Restaurant biz?

rpadula

rpadula

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PancakeBunny
There’s always a great wealth of knowledge here - does anyone know the restaurant business? Or can point me to some good resources?

I know someone with a small, independent restaurant and they’re struggling. Since I’ve got some spare time, I thought I’d investigate to see if I could help out. Definitely not with the cooking part, but perhaps reverse engineering the business numbers and figuring out how to turn it around.

Thanks,
Rich
 
don't restaurants have like the highest failure rate of most small businesses? pretty slim margins, etc.... tough bidness.
 
eman1200 said:
don't restaurants have like the highest failure rate of most small businesses? pretty slim margins, etc.... tough bidness.
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Yup...they are the ultimate trap of believing that just because you are good at a skill you will good at running a business providing that skill. Being good at a trade or service and running a businesses are two completely different skillsets and entrepreneurs that don't recognize that often struggle or fail.

This book is MUST read IMO for anyone in or starting to think about a small business. There are some perfect examples in it that your friends should directly relate to.

https://www.amazon.com/Myth-Revisit...child=1&keywords=E+Myth&qid=1621275582&sr=8-1
 
Ooh, tough business. Direct them to watch a few episodes of Restaurant Impossible.
 
Reality TV isn't.

I have a friend whose family had a Greek restaurant. My friend says "nobody should have to work that hard."
 
...also will never forget a valuable lesson I learned working for a close friend's restaurant when I was younger and now use in my own company to this day.

It was actually a pretty busy place but they were on the struggle buss financially. They hired a consultant to help them out and first thing he said was "raise all your prices by at least two dollars" (or whatever it was)

"Heck no!...we will loose 25% of our customers!" said the owner.

"If you if you did that how much revenue would you then generate taking into account that customer loss?" asked the consultant.

[runs the numbers]..."Almost same revenue as we are bringing in now"

"Great, so why not make the same amount of money with 25% less work then have that additional capacity available at a higher profit margin?"

That was a paradigm shift in thinking vs just trying to pack in customers at a lower price point and bleeding money in the process. Now there is a balance to that but the moral of the story was not sell yourself short and overwork the business just to keep revenue up especially if you are not keeping enough of the money in profitability.

Had another friend who has a side business and she was so bad at that concept and overworking everyone that even her employees had a a saying..." what we loose in profitability we make up for in volume". She lost a LOT of money over the years.
 
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Worked in restaurants as a young Savage. Rule number 1 is cleanliness. Keep everything clean. Dining room, kitchen, walk ins and especially the bathrooms. Those should be cleaned a couple times a day and swabbed out and spot cleaned every couple hours during a busy evening.

The other thing I would do were I in the restaurant business is figure out what wasn't in any of the restaurants in the area. Whatever that was, I'd make certain it was in mine.

All that said I am very glad not to be in the restaurant business. It's really hard work.
 
What kind of restaurant is it?

Unless you’ve got a niche, that’s a hard business to be in. The barriers to entry are low, so the competition is quite high and the margins are very small. Not a space I’d want to be in.
 
I have a mentoring client whose business is doing the accounting and serving as part-time CFO for restaurants. Her advice to people considering opening a restaurant is: "Don't."

That said, the first place she works to make her clients profitable is cutting labor. She delivers charts of metrics like labor dollars per revenue dollar for every hour the restaurant is open. The punch line there is that managers bring in staff too early and keep them too late versus revenue periods. Another thing she works on is food cost, of course. She is quite contemptuous of kitchens where portions going onto plates are not weighed.
 
My wife is a CPA who works for another CPA. The other lady appears to be a great CPA but is a terrible businesswoman.
 
airdale said:
I have a mentoring client whose business is doing the accounting and serving as part-time CFO for restaurants. Her advice to people considering opening a restaurant is: "Don't."
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That’s generally good advice, but the problem here is that the OP’s friends are already in the business.
There has been some good advice here. Raising prices is the second most necessary thing. BUT, you must make sure the food and service you provide justifies it.
And while controlling cost is important, having the best employees is critical. Fire any employee that is not a 9 or 10. And pay the top performers well. Firing those non-performers is what makes management so hard.

