Opening a restaurant....... bad idea?
Discussion
A friend of mine (who has experience of running restaurants) has an idea for a restaurant and is looking for investors.
I actually had an idea for a different restaurant after I returned from a holiday, but after we got talking, his idea is probably better.
I am aware that restaurants are very comeptitive and round my way (medium size city) they are always opening and closing. I am also aware of many big chains closing and of course with the economy as it is/Brexit etc - it could be a real risk.
The idea looks good and would be unique for our area. The idea has been done in other cities (London) but their market is different to ours as there are so many people there.
I know there is no correct answer and it might be one of those suck it and see scenarios but does anyone here own a restaurant or have any experience of what might be a good/bad sign as to deciding whether to invest?
I am generally a very risk averse person. I have a normal job but I am in a position of thinking I want to try something businesswise and see what happens.
We are looking at a location in the town cente to cater at lunch and dinner.
I actually had an idea for a different restaurant after I returned from a holiday, but after we got talking, his idea is probably better.
I am aware that restaurants are very comeptitive and round my way (medium size city) they are always opening and closing. I am also aware of many big chains closing and of course with the economy as it is/Brexit etc - it could be a real risk.
The idea looks good and would be unique for our area. The idea has been done in other cities (London) but their market is different to ours as there are so many people there.
I know there is no correct answer and it might be one of those suck it and see scenarios but does anyone here own a restaurant or have any experience of what might be a good/bad sign as to deciding whether to invest?
I am generally a very risk averse person. I have a normal job but I am in a position of thinking I want to try something businesswise and see what happens.
We are looking at a location in the town cente to cater at lunch and dinner.
A buddy invested in a new restaurant in an up and coming location.
Ok, it’s the US, not the UK, but I’m pretty sure he regrets it!
From what I understand, the problem is being dependent on someone else for the success of the investment.
If the market in general takes a turn for the worse, is this other dude going to be more inclined to push harder with the restaurant that he has skin in the game or that which he has an external investor?
Ok, it’s the US, not the UK, but I’m pretty sure he regrets it!
From what I understand, the problem is being dependent on someone else for the success of the investment.
If the market in general takes a turn for the worse, is this other dude going to be more inclined to push harder with the restaurant that he has skin in the game or that which he has an external investor?
The amount of money to get it up and running is not huge in the grand scheme of things - some PHers spend more on a weekend car. That is for my half. Of course I cannot afford to lose it but with money already I have I may only need to borrow 10-15k. That is assumign we can do it based on 'back of fag packet' sums we have estimated.
I am also in a position whereby I can take a risk (no wife/kids/mortgage) - I may not be in a position like this much longer/forever.
For me there are a few issues
- the stress - although I am sure i can handle it if it was making a profit
- staff - I am aware that it is quite hard to find and retain good staff
- USP - the skill of the chef offering a good menu will be the main USP and there is concern about what happens if he/she leaves/becomes unavailable - although we have discussed training other people - you are still fundamentally heavily reliant on another persons skill
We both have others jobs and if anything he is more likely to be able to commit more to it.
I am also in a position whereby I can take a risk (no wife/kids/mortgage) - I may not be in a position like this much longer/forever.
For me there are a few issues
- the stress - although I am sure i can handle it if it was making a profit
- staff - I am aware that it is quite hard to find and retain good staff
- USP - the skill of the chef offering a good menu will be the main USP and there is concern about what happens if he/she leaves/becomes unavailable - although we have discussed training other people - you are still fundamentally heavily reliant on another persons skill
We both have others jobs and if anything he is more likely to be able to commit more to it.
To give an example, recently PREZZO closed. As you may seen on the news PREZZO closed about 30 restaurants.
To my mind PREZZO would/should have been making a fair profit becasue to me they had a good brand and I assumed pizza was always in demand. But of course I don't know how loaded they with marketing and head office costs.
My friend also knows a guy who has a normal full time job and opened a resturant (one of these ones that specialises in meat -a steak house I believe) - he runs both of these in aiddtion to his normal job and both are making a profit and he is doing well out of it.Obviously the day to day management is done by other people.
To my mind PREZZO would/should have been making a fair profit becasue to me they had a good brand and I assumed pizza was always in demand. But of course I don't know how loaded they with marketing and head office costs.
