6 Things You Need to Know Before Opening A Restaurant
Updated: Jun 21, 2020
Putting up a restaurant business is never easy. It requires a lot of time, money and energy.
My husband and I own a couple of restaurants in San Antonio, Texas area. We bought a fading pizzeria in 2014 and within the last five years, we tripled our sales with zero prior restaurant experience.
Now that sounds, maybe, impressive, but it also signifies that it's been an intense five years for us.
We have been obsessed with growing our sales and that started the whole thing with "Making Dough Show", our very own go-to online site for step by step practical training that caters to restaurateurs and helps them boost their sales day in and day out.
Our "Making Dough Show" is the answer to a lot of questions that we get from different people about how and what we have done to attain success in the restaurant business.
Five years ago, we did not know what we were doing when we bought our restaurant.
So now, I want to share with you 6 tips to help you start your own restaurant business based on what we had experienced in the past. And honestly, if we could go back in time, and focus on these 6 things, I think we would have been in a better place.
These are the 6 important points that you must remember when opening a restaurant:
1.Study the numbers
You must be obsessed with your numbers. You need to study the numbers, review the numbers, you question every single number.
If you are purchasing an existing restaurant, they would give you a P and L (Profit and Loss) to show you what you are paying for, unless it is an asset purchase.
An asset purchase means that you are purchasing the physical assets of a restaurant such as equipment like makelines, stoves, ovens, tables, chairs, etc.
If you are purchasing the restaurant based on gross sales, just like ours, here's what I can tell you.
With the restaurant that we purchased, we just bought it for about $140,000 and that was based on the P and L that we received saying whatever it was.
One of the problems that we had was we did not know how to study the P and L at that time.
So we realized that as a buyer, there's a need for you to sit down with the owner and the broker, and question every single number that they present you.
Don't feel bad if you do not know, you are going to be paying a big amount of money so you better know every single number.
If you can, take extra time to look up for these numbers before your meeting with the owner and the broker.
Study each number, research what they indicate, how are they calculated and then discuss it in the meeting. I am sorry to tell you that there's a lot of times when the P and L's are cooked.
And I know that's politically incorrect for me to tell that but that's the reality. As a business person, you want to know what are the standards in your industry. What do I mean by this?
For instance, for us, we own pizzerias, so for the pizzeria's the recommended rate for different things is that the rent needs to be about 7-8% and the food and labor should be less than 60% which is your big prime cost.
These are the two variable costs that are very important, your food and your labor. So what happened is on the owner's payroll for the employees, we noticed that it was awfully low number.
I mean we did not know what's low and what's high, but it was because the owner was paying people cash, not declaring those sales so not paying proper sales tax and all that jazz. So we did not know what questions to ask.
Again, you need to know the standards for whatever kind of restaurant you are venturing into. Do you open a burger joint or a barbecue joint?
You need to know the standards that are traditional for what you are going to do, and match that to the P and L that you have been given. Make sure that you match and question every single number.
2. Negotiate everything
In the beginning, you feel like there's no one to give you grace or give you time to pay for different stuff. You feel like you are not entitled to negotiate because you are just starting.
You need to view this exactly the opposite. Because you are just starting up, you need to ask for grace.
You can say, "Can I have one month that I don't pay rent?" or you may ask if for the first month of rent if they charge you 50% off and then for the following month, you will pay full price. Negotiate and see what you can get.
Always negotiate further out and work your way back. Watch for some training videos on how to negotiate. You've got to negotiate your lease, negotiate with your vendors, your food vendors.
You need to say this for example, "Hey listen this is a start-up, you're gonna benefit if I am going to continue in business, is that correct? Fantastic, then why won't you help me out for the next three months, lower your rate to this, give me some grace so I can get my feet on the ground and get going and within 3 months I'd be backed up. We are very passionate about this restaurant, we know it's gonna be successful and I want to work with you long term. And this is gonna be long term business relationship".
Again, ask for grace and negotiate everything.
3. Document everything
In the beginning, you're going to be entering a chaotic zone where people call you for different things, you make a promise and you are going to forget.
So it is a must for you to document everything.
You sat with somebody, they told you something, you are going to agree to do this and that, always have a pen and paper ready with you. When they are making a promise, you write it down.
Write the date and time of the meeting, the person's name, and their contact information or you can also staple their business cards on your notes.
Document everything so you can have something to back you up especially when the other person tends to forget too.
Make it a habit to document everything so that when you already open your business and you will have a meeting with your staff or you are coaching a team member, you will be able to use it.
Believe me when I say that there's going to be so many important details you are going to forget, so document everything.
Now when it comes to documenting, obviously you can use a typical pen and paper or a notebook or you can use a logbook feature that many software offers.
So, for instance, for us, we use scheduling software that has a logbook feature wherein you can log in. We do religiously use the logbook daily and our managers also document everything in there.
4. Expect that you will make loads of mistakes
Expect a piece of equipment is going to breakdown. Expect that you are going to lose a lot of money.
Because reality is, stress and disappointments happen. When you expect too high and something unlikely happens, it only results in huge stress.
I have to tell you, for instance in our restaurant, we made no money during the first few months.
The rent was really high, we did not know gross sales were low. So we made no profit in that first year.
One unfortunate thing that happened to us was, one time, one of our makelines broke because when we bought our restaurant, we did not know exactly the condition of the pieces of equipment when we're buying them.
So the makeline broke down, and we call the company to come and fix it. I remember vividly because we had this large catering order at that time.
So these two guys came over to fix the makeline in the middle of the shift when we had everything out of the fridge. It was huge chaos.
These guys worked for two hours and gave my husband an invoice for $750 and they were unable to fix the makeline.