Does anyone here own a restaurant?  I have a few questions if you are willing to answer them.  I'm really looking for any that are not franchises.

What type of restaurant is it?  How did you get started/?  How did you build a supply chain?

Any tips/tricks of the trade?

Knowing what you know now would you still open a restaurant?

Q 1: Do you have a liquor license?
Q 2: Are you looking forward to life as a sleep-deprived, middle-aged, divorced man?
Q 3: Do you really want to invite the man into your life that much?
Q 4: Are you independently wealthy and able to survive months without a paycheck?

If the answer to any of those questions is "NO", you might want to rethink it a bit.

Are you ready to deal with people stealing money, food, and liquor from you?  I have taken many reports of theft from restaurant owners.  Not a very good ratio of success to failure in the business.  If you can afford to lose the money you invest then go for it.

I had some friends who used to own an A & W. It did well, but they eventually closed it and walked away due to it becoming an endless cycle of work 17 hours a day 7 days a week because the employees constantly called in sick, didn't show up, or had  to get fired for doing stupid shit.

Family had one for almost 20yrs. Drive In.

Don't own one but financed several in may commercial lending days.  

Extremely competitive, arguably overbuilt industry.  Brutal hours.  Near constant employee turnover.  Fickle customer base.  Market is dominated by national chains.  Independents can succeed but its very tough.  You have to find a niche.

I have been cooking professionally for 30 years.  People often ask me why I don't have my own place.   Main reason?  Life is too short.  Plus I always answer.  If I had my own place.  I wouldn't be standing here talking to you.  I would be at work.

My grand parents had 2 and this is pretty much my view. They did well but they both worked 70+ hour weeks 50+ weeks a year for more than a decade. After everything got established and setup they moved to more of a hands off owners but still worked 40 hours a week while "retired".

They enjoyed it because they liked to manage, cook, and be busy. If you don't, and you can't afford to lose every dime you put in, I would stay away.

I'm considering doing a BBQ place.  There are several in town but all of them pretty much suck.  

It isn't something I'm planning to do right away, just mulling it over.

Worked in one years ago. I know several that own theirs, from Subway to higher end local places.

It is VERY hard work!!! Long hours, employee issues, etc.

One thing most common and closes them is their debt service. They go,out and build way more than they need or rent way more than they need. Just their monthly expense to just open the doors puts them in the hole.

My family started a growing bbq chain from a smaller trailer

To sum it up, I'd say a restaurant is 20% food and 80% business.  A great product is meaningless if you can't make it monetarily worth your wild, pay your vendors, hire employees.  I've seen so many places go under that served wonderful food because the owners weren't prepared to work 100 hours a week and didn't realize their employees didn't give a crap about the business when the they were away

Suppliers: start small, a lot of people will begin buying supplies from a Sams or Costco.  Once you know your volume and can support a large company to stop a truck explore larger grocery suppliers (Ben E Keith, PFG, etc).  When we started in our 18' trailer, we worked a deal with a local grocer for meat, almost everything else was from Sams.  

Employees:  hard to find anyone as dedicated as you'll be to the business.  Really hard to find people that will do a anything over the bare minimum these days.  We tried hire more people and paying min. wage to start, then weeded out the bad ones, started paying the good ones more.  That's where I learned people will surprise you.  There are some "career minimum wagers" that really only work at places long enough to build trust then cash out and move on.  Some good employees move on naturally.  Some people come from bad habits that no matter how hard they work, always fall back into those habits.  Pick your crew carefully and remember its your business, your rear end, your dollar.  That friend/employer line gets blurry if you're not careful.

My tip for a new business, especially a restaurant, is to start small, I'm a huge fan of food trailers.  You'd be shocked at how much you can serve from a 16' trailer if you're organized and efficient.  Keep a simple menu, avoid gimmicks at first.  If an item isn't selling, drop it.  

Before you're ready to open, make up some samples and drop them by local businesses.  We took food to a lot of places, dropped of menus etc.  Also, do a soft opening.  Invite friends and family, have them order (for free of course) and go the motions like you would do it for real.  Then ask for honest feedback.  Leave your feelings at the door and listen to them.  You'll work a lot of kinks out with your first night.  

