Restaurant Start-Up

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Lowering Your Risk Before Opening a New Restaurant

Lowering Your Risk Before Opening a New Restaurant

Originally Posted on Typsy by Doug Radkey – 01/16/2018

Early recognition of risk is crucial for the success of any business, and arguably more so for restaurants. To ensure proper positioning and ongoing success, it’s vital for a restaurateur to understand the variety of operational, financial, legal, systematic, and people-related risks to not only opening a restaurant, but operating one too.

Identifying risks from the very early stages will position a restaurant  to be disciplined and prepared for when things may ‘go wrong’ down the road. Identifying risks will also help streamline a restaurants’ processes while improving communication and implementing a variety of systematic control methods, something every restaurant needs for long-term success.

The opposite of risk, is opportunity, and that’s why  focusing on with these seven tips will help you avoid pitfalls before opening your restaurant.

1. Assess Yourself First

First and foremost, the hospitality industry is not for everyone. It’s not what it’s made out to be on television and across some social media feeds. This industry is cut-throat; plain and simple. Take the time to look in the mirror and ask yourself about the required character traits.

You then want to ask yourself, and also write down detailed responses to:

  • Why you want to open a restaurant or bar
  • Why you think many restaurants fail within 18 months
  • What the difference is between success and survival
  • Explaining expectations of profit versus the lifestyle you want to live
  • Explaining how important growth is to you, both personally and in business.

Do you feel you have what it takes? This industry requires sacrifice, systemized thinking, social skills, creativity, stress management, and a lot of passion. The first opportunity in risk management – starts with you.

2. Plan Thoroughly

One word that cannot be stressed enough during the start-up phase is of course, planning. Sometimes, however, even with a high level of planning in place, things can unfortunately go sideways — and they can happen fast.

This is where having a strategic combination of feasibility studies, concept development plans, and business plans will be beneficial and provide you with an opportunity to set the tone early, for the upcoming project. 

These plans will analyze and reduce the risk for many potential, common, and ‘unforeseen’ events during both start-up and operational stages.

3. Form a Strategic Team

You’re determined, positive, confident, adaptable, and crave learning experiences. Being an a restaurateur combines an enormous amount of passion and vision for creating food, drink, and experiences – and a drive to be undeterred by a high level of unprecedented risks.

But you shouldn’t go about it alone. Work with a team of supporters; including mentors, consultants, accountants, lawyers, designers, engineers, and chef/bar focused experts.

They will help minimize start-up and operational risks by creating efficient systems that will undoubtedly streamline your restaurant and both its start-up and ongoing processes. You will also be given the opportunity to learn a lot from these professionals in their respective fields which will assist you both short-term and long-term.

4. Do a Financial Check-Up

One of the many headaches aspiring restaurateurs face is the simple fact of running out of money before the restaurant even opens – a common, but detrimental risk.

A thorough set of plans reviewed by consultants, accountants, and designers – will prepare a restaurant  for potentially hidden costs by measuring realistic financial scenarios. Ideally, there should be at least three months worth of operating capital set aside for opening day.

Aspiring restaurateurs should also analyze the potential for leasing equipment and other assets while comparing interest rates and exit strategies for each potential financial program they may apply to.

Restaurant owners should also ensure they have a credit check report and a statement of personal net worth, and to clear any outstanding debt with past creditors prior to starting a restaurant. Most importantly, set aside savings (ideally 6-12 months worth) for yourself and your family in case the restaurant is off to a slower start than originally predicted.

5. Complete All Business Paperwork

Make sure you receive the full list of permits that your local municipality requires for starting a restaurant or bar. Visit your city clerk office to receive the entire list, in writing, plus their associated fees and timeline for approval. Overlooking one or more of the required permits or licenses can result in a delayed opening and course, further additional costs.

These may include business registration forms, business licensing, building permits, zoning adjustments, occupancy certificates, ventilation, electrical and plumbing permits, outdoor signage permits, health and safety inspection certificates, liquor licenses, and others. Each municipality, province/state, and federal government will be different, so ensure you receive the correct information for your specific location.

A restaurant also needs to measure a variety of liability factors. Disaster can strike at any moment, therefore an aspiring restaurateur should ‘hire’ an insurance broker, to source the best general liability insurance, property insurance, off-premise insurance, liquor liability insurance, and workers compensation insurance to reduce risk, costs, and any personal liability.

6. Assess Your Restaurant’s Location

Choosing a location is an exciting component of starting a restaurant, but it comes with its own variety of risks. New restaurateurs often find out after a lease is signed that their property may not be fully compatible for a restaurant and will need further upgrades to meet standards for energy and ventilation, plus any revised building and/or health codes (to name a few).

This is where working with a commercial realtor, property inspector, engineer, and commercial lawyer will reduce any potential shortcomings while looking for specific leasehold concessions and exit clauses that will reduce your own risk, down the road, if the restaurant is unsuccessful.

7. Prepare Your Restaurant’s Operational Setup

When it comes to restaurants, bars, and cafes etc; the producers, manufacturers, delivery drivers, owners, managers, and servers ultimately share the responsibility to create a safe and enjoyable dining experience.

Transparency, traceability, and accountability in terms of food and  beverage, must be a top concern when deciding on vendors to ensure all product entering your restaurant are not only safe for your customers, but for your community.

Knowing and understanding your concept will also assist in kitchen, bar, and storage requirements – reducing the risk for spoilage, theft, and accidents.