My friend also knows a guy who has a normal full time job and opened a resturant (one of these ones that specialises in meat -a steak house I believe) - he runs both of these in aiddtion to his normal job and both are making a profit and he is doing well out of it.Obviously the day to day management is done by other people.
Mojooo said:
Of course I cannot afford to lose it
I may (only) need to borrow 10-15k.
USP - the skill of the chef offering a good menu will be the main USP and there is concern about what happens if he/she leaves/becomes unavailable
We both have others jobs.
I may (only) need to borrow 10-15k.
USP - the skill of the chef offering a good menu will be the main USP and there is concern about what happens if he/she leaves/becomes unavailable
We both have others jobs.
No chance. For all the macro economic reasons for restaurants on the high street now. And for the specific reason for yourself as above.
Bringing a whole lot of pain and likely potential loss vs limited upside.
Mojooo said:
I know there is no correct answer
Yes there is.I was casually looking at businesses for sale in my city, and a big majority were bar/restaurants. Ad that's the ones with the cash to stay open and try to secure a sale. The rest just close.
If you're risk averse stay well away.
singlecoil said:
The owner of any such establishment is completely at the mercy of his staff, and restaurants can't charge enough to be able to afford decent pay. So there's a built-in tension there which requires both luck and constant hands-on vigilance, seven days a week, to overcome.
Yea, this is basically one of my biggest concerns for meThesprucegoose said:
Why not test the water with a pop up. Also why a restaurant why not a takeaway and deliver.
Yes we have discussed a pop up. I dont think it owuld work as a take away only.There are ways of doing it cheaper to start, not as fancy a fit out to start with, second hand kitchen etc
singlecoil said:
The owner of any such establishment is completely at the mercy of his staff, and restaurants can't charge enough to be able to afford decent pay. So there's a built-in tension there which requires both luck and constant hands-on vigilance, seven days a week, to overcome.
This ^^One of my businesses is in a similar position where in the market won’t stand the price you need to pay really good wages.
This isn’t so much an issue but what it means is you need an owner/operator to really sweat the business. So your head honcho is also the day to day brains of the business and also the reason your customers stay/return.
In a restaurant, that means the head chef.
So as well as running the business, s/he is also the talent in the kitchen that keeps the customers satisfied. They will need to know the menu inside out and have a process of staff training in place to replace the low waged revolving door of workers that will come and go as they get better options elsewhere.
You also need to replicate this for front of house and the bar if you have one too.
It’s why a lot of successful small restauranteurs are husband and wife teams. He runs the kitchen, she front of house.
It’s also why a lot go up for sale, as it’s an incredibly hard balancing act and stupidly unsociable hours that’s almost impossible to run a family around.
Can you afford to lose a friend? (and some money in the process).
Get your friend to provide a business case with sound financial analysis behind it and not some fag-packet calculations. Base your decision on the worst case.
Look at the accounts of restaurants in the town and see how hard it is out there. Walking into this (or not) with your eyes open reduces the risk of it being an expensive folly.
Get your friend to provide a business case with sound financial analysis behind it and not some fag-packet calculations. Base your decision on the worst case.
Look at the accounts of restaurants in the town and see how hard it is out there. Walking into this (or not) with your eyes open reduces the risk of it being an expensive folly.
To be fair we are literally at the very early stages of discussions - we havent got as far as actually costing everything out in detail.
I am personally still deciding whether to not even bother before doing more work - although in all probability we will do some proper costings.
I approached my friend first with my own idea (a type of food I saw on holiday) - he only told me of his idea after that.
I have looked at some of the businesses for sale in the area and it does make interesting reading.
I am personally still deciding whether to not even bother before doing more work - although in all probability we will do some proper costings.
I approached my friend first with my own idea (a type of food I saw on holiday) - he only told me of his idea after that.
I have looked at some of the businesses for sale in the area and it does make interesting reading.
At least one of you needs to understand the type of business in great detail. Ideally that person should work day to day in it, if it launches.
Hired chefs/cooks and waiting staff are transitory, unreliable and unpredictable.
I'd imagine the financial success of restaurant depends on all the element working in harmony; a concept interesting enough to attract new custom, a menu enticing them to spend more than they planned, dishes that have been worked out to deliver good GP, cooked well enough to impress, in a pleasant surrounding, delivered by engaging and attentive staff, consistently, day in, day out.
