You Want to Open A Restaurant ?

1. You Want to Open A Restaurant ? There is a Lot to Know!

2. The Growing Restaurant Industry • Look at the Handout with Industry Trends • In the U.S., the restaurant industry employs the second most employees only behind the government. • In 2006, estimated sales from restaurants in the U.S. should reach more than $511 billion. • The total economic impact of restaurant sales is more than $1 trillion in the U.S., largely because every dollar spent in a restaurant generates more than two dollars in business for other industries. • People Eat Out a lot. It is estimated that of the dollars an individual spends on his total food consumption – over 50% will be spent at restaurants by 2010.

3. The Benefits To You • What is the Allure to this Business? • Whatever it is, it would explain why, even though they have exciting and glamorous careers, and all the money they can handle, so many stars own restaurants. • Being a restaurant owner is all about being creative and being in charge.

4. Outline for the Day • Introduction by all • What are the skills necessary to do this job successfully • Conceptualize, plan and develop your restaurant • Writing a good Business Plan (BP), Forming a company, Build a leadership Team • Getting ready to Open • Day to Day operations • Budgeting for Success • Q & A

5. Skills Needed to own a Restaurant • You must be Organized and Aware • You must be Flexible • You must be Creative • You must have People Skills • You must be Business – Minded • You must be a Restaurant Fanatic

6. What a Restaurant Owner Does • He/ She does or oversees: • Greeting of guests, accepting compliments and handling complaints • Staffing of the kitchen, dining room and bar • Working on Promotions and special events • Ordering Food, liquor, beer, wine, general supplies • Dealing with repair and maintenance issues • Doing the daily books and paying bills

7. Ways to Develop Your Skills • Visit Other Restaurants • Have a template to fill out when you go • Work in a Restaurant • This is a Must • Find a Mentor • Keep informed about the Industry • Trade magazines, Trade Shows, NRA • Specialty Restaurant/Hospitality Mgmt Programs • www.restaurant.org/careers/schools.cfm • Certification Programs • www.americanfoodsafety.com

8. Conceptualize/ Design your Restaurant • The Type of Restaurant- franchise or independent • Elegant 5 – star • Casual and/or trendy • Fast-Food • Steakhouse • Pizzeria • Sports Bar • Italian Family Style • Think About • How you would change the idea to make it new and interesting • What image do you want to project • What props will be needed to set the visual look you want • How big should the restaurant be: seats, wait staff, bars etc..

9. Take Over or Start New ? • Take over an Existing Restaurant • The quickest and easiest ways to get into the business. • Be aware that just because it was successful before, does not mean it will be successful with you • It needs to be a place you love • You will still need a Business Plan • Be cautious about any outstanding liabilities, do not buy their legal entity - only the business.

10. Start a New Restaurant • Choosing the Location • There is no exact formula for finding the right location • Factors to consider: • What is there now • What is the area like • What does the future look like for that area • How do similar concepts do • What are the demographics of the people and how many are there • Parking • Crime

11. Starting a New Restaurant • Buy or Lease • Recommend buy the location and for tax benefits and liability reasons set up a separate company to own the business • If you can not raise the money or it is not for sale, get a first right of refusal into your lease • If lease, always push for landlord to contribute dollars towards build out and/or get free rent months

12. Building and/or Renovating • How the space is laid out is vital to the flow for customers and staff • There are laws and suggested rules to follow • The Entrance: • A transition Area • The area for the host/hostess • The Bar Area: • Away from the dining room in a place where you don’t walk thru dining area to get to the bar • Distance from the back wall to the front of the bar counter needs to be at least 8 ft. • Back bar is typically 2 ft deep and 42 inches high. Counter area, front bar, is typically 3 feet deep and 42 inches high

13. Building or Renovating • The following items are useful or required for bar area: • Hand sink with towel and soap dispenser • Three compartment sink for glasses or under-counter dishwasher • Reach in or beer coolers for wine, bottled beers, mixers • Ice bins • Soda/ juice dispensers • Under counter cabinets for storage of liquors, paper goods, misc. items • Floor drain(s) • Ample shelving