There is so much that goes into operational setup, but focusing on the above plus proper HR programs, staff training programs, allergen disclosures, secured networks, and overall venue related security, will create a safer environment for both your employees and customers; reducing a long list of risks and potential lawsuits.

Life happens, things go wrong, but being prepared is what will make you stand out from the others. It takes planning, effort, and an experienced support team to overcome the impact of an unfortunate event when opening your restaurant.

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What to Look for in a Restaurant Business Partner

What to Look for in a Restaurant Business Partner

Originally Posted on Typsy by Doug Radkey – 11/01/2017

If you’ve worked as a leader in the restaurant industry, then you know what it’s like. You know that leaders have to be willing to make sacrifices and acquire the systemized thinking, social skills, creativity, stress management, and passion that it takes to be successful.

Becoming a restaurateur combines an enormous amount of passion and vision. You have to create food, drink, and overall experiences with a drive that is undeterred by the high number of unprecedented risks. You must be determined, positive, confident, adaptable, and crave learning experiences.

And even if you do have all of those qualities, it can often be too much for one person to endure. This is when considering a partnership might be ideal for some.

It’s not uncommon for restaurants to be started or initially operated by a partnership, and you will be hard pressed to find a well-known restaurant brand that didn’t start as a partnership before becoming a larger corporation.

However, partnerships aren’t easy. They come with their own set of challenges, both at the start-up phase and during the operational stage.

There must be a common vision, mission, and commitment, and a high level of communication, creativity, and expertise between partners. Effective partners will also play off each other’s strengths and weaknesses to succeed in this cutthroat industry.

Here are a few elements to consider when determining if a restaurant partnership is right for you. This is what you should be looking for in a business partner today.

1. Have a Three-Step Plan 

Before engaging in serious partnership discussions or agreements, it is crucial to complete a feasibility study, concept development plan, and business plan. Is the idea of a partnership even feasible? Can your restaurant concept withstand not only the market, but also two or more owners? Is there enough of a profit margin for all partners to live a healthy lifestyle? What are the short and long-term goals? 

Many questions need to be answered before you make any decisions, and these plans will lay the foundation needed to move forward.

2. Conduct a SWOT Analysis

There should be a competitive SWOT analysis within the business plan, but it is also ideal to complete a thorough SWOT analysis (strengths, weaknesses, opportunities and threats) on both a personal and partnership level. 

What strengths and weaknesses do you each possess, what opportunities exist if you decide to partner, and what threats will present themselves if you formulate a partnership? 

For full effectiveness, have all potential partner(s) complete the same and analyze all of the responses.

3. Create Statements

To ensure potential partners are on the same page, it is imperative that you all have a similar vision, mission, value, and culture statements. Complete an exercise, similar to the SWOT analysis, in which each individual writes a statement addressing those four categories. These answers should then be compared against one another.

A partnership will inevitably run into hard challenges if visions and goals are not equally aligned. If you cannot cohesively agree on these statements at this stage, don’t move on to the next step.

4. Review the Laws

It’s absolutely critical to review your national and local business laws, regulations, taxes, and how they may relate to structured partnerships, liability, and asset management. Many countries, states, provinces and local municipalities have different information on their registered requirements.

Study this information and review it with both an accountant and a lawyer, so you can determine which partnership structure is best for your unique situation.

5. Draft an Agreement

Restaurants, bars, and other hospitality related businesses are really no different to traditional businesses. There needs to be a comprehensive and clear partnership agreement in place, even if it is a friend or family member as the potential partner.

The agreement must clearly state the financial structure of the partnership (investment, return and profit share) in addition to property management involvement, labor involvement, and overall activeness within the business.

Will both partners be active in the day-to-day operations, or will one act as a ‘silent partner’? Often, one partner looks after the back-of-house while another looks after the front-of-house, or is one partner just there to assist in finances while the other operates the business? Every minor detail must be documented, reviewed by a lawyer, and signed for liability and accountability purposes.

At the end of the day, successful partnerships rely on setting realistic (S.M.A.R.T) goals, open communication, frequent meetings, defined roles, and sound business structure. Only partner with other individuals who are willing to be open, honest, and respectful, and share the same values that you do.

You will need a balance of planning, trust and talent to be compatible. There will undoubtedly be stressful situations throughout the start-up phase, operational phase, and overall partnership that will reveal who you have really partnered with.

By executing these steps, you should be able to limit any surprises. The same goes for partnerships as it does for business in general; if you fail to plan, then you plan to fail.

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Often Overlooked Benefits of Restaurant Lighting

Often Overlooked Benefits of Restaurant Lighting

Originally Posted on FoodableTV by Doug Radkey – 10/19/2017

There are so many critical elements that go into the design of a restaurant, so much so that it can easily become overwhelming. It’s a moment during the start-up or renovation period, where specifics that play a large impact on customer experience, can simply be overlooked. One of the key elements that are often overlooked — is the importance of restaurant lighting.

To create positive emotions and to deliver on your promise for memorable customer experiences, a concept must think through its initial design while utilizing processes, maximizing communication, and creating surprises through a multitude of ‘touch points.’ Arguably one of the most important touch points in the overall design — is again that of restaurant lighting.

Lighting within a restaurant (or bar), affects many elements within both operations and guest experience, including food and drink presentation, atmosphere, and length of stay. Lights come in many creative materials, shapes, sizes, and brightness; therefore the largest challenge is finding the right balance for each location and concept.

When planning a restaurant space, one has to consider the ‘job’ of each light source. Is it meant to highlight wall features, to enhance a back-bar, to highlight walkways, washrooms, and exits, or is it to create the right mood over a table? Or perhaps it is for security, liability, and theft prevention?

