of Food n n n Describe how you made your choice Will there be a kid’s selection and banquet menu Include a copy of the proposed menus – make it look as professional as possible n Legal Structure n How it will be organized and why

Organizational Plan n Location and Space Requirements n If You have a space in mind: n n How many square feet and how many seats will it hold Why you chose this location n Management and Staff n n n List your main personnel and their qualifications A management tree with expected numbers of each type of employee you expect Staffing plan

Market Analysis n This will explain why you think the demographics of this location are right n n n Target Customers n Statististics on age, income and education n Who you will be targeting Market Trends n Restaurant growth data both locally and on a national level (by type of restaurant) n Seasonal trends n Population and general business growth trends Competition n Both local and national n Specify the type of food, seating, and average check n Discuss their strengths and weaknesses

Market Strategy n Overviewn n It may be simply stating that you plan on becoming an integral part of your community, with growth of 10 percent per year. You plan to accomplish this by: n n Concentrating on the local market, creating a loyalty program and by being involved in local activities and sponsorships Doing a national and local campaign with Rewards Network n Positioning Statementn Should give a strong impression of what your marketing future will be i. e. : n n n We want to create a recognizable “brand” for our restaurant We want to build a strong customer base for our restaurant by offering prices that are fair, a quality product and exceptional service We will increase sales through population projections

Marketing Strategy n How much of your revenue will go towards marketing? n How should you divide up your marketing $$? n n Radio, newspaper, rewards network, donations, hotel publications, in house discounts etc. . Utilize your liquor distributors dollars whenever possible n Don’t Forget to Budget for and be involved in community events n Try and utilize track able vehicles as much as possible

FINANCIAL PROJECTIONS n Translate action plans into money n Calculate what financial success/failure looks like in the future n Identify problems on paper to save real money down the road n Convince banks and investors to participate

ESSENTIAL CONCEPTS TO LEARN n Define your business/restaurant model n Projecting future results n Financial Statements (standard practice)

YOUR RESTAURANT MODEL (the specifics of how you make money) Days open per week Number of tables Menu for breakfast, lunch, dinner Menu prices Number of customers and average value per check Food and beverage cost per serving (% of revenue or specific product cost) n Daily staffing plan n All other costs to run the operation n n n

PROJECTING FUTURE RESULTS n Some elements are your choice (location, menu, price, style, etc. ) n Some elements are out of your control (word-of-mouth, the economy, tastes, etc. ) n Dangers of being too optimistic/pessimistic about the future n Consider future scenarios rather than a single set of numbers

REVENUE PROJECTIONS n Prepare spreadsheets that calculate daily revenue based on n n your specific model Specify check average, meal type, customer volume, specials, menu prices, etc. Calculate sales by day, week, month, year Do projections for first three years Include explanation of why your projections are reasonable n Study other restaurants in area n Get professional/expert advice

COST PROJECTIONS n Develop a cost model (two basic types): n n Standard cost for each item served Cost as a % of revenue amount n Figure out which costs are variable with food & beverage served and which are fixed costs n Determine when you have to pay for food & beverage deliveries n Project costs to match the revenue projections

LENDER QUESTIONS n How much money do you need? n How much are you putting into you business? n How will you use the money? n How will you pay back the loan?

FINANCIAL STATEMENTS n Sources & Uses of funds n Profit & Loss (P&L, Income statement) n Cash Flow n Balance Sheet n Break Even Analysis

SOURCES & USES OF FUNDS Sources of Funds: Owner Investment Financing needed Total Sources $40, 000 76, 000 116, 000 Uses of Funds: Start up expenses Beginning Inventory Working Capital Cash reserve Total Uses 52, 000 15, 000 24, 000 25, 000 116, 000

START UP EXPENSES n Make your best estimate of the following: -Legal fees -Architectural Fees -License Fees -Food Inventory -Supplies Inventory -Construction Expense -Large Rest Equipment -Working Capital -Marketing/Advertising -Accounting Fees -Rent Deposits -Insurance Deposits -Liquor Inventory -Training Costs -Furniture & Fixtures -Kitchen Small wares -DR & Barware

PROFIT & LOSS STATEMENT Food & Beverage Sales Cost of Sales Jan $100 30 Feb $105 31 Mar $112 32 70 55 8 1 74 55 8 1 80 58 8 1 6 $ 10 $ 13 Gross Profit Operating Expenses Interest Expense Depreciation Income Before Tax $ ---

