Restaurant Business

If you think it’s a bad time to opening a restaurant business, you might want to think about it again.

Everyone knows the prevailing wisdom about the restaurant business: It’s a bad bet, notorious for failure, with three out of four places closing within the first three years.

But consider this: Studies have found the risk of closing is the same in good times and bad, according to Andrew Rigie of the New York State Restaurant Association. And the upsides to a down economy make it a risk worth considering. Rents have dropped by as much as 66 percent in prime locations, and landlords are actually offering abatements. There’s a huge pool of talented chefs and workers desperate for jobs and willing to work for much less. And, as Hoffman says, “There’s money sitting on the sidelines” to be tapped for investments, even if banks are not loaning at all.

Yes, the cost of space has gotten down and landlords are bending their backs for tenant occupancy. Although Hawaii’s scenario might not be in tact, asking the right questions can garner the right terms and agreement of operating a restaurant.

As always, the bottom line really is the bottom line, which is why successful restaurateurs hammer on the importance of a business plan. “You can’t think you are going to open a restaurant and only pay the bills,” Mendes says. “You really have to have a strong plan. It’s tedious, it’s a test of patience. But it’s key.” More important, “don’t open with zero in the bank –I’ve been open for six months and am still paying bills for construction.”

Arpaia and others lament that culinary schools graduate chefs with no serious training in business beyond managing food costs. And so she advises: “Partner with people who know what they are doing and not be undercapitalized. If you think you need $50,000, you really need $100,000. You need to cover payroll, food and wine. People who are undercapitalized make it to nine months; most don’t make that first year.”

As always, homework is always necessary and something you cannot dismiss especially in this competitive age. One needs to dissect the cost of operating and expenses very seriously to break even. Don’t you wish it was a lot easier like school homework?

Read the full article here.