By Chris Tripoli & Jay Goldstein
It was one week until my client’s restaurant was set to open, and as I walked in I found myself stepping over a man installing the marble floor entry, dodging the delivery people bringing supplies to the bar and watching the painter touch up a wall while someone else reached around him to hang up the artwork. I couldn’t help but notice the ladders in the middle of the dining room or the workers installing the sound system and hanging the last of the light fixtures. As I greeted the manager, he explained how far behind their deadlines everybody seemed to be and that he had to keep pushing the workers to complete their tasks and be gone in two days so he could clean everything up and finish practice service before opening.
We were interrupted by the landscape deliveryman who informed us that he wasn’t able to install the front areas because of the wet ground. The manager seemed overly stressed and looked very tired. About the same time, the millworker announced that the large booth for the corner didn’t fit and would need to go back to the shop to be modified.
Just then, we heard a loud crash coming from the kitchen where we discovered that two men had bumped into the kitchen equipment installer and dropped the large custom mirror that was to hang above the bar … Ouch!
Welcome to another day in restaurant opening hell.
I’ve observed that many first-time restaurant owners continue to create their concept while construction is progressing. This lack of planning leads to confusion, changes, loss of time and increased cost. New restaurant operators are also more likely to rush and make up for lost time in order to meet a designated opening day. They become over-eager to open toward the end of the construction period leading to hurried management and a poorly prepared staff.
Can we manage our new restaurant opening more like the engineer of a train and less like the caboose trying to catch up? Yes, of course we can. Restaurant openings may be far from an exact science, but we have come a long way from throwing darts at calendar dates.
I am often amazed by the number of otherwise educated and savvy people who cannot wait to leave their successful careers so that they can open their very first restaurant or bar.
DEVELOPING YOUR CONCEPT
Perhaps it is because the restaurant business has become big business. When all the figures are in, 2013 restaurant sales are projected to exceed $660 billion. That is an increase of 3.6 percent over 2012. The restaurant industry’s share of the food dollar has grown steadily from 25 percent in 1955 to 48 percent currently. At this rate we are close to a culture where there is a 50/50 chance that we will eat our meal in a restaurant rather than at home.
If there was any doubt, the recent recession has confirmed that the public no longer views dining out as an occasional event but rather as a significant part of our way of life. The success of the Food Network has provided us with a more educated consumer. Grocery chains are providing fully cooked meals and offering many local restaurant products, thus creating crossover occasions. Talented chefs have successfully raised the expectation of food-truck dining. All of this adds up to increased awareness and opportunities for new business.
Successful first-time restaurant operators tell me they were attracted to opening their concept for the personal satisfaction, potential expansion and the creation of wealth. What they usually learn through the opening process is that there are a few downsides to opening a restaurant as well. These include:
An average full-service restaurant usually costs $250 per square foot to design, build, equip and furnish.
PERSONAL LIABILITY It is likely that a personal guarantee will be required for the lease, loans and some purveyors.
TIME SACRIFICE It is common for new restaurant operators to underestimate the amount of time required to be on premise in order to successfully get the new restaurant up and running. I remember telling a first-time restaurant operator that once his restaurant opened the only way he would be joining his Friday night wine group was if they dined at his restaurant, because that is where he was going to be every Friday night.
Let’s also dispense with some common myths about opening a new restaurant.
MYTH #1 NINETY PERCENT OF NEW RESTAURANTS FAIL IN THE FIRST YEAR. I don’t know where that number first got legs, but I have heard it often over the years. Although I believe new restaurants to be quite risky, recent national surveys suggest that 26 percent of new restaurants close during the first year and another 19 percent close during the second year.
MYTH #2 RESTAURANTS MAKE LARGE PROFITS. It seems that all someone needs to do is pay $9 for a cocktail and $28 for a chicken dinner to start believing that all restaurant owners are rich. In truth, after considering the product cost, labor, operating expenses and occupancy cost, the average new restaurant earns seven to nine percent of pretax profit.
MYTH #3 IF YOU OFFER GOOD QUALITY, FRIENDLY SERVICE AND A CLEAN ENVIRONMENT YOU ARE CERTAIN TO SUCCEED. Although restaurants are nothing without consistently offering good quality, service and cleanliness, in today’s competitive environment those items are simply the price of admission. We must do more to succeed. It takes a complete concept offering an experience that creates a bond with the guest so that he or she cannot wait to come back. Even more than that, that customer should want to tell others to come try your restaurant.
READ PART 2 OF THIS SIX-PART SERIES ON OPENING A RESTAURANT IN OUR APRIL-MAY EDITION.
How can we successfully open a restaurant? Much like a bountiful garden begins with the soil preparation, making the most of your restaurant opening begins with proper planning. Months and months before you open, you lay the foundation for its success. The first step in the process is called Concept Development.
When John Sheely opened Osteria Mazzantini at 2200 Post Oak Blvd. last fall, he got a lot more than a new restaurant. He received the satisfaction of fulfilling his dream of creating an Italian experience that was a tribute to his heritage. John’s concept development started years before while visiting osteria-style restaurants in New York, Philadelphia, Chicago and Napa Valley.