We started our business from a road side bbq trailer, grew it into a small brick and mortar.  Then we expanded that building twice.  Then we opened more stores, sold licenses.   The whole time we watched our cash flow, debt and didn't grow too quickly or too slow.  It's tricky, but do able given you have the desire to do it.

My buddy who has talked me out of opening a bar/restaurant several times told me if you want to wind up with a million dollars from a restaurant start with 5 million. It'll get there quick.

If you don't know how to run a business you will more than likely fail, if you don't have the money to get the right location you will more than likely fail, if you don't know how to hire and train staff, you will more than likely fail, etc

I know plenty of people who were great cooks or even ran kitchens at major restaurants and failed miserably.  I have owned and sold two.  I would never start one from scratch.

Eta:  it helps if you hate tAking time off

I've been thinking about going the food truck route to get started.  I'll probably end up doing that if I move forward.

my opinion when asked has been this.


Give me 1/2 the money you "think" you need to open a restaurant,,


I then BEAT the shit out of you...


you gain the experience of being a restaurant owner and the education only cost you 1/2 as much..


with todays Federal labor and EPA issues, Obamacare, city and county ordinances, and the shit that
the minimum wage plus crowd has become? no way I"d open another restaurant..

Chef.

No. Don't do it. Trust me.

Thanks for the info guys.  After the comments here and some other discussions I'll be staying away from this idea.

excellent summary, IMO.



 

Very wise

Against my better judgement, I made the mistake of backing a restaurateur back in 04'.  It was an expensive lesson.  There are people that can do it, but you have to be some sort of magician, with a super business mind.  I have a friend who has "successfully" backed a dozen or so restaurants....and made money.  But anytime I hear someone thinking of opening a restaurant my stomach tightens, and I get a little nauseous.  

But as I said, there are folks that make it work.  How I've no idea.  Razor thin margins, and inventory that spoils, high overhead, and in most geographies (I guess there are places this might not be the case....but I don't know where) a workforce that is practiced in hundreds of ways to steal from you, lose you money, or just plain doesn't give a shit.        

Don't forget the bogus lawsuits .  filed just to extort $$$$ from you.



gd

Very good advice here

OP, I've heard that BBQ restaurant's are the number one restaurant to close it's doors.
Years ago worked with someone who was wanting to open one up.
Went to the bank and that's what the banker told him. He changed his mind on opening one.

I've always kind of kept an eye open of BBQ places that opened up after hearing that and I think the banker was right.
Most don't seem to stay open long.

If you do, start out with a mobile version, go to weekend festivals, fairs, flea markets ect.
Start there, see how you like it, let it be a part time learning experience before you you go full blast into it.

Plus at those places, people will spend money on food guaranteed.

My 2 cents

I'd second that.  You'll still have to deal with government inspectors, but at least your overhead would be lower.  Paying 3x the rate for electricity, water, and sewage just because you're a business is nuts.  Not to mention all the .gov inspectors that with the stroke of a pen will add thousands of dollars of expense to your physical plant.  It's really mind numbing.  All the while you have to figure out a way to charge at least a 300% markup of the cost of ingredients just so you have chance to turn a profit.  

A food truck also minimizes or eliminates the need for employees.  

The funny thing is I lost my ass, but the government made out quit well from my resturant failure.  They got their sales tax, licensing fees, property tax, and payroll tax....all in it was quite profitable fo the government.  

It can be done. My wife opened a small (50) seat Cajun/southern restaurant two months ago, and has been in the black since the doors opened. By in the black I mean I haven't had to invest anymore since it opened - no income yet, but no outgo. Her accountant is as surprised as I am. Two months isn't long, but business is picking up each week. PM me with any questions..

IMHO, barbecue places are the hardest types of restaurants to be made successful.