When considering the job of each light source, it’s imperative to remember to keep customers and operations top of mind first and not the architecture itself.

Here are other ways that restaurant lighting can have a large impact on revenue, profit, and customer satisfaction by again, considering the ‘job’ of each source.

Sense of Security

Ensure that the restaurant and bar space is well lit (this is both inside and outside the venue). Strategic placement and brightness of lights will undoubtedly reduce theft opportunities, reduce damage to property, reduce injury and liability, and keep both employees and customers safe (especially at night).

Differentiated Space

Different lighting sources within a venue can assist in creating multiple spaces. Similar to guest positioning, lights can assist in highlighting the multiple “levels of comfort” that guests will connect with and want to be seated near, allowing the restaurant to maximize each individual seating area, effectively managing customer satisfaction and revenue opportunities.

Seat Optimization  

Lighting has another effect on Restaurant Revenue Management, as well. If a restaurant wants customers in and out quickly (QSR model), they should consider brighter lights paired with fast paced music, as it often makes guests feel hurried. A balance between warm and bright lights is ideal for casual restaurants where dimmed (softer) lights is therefore more ideal for restaurants that are looking for longer guest duration.

Kitchen & Bar Performance

Don’t forget about a restaurants team and the productive areas within the restaurant space. Ensure the correct light placement and correct choice of bulbs is decided upon for inside the kitchen and bar production area. Consider where food and beverage preparation and final presentation will be completed for a final quality check before being delivered to the guest.

Food & Beverage Presentation

Increase restaurant and bar profits with the correct back-lighting, up-lighting, and track lighting along liquor, beer, and wine displays. Take it up a notch and differentiate positioning of premium product with a different set of lights. Furthermore, food and drink can look unappealing if placed under the wrong lighting element— therefore bars and full service restaurants should use dimmers to control brightness (softness of light) and to ensure there are no shadows along the plate or glass while at a table.

Energy Conservation

When deciding on lights, consider the upfront cost and the ongoing energy cost and look for long-term operational savings, adding profits to a restaurants bottom line. Restaurants use a lot of lights so dimmers (or control systems) for example, are great for a variety of concepts to reduce costs and create more efficient layouts.

Curb Appeal

A restaurant cannot forget about its exterior lighting. Outside of the obvious security reasons, a well designed exterior with strategic lighting can in fact, invite people inside versus them choosing a neighboring restaurant. Lighting along entranceways, signage, landscape, and the up-lighting of architectural highlights, is most ideal. Lastly, outdoor lighting for a restaurants patio needs to be creatively decided upon and equally not overlooked to create not only the right outdoor atmosphere, but curb appeal, as well.

Poor restaurant lighting can lead to a cold and clinical feeling or a dark and unsafe feeling among guests. Lighting can also have a psychological effect on guests, as their minds may play tricks on them when it comes to flavors and scents for both food and drink. 

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Restaurant Seating Strategies

Restaurant Seating Strategies

Originally Posted on FoodableTV by Doug Radkey 10/09/2017

There are many tactical elements to operating a restaurant business and Restaurant Revenue Management (RRM) is one of them.

RRM can be defined simply as selling the right seat, to the right customer, at the right price, and for the right duration of time.

As property and overall restaurant operating costs continue to increase, so does the desire to maximize seating and guest turnover. This goes for either a full service or quick service restaurant environment. There is, however, a science to restaurant seating strategies— the essence of RRM.

First and foremost, restaurateurs need to understand their intended guest experience and their ideal customer profile — including guest behaviours — to maximize their seating potential.  

With the right seating strategy, a restaurateur will position themselves to increase guest spending, increase turned tables, and contribute to a more positive guest experience. Consequently, this will greatly affect the operator’s revenue and profit potential.

An award winning seating strategy will include the following planning steps and thought processes.

Here are six factors to think about:

1. Room Size

The general rule of thumb for a restaurant is to allocate 60 to 70 percent of real estate to the dining area with the remaining percentage allocated for kitchen, storage, and washrooms etc. Ideally, a restaurant wants to keep approximately 20 to 25 square feet per seat, to offer the most comfort and flexibility for guests and the most adequate flow for staff including traffic aisles, server stations, and beverage bars/counters.

For example, a 5,000 square foot property will provide approximately 3,250 square feet (65 percent) for the dining and/or service area, resulting in an average of 144 optimal seats (22.5 square feet per seat).

2. Table Size

As with the above room size, there is a general rule of thumb for table size as well. Ideally, guests should be given a minimum of 300 square inches of space (per guest). For example, a 24 inch by 30 inch table will offer 720 total square inches of space or 360 total square inches per guest for up to two guests, often enough space for traditional plating, utensils, and glassware.

Table size can fluctuate based on concept, menu, plating style, and service sequence. Make the tables too small, and guests will feel uncomfortable and leave more quickly. Make the tables too large, and your property will lose valuable real estate. In this case, size does matter!

3. Table Optimization

A profitable interior design combines a variety of table sizes to meet the demand of different sized parties in addition to maximizing Sales Per Minute (SPM), an essential key performance indicator of Restaurant Revenue Management. For a restaurant to be successful, it needs to live in the moment by maximizing every day, every hour, and every seat.

Optimizing table sizes and their positioning, will improve traffic flow and turnover while reducing noise and accidents within the restaurant. Utilize point-of-sale reports to understand typical party sizes, average duration of stay, and dollars spent to ensure the restaurant is not wasting any seats or opportunities.