14. Building or Renovating • Restrooms • Building codes are very important to follow • Keep the entrances out of the dining room view • Lighting is important, especially for ladies • Depending on the type of restaurant, baby changing stations are also important. • Kitchens • Dimensions are the same as the bar. You need 8 ft from the back wall to the front side of the line. • For Health Inspection Reasons: • Washable walls (mylar, stainless, satin or enamel paint finish) • Mop sink (18 inches square)

15. Building or Renovating • Grease Trap - clean them regularly • Covered lighting – recessed fluorescent is preferred. • Open floor sink (drain) under both the dishwasher area and three-compartment sink • Hood system above all cooking equipment with make up air and fire suppression system- this also needs regular cleaning • Hand Sinks (specific codes) • Dining Room • Only use comfortable chairs and bar stools • Do not skimp on lighting fixtures • Have strategically place service stations

16. Business Plan • Executive Summary • Organizational Plan • Market Analysis • Marketing Strategy • Financial Plan

17. Executive Summary A one or two page outline of the entire business plan: • Introduction-name, location, concept • A description of the management • Growth plans • The competition • Financial Plan

18. Organizational Plan • The “Set-Up” or “Inner Workings” of the restaurant • Concept and Theme • Legal Structure • Type of food and service • Location and Size • Management and personnel • Concept and Theme: • Detail on the type of restaurant you are creating • Show examples of other similar successful restaurants • Physically describe what the restaurant will look like • Describe the type of service you will be giving

19. Organizational Plan • Type of Food • Describe how you made your choice • Will there be a kid’s selection and banquet menu • Include a copy of the proposed menus – make it look as professional as possible • Legal Structure • How it will be organized and why

20. Organizational Plan • Location and Space Requirements • If You have a space in mind: • How many square feet and how many seats will it hold • Why you chose this location • Management and Staff • List your main personnel and their qualifications • A management tree with expected numbers of each type of employee you expect • Staffing plan

21. Market Analysis • This will explain why you think the demographics of this location are right • Target Customers • Statististics on age, income and education • Who you will be targeting • Market Trends • Restaurant growth data both locally and on a national level (by type of restaurant) • Seasonal trends • Population and general business growth trends • Competition • Both local and national • Specify the type of food, seating, and average check • Discuss their strengths and weaknesses

22. Market Strategy • Overview- • It may be simply stating that you plan on becoming an integral part of your community, with growth of 10 percent per year. • You plan to accomplish this by: • Concentrating on the local market, creating a loyalty program and by being involved in local activities and sponsorships • Doing a national and local campaign with Rewards Network • Positioning Statement- • Should give a strong impression of what your marketing future will be i.e.: • We want to create a recognizable “brand” for our restaurant • We want to build a strong customer base for our restaurant by offering prices that are fair, a quality product and exceptional service • We will increase sales through population projections

23. Marketing Strategy • How much of your revenue will go towards marketing? • How should you divide up your marketing $$? • Radio, newspaper, rewards network, donations, hotel publications, in house discounts etc.. • Utilize your liquor distributors dollars whenever possible • Don’t Forget to Budget for and be involved in community events • Try and utilize track able vehicles as much as possible

24. FINANCIAL PROJECTIONS Translate action plans into money Calculate what financial success/failure looks like in the future Identify problems on paper to save real money down the road Convince banks and investors to participate

25. ESSENTIAL CONCEPTS TO LEARN Define your business/restaurant model Projecting future results Financial Statements (standard practice)

26. YOUR RESTAURANT MODEL(the specifics of how you make money) Days open per week Number of tables Menu for breakfast, lunch, dinner Menu prices Number of customers and average value per check Food and beverage cost per serving (% of revenue or specific product cost) Daily staffing plan All other costs to run the operation

