Hint: You don’t get there by table hopping.
Forty years ago I found a location, financing, employees, construction company and plans, got all the permits and opened my first restaurant. Over the next forty years I opened 23 more. Three failed but twenty one succeeded, some spectacularly.
“Good judgment comes from experience, and a lot of that comes from bad judgment.”- Will Rogers
These are my five keys:
I.) Franchise: Restaurant failure is common, costly and excruciating. Time and money are important, so it’s imperative that you succeed! Look at the odds of success and they cry out one word, “FRANCHISE!”. Yes, affiliating with a franchisor is expensive and frustrating. It cost time and money to go through the franchise qualification process. Going solo is simpler. It’s also risky and arrogant.
You may think you’ve dined in restaurants all your life. You may ask yourself why you need help with site selection, kitchen layout, recipes, menu design, pricing, personal training, advertising, or creating a logo and market winning concept? The answer: Because you’ll be far more likely to succeed than fail.
II.) Site: This is the most important decision you can’t reverse. Manufacturers have economies of scale. Restaurants have economies of location. My three spectacularly successful restaurants were the most costly, time consuming and difficult to negotiate. But, they were in the high traffic high, high visibility locations where customers went to dine. Conversely, the three restaurants that failed were easy to acquire at an affordable price.
There really are no cheap or expensive locations. Stores can afford to pay occupancy cost of 8% of sales. Look at the site’s annual occupancy cost. That location will deliver sales (customers) that are 12 times that figure or it will not.
III.) People: I had 10 liquor licenses, sold millions of dollars of alcohol but don’t drink or mix drinks. I needed bar tenders. I lack skills to negotiate with chefs or burger flippers so I needed an executive chef, general manager or partner. Nobody can know it all, so must hire to make up for your deficiencies.
(Trigger warning) Working with talented associates with the skills you lack, is both humiliating and counter intuitive. It’s comfortable to work with people who share your strengths and weaknesses. Those with complementary skills will annoy, confront, and challenge you.
How to live with such people? Swallow your ego, hire the candidate, but keep tight control of the company’s hiring and firing.
IV.) Cash: All your employees have their hands on your cash and liquid assets. With good bookkeeping, modern cash registers and standard financial controls, theft is a solvable problem. What’s not solvable is the fact that your most trusted associates are the ones who are best able to rob you. If you are a one unit, on site operator counting your own inventory and cash nightly, controlling cash is easily. Likely, you’ll need a bookkeeper, accountant and food cost programs.
V.) You: You’ve chose your site, concept and employees well, you should have confidence that the business viable. Your crew will settle into a daily routine. As an employer, you face the competing interests of the bank, the landlord, staffing, the suppliers, customers, city inspectors, the franchisor, as well as your own expansion plans. They all demand more than you finances or physical endurance can offer.
You’ll be faced with ugly choices. For me it was firing long term employees, closing down a store I’d put so much into building, saying no to reasonable demands. Owning a business that’s going well, is like sitting on the sun deck of a cruise ship. I didn’t think about the wind and waves. However when things went wrong, it was more like owning a crowded life boat with water coming over the gunwales. No Mr. Nice Guy. As the Captain trying to save the ship, I was required to throw the weak and unproductive overboard and do everything else necessary to stay afloat.
Being a captain is not for everyone.
Indeed! Pretty much holds true for any business, not just restaurants.