4. Guest Positioning

Depending on the concept, we know guests either sit themselves or wait to be seated. If one were to sit back and watch how guests were to seat themselves in a full service restaurant, a high percentage of guests would rather choose to sit near a window, featured wall (near fireplaces or wine racks, for example), or a partition wall. This is because these elements create a level of comfort.

When planning a floor layout, it is important to keep this in mind and create multiple “levels of comfort” that guests will connect with and want to be seated near, allowing the restaurant to maximize the space and not have undesirable seating areas that lead to quick visits and less spending.

5. Seating Styles

Without getting into specific details on chair styles (that’s another article), there are three key seating arrangements that are known to either keep guests in their seats and/or keep them spending more money.

Banquette tables (a bench along a wall with an opposite chair), often reduces sales per minute because it keeps guests sitting longer (which can be a great thing). This results, however, in a requirement for the restaurant to up-sell coffees, desserts, and/or other profitable items throughout the meal. This is a critical communication point to all service staff.

Booths on the other hand, are the number one option for guests and users of these booths are known to spend more in both time and dollars, as they feel highly comfortable and often feel a higher sense of privacy. Unfortunately, most restaurants cannot offer a space consisting 100 percent of booths, nor is it ideal for single diners. The right table and seating mix is required, but more booths than others, is a more desirable approach.

Traditional tables, those with two or more seats, often lead to quicker visits, unless strategically positioned near levels of comfort and appropriately spaced apart — offering a more intimate experience and ultimately leading to longer stays. It is essential this setting is truly mixed for seating of two and four (or more) to maximize potential and to reduce the risk of a single diner, for example, sitting at a table for four.

6. Guest Duration

By now, we understand that the longer a guest stays, the more they need to spend to maximize the seat and space. As a restaurateur who knows their concept and ideal customer profile, one must decide whether to focus on longer stays and higher revenues per table or to focus on volume of guests (resulting in volume food and beverage production).

What is needed to not only breakeven, but be profitable long term while having a highly productive, but not overrun kitchen and bar?

Every concept and every location will be slightly different, but once you know the average meal length, one can determine many other aspects of the restaurant such as the full potential for each day of the week which will then correlate to improving other financial management components including optimal staff schedules and food and beverage preparation.  

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How to Develop a Restaurant Menu – For Real

How to Develop a Restaurant Menu – For Real

Originally Posted on Typsy by Doug Radkey 08/31/2017

It doesn’t matter if you’re developing your very first restaurant menu or you’re planning to re-invent your current one – you need to have a strategy in place with both the food and beverages on offer. 

If you’ve done a concept development plan, you’re already on the right path. Your restaurant menu is there to give meaning to the overall guest experience while also delivering emotions and brand personality.

These are the fundamentals of a restaurant’s concept.

To develop a memorable food and beverage menu, however, you must have a thorough understanding of your target customers. You should also undertake an advanced hyper-local analysis (competitive analysis) and aim to understand your local economic factors.

If you’re just starting out, developing a menu concept will assist both you and your architect in designing a kitchen and bar layout that is going to deliver effective productivity, storage, and preparation.

Here are a few tips to help you get started.

1. Develop Your Menu Concept

First and foremost, you should ask yourself what you want your restaurant to be known for. The best ‘what’ in your area? From here, you can begin to develop a flavor profile with supporting elements such as colors and textures that will deliver that promise.

The goal is to keep it simple and memorable. Try to keep your menu under 24 items for optimal productivity, and to minimize confusion and anxiety among your guests (and staff).

Remember, guests prefer to make a decision within 120 seconds.

Take this time to list out your desired menu and if it’s too large, begin to narrow it down.

2. Develop a List of Core Ingredients

Developing a menu and/or new and specific dishes and drinks can take a lot of trial and error. It’s important to understand your concept and target market while working with flavors that will make customers go ‘wow’!

Put together a list of the core ingredients that will deliver that wow factor within your desired menu. You’ll also want to consider how you can repurpose raw ingredients as much as possible to reduce food costs and potential waste.

Consider this; how can the kitchen & bar collaborate to maximize the yield on ingredients?

When considering ingredients, try using as much product from around you as possible – for example, produce that is in season, food artisans from your area, or meats from a local farm/butcher. Take this time to list out all the main ingredients you will require.

3. Investigate Your Supply Chain 

Now that you know your concept and its core ingredients, where can you find them?

You want to reduce your risk (and often costs) by eliminating as many third parties as possible within the supply chain. When planning your menu(s), list out a limited number of targeted suppliers, including data on their company history, any past product recalls, their storage facilities, delivery logistics, and ethical working environment.

Build a list of two to three local butchers, seafood suppliers, dry goods, craft breweries, local wineries, and produce suppliers (etc.) needed for your concept.

4. Cost Out Your Menu Items

Using a recipe management program or simply inputting available data into a spreadsheet will allow you to begin analyzing your menu concept, its portions, and each associated item with its core list of ingredients.

Based on the concept, noted ingredients, and each supplier’s cost, can the menu items be priced accordingly for your target customers and local economy? Is there enough room for profit based on your location’s needs? Is there enough balance in the pricing? What is the goal for average revenue per customer?

This is where having a business plan in place will assist in understanding appropriate key performance indicators (KPIs) required to be a successful restaurant.

5. Visualize Plating and Glassware

Now that you have the concept and initial costs figured out, you can move along to the next step. Many aspiring restaurateurs forget about this one. It’s time to consider how your guests will eat and drink your menu offerings.