But Sheely’s determination to do an Italian concept started even before that. At age 35 Sheely owned his first restaurant, L’Ostello, an Italian concept inside a hotel in Vail, Colorado. Sheely was the general manager and ran the front-of-house service until the day the chef quit. “It was baptism by fire,” he says. “I took over the kitchen and fell in love with creating Italian dishes. I knew then I wanted to develop my own Italian concept one day. The cooking style fit, and I have the family history.” (Sheely also owns the very successful Mockingbird Bistro.)
FOR OPENING A RESTAURANT
WORK IN THE INDUSTRY FIRST.
Cook, clean and manage some personnel. Hands-on experience working with staff and serving the public will tell you if you are in the right business.
CLEARLY DEFINE YOUR CONCEPT.
Don’t try to do too much. You can add and modify a little as you go to stay fresh, but don’t confuse the guest with too much at the opening.
DO YOUR HOMEWORK.
Travel, review other restaurants and speak to other restaurateurs for input on your concept. Develop a mission statement and define how you are going to measure its success.
CAREFULLY SELECT YOUR SITE.
Use an expert to assist with market analysis. Select a real estate consultant who specializes in retail (check references). More than just demographics and traffic count around a restaurant site; you also want to know spending patterns and area growth as well.
DEVELOP FINANCIAL PROJECTIONS AND A BUDGET.
Don’t forget the little things. Allow for a contingency fund and operating capital.
SUPERVISE THE PRE-OPENING.
Be involved in layout and construction. Check and double-check your schedule. Openings require proper planning, realistic timetables and diligent follow-through. If you need to push back the opening date, do so.
TRAIN AND DEVELOP YOUR STAFF.
You only get one chance to open. Allow managers time to put systems in place and train staff. Have two or three test days before opening to the public.
SELECT YOUR PURVEYORS.
Visit and compare your bakery, produce, meat and grocery companies. Team up with companies based on service and quality, not just price.
STAY THE COURSE.
Maintain the integrity of your concept. Be consistent.
NEVER FEAR FAILURE.
You need to take a risk to reap a reward. Believe in what you are doing.
Concept development forms the foundation of the business plan that is a required document for the new restaurant operator. A well-written concept statement is from the guest’s perspective and includes comments on all five senses. What the guest will see, touch, hear, smell and taste defines the concept. This information helps determine the customer profile and the concept’s impact on menu, design, operations, management structure and marketing. These are the very items presented in a restaurant business plan.
Sheely determined his customer profile to be the more knowledgeable diner and seasoned traveler. “The selection of a location in the Galleria area made sense to me considering the affluence nearby and the hotels and shopping.”
The concept’s impact on name was important. “Mazzantini is my family on my mother’s side, and ‘osteria’ comes from the Latin word hospes meaning ‘guest.'”
Creating a menu that hits the target of the customer profile while being consistent with the concept is always the objective. “That is why I needed the bar menu, happy hour promotion, as well as regular lunch and dinner menus” says Sheely. “There is a diversity of diners within my profile, and I wanted to include the small plate taster in the bar as well as the patio diner and private party room user in my menu planning.”
The menu is where the concept is best able to display its “point of difference.” It is important for the guest to easily understand what the restaurant concept is doing a little differently in order to create the bond each restaurant owner wants to make with the guest. In the case of Osteria Mazzantini, it’s on-premise preparation that makes the difference. Sheely’s influence comes from early childhood memories of Sunday family dinners in Galveston: “the homemade pasta drying from curtain rods, the fresh bread baking and Grandma’s sauce.” It’s no surprise then that his menu includes fresh-made pasta, pizza and on-site cured meats. The variety of house-cured salumi have become an early favorite.
Concept’s impact on design determines such things as size and scale, seating capacity, furnishings and finishes. Some items often overlooked by first-time owners are the importance of sound levels and lighting.
The recent recession confirmed that the public no longer views dining out as an occasional event but rather as a significant part of our way of life.
Sheely’s goal at Osteria Mazzantini was to provide a comfortable, woman-friendly, slightly romantic environment without appearing too “special occasion.”
To meet that objective he broadened his interior design approach to include a branding specialist. “I wanted to be certain that layout, design, color, materials, finishes and décor blended well with logo, uniforms and music. I was doing this restaurant from scratch and wanted to be certain everything fit well within my concept.
“I would recommend that every first-time restaurant operator create a written concept statement with budget and select restaurant-experienced companies for design and construction,” says Sheely. [Opening budget forms and a business plan template can be found at restaurantowner.com.] Concept development isn’t complete without a pre-opening cost budget and annual income projections. The items most typically overlooked are a contingency for opening costs and an adequate working capital reserve for the initial opening period. I recommend placing the working capital reserve separate from the opening budget so that it doesn’t get used for items before opening.
In the case of Osteria Mazzantini, a contingency was certainly important considering there were changes in design that affected cost. Being located in the bottom of a parking garage created unforeseen issues with the ventilation, for example. “Had I not had a contingency factored into my pre-opening budget, I would have been in real trouble,” admits Sheely.
The four most common start-up mistakes are:
- Trying to do too much within the concept
- Not having a contingency fund and enough working capital
- Opening before staff are fully trained
- Lack of industry experience
Sheely and his team were able to avoid all four mistakes while concepting a new Italian restaurant and opening it successfully. Having a well-written concept statement as a part of a restaurant’s business plan helps the first-time restaurant owner raise capital, secure the right location and maintain focus on the concept during the preopening process. It isn’t the easiest thing to do, but opening a restaurant is nothing to be afraid of. Instead it is something to be prepared for.