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You Want to Open A You Want to Open A Restaurant ?Restaurant ?
There is a Lot to Know!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
What is the Allure to this Business? 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.
Being a restaurant owner is all about being creative and being in charge.
Outline for the Day
1) Introduction by all
2) What are the skills necessary to do this job successfully
3) Conceptualize, plan and develop your restaurant
4) Writing a good Business Plan (BP), Forming a company, Build a leadership Team
5) Getting ready to Open
6) Day to Day operations
7) Budgeting for Success
8) Q & A
Skills Needed to own a Restaurant
You must be Organized and Aware You must be Flexible You must be Creative You must have People Skills You must be Business – Minded You must be a Restaurant Fanatic
What a Restaurant Owner Does
He/ She does or oversees: 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
Visit Other Restaurants Have a template to fill out when you go
Work in a Restaurant This is a Must
Find a Mentor Keep informed about the Industry
Trade magazines, Trade Shows, NRA Specialty Restaurant/Hospitality Mgmt Programs
www.restaurant.org/careers/schools.cfm Certification Programs
www.americanfoodsafety.com
Conceptualize/ Design your Restaurant
The Type of Restaurant- franchise or independent Elegant 5 – star Casual and/or trendy Fast-Food Steakhouse Pizzeria Sports Bar Italian Family Style
Think About 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 ?
Take over an Existing Restaurant 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
Choosing the Location There is no exact formula for finding the right
location Factors to consider:
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
Buy or Lease 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
How the space is laid out is vital to the flow for customers and staff
There are laws and suggested rules to follow The Entrance:
A transition Area The area for the host/hostess
The Bar Area: 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
The following items are useful or required for bar area:
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
Restrooms 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.
Kitchens 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:
Washable walls (mylar, stainless, satin or enamel paint finish) Mop sink (18 inches square)
Building or Renovating
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)
Dining Room Only use comfortable chairs and bar stools Do not skimp on lighting fixtures Have strategically place service stations
Business Plan
Executive Summary Organizational Plan Market Analysis Marketing Strategy Financial Plan
Executive Summary
A one or two page outline of the entire business plan: Introduction-name, location, concept A description of the management Growth plans The competition Financial Plan
Organizational Plan
The “Set-Up” or “Inner Workings” of the restaurant Concept and Theme Legal Structure Type of food and service Location and Size Management and personnel
Concept and Theme: Detail on the type of restaurant you are creating Show examples of other similar successful restaurants Physically describe what the restaurant will look like Describe the type of service you will be giving
Organizational Plan
Type of Food 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
Legal Structure How it will be organized and why
Organizational Plan
Location and Space Requirements If You have a space in mind:
How many square feet and how many seats will it hold
Why you chose this location
Management and Staff List your main personnel and their qualifications A management tree with expected numbers of
each type of employee you expect Staffing plan
Market Analysis
This will explain why you think the demographics of this location are right Target Customers
Statististics on age, income and education Who you will be targeting
Market Trends Restaurant growth data both locally and on a national
level (by type of restaurant) Seasonal trends Population and general business growth trends
Competition Both local and national Specify the type of food, seating, and average check Discuss their strengths and weaknesses
Market Strategy
Overview- 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:
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
Positioning Statement- Should give a strong impression of what your marketing future will
be i.e.: 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
How much of your revenue will go towards marketing?
How should you divide up your marketing $$? Radio, newspaper, rewards network, donations, hotel
publications, in house discounts etc.. Utilize your liquor distributors dollars whenever possible
Don’t Forget to Budget for and be involved in community events
Try and utilize track able vehicles as much as possible
FINANCIAL PROJECTIONS
Translate action plans into money Calculate what financial success/failure looks
like in the future Identify problems on paper to save real
money down the road Convince banks and investors to participate
ESSENTIAL CONCEPTS TO LEARN
Define your business/restaurant model Projecting future results 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) Daily staffing plan All other costs to run the operation
PROJECTING FUTURE RESULTS
Some elements are your choice (location, menu, price, style, etc.)
Some elements are out of your control (word-of-mouth, the economy, tastes, etc.)
Dangers of being too optimistic/pessimistic about the future
Consider future scenarios rather than a single set of numbers
REVENUE PROJECTIONS Prepare spreadsheets that calculate daily revenue based on
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
Study other restaurants in area Get professional/expert advice
COST PROJECTIONS
Develop a cost model (two basic types): Standard cost for each item served Cost as a % of revenue amount
Figure out which costs are variable with food & beverage served and which are fixed costs
Determine when you have to pay for food & beverage deliveries Project costs to match the revenue projections
LENDER QUESTIONS
How much money do you need? How much are you putting into you business? How will you use the money? How will you pay back the loan?