How will it look on the plate or in the glass? How will the colors contrast with one another? Is the dish or drink ‘Instagram’-worthy? Which elements should go on a fork or spoon together?

If it’s available for take-out, how will the menu item perform after being in a container for 10+ minutes on the drive home?

It’s ideal to plate it three different ways, test it, take photos, and also test its longevity if it is going to be available for take-out.

Again, trial and error makes perfect.

6. Run a Test Kitchen

This is arguably the most exciting aspect – testing the flavors! Do the menu items meet and exceed your expectations? Give each item a few different tweaks and decide which is best. Get others involved in the process and don’t be afraid to use a soft opening to gather further feedback.

You may want to take photos and put them on social media to see which ones gather the most engagement from a visual standpoint.

At the end of the day, the key to a profitable and memorable menu is to keep it small and focused with signature items that you want to be known for – while differentiating your concept from local competition and offering a balance in pricing.

This is the recipe for success!

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What is the Cost of Opening a Restaurant

What is the Cost of Opening a Restaurant?

Originally Posted on Typsy – By Doug Radkey 06/28/2017

Starting a restaurant is not a cheap endeavour. There are a variety of cost factors to consider when developing a restaurant concept and it is imperative that an aspiring restaurateur measures the cost difference between purchasing an existing restaurant, taking over a vacant restaurant space, starting a restaurant from scratch, or buying into a franchise model.

The riskiest scenario, which will require additional planning and, in all likelihood, additional funding, involves starting a restaurant from scratch.

Using this start-up model as an example, we can break down the different cost categories that many will overlook.

The average start-up restaurant, in US dollars, can range from $295,000 to $660,000+ depending on a variety of factors, including of course size of establishment. In terms of square feet, the total project can range from $150 to $200+ USD per square foot, depending on the scale of design and chosen materials.

The largest cost factor is going to be the construction and renovation period, which can range from 35 to 65% of the total start-up costs.

These are key budget scenarios to consider when one is trying to decide on a location and size of an establishment. A restaurateur will want to keep 24 to 28% of the space for kitchen production and allow for approximately (and ideally) 15 to 25 square feet, per seat.

This again all depends on choice of concept. It is difficult to pin-point precise costs for you as every concept is different, but we can outline the variety of cost categories to consider for your start-up budgets.

Leasehold Assets

Construction and design
In addition to the above notes, a restaurateur will want to keep in mind engineering costs, interior designer costs, millwork costs, artist renderings, and permit costs.

Restaurant furniture
Consider the style of tables, table stands, and chairs that one would need for the restaurant, based on concept and size. This can range from $300 to $700+ per set of table and chairs.

Kitchen & bar equipment and supplies
When developing a concept, it’s important to understand the menu that will be developed to assist in estimating kitchen & bar size constraints and the type of equipment needed. Kitchen and bar equipment can range from $50,000 to $125,000+ USD depending on the size of space. Consider in this budget shelving, storage, and small wares in addition to any required exhaust hood systems.

Plates, glassware, and takeout containers
Based on the size of the restaurant and project sales and turnover, how many plates, drinking glasses, and takeout containers will one need to get started? Consider each type of glass (wine, beer, juice, martini etc.) in addition to soup bowls, salad bowls, desserts and so on.

Food and beverage supply
The cost of purchasing food and beverage for opening is often overlooked. Though some suppliers will offer payment terms, it is best to budget for the first shipment(s) in addition to food & beverage for training.

Rent & Operating Costs

Security deposit
As a new entrepreneur without any kind of track record, a property manager will likely require a security deposit that will be returned after the first twelve months of business. This can range from $5,000 to $10,000 USD.

Lease payments
During renovations, a property manager will often settle on a negotiation for ‘free rent’ during that period, usually 2-3 months. However, it is ideal to budget 1 to 2 months of lease payments in the case of any unexpected delays.

Utility payments
It is wise to budget for 3 to 6 months of utility costs and keep in mind that many utility companies (water, energy, and gas), will want a deposit from new customers.

Capital cash flow
Many restaurants open with no money left in the bank. This can become a critical situation. It is best practice to budget at least 1-3 months or more worth of wages and lease payments to be on the safe side, and to have money in the bank for emergency and simple cash-flow purposes.

Marketing & Advertising Costs

Web design and social media

Unless one plans to do in-house, a professional marketing agency may be hired to design a website, set-up social media channels, and get the restaurant listed on all of the crucial review sites.

Logo design
This could be provided by the same agency as above. It is always suggested to have a professional design the logo and branding package. In this category, also consider the cost of trademarks.

Outdoor and indoor signage
This cost can vary greatly, depending on the style of sign needed for the property and the layout of the logo. One must not forget about interior signage and branding as well.

Menu printing
There must be a budget for menu covers and printing. Again, this cost can vary, depending on number of seats, style of menus, and if there are printed takeout menus to be distributed.

Other mediums
Set aside a budget for any video production, radio commercials, print advertising, and other partnerships that may be needed to generate opening day buzz!

Grand Opening Costs

Staff uniforms
Once a restaurateur has an idea of the staff plan, a uniform budget can be allocated for chefs, cooks, bartenders, servers, and managers. To save some costs, it’s ideal to have employees provide their own pants.

Staff training
A start-up restaurant will want to set aside two to three weeks of training and orientation. It is best practice to set up a mock training schedule during the planning stage to develop this budget.

Soft opening
Often you will have a one week practice period so your staff can run through real-life scenarios with a select group of guests. A budget should be set aside for food and beverage costs, as a soft opening is often offered for free to guests.

