So you want to open a restaurant, eh? As someone who has been through the process eight times now, let me share a piece of advice; sleep on it!
Still want to do it? Really? Alright, let me try to offer you some guidance.
The first thing that anyone needs to know about opening a restaurant, or being an entrepreneur in general, is this; it’s not nearly as romantic as it’s made out to be in the movies. When owning a business, you are responsible for the health and well-being of your patrons, the livelihood of your staff… not to mention your own well-being. It is up to you to ensure that not only the rent, but everything and everyone is paid every month. There are many other risks that weigh heavily on the entrepreneur, each and every day.
1. Before you invest your life’s savings, consider the narrow profit margin of the restaurant business; it is a 5% profit business, and that is if you do everything right. Take a second to consider what that means—if your restaurant soars and you manage to generate $1 million in sales that leaves you with $50 thousand in net profit. Then you have to pay taxes on that. You also have to consider it probably costs you about $500 thousand to open a restaurant. That is not a small commitment on anyone’s part, and could take a long time to pay back.
2. Make sure you have a solid concept. This is a harsh business, where only the strong-willed survive, so do your homework. Make sure that what you intend to offer is enough to set you apart. Don’t just ask your parents or friends—people who are going to tell you what you want to hear—for their opinion. Rather, do your due diligence and thoroughly put your idea to the test before you take this kind of risk.
3. Do it on your own! Whenever possible, try to avoid taking a partner, or several partners for that matter. If there are more people involved, your initially small pie gets split into even smaller pieces. Another reason to avoid this is the more partners you have, the more opinions involved in every decision. It may sound like fun to go into business with a close friend, but silent partners never stay silent for long—especially if they are not making enough return on their investment.
4. Nothing comes before the menu! I’m not saying that you need to know exactly which lettuce you will serve on your burger, but you need to know the type of food you will be serving and what the menu is going to consist of. This will dictate the size of the space you require, the layout and look of the space, and it might even dictate which neighborhood you shop in for furniture. You can’t lay out your kitchen properly or know the type of equipment you need, before you know what’s on the menu.
5. Expect the construction will take longer and cost more than quoted. I have seen eight restaurants built, and have yet to have one be delivered on time or on budget. It’s imperative to set a firm due date with your contractor, but be prepared for some delays. Perhaps, more importantly, prepare to be over budget. No matter how well you plan, there are always surprises when it comes to building. Most people say it’s important to have a 10% contingency, I say 20% is much safer.
6. Don’t make the mistake of running out of money early on. I would encourage you to have at least two, if not three months worth of start up costs. More simply put, if your restaurant is going to gross $100 thousand a month in sales, and your forecasted profit is 5%, you will need $95 thousand per month for start up costs. This is being overly cautious, but it’s better to be safe than sorry.
7. Don’t sacrifice form for function. It is important to have a good looking room, decorative furniture, and fancy plates, but they have to work with your concept and withstand the wear and tear of a busy restaurant.
8. Ensure you have adequate space to get the job done. I realize that seats equal sales, but if there is an insufficient amount of service stations, bar space, and kitchen space to work with, you are bound to run into trouble in the long run.
9. While I’m at it, consider your staff while building. I know, no one wants to give up too much space, but giving your staff a decent-sized washroom, a place to store their belongings, and even a break room, can really help the overall morale of the team (something that is seldom thought of when building).
10. Perhaps the most important piece of advice I can give you is to do it for the love of it. This business demands extremely long hours, hard work, and a great deal of personal sacrifice—especially when it’s your livelihood on the line. Not to mention, you can truly taste the difference in someone’s food when they love doing what they are doing.
So, if you have made your way through this and still think the restaurant business is for you, then put your plan together, do the math, figure out what it is going to take to succeed, and then make it happen. Best of luck to you!
Chef Paul Shufelt is a business partner and executive chef of Century Hospitality Group. He’s competed in the Canadian Culinary Championships and Best in Chow Burger Wars, has been featured in Avenue magazine and is leading a fundraiser for the Canadian Culinary fund.