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

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


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)


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


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


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


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


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



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%


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


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



• 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”

Documents

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