Grand opening
Consider a budget for a grand opening event that will attract the attention of local dignitaries, media, food bloggers, and the immediate community.

Administrative Costs

Business licenses
Though minimal and needed, research your local and regional licenses and their associated costs, including traditional business/corporation licenses, liquor/beer licenses, and music licenses.

Ordering and payment solutions
A point of sale (POS) system is vital for customer service, inventory, communication, and other reports. Set aside a budget for a program and set of hardware that is suitable for the style of concept.

Insurance/legal fees
Construction insurance and operating insurance should be purchased prior to opening, for the renovation and training period. You should also allocate part of your budget to a business lawyer who can read through lease agreements.

Accountant 
It is ideal to have an accountant during the start-up phase, to track and organize expenses and to guide a restaurateur in the right direction, financially. This individual will also assist in setting up payroll and HR files for all start-up employees.

Hidden costs
As with any type of project, there are always hidden costs that are not accounted for. It is best practice to set aside a budget, similar to that of the operating capital, to ensure there are some funds available in case of emergency.

All of this may become very overwhelming for a start-up venture. With a proper feasibility study, concept development plan, and business plan – in addition to a restaurateur surrounding themselves with the right team of consultants, engineers, designers, and contractors – a start-up project can in fact stay within budget.

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Developing a Profitable Restaurant Concept Plan

Developing a Profitable Restaurant Concept Plan

Originally Posted on Resto Biz – By Doug Radkey 06/14/2017

No question, every restaurant or food and beverage related establishment starts with a vision. A dream for most that must be met with the right research, planning, and overall mind-set. Similar to the true definition of branding, one’s market will, and must, also define the concept. To be successful, you must be open to building a venue the market both wants and needs.

A common theme through the first phase of starting a restaurant (or any business) is research, research, research! Whether you’re an experienced restaurateur or new to the scene, if you are looking to start a new restaurant, the question you’re likely asking is, ‘where does one start?’

A feasibility study, concept development plan, and a strategic business plan are the three key steps in developing a scalable, profitable, memorable, consistent and sustainable restaurant. These plans should be composed simultaneously and reviewed by industry experts prior to securing any leases or further investments.

This article, the framework for a restaurant concept development plan, will not only deliver on vision and purpose, but assist in determining realistic start-up costs. A restaurant concept development plan should (at the very least) follow these essential headings, after a thoroughly completed feasibility study.

Restaurant Concept Summary

This first section is about giving the start-up restaurant character. Summarize the dream, the proposed name, and the main descriptions for the concept on one page. From there, take the time to carefully craft a value, vision, mission and culture statement, which will build the foundations for your brand.

The concept summary should also highlight any proposed operational configurations and hours of operation in addition to management and staff requirements, plus uniform design and wage structure, which should flow from your previously written culture statement.

Architectural Design

The overall restaurant experience is summarized into four basic areas: food (30 per cent), service (25 per cent), environment (24 per cent) and cost (21 per cent). It’s imperative to ensure that the ambiance and environment match that of the menu to drive a memorable concept.

Every piece of real estate is unique in its own way; a 1,000 square foot location will have different needs than a 1,000 square foot location two blocks away, so it is difficult to be 100 per cent accurate, but this section will surely define any future budget restraints.

With the right research techniques, one will be able to determine the space allocation (number of seats, take-out counter size, washroom requirements, and kitchen/bar production space) needed to meet financial objectives in the feasibility study.

From there, define the interior characteristics your location would need and list out your wants versus needs for the interior design. Taking research to another level in this section will properly estimate the costs for your desired floor styles, wall finishes, lighting, tables, chairs, and so on.

Take this time to also list out the top three to five interior designers, engineers, architects and contractors that you would like to contact and have bid on your project.

By the end of this section, you should also be able to determine if you’re in a financial position to purchase/remodel a restaurant, build a new restaurant, or retrofit an existing restaurant space.

Bar & Kitchen Production

Much like the architectural design, it’s imperative to plan out your kitchen and bar space. A helpful tip to remember is the average kitchen equates to approximately 20 to 28 per cent of the overall space. To plan a kitchen and bar properly, you must also have a solid idea of the proposed menu and estimated number of seats or daily orders.

Take this time to determine the key pieces of equipment required to execute the menu in addition to understanding their specs (electrical/gas/water usage, and overall size), plus estimated costs for each piece of equipment.

Based on the above, will your establishment need an exhaust hood system? What is the estimated ‘BTUs’ that will be used for accumulated gas equipment? What is the estimated number of ‘amps’ required for accumulated electrical supply? Lastly, what technology-related equipment will you require to execute on the customer service side (POS and digital boards for example)?

Once all of this information is collected, list out the top equipment suppliers in your area that you would like to bid on your project for when the time comes.

Menu Design Attributes

Understanding the core menu items early on will allow a start-up to plan the kitchen and also determine estimated food and beverage price points. You don’t need to have the entire menu completed, but a solid idea that flows with the remainder of your concept is required.

Based on the menu, what plating, take-out containers, and glassware styles will be required? Based on seats and projected orders, how much of each will be needed at start-up? Take this time to source possible suppliers and their estimated costs.

Knowing your core menu will also position you early on to determine key food and beverage suppliers and begin mapping out possible supply chain solutions in addition to any challenges you may face to meet the demands of your concept.

When a concept development plan is complete, it will assist in completing the strategic business plan by preparing you for capital requirements, budget limitations, construction related options, space planning, lease requirements, and overall day-to-day operations.

