How much money do you need to start your dream restaurant?
There are two options:
- Start from scratch
- Buy an existing restaurant
Why should you buy someone else’s joint when you can create your own concept and be the top dude with your own kingdom?
If you start from scratch you will need cash to do the following:
- You will need to put in a fair amount of cash, somewhere around $250,000 to $300,000, for at least one to two years, possibly more. That’s how long it takes to break even.
- Money to secure a lease or to buy a suitable piece of land zoned for business. Remember the three magic words: LOCATION, LOCATION, LOCATION.
- Advertise your business name in a local newspaper
- Open a business account in a local bank
- Hire an architect. You can do any new construction without one.
- Hire an accountant
- Have a clear concept of thekind of restaurant you will create: coffee shop, sit down restaurant, table cloth restaurant, fast food, etc.
- Apply for permits including: building and safety, health department, fire department, city for awning and signage.
- Deposits to the electric & water company, State Board of Equalization, telephone and gas companies. All of this might amount to at least $15,000, depending of the seating capacity of your restaurant
- You will need three bids from contractors to do the work
- The most expensive steps involve what nobody will ever see: plumbing, electricity, gas lines to the kitchen, air conditioning. All of that is buried under ground or on top of the building out of everyone’s sight.
- You will also need a new electric box for around $12,000 or so. A grease trap runs $15,000- 20,000.
- The first & last months’ rent.
- Your lawyer is waiting for a nice fee to write gibberish in all official papers you will have to sign. Personally, I never use a lawyer. You can do without one, if you have two cents of common sense. If you are insecure, the lawyer will sock it to you big time.
- Then when everything is in motion, you will spend your time with the contractor and sub-contractors, watching your baby come alive. You will have some good times and bad times. Many a night you will have nightmares and stay awake and be ready to throw in the towel. This will be in relation to your stamina, and how much punishment you can take.
- Meanwhile you have to think about pre-open marketing. On opening night, what are you going to do? Who will be invited for that special night? Are you hiring a public relations consultant? Do you send letters to newspapers, TV stations, radio stations. Did they respond? Did you give interviews? We will detail all of that good stuff later in a marketing later section.
- And that’s not all. You will need a business plan and a marketing plan. You can write one yourself or get one from Best Eatz for an incredible deal of $49. Most accountants will charge $1,500-$2,000. The Best Eatz business plan is 100% dedicated to the Hospitality Industry. It comes with an 100% Money Back Guarantee if not satisfied.
- All of that looks complicated because it is. You will not get the restaurant of your dreams without hard work.
Why buy an existing restaurant compared to starting one from scratch.
The answer my friend is in the wind. Think about this, if 92% of new restaurants opening fail, and you buy an existing one that’s been around for at least five years, you’re already among the 8% who survived.
If you buy an existing restaurant you will need to do the following:
- The amount of cash, will be determined by the price of the business. The best plan is to give a down payment and have the owner carry the balance. You will still need cash for the rent and the basic expenses, a bond for the State Board of Equalization, food, utilities, payroll, a bond or deposits for utilities and telephone and don’t forget about Workman Compensation. You will also need extra cash as a safety precaution for unexpected expenses.
- You bought an existing restaurant. Who knows about the plumbing? What if one of the stove breaks down on a Saturday night? A toilet plugs up in the middle of rush hour. You also might lose business if regular customers don’t returning because the previous owners are gone. This can drain your cash flow so you might not have a positive balance sheet for three to six months. During the first six months you will have to spend money to keep the beast alive. Do not forget about the accountant and maybe your lawyer. You might want to keep that shark from nibbling away at your hard earned cash.You will need to change the sign if you decide to change the name. It might not be a great idea to change anything. Perhaps it’s better to wait until the customers have accepted the transfer of power.
- The most important step is to keep the staff or at least most of them. Keep the same food, same menu: same everything. Visit every table and introduce yourself with a smile, stating that you do not intent to change anything of their lovely establishment. You should not make any changes for at least six to 12 months. You bought an existing business for one reason and one reason only. It showed positive income. Don’t let your ego mess it up.
- What changes do you need to make? You probably want to increase the bottom line but you’ve got something that’s working. Worry about Nirvana later. Make changes very carefully and very lightly. Take small steps, one at a time. You studied the menu way before you went into Escrow. You have made up your mind about what is good and what needs to be changed. You have identified the cash cow, the star and the dead horse. With your business plan in hand you have analyzed every corner of this new baby. Is the inventory adequate? What about the staff? Are you over-staffed? What about the purveyors? Did the previous owners get the best deals? How is the staff training program? What if there is no training program? Ooops, you better put on in place right away. Is there an operation manual? No? Put one in place the minute you take control of the restaurant. Is there an employees manual? A marketing plan? Was everything simply left up to the whim of the previous owners. Put a marketing plan into action––Right AWAY!
- When the major steps have been implemented, you can now control this little devil. You are now the captain of the ship.
- But what does taking over mean? Changing everything to make it your own way? Hey fellow, you have an ego problem? This isn’t the time for that. Write this down. Better, print out a banner: This restaurant is not mine. It belongs to my guests. My job is to make sure I give them the best service and food quality possible, each and every single time they come to my establishment.