But here is the dilemma: hiring anyone these days is hard when they can get paid for not working. That is what is driving even well managed places out of business.

Good luck to the OPs friends.
 
flyingron said:
I have a friend whose family had a Greek restaurant. My friend says "nobody should have to work that hard."
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There is a reason why the kids of such restaurateurs often choose other fields...
 
rpadula said:
There’s always a great wealth of knowledge here - does anyone know the restaurant business? Or can point me to some good resources?

I know someone with a small, independent restaurant and they’re struggling. Since I’ve got some spare time, I thought I’d investigate to see if I could help out. Definitely not with the cooking part, but perhaps reverse engineering the business numbers and figuring out how to turn it around.

Thanks,
Rich
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The two biggest controllable line items for restaurants are food costs and labor costs if either are out of control you fail. I would start looking at those two items first.
 
Worked my way through college in restaurants. One of the owners always said, "you can serve them dog dung, but if the ambiance is nice and the service is 5-star they say it was the best meal they ever had."

Tough business, hard work, and get use to going to work when everyone else is kicking back.
 
I know a couple people that own several Little Caesars (sic) franchise locations. I'm not sure that a take out pizza chain qualifies as a "restaurant" per se, but they seem to be doing well and don't seem to work overly hard. I suppose a person qualified run a Digorno's through a conveyor oven and let it slide in to a cardboard pizza box is all you need for for skill.

But a real restaurant? I couldn't do it. My table side manner would resemble that of the Soup Nazi's.
 
Sac Arrow said:
I suppose a person qualified run a Digorno's through a conveyor oven and let it slide in to a cardboard pizza box is all you need for for skill.
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How about robots?
 
I have nearly 20 years of restaurant experience. A good chunk of that time as a General Manager at multiple different restaurants. The restaurant business is HARD. It's a ton of work. When things are going well, it's like you're hosting a party. When things aren't going well, it can feel like Hell. Way too many people have the perception that a restaurant is a "little business" that can be easy to run. It's not a business for people who don't know what they're doing. My advice is to be supportive, but recognize that it takes experience. coming in fresh off the street with good intentions and non-specific business knowledge is not the way to fix a restaurant.
 
Ventucky Red said:
Worked my way through college in restaurants. One of the owners always said, "you can serve them dog dung, but if the ambiance is nice and the service is 5-star they say it was the best meal they ever had."
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Works mainly in touristy areas and suburbs where people have never had good food. I avoid said areas when I go out to eat since the food sucks and you can tell they're compensating for it with the aspects you mentioned.
 
Used to management for a major chain.
Several areas of costs:
Food costs
Labor costs
Bomb & breakage
Maintenance & repair
Each has a percentage of sales. generally return to corporate was roughly 14% of sales. Consider that profit.
 
Plus deduct lease/0 ownership of property.
 
Kritchlow said:
Plus deduct lease/0 ownership of property.
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Outside of Agriculture, most owners of small businesses forget to account for their own time as cost. They mistake their income for 'profit' and ignore the 80 weeks they work to make it.
Profit is really the difference between what you make as owner of the restaurant vs. working as employed general manager of a similar restaurant (who leases out his strip mall space to another cellphone store).
 
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As far as making money goes, there’s very few things.

Are there enough customers?

Is the reputation of the restaurant good?

is food being sold at a profitable price? If not, why? Food cost too high? High labor? High overhead? Waste?

If you can keep getting people in the seats and sell them food at a profit, you make it. So what is blocking that?
 
Neighbors two houses down own and run a well known breakfast/lunch place in the neighborhood, and they work their ASS off! I mean it, they work really hard! They have a nice house and a nice lifestyle, but that kind of work isn't my thing.
 
bflynn said:
As far as making money goes, there’s very few things.

Are there enough customers?

Is the reputation of the restaurant good?

is food being sold at a profitable price? If not, why? Food cost too high? High labor? High overhead? Waste?

If you can keep getting people in the seats and sell them food at a profit, you make it. So what is blocking that?
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This sounds like "all you gotta do is the right stuff in the right way, it's easy. What's the problem?" Huge over simplification.
 