CASH FLOW Cash Receipts: From Customers From Credit cards Total Receipts Disbursements: Food & Beverage payments Payroll/taxes Supplies Utilities Maintenance Rent Insurance Other Total Disbursements Jan Feb Mar $65 25 90 $70 30 100 $74 28 102 20 15 25 0 5 10 2 2 79 45 15 0 9 5 10 2 5 91 42 16 10 0 5 10 2 40 125 Net Cash Flow 11 9 -23 Cash Beginning 350 366 375 Cash Ending $ 366 $ 375 $ 352 -----

BALANCE SHEET Assets: Current Assets Cash Accounts Receivable Inventory Prepaid Expenses Other Current Total Current Assets Liabilities: Current Liabilities Accounts Payable Other Current Total Current Liabilities Long Term Liabilities Total Liabilities Fixed Assets Land & Building Leasehold Improvements Furniture & Fixtures Total Fixed Assets Total Assets Owners Equity Capital Stock Accumulated Earnings Total Liabilities & Equity

BREAK EVEN ANALYSIS Loss Sales Revenue Cost of Sales Gross Profit (70%) Fixed Costs 90 27 63 70 Profit/(Loss) (7) Break Even 100 30 70 70 -0 - Profit 110 33 77 70 7

Preparing to Open Insurance (will vary) - Commercial Liability- covers you and your employee - Property Insurance – covers the actual restaurant - Business Interruption – covers ongoing expenses - Liquor Liability – liabilities caused by intoxicated customers - Workers Compensation – on the job injuries and lost wages - Sexual Harassment – to protect you & acts of employees - Disability Insurance – any key employee

Preparing to Open Equipment Checklist n Refrigeration – depends on menu and restaurant design § Walk-in Cooler and Freezer § Two door reach in § Sandwich prep cooler § Beer coolers n Electronics § § § Stereo System POS System Credit Card Machines Phone System Alarm System

Preparing to Open n General Equipment § § § § § Stainless prep tables Dishwasher 3 compartment pot sink Floor Mixer Bermixer Table top mixer Food processor Slicer 3 compartment sink for bar Hand sinks Ice machine Ice Bins Range with Oven Grill Salimandors Dunnage racks Walk in racks Coffee Equipment- lent

Preparing to Open n Furniture § § § § n Table tops Table Bases Chairs Booths Bar Stools High Chairs Booster Chairs Tray Stands Small Equipment § § § § § Sheet pans Assorted pots Stainless steel mixing bowls Saute pans (diff sizes) Stock pots Soup pots China Cap Chef spoons/ tongs Knives

Preparing to Open n Small Equipment (cont’d) § § § § § Rubber spatulas Muffin tins Thermometers Pastry bags and tips Flour/sugar bins Ice scoops Commercial can opener Trash cans Salt & pepper shakers Sugar caddies Silverware Rubber floor mats Coffee cups and saucers Assorted china Assorted bar glassware Water glasses Etc…. .

The Menu n Should be based on the following criteria: n The Concept § It should be reflected in the menu, décor, uniforms etc. n What the Clientele wants § Based on your market research and targeted customer n Availability/ Geographic area § Pair the restaurant’s food type with what is locally available § This will help your bottom line

The Menu n The limitations of the Kitchen and Staff n n Easier to design a menu for a kitchen than a kitchen for a menu Streamlining of Products n n n Design a menu that uses cross-over ingredients Thin your inventory and make sure all the items are utilized more than once Keeps your food and labor cost down n Choosing Food distributors n n n Shop - Make Sure you Compare Use a Purchasing sheet Make sure all deliveries are checked in by a supervisor

The Menu n Food Cost and Pricing n Do not make guesses n Every item should be priced out n If an item cost is $1. 24 and you want a 25% food cost, then the menu price should be $4. 95 n Monthly inventories should be taken so that you can manage the restaurant effectively

The Menu n Design of your Menu n Placement of items is key § People will look at the top, bottom and middle before reading whole menu n It should be clear and easy to read § Large font size § Limit difficult words (put in clear descriptions) § Clearer the menu, less time waiter will need to be there n Remember- Get your liquor or wine companies to pay for your menus and printing

Staffing n Interviewing n n n n n Appearance at the interview is important Length of time at previous jobs When can you absolutely not work? Why do you feel qualified for this position? Tell me about your last job and why you left? Who was your best boss and why? Are you pursuing a career in this business? What would previous employers say about you? Managers or chefs should be asked math questions such as food cost calculations and questions referencing health code rules such as proper holding temperatures n Always Check References & do background checks on supervisors