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Why You Should Conduct a Restaurant Feasibility Study

Why You Should Conduct a Restaurant Feasibility Study

Originally Posted on Typsy – By Doug Radkey 06/01/2017

So you have an idea for a new restaurant or bar – fantastic! But will it have long-term sustainability, or will it just become another failing statistic in 12 to 18 months?

Is it a restaurant you want to open because it’s been your dream… or is it equally a restaurant your market both wants and needs?

A feasibility study is an essential component of your start-up’s success, but it’s a process many new restaurateurs skip out on, leading to wasted time and a quick loss of investment. A feasibility study must be conducted in order to determine the potential success rate of the restaurant, and to minimize the risks related to the start-up.

This plan or study should be the first of three plans (a feasibility study, a concept development, and a business plan) that work as a cohesive unit prior to securing any lease or investing any further funds.

Here are four essential categories to assist you in researching and presenting a successful feasibility study.

Step One: Preliminary Analysis

Outline your proposed restaurant in terms of service style, target market, required location size, and style of food and beverage. Take this time to be as specific as possible!

Next, determine if your restaurant will fill a gap in a currently under-served niche in your market (look at age groups, income groups, and multicultural populations – specifically). List as many details as possible.

Will your new restaurant successfully compete with similar food & beverage concepts within your proposed market? Is there enough room for more? What advantages will your new concept bring to differentiate itself? Use this time to consider intended food & beverage quality, space capacity, location needs, value statements, pricing structure, and atmosphere.

If your market has zero direct competitors, first ask yourself: why?

Next, what immediate challenges or threats will your start-up face? What is the labour market looking like? Are there enough qualified chefs, managers, and bartenders, for example? Would your location have challenges in terms of supply chain management or food and beverage delivery logistics? Are you close to a farming community?

If you think your early vision has a chance – move on to the next step of the process.

Step Two: Market Survey

A good market analysis is key to your success. Accumulate and analyze your market’s population trends, lifestyles, demographic features, community profiles, cultural factors, traffic patterns, local capital improvement projects, and the income levels within your target city.

Next, analyze the food and beverage offerings within your community. Map them out by location and style of concept. Keep in mind high-end grocery chains that now offer quick meal solutions.

Complete a SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) to analyze the pricing, menu options, location, seating, promotions, service level, customer reviews, and community involvement of each key competitor.

Finally, get out in the market (physically and/or online) and survey actual target customers. Ask them a series of important questions regarding your visualized concept. Document these answers for review and analysis to determine if the target market is not only large enough, but has room for growth.

Step Three: Mock Financials

This is an important step, for obvious reasons. But how will you know your proposed restaurant’s monthly expenses and revenue? With careful research, analysis, industry percentages, and reports from government agencies, you can determine averages and projections for your concept and style of service.

With this step, you can also determine projected start-up costs (budget constraints), staffing needs, wages and salaries, food and beverage costs, average monthly lease payments, marketing and advertising costs, and much more.

To determine potential revenue, you can project your operating hours, seating or take-out capacity, and revenue per customer goals that are a reflection of the market size. Use this data to complete an hourly based foot traffic analysis to back-up your numbers and realistically see how many customers can be served per hour, day, week, and month.

There is a lot of data you need to research, to complete this step, so you may want to consider hiring a professional who knows the industry and/or local market at this point. It is important to understand projected break-even points and if there is enough demand in your market space so you know you can generate a profit.

Step Four: Review

Re-examine your entire study so far. Make sure it is organized with graphs, charts, and plenty of factual data. Does the data reflect realistic expectations? Analyze your risks, time, and overall projections.

Listen to your gut feeling and make sure your next decision is a calculated one. The more data you collect, the easier the decision will be. Are you ready to make the commitment? If not, walk away now.

If yes, great … the next step is taking this data and implementing it into your action plans!

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Effective FOH & BOH Systems

Developing Effective FOH & BOH Systems

Originally Posted on RestoBiz – By Doug Radkey (02/22/2017)

The more any restaurant depends on the owner’s day in-day out involvement in the operational details of the restaurant, the greater the risk of failure. Starting and operating a successful restaurant or bar relies heavily on having the right systems in place, allowing the venue and its hired team to work as a cohesive unit.

Having the correct systems in place will create consistency, develop operating capital, enhance your team morale, and build business value while positioning your concept for future growth opportunities.

Below are some basic systems each venue should have in place (and can easily implement if they don’t) to allow the owner some freedom to work on the business and not in the business.

Operating Systems

HR Management | Create a paper trail for all employees, be compliant with local laws, and keep your HR system organized in print form with a digital backup. This would include application forms, emergency contact information, warning notices, copies of any incident reports, plus any staff incentive programs and quarterly staff performance reviews – which should be recorded every three to four months.

Inventory Management | The average restaurant & bar can see three to four percent of revenue lost to theft or mismanagement of inventory, especially in high ticket items such as alcohol, proteins, and day-to-day supplies.

Ensure there is an auditable system in place (digital, app based, and/or paper) at your venue for all inventory in addition to what is referred to as a Top 10; your 10 most expensive items. These items must be recorded and accounted for each operating day to help monitor your bottom line.

Team Communications | How often are you holding individual reviews and team meetings? Do you hold pre-shift meetings? How do your employees communicate with one another, especially between front-of-house and back-of-house during service? Get into the habit of holding daily shift meetings, monthly team meetings, and quarterly staff reviews.