JEB said:
This sounds like "all you gotta do is the right stuff in the right way, it's easy. What's the problem?" Huge over simplification.
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LIke I said above, a hard business with hard working people.
 
JEB said:
This sounds like "all you gotta do is the right stuff in the right way, it's easy. What's the problem?" Huge over simplification.
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Yes, I agree it's a simplification, I'm not going to write a dissertation. I basically gave a one sentence descriptions of some significant potential problem areas. But since the problem statement was a simplification, that's all I can add.

At the core, it's a simple business - put customers in the seats, sell them food at a profit and don't screw it up. That each one of these is a deep topic in itself doesn't change the high level idea. So what is going on? Are there no customers, is the food sell not profitable or are they screwing up the execution (which is going to impact A and B and make a hard business harder).
 
steingar said:
All that said I am very glad not to be in the restaurant business. It's really hard work.
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Yep, I've always heard that. The point was really driven home a week or two ago, when I met up with a former neighbor, now an executive chef at a nice restaurant in Charlotte. He said he's been working 7 days a week for three consecutive years--not one day off in all that time. His only days away from the restaurant were last year, when he was flat on his back for 10 days with Covid...and he said he averaged a dozen calls a day from the restaurant during that time.
 
It is pretty straightforward to calculate wholesale food costs , your gross profit selling it retail , cost of rent and utilities etc ... that is the easy part.

Here is the killer ...... it can be impossible to have the proper amount of staff at work at any given time .... because it is the daily whims of the customer that decides whether you are busy or slow ...... on the slow days you lose huge amounts of money paying staff .... and the busy days you are understaffed and customer service suffers.
 
I know nothing about the business other than having spent a whole lotta money at a whole lotta different restaurants...

seems to me it is extremely nuanced and often very hard to put a finger on what makes one place good and another feel 'off'...Sometimes even a little slight little things that would be easy to fix...a twist in decor, background music, a nice looking ceiling, a smell, lighting...can make a big difference in perception...and sometimes any of those things done very well still aren't enough.
Other times it's something much more significant such as location...but can still be overcome with just the right combination.
I can remember a lot of places that looked great otherwise but had a crappy dirty white 2x2 tile suspended ceiling that just looked horrible and just threw off the feel. Most people never look up, but it makes a diffence. Other places that just needed some music....or some plants on the outdoor patio......

I'm thinking of a BBQ place that opened a few years ago near me.... the place is always jumping....in an old gas station building that had been mostly vacant for a very long time.... crappy location, nothing much else around....way out in the sticks...building not designed or laid out well as a restaurant. They cleaned it up nice....very clean and all nice enough, but not what I would call comfortable or very great. Large servings and food is very good but not what I would say is light years better than most any other BBQ joint.
They have a shtick...when they opened and I'd overhear folks talking..."gotta get there early, they only make so much food and when they're out there's no more". A gimick if you ask me. That, along with the location that's out in the boonies kinda make it an adventure of sorts. It's their combination and it works.
 
Brad W said:
They have a shtick...when they opened and I'd overhear folks talking..."gotta get there early, they only make so much food and when they're out there's no more". A gimick if you ask me.
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That's not really a gimmick, for a BBQ joint. When they run out of brisket, it might take 14 hours to have the next one ready. Even chicken or links take hours to smoke. And it's too expensive to make excess every day, just in case.

So they mostly operate on a 'one-batch-a day' model, and when that food is gone, it's gone. Until tomorrow's batch is done.
 
Many of the Q places here only fire up the smoker on Friday. They may still have stuff on Sunday, but there's two fundamental things you can't get in NC on Sunday: hard liquor and good barbecue.
 
The food industry is fickle. I was just talking to a local realtor friend of mine about that. He said 5 years is about average lifespan for an operator in his experience. Then on the other hand you have the restaurants that have been there since time began and just keep it ticking. We have one in our town that is 50+ years old, always family owned, and you have to wait outside in line at least 30 minutes before they open to get a table 7 nights a week. I knew a place where I grew up that was a high dollar steak place, that didn't even have a sign on the building, looked like a house from the road, never advertised, but was always packed just from word of mouth. Then you have other high profile places in high traffic areas that can barely keep the doors open.

And that was all before Covid...
 
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