Getting all of this equilibrium is, I imagine, really difficult, which is why you see such an enormous turnover of new businesses, particularly in city centres. I'd expect landlords may offer attractive terms for an initial lease period, however how many places do you see close within a few months of their 6 or 12 month anniversary, once the real costs have kicked in? How.many directors have had to give PGs to get leases and loans?
Hired chefs/cooks and waiting staff are transitory, unreliable and unpredictable.
I'd imagine the financial success of restaurant depends on all the element working in harmony; a concept interesting enough to attract new custom, a menu enticing them to spend more than they planned, dishes that have been worked out to deliver good GP, cooked well enough to impress, in a pleasant surrounding, delivered by engaging and attentive staff, consistently, day in, day out.
Getting all of this equilibrium is, I imagine, really difficult, which is why you see such an enormous turnover of new businesses, particularly in city centres. I'd expect landlords may offer attractive terms for an initial lease period, however how many places do you see close within a few months of their 6 or 12 month anniversary, once the real costs have kicked in? How.many directors have had to give PGs to get leases and loans?
Only one type of restaurant investment works in my experience - Start up, build a chain of 3-5, make it "the place to be" so you can be profitable, sell before it becomes last years thing.
You need someone to drive it to be the place to be almost more than anything else. You can then get somemug investor to buy it from you at a premium before realism sets in.
Don't hold onto the business - they are phenomenally hard work hence why most single operations are owner/manager/chef or front of house in one and they are totally at the whim of changing tastes, fashion and staff.
But selling may be harder than recent past - the bigger chains consistently hitting the press have pushed away some of the people who think they can be the next Jamie Oliver (but whom never understood the lack of profitability of even that venture).
Other warning signs from me : your co-investor is a friend; you need to borrow money to do this...
They can work if you have a USP that customers really take to, but once it's lost its shine almost all fall into the doldrums never to return.
Good luck...!
You need someone to drive it to be the place to be almost more than anything else. You can then get some
Don't hold onto the business - they are phenomenally hard work hence why most single operations are owner/manager/chef or front of house in one and they are totally at the whim of changing tastes, fashion and staff.
But selling may be harder than recent past - the bigger chains consistently hitting the press have pushed away some of the people who think they can be the next Jamie Oliver (but whom never understood the lack of profitability of even that venture).
Other warning signs from me : your co-investor is a friend; you need to borrow money to do this...
They can work if you have a USP that customers really take to, but once it's lost its shine almost all fall into the doldrums never to return.
Good luck...!
sleepezy said:
Only one type of restaurant investment works in my experience - Start up, build a chain of 3-5, make it "the place to be" so you can be profitable, sell before it becomes last years thing.
You need someone to drive it to be the place to be almost more than anything else. You can then get somemug investor to buy it from you at a premium before realism sets in.
Don't hold onto the business - they are phenomenally hard work hence why most single operations are owner/manager/chef or front of house in one and they are totally at the whim of changing tastes, fashion and staff.
But selling may be harder than recent past - the bigger chains consistently hitting the press have pushed away some of the people who think they can be the next Jamie Oliver (but whom never understood the lack of profitability of even that venture).
Other warning signs from me : your co-investor is a friend; you need to borrow money to do this...
They can work if you have a USP that customers really take to, but once it's lost its shine almost all fall into the doldrums never to return.
Good luck...!
Totally agree with this dude. Spot on !!!You need someone to drive it to be the place to be almost more than anything else. You can then get some
Don't hold onto the business - they are phenomenally hard work hence why most single operations are owner/manager/chef or front of house in one and they are totally at the whim of changing tastes, fashion and staff.
But selling may be harder than recent past - the bigger chains consistently hitting the press have pushed away some of the people who think they can be the next Jamie Oliver (but whom never understood the lack of profitability of even that venture).
Other warning signs from me : your co-investor is a friend; you need to borrow money to do this...
They can work if you have a USP that customers really take to, but once it's lost its shine almost all fall into the doldrums never to return.
Good luck...!
Personally, don't bother. Unless your a self owning chef then you will be dependant on one man being your busy.
Invest elsewhere.
SBK
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