27. PROJECTING FUTURE RESULTS Some elements are your choice (location, menu, price, style, etc.) Some elements are out of your control (word-of-mouth, the economy, tastes, etc.) Dangers of being too optimistic/pessimistic about the future Consider future scenarios rather than a single set of numbers

28. REVENUE PROJECTIONS • Prepare spreadsheets that calculate daily revenue based on your specific model • Specify check average, meal type, customer volume, specials, menu prices, etc. • Calculate sales by day, week, month, year • Do projections for first three years • Include explanation of why your projections are reasonable • Study other restaurants in area • Get professional/expert advice

29. COST PROJECTIONS • Develop a cost model (two basic types): • Standard cost for each item served • Cost as a % of revenue amount • Figure out which costs are variable with food & beverage served and which are fixed costs • Determine when you have to pay for food & beverage deliveries • Project costs to match the revenue projections

30. LENDER QUESTIONS How much money do you need? How much are you putting into you business? How will you use the money? How will you pay back the loan?

31. FINANCIAL STATEMENTS Sources & Uses of funds Profit & Loss (P&L, Income statement) Cash Flow Balance Sheet Break Even Analysis

32. SOURCES & USES OF FUNDS Sources of Funds: Owner Investment $40,000 Financing needed 76,000 Total Sources 116,000 Uses of Funds: Start up expenses 52,000 Beginning Inventory 15,000 Working Capital 24,000 Cash reserve 25,000 Total Uses 116,000

33. START UP EXPENSES • Make your best estimate of the following: -Legal fees -Accounting Fees -Architectural Fees -Rent Deposits -License Fees -Insurance Deposits -Food Inventory -Liquor Inventory -Supplies Inventory -Training Costs -Construction Expense -Furniture & Fixtures -Large Rest Equipment -Kitchen Small wares -Working Capital -DR & Barware -Marketing/Advertising

34. PROFIT & LOSS STATEMENT Jan Feb Mar --- Food & Beverage Sales $100 $105 $112 Cost of Sales 30 31 32 Gross Profit 70 74 80 Operating Expenses 55 55 58 Interest Expense 8 8 8 Depreciation 1 1 1 Income Before Tax $ 6 $ 10 $ 13

35. CASH FLOW JanFebMar --------- Cash Receipts: From Customers $65 $70 $74 From Credit cards 25 30 28 Total Receipts 90 100 102 Disbursements: Food & Beverage payments 20 45 42 Payroll/taxes 15 15 16 Supplies 25 0 10 Utilities 0 9 0 Maintenance 5 5 5 Rent 10 10 10 Insurance 2 2 2 Other 2 5 40 Total Disbursements 79 91 125 Net Cash Flow 11 9 -23 Cash Beginning 350 366 375 Cash Ending $ 366 $ 375 $ 352

36. BALANCE SHEET Assets:Liabilities: Current Assets Current Liabilities Cash Accounts Payable Accounts Receivable Other Current Inventory Total Current Liabilities Prepaid Expenses Other Current Long Term Liabilities Total Current Assets Total Liabilities Fixed Assets Land & Building Owners Equity Leasehold Improvements Capital Stock Furniture & Fixtures Accumulated Earnings Total Fixed Assets Total Assets Total Liabilities & Equity

37. BREAK EVEN ANALYSIS Loss Break Even Profit Sales Revenue 90 100 110 Cost of Sales 273033 Gross Profit (70%) 63 70 77 Fixed Costs 707070 Profit/(Loss) (7) -0- 7

38. Preparing to Open Insurance(will vary) - Commercial Liability- covers you and your employee - Property Insurance – covers the actual restaurant - Business Interruption – covers ongoing expenses - Liquor Liability – liabilities caused by intoxicated customers - Workers Compensation – on the job injuries and lost wages - Sexual Harassment – to protect you & acts of employees - Disability Insurance – any key employee