Barbecue is so subjective. There are so many styles/types of barbecue not to mention the sauces. I have seen several near me come and go. Take 4 people in and you will get 4 very different opinions of it. What I also see is how expensive some make it, most cuts of meat used in barbecue are the cheapest, hence the need to "barbecue" it.

She pays herself right?

I'm not talking about ROI, I'm asking if she receives a salary or wage for her labor, as part of her total payroll cost.  If she's not that's a huge mistake, and one that a lot of business owners make.  The key to any business is sustainability.  Successful business people learn a valuable lesson, and restaurateurs learn it fast, which is how to fail fast.   IN the restaurant business some owners will forgo their own wages to balance the books, which is an early sign of failure, not success.

The friends I mentioned in an earlier post have literally opened and closed a restaurant within months, cutting the losses and risk.  If a business model in the restaurant business is going to work, you'll know it pretty damn fast.  One of the early red flags is if the owner is paying themselves a salary or wage.  If their not, then it isn't running in the black.    

 

IF you think you'll love cooking for hundreds of people, or that your cooking is the "bomb", which people will throw cash at you to get, what about starting in catering?

Find a church, civic center, club, or organization that has a kitchen they infrequently use (but has to pass all the health food inspections...which you won't have to deal with) and work out a deal to rent it.   Then market the hell out of your catering services.  Even for many resturants a catering gig is fantastic.  You don't have to deal with waste, and you know your profitability going into it.  If your catering business takes off, and people love your food as much as you think they might, ....and you still love it, then move up to a restaurant.

I'm an investor in one with a winner of Top Chef. I have no say in day to day operational stuff though or anything like that.

Yes.  What everyone else here says.  I'm grateful i only work 6 days a week.  My hours are fucked up.

Buddy of mine owns a successful place and he asked.  how do you make a small fortune in the restaurant biz?  Start with a large fortune.

We have a bbq place and for us its been 25 years of LABOR.   LOCATION is paramount.

No, she isn't drawing a salary or paycheck. All excess proceeds (beyond payroll, taxes, insurance, rent, utilities, food costs, etc...) are going into the business account. Nor do I want her to draw a check - at my tax rate the additional income would kill me.  She was a stay at home wife earning nothing, now she is a working wife, earning nothing.

I can afford to support her personally (as I've always done) and the equity in her restaurant will be worth something in the next few years.

My point is that a restaurant can be opened and successful, just don't expect to be rich and famous in the first two years :)

Wow, you should really discuss with your accountant how this works because if she is making money, you are paying taxes, how to structure that to your advantage is important.  Also, I don't think you understand how taxes work

Stay out of the restaurant business.

The only strategy I can think of where this is a viable business model for a restaurant, is if you are buying the commercial real estate she's in, and everything is going to paying that off.  Which may not be a bad idea, for the right financial situation..

The fixtures and equipment depreciate to pennies on the dollar, so there's no equity there, and a restaurant with no ROI isn't very marketable in a business sale.   Since there is no such thing as 100% tax rate there's no such thing as a "bad income".  Even for someone who is bringing down a couple of million dollars a year...  they're not taxed at 100%.  To each his own, but as a business model, a restaurant were the owner can't pay themselves normal wages isn't a business, it's a hobby.  Successful restaurateurs will tell you this is usually the first step to disaster.

The other profitable strategies is to use it to launder money, or evade taxes but the IRS and state revenue agencies watch them like a hawk.  

Don't do it.

My brother-in-law has been done this road a few times. Currently still owns a posh uppity wine bar.

He can best be described as...

• Commercial Cooking/Prep


• Recipe formulation


• Front of the House


• Food Costing


• Personnel Management


• Accounting


• Human Resources Law


• Advertising


• mechanical systems maintenance


• Plumbing


• Refrigeration


• Equipment and small-wares sourcing


• Hospitality

I knew three - all dead from heart attacks.

Once I hit the power ball or mega millions I might open a food truck, work with a couple of buddies, sell beer and food we enjoy. Be open from 11-1 or something twice a week.