Take it up a notch and consider adding in special training days at a brewery, winery, or a local farm every couple of months, so they can learn, communicate with customers, and train new staff about your offered menu items first hand.

Financial Systems | How often do you review monthly, quarterly, or yearly budgets? How often do you complete a sales mix analysis and review your menu, suppliers, and costs? When you complete your staff schedules, do you complete a roster analysis that measures sales per labour hour, for example? This easily available data will ultimately save time, control your costs, and generate further gross profit!

FOH & BOH Systems

Chef/Mixologist Shift Checklist | This important checklist will keep the leader of the kitchen organized with what needs to be completed in the morning, afternoon, and evening. It should also provide an area to:

  • Project daily sales
  • Record the number of reservations
  • The day’s labour cost for the kitchen (and bar)
  • The previous day’s food waste
  • What needs to be ordered each day

Manager Checklist | Similar to the above checklist, general managers and bar managers should have a similar mindset and list of daily tasks, daily financial goals, and daily staff costs, etc.

If a chef, mixologist, manager, or supervisor is sick or on an extended leave, another team member can step in and understand exactly what needs to be completed, to ensure consistency in your operations.

Kitchen & Bar Prep List | This is a crucial system to ensure your venue minimizes waste. A daily prep list should include all required ingredients, the portion sizes, shelf life, quantity on-hand, and the amount to prep based on both the minimum and maximum you’ve produced and sold on that specific day of the week (in relation to any waste) over the past three months.

This must go hand-in-hand with printed sales reports to visualize trends, maximize efficiency, reduce waste, and improve production times.

Line Cook & Server Checklist | The lists don’t stop at management. All team member (FOH & BOH) positions should have a checklist to hold staff accountable, engaged, and working towards a series of set goals for each day of the week.

Quality Control Measures | It is important to track the number of occurrences related to food quality, service problems, and drink related issues. Find trends in temperatures, timing, presentation, and other forms of customer feedback. Put a dollar figure beside each occurrence, discuss with your team, and take immediate action.

It takes effort, honesty, training, reviews, and accountability by the entire team to ensure these basic systems work and are implemented on a daily basis. It may look like more ‘work’ up front, and there are many more systems to suggest, but these will provide the results you need to begin leading a successful operation, starting tomorrow!

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Are You Really Ready?

Are You Really Ready to Open a Restaurant?

Originally Posted on FoodableTV – By Doug Radkey 02/02/2017

At some point in life, it seems nearly everyone has aspirations to one day open their own restaurant or bar. With the saturation of restaurants in recent years and months, it appears that the entry-level barriers must have become easier to overcome or are less expensive to do so, and many are jumping on board.

But is everyone really ready to open their own restaurant?

The simple fact is: This industry is not for everyone. It’s not what it’s made out to be on television and across some social media feeds. This industry is cut-throat, plain and simple. If you’re wanting to open a restaurant because you can cook at home for your friends and family or if you want to open a bar because you love hanging out at your local drinking spot with friends, stop here — please!

This industry may not be for you. Consider saving your investment, now!

If you’ve worked in this industry, you surely know what it’s like. No matter how much improvement we’ve collectively made in recent times to keep operations manageable, flexible, and “fun,” there are still the long hours, the working on holidays and weekends, the minimal margins, the rising costs, and the demand of the market to deliver quality food & drink, all at often the lowest price possible.

If you’ve experienced managing a restaurant or leading the kitchen of one, and you have paired this with the willingness to sacrifice and the required systemized thinking, social skills, creativity, stress management, and a lot of passion, then — and only then — you should consider opening a restaurant.

Self Assessment

Take the time to look in the mirror and ask yourself about the above character traits. You then want to ask yourself, and also write down, why you want to open a restaurant or bar, followed by: explaining why you think many restaurants fail within 18 months, explaining the difference between success and survival, explaining your expectations of profit versus the lifestyle you want to live, and finally, explaining how important growth is to you, both personally and in business.

Learn to Cook

Assuming you’re not a chef-turned-owner, make sure you learn about different cooking methods, different kitchen positions, and the use of different commercial equipment. Look for shared or co-op kitchens in your area to rent and test out, visit restaurant equipment suppliers, and consider working with a caterer or restaurant for a short period of time if you haven’t already.

Course Instruction

Hospitality, financing, and business administration courses are a great educational foundation to have when owning or operating a restaurant. This formal style of training will ensure you bring additional skills to the table in terms of management, operations, and menu development.

As an owner, you need to monitor your inventory, employees, food and beverage preparations, legal issues, budgets, and other local regulations, in addition to marketing, and of course, your customers. Depending on the size of restaurant, you may be wearing many hats. Be prepared.

Live the Industry

Embed yourself in the industry as much as possible. Read industry articles or books, visit trade shows, listen to podcasts on the way to work, and meet other owners in your community. Simply, get involved.

Define Your Role

What type of owner will you be and how will you look to position yourself within the operations of your restaurant? Will you be the chef? Will you be the FOH manager? Will you be a silent owner? If you plan to grow into multiple locations, leave yourself (and your team) room for growth within the operations with different positions to learn and develop.

Begin Planning

If you’re ready after all of that, it’s time to begin planning and developing your support team. Find out the financial start-up requirements for building, renovating, or buying an existing restaurant. Use this time — before you get too deep — to complete a feasibility study and ensure you’re creating something your market needs and wants, not just a concept that is your favorite to visit.

It’s impossible to know for sure when you’re truly ready to be an owner, but make sure you’ve done your due diligence, have experienced the industry, and have trained yourself as much as possible to become one first.

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