39. Preparing to Open Equipment Checklist • Refrigeration – depends on menu andrestaurant design • Walk-in Cooler and Freezer • Two door reach in • Sandwich prepcooler • Beer coolers • Electronics • Stereo System • POS System • Credit Card Machines • Phone System • Alarm System

40. Preparing to Open • General Equipment • Stainless prep tables • Dishwasher • 3 compartment pot sink • Floor Mixer • Bermixer • Table top mixer • Food processor • Slicer • 3 compartment sink for bar • Hand sinks • Ice machine • Ice Bins • Range with Oven • Grill • Salimandors • Dunnage racks • Walk in racks • Coffee Equipment- lent

41. Preparing to Open • Furniture • Table tops • Table Bases • Chairs • Booths • Bar Stools • High Chairs • Booster Chairs • Tray Stands • Small Equipment • Sheet pans • Assorted pots • Stainless steel mixing bowls • Saute pans (diff sizes) • Stock pots • Soup pots • China Cap • Chef spoons/ tongs • Knives

42. Preparing to Open • Small Equipment (cont’d) • Rubber spatulas • Muffin tins • Thermometers • Pastry bags and tips • Flour/sugar bins • Ice scoops • Commercial can opener • Trash cans • Salt & pepper shakers • Sugar caddies • Silverware • Rubber floor mats • Coffee cups and saucers • Assorted china • Assorted bar glassware • Water glasses • Etc…..

43. The Menu • Should be based on the following criteria: • The Concept • It should be reflected in the menu, décor, uniforms etc. • What the Clientele wants • Based on your market research and targeted customer • Availability/ Geographic area • Pair the restaurant’s food type with what is locally available • This will help your bottom line

44. The Menu • The limitations of the Kitchen and Staff • Easier to design a menu for a kitchen than a kitchen for a menu • Streamlining of Products • Design a menu that uses cross-over ingredients • Thin your inventory and make sure all the items are utilized more than once • Keeps your food and labor cost down • Choosing Food distributors • Shop - Make Sure you Compare • Use a Purchasing sheet • Make sure all deliveries are checked in by a supervisor

45. The Menu • Food Cost and Pricing • Do not make guesses • Every item should be priced out • If an item cost is $1.24 and you want a 25% food cost, then the menu price should be $4.95 • Monthly inventories should be taken so that you can manage the restaurant effectively

46. The Menu • Design of your Menu • Placement of items is key • People will look at the top, bottom and middle before reading whole menu • It should be clear and easy to read • Large font size • Limit difficult words (put in clear descriptions) • Clearer the menu, less time waiter will need to be there • Remember- Get your liquor or wine companies to pay for your menus and printing

47. Staffing • Interviewing • Appearance at the interview is important • Length of time at previous jobs • When can you absolutely not work? • Why do you feel qualified for this position? • Tell me about your last job and why you left? • Who was your best boss and why? • Are you pursuing a career in this business? • What would previous employers say about you? • Managers or chefs should be asked math questions such as food cost calculations and questions referencing health code rules such as proper holding temperatures • Always Check References & do background checks on supervisors

48. Training • Follow through with a program • Continue to train throughout the year • Updates with health codes/ wine classes • Do a follow up and test new employees • Wait staff & cooks: quiz them on ingredients • Bartenders: quiz on prices • Have a Training and HR Manual • Review policies and procedures with all new employees • Must include company’s sexual harassment policy

49. Day to Day Operations • Set a Consistent Environment • Projecting a positive image to the community • Happy workplace with a lot of smiles • Besides the human elements, there is: • Lighting • Music • Temperature • Cleanliness • Lighting • Needs to be subtle and adjustable • Make it a main element in the design aspect • Mark your dimmers for different times of the day

50. Day to Day Operations • Music • Two key factors that will make the environment better • Type and Volume of the music • Do not give access to all employees • Keep it systematic • Temperature • Comfort is extremely important to customer satisfaction • Be flexible to customers needs • Employees are not good indicators