My dad owned a bar years ago. I have a friend near me who owned a chicken place . He was never happier than when he sold it . He was in pizza before that. He id now retired but he said he would do pizza instead of chicken if he did it again. The pitfalls are all described above . I went in in the morning after working 3rd shift and helped him more than once when employees failed to show up for whatever reason. He had an employee disable an alarm sensor and break in once as well .

m


Think of her income as a deferred payment. All excess income is piling up in the business account  (where I don't have to pay income tax on it - yet.)  I will eventually buy the building and the one next door.  My point was (and is) that you can successfully open a restaurant if you research the local market.

listen to this man.

not an owner, but i have 20+ years in the business, 10+ management (much of that working for independent owner-operators).  here is the most fundamental truth of the hospitality industry:

unless you live and breathe hospitality--that is, unless you are so desperate to own a bar/restaurant that you are literally willing to sacrifice every other part of your life to it--don't open one.

if you are willing to sacrifice everything--free time, social life, life savings, home ownership, marriage, reputation, credit rating, and so forth--then you might be a suitable candidate.  here's an effective tool for honest self-assessment (which is an absolutely imperative skill):

are you so passionate about the restaurant business that you would be willing to quit your current career to spend 5 years as a junior manager, in order to learn what you need to know?

if the answer is no, then save your dough.

that's a good start, but at 2 months she still isn't even in honeymoon period yet.  if the place follows normal startup trajectory, honeymoon will start ramping up in 1-2 more months, and last through about the end of the third quarter.  at that point, real life kicks in--the day to day grind of operating the business when the initial burst of owner energy and 'new restaurant' buzz dies down.

that's when you find out if you are any good or not.

My grandpa came from Greece. Restaraunts were the family business. My parents always worried, never had a day off, never was able to get ahead. The only vacation we ever went on was when they lost it and we moved from pa to fla to work for someone else.

It's like a slow death. You could probably do better with a hot dog truck.

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Cash can't pile up tax free, or deferred in a business account.  She can't have deferred income unless she's taking advantage of a qualified retirement plan, or buying equity.  

If the business is piling up cash, and it's an S-corp, the profits pass through to the owner...annually, and are paid at their individual tax rate.  If it's a C-corp the taxes are paid by the corporation, building cash is even worse, because the corporation will hit higher rates at lower levels than an individual.  So you're not piling up cash (profits) in the business accounts and deferring taxes.  

I'm not trying to attack your plan, I'm just saying there are lots of "hobby businesses" that owner feels like they have a great business model, and are emotionally attached to it,  just because they can stay in business.  But IF they aren't drawing a salary, and the owner or investor isn't drawing an ROI, nor is equity building in a building, then the simple truth is it's a failed business model.  The business of business is making money.  Not employing people, or delivering a good or service for no profit.  If a restaurant isn't turning an ROI, nor paying the owner a wage or salary something is wrong and needs to be fixed fast.  

Now with that said, two months is a short time, I'm sure marketing expenses, and working the kinks out might still be an issue.....but if it continues for very long, cut your loses.  The restaurant business is very unforgiving.  I still think she needs to pay herself a salary, especially if cash is building.  If that's not the case because she can't afford it, then the business is still in the red, if you're building cash in business accounts thinking that it won't be considered income simply because a W-2, of 1099 isn't associated with it, the federal and state revenuers aren't going to view it that way.   You can't defer cash profits simply by saving them in business accounts.        

From my personal experience, this guy here fucking nailed it.

You should ask for more than half the money since you're going to have to beat the shit out of him for 18 hours a day for a few months to get the full effect. Teaching people about the restaurant business is hard work.

It's not necessarily location. If you are the destination, you'll probably be fine. If you're not the destination, you'd better be close to the destination.

Business owner here, I think you better listen to this guys advice and you should also talk to your accountant.

You can't retain earnings and not pay taxes on them.  With an LLC or S Corp, you are going to pay your personal income tax rate on all of your profits, regardless of if they are in your business account or your personal account post distribution.

If you have a  C Corp, you would pay the corporate rate ... I doubt you have a C Corp though, it's usually not a good way to go for a small business.