FINANCIAL STATEMENTS
Sources & Uses of funds Profit & Loss (P&L, Income statement) Cash Flow Balance Sheet Break Even Analysis
SOURCES & USES OF FUNDS
Sources of Funds:Owner Investment $40,000Financing needed 76,000
Total Sources 116,000
Uses of Funds:Start up expenses 52,000Beginning Inventory 15,000Working Capital 24,000Cash reserve 25,000
Total Uses 116,000
START UP EXPENSES
Make your best estimate of the following:-Legal fees -Accounting Fees-Architectural Fees -Rent Deposits-License Fees -Insurance Deposits-Food Inventory -Liquor Inventory-Supplies Inventory -Training Costs-Construction Expense -Furniture & Fixtures-Large Rest Equipment -Kitchen Small wares-Working Capital -DR & Barware-Marketing/Advertising
PROFIT & LOSS STATEMENT
Jan Feb Mar ---
Food & Beverage Sales $100 $105 $112Cost of Sales 30 31 32
Gross Profit 70 74 80Operating Expenses 55 55 58Interest Expense 8 8 8 Depreciation 1 1 1
Income Before Tax $ 6 $ 10 $ 13
CASH FLOW
Jan Feb Mar ---------Cash Receipts:
From Customers $65 $70 $74
From Credit cards 25 30 28
Total Receipts 90 100 102
Disbursements:Food & Beverage payments 20 45 42 Payroll/taxes 15 15 16Supplies 25 0 10Utilities 0 9 0 Maintenance 5 5 5 Rent 10 10 10
Insurance 2 2 2Other 2 5 40
Total Disbursements 79 91 125
Net Cash Flow 11 9 -23
Cash Beginning 350 366 375
Cash Ending $ 366 $ 375 $ 352
BALANCE SHEETAssets: Liabilities:
Current Assets Current LiabilitiesCash Accounts Payable Accounts Receivable Other Current Inventory Total Current Liabilities Prepaid Expenses Other Current Long Term Liabilities
Total Current AssetsTotal Liabilities
Fixed AssetsLand & Building Owners EquityLeasehold Improvements Capital StockFurniture & Fixtures Accumulated Earnings
Total Fixed Assets
Total Assets Total Liabilities & Equity
BREAK EVEN ANALYSIS
Loss Break Even Profit
Sales Revenue 90 100 110
Cost of Sales 27 30 33
Gross Profit (70%) 63 70 77
Fixed Costs 70 70 70
Profit/(Loss) (7) -0- 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 Refrigeration – depends on menu and restaurant design
Walk-in Cooler and Freezer Two door reach in Sandwich prep cooler Beer coolers
Electronics Stereo System POS System Credit Card Machines Phone System Alarm System
Preparing to Open 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
Furniture 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 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
Should be based on the following criteria: The Concept
It should be reflected in the menu, décor, uniforms etc.
What the Clientele wants Based on your market research and targeted
customer
Availability/ Geographic area Pair the restaurant’s food type with what is locally
available This will help your bottom line
The Menu
The limitations of the Kitchen and Staff Easier to design a menu for a kitchen than a kitchen for a menu
Streamlining of Products 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
Choosing Food distributors Shop - Make Sure you Compare Use a Purchasing sheet Make sure all deliveries are checked in by a supervisor
The Menu
Food Cost and Pricing Do not make guesses Every item should be priced out If an item cost is $1.24 and you want a 25%
food cost, then the menu price should be $4.95
Monthly inventories should be taken so that you can manage the restaurant effectively
The Menu
Design of your Menu Placement of items is key
People will look at the top, bottom and middle before reading whole menu
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
Remember- Get your liquor or wine companies to pay for your menus and printing
Staffing
Interviewing 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
Always Check References & do background checks on supervisors
Training
Follow through with a program Continue to train throughout the year
Updates with health codes/ wine classes Do a follow up and test new employees
Wait staff & cooks: quiz them on ingredients Bartenders: quiz on prices
Have a Training and HR Manual Review policies and procedures with all new
employees Must include company’s sexual harassment
policy
Day to Day Operations
Set a Consistent Environment Projecting a positive image to the community Happy workplace with a lot of smiles Besides the human elements, there is:
Lighting Music Temperature Cleanliness
Lighting Needs to be subtle and adjustable Make it a main element in the design aspect Mark your dimmers for different times of the day
Day to Day Operations
Music 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
Temperature Comfort is extremely important to customer
satisfaction Be flexible to customers needs Employees are not good indicators
Day to Day Operations
Cleanliness 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
Marketing 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
You have to spend money to make money ! Your BP should specify what your marketing budget is Don’t waste your money- do track able marketing Spend 1% to 3% of revenue on Marketing
Community involvement is a must Donate Gift certificates (cost-effective) Loyalty Programs- RN, in house Website
Day to Day Operations
Servicing the Customer Be organized and follow a system
Use Table Numbers Utilize station charts
Do not rotate tables amongst wait staff
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
Meetings 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
Be at the restaurant 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
Today’s Technology is very helpful Use a Daily Sales Report (DSR)
Balance books daily against your actual cash and cc deposits
Investigate discrepancies immediately Track daily labor costs
Conduct Monthly F & B Inventories Cost of sales = BI + purchases - EI If you see poor trends, investigate Update inventory prices as they change
Budgeting for Success Industry Cost Averages
Food 35% Liquor 20% Wine 35-50% Beer 25-35%
Budgeting for Success
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
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
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
ConclusionsConclusionsThis is a Great Business to be inThis is a Great Business to be inBe CautiousBe CautiousBe SmartBe SmartBe Ready to Work Harder than EverBe Ready to Work Harder than EverBe Open Minded. Take adviceBe Open Minded. Take advice
Good LuckGood Luck““The harder you work the luckier you The harder you work the luckier you
become”become”