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.
So they worked two hours on that makeline, it did not work and we still have to pay them $750. And here I was working a hundred hours a week and making zero profit.
I tell you, that really hurt, but that that was the cost of it and we needed to pay whatever it was. We didn't expect that.
But at least now we know what to expect. When a technician comes out, whether to check the AC or it is a plumber, they charge for the trip $150.
We had people come out like we had a meat slicer that didn't work properly, a technician came over and we had to pay $150 for his highness to come over and check.
He was even saying, "Oh, it will be $4000 if we replace this and that". So we were like, "No, we are not interested", but then again, we still have to pay this gentleman $150 just for him to come out.
Those things can be very stressful and unhealthy when you are not making money.
So now I am telling you, expect that you are not going to make money, expect that equipment will break down, and it is going to be what it is going to be.
I am just being honest with you here, that's why you need to get into it with that expectation of what it is going to be like for the first year until you get everything working smoothly.
It will take an enormous amount of work to make a business successful. So expect the unexpected so it will be less stressful for you.
5. Be obsessed with your sales
This has been the top-secret of our business to success, we've been obsessed with making sales!
Maybe most of you are going to be obsessed with your sales only when they are not good.
But that's a wrong mindset because you should continue being obsessed even if it is good.
The way it works in the restaurant is whatever you do today, whatever you do to grow sales, whatever activity you do to market your restaurant, is not going to surface up instantly.
You won't see the results in 4 to 6 weeks.
So you go through this season where sales are really good, and you slow down in your marketing because you think that sales are really good.
But what you must do is you create the marketing today, make sure that your sales are good for the next 4 to 6 weeks. Most importantly, think of ways to keep that going for you to have a sustained level of sales.
You are going to have so many problems in the restaurant, people are going to quit, equipment is going to breakdown, but if sales are good, at least you have this one thing that you can hang on.
Customers are happy with your food, and sales are good, you will forgive everything else.
You can pay more, a staff left, you can hire more people, equipment breaks, you just have to buy another one or you can pay a handyman to fix it, you just get over it.
But if sales are not good, really nothing else makes sense. So be obsessed growing your sales from day one.
One of our goals for you is to help you grow your sales two digits or more as in ten percent or more every single month. That has been our strategy on how we triple our sales because we focus on ten percent or more every single month in sales growth.
6. Go work at a restaurant
The last tip that you need to take that my husband and I failed to do is to work at another restaurant.
Maybe you have had years of restaurant experience or not but in our case, we had zero.
We never worked as dishwashers or servers, not at all. It is certainly unwise if you do not experience working in a restaurant. And we had to learn a lot of things the hard way because of that.
So if you have the opportunity, I suggest, take six months and slow down what you had in mind, and go work at a restaurant and get to know the owners.
Hypothetically when you worked as a chef in a restaurant and you believe that it is going to qualify you to run a restaurant properly because you think the owner does not know much (I am not saying it's you but you know sometimes that's the mindset people have).
Know that it is a totally different skill to run a business. Being a businessman and being a chef, they have a different set of skills.
A restaurant business owner needs to know business marketing, human resources, finances, food production and customer service, systems, etc.
There's a lot of things that you need to master as a restaurant owner so if you have worked for a restaurant for years. If I were you, I would build a closer relationship with the owner of the restaurant where you're working at.
Figure out what are the issues they are dealing with, and just learn as much as you can from another restaurant owner.
My advice is if you can save thousands of dollars and loads of stress and headache by slowing down for six months.
In the meantime, build up your savings going to and starting your own adventure, that's what I would do. It's your call.
Our love for having people together and serve them delicious scratch-made food made us thought of opening a restaurant.
It is a combination of passion for food and business that put us to where we are right now.
We have learned a lot from our mistakes from the past and we continue to learn each day to improve our food, our services, our marketing strategy, etc.
Keep in mind that you must have a very strong marketing plan before opening your restaurant.
Because if you do not start with a bang, you're going to feel frustrated that every month you would get negative results.
So better start things right and avoid making the same mistakes that we had, and run your very own successful restaurant!
It's gonna be hard for sure, but it would be well worth of everything if you are passionate about food and serving people.
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