Training n Follow through with a program n Continue to train throughout the year n Updates with health codes/ wine classes n Do a follow up and test new employees n n Wait staff & cooks: quiz them on ingredients Bartenders: quiz on prices n Have a Training and HR Manual n n Review policies and procedures with all new employees Must include company’s sexual harassment policy

Day to Day Operations n Set a Consistent Environment n Projecting a positive image to the community n Happy workplace with a lot of smiles n Besides the human elements, there is: § § n Lighting Music Temperature Cleanliness Lighting n Needs to be subtle and adjustable n Make it a main element in the design aspect n Mark your dimmers for different times of the day

Day to Day Operations n Music n Two key factors that will make the environment better § Type and Volume of the music § Do not give access to all employees § Keep it systematic n Temperature n n n Comfort is extremely important to customer satisfaction Be flexible to customers needs Employees are not good indicators

Day to Day Operations n Cleanliness n n Customer survey – always ask about cleanliness It is not only important for health reasons, but it portrays how the overall operation is run It must be clean from the parking lot thru to the bathrooms Displays, including menu stands should be spotless

Day to Day Operations n Marketing n No matter how busy you are, you must continue to market your restaurant to keep it in the minds of your existing customers and new ones n You have to spend money to make money ! n Your BP should specify what your marketing budget is n Don’t waste your money- do track able marketing n Spend 1% to 3% of revenue on Marketing n n Community involvement is a must Donate Gift certificates (cost-effective) Loyalty Programs- RN, in house Website

Day to Day Operations n Servicing the Customer n Be organized and follow a system Use Table Numbers n Utilize station charts n § Do not rotate tables amongst wait staff n n n The front door and phone must always be covered Require managers to speak to a set number of customers during each shift Remember what “regulars” like Only you or a manager handle customer complaints Use Checklists for all positions to guarantee standards are met before, during and after each shift

Day to Day Operations

Day to Day Operations n Meetings n n Always conduct managers meetings Have Managers conduct shift meetings During the year conduct all employee meetings Have a kitchen staff meeting after every Health Inspection n Be at the restaurant n n The odds are more in your favor if you spend time at the business – “Hands on” Customers and employees want to see the owner

Budgeting for Success n Today’s Technology is very helpful n Use a Daily Sales Report (DSR) n n n Balance books daily against your actual cash and cc deposits Investigate discrepancies immediately Track daily labor costs n Conduct Monthly F & B Inventories n n n Cost of sales = BI + purchases - EI If you see poor trends, investigate Update inventory prices as they change

Budgeting for Success n Industry Cost Averages § § Food Liquor Wine Beer 35% 20% 35 -50% 25 -35%

Budgeting for Success n Setting you Labor Budget § Expect the first months to be higher § Stated as a % of Sales § Monthly labor $$ / monthly sales (-taxes) § Keys to labor control § Tipped employees are not the first place to look § Highest labor dollars are in kitchen § Cross train – i. e. Dishwasher to do prep n Other Controllable Expenses § Payroll taxes – 12 -18% of entire payroll § Repair and Maintenance – preventive and self § Supplies – shop around and look for alternatives

Budgeting for Success § Office Supplies – it’s a penny business § Advertising – be creative, stick to budget § Utilities – be on the employees - it is your money. Some employees don’t care if it is not there money § Music – don’t forget ASCAP fee § Telephone – restrict the use n Non- Controllable Expenses § § § Interest expense on loans Depreciation Expense Rent Insurances Legal and Accounting fees

Budgeting for Success

Budgeting for Success • HAVE A RAINY DAY FUND ESPECIALLY IN YEAR ONE ! • PREPARE FOR THE “OFF SEASON” • SPEND AS MUCH TIME AS POSSIBLE IN THE RESTAURANT THE FIRST YEAR • “HANDS ON” MANAGEMENT leads to SUCCESS

– – – – – – Restaurant Lingo 86 Back of the house Break-Even Point Cash-In-Sheet Chef De Cuisine Chef De Garde Manger Covers Cost of Goods Cross Contamination Deuce Captain Executive Chef Expediter Front of House Hold Time High Top Maitre’D Misen Place Mystery Shopper Position Numbers Runner Saute Cook Sidework Turns

Conclusions l This is a Great Business to be in l Be Cautious l Be Smart l Be Ready to Work Harder than Ever l Be Open Minded. Take advice l Good Luck “The harder you work the luckier you become”