The Best-Laid Plans: Avoiding the Common Pitfalls of Restaurant Planning
Restaurants USA magazine's final issue was published in September 2002 but these
archived articles remain available for our readers' convenience.
Restaurants USA, January/February 2000
Restaurant consultants and operators share the secrets to laying the foundation for a successful business.
By Beth Panitz
Starting a new restaurant can be a lot like having a baby. YouÕve got to nurture and help the restaurant grow for months before it finally arrivesÑand then the work is only beginning. Before you reach opening day, you can expect to put in many long hours conducting extensive research and planning. And it very well might take you longer than nine months to plan your restaurant. A new restaurant usually requires at least six months of planning, but some may require a year or more.
Whether your starting your first restaurant or your 15th, you can always benefit from some advice from other restaurateurs and consultants. So hereÕs a guide on what to plan for while youÕre planning your restaurant.
Get your feet wet before you jump in
Before you plunk your lifeÕs savings into your own restaurant, take the time to evaluate whether itÕs the right move for you. "One of the first things I do [when people come
to me wanting to open a restaurant] is ask them why they want to go into business," says Fred Schneeweiss, president of Restaurant Management Consultants in Lakehurst, New Jersey. "If they say I always like to cook at home and I do a great barbecue and I make great pies, I tell them that running a restaurant isnÕt the same as cooking at home. Unfortunately, good cooking isnÕt enough to make it today. You have to be able to do the business part, to do the marketing, the advertising.
"I would advise them to work in a restaurant first so that they see what goes on. Take any job you can get, even a dishwasher. Get as much information on running a restaurant as possible. I find that probably 75 percent of the people I run into I dissuade," he says.
Even great restaurant chefs donÕt always make great restaurant owners. "IÕve been a chef for about 18 years, but a lot of the business part of running a restaurant I really didnÕt understand until the last few years," says Jeremy Marshall, chef and co-owner of ManhattanÕs Aquagrill, which opened in February 1996.
Marshall had considered starting a restaurant when he was 23. When his loan application was refused, he put the idea on the back burner until he gained more experience. Twelve years later he opened Aquagrill.
During those 12 years, Marshall gained an important life partner and business partner, his wife, Jennifer, who had worked as the wine steward at Windows on the World, the top-floor restaurant at the World Trade Center. "We had both worked in the industry for years. Together we had more than 25 yearsÕ experience" by the time Aquagrill was launched, says Jeremy Marshall.
David Abes owner of Insignia restaurant in Atlanta also viewed industry experience as a prerequisite for opening his own restaurant. Abes worked in the restaurant industry for 15 yearsÑserving in management positions for Morrison Restaurants, the Atlanta Fish Market and the Horseradish GrillÑbefore launching Insignia this past summer. "It was always my dream to own my own restaurant," he says. "But I wanted to go to work first for different restaurants to learn what to do."
Conceptualize your restaurant
Jeffrey Yarbrough knew he wanted to open a restaurant in Dallas to add to his budding empireÑwhich consisted of two nightclubs and a barÑbut he wasnÕt sure what type of restaurant. So Yarbrough and his wife, Tara, set out on a five-month cross-country trip in search of a restaurant concept. "It was a fact-finding, researching and brainstorming mission," he says. The YarbroughsÕ itinerary included such great restaurant cities as New York, Los Angeles and San Francisco.
"In San Francisco we went to 30 restaurants in one day," recalls Jeffrey Yarbrough. We would hire a driver, plot out a map and chart a course. Sometimes we would stick our head in the restaurant and see there was no energy, no anything, and weÕd leave. Other times we would say letÕs grab a beer or split an appetizer. If we found ourselves drawn to the place, we would introduce ourselves and speak to the managers and the chef.
"What we noticed was that chefs were influenced more and more by Asian foods. We would also go to noodle shops in ethnic neighborhoods, and they were mom-and-pop shops where the staff didnÕt speak English, there was no decor, there were no wine pairings," Yarbrough continues. Somewhere along the trip an idea sparked. Why not open an American-style restaurant that features Asian noodle dishes? "I felt it was a concept I could develop, and we saw a market for it," he says.
Evidently, the Yarbroughs surmised correctly. Liberty, their Pan-Asian noodle restaurant, opened in Dallas in November 1997. Sales are soaring, and Yarbrough plans to open a second unit in Houston this fall.
The Yarbroughs arenÕt the only ones who have gained inspiration from their travels. The Marshalls, of Aquagrill, decided to focus on seafood after dining at a popular seafood restaurant in Miami. "The restaurant was packed, and it seemed like a fairly easy idea to execute," says Jeremy Marshall. Before settling on the concept, the visited all the other seafood restaurants in Manhattan. "The industry is really niche driven. You have to try to fill a gap," says Marshall.
New York CityÕs Tabla restaurant, which opened in the fall of 1998, also grew from a "germ of an idea that came from travel," says David Swinghamer, who is a co-owner with Danny Meyer and others. Swinghamer oversees business development for MeyerÕs Union Square Hospitality Group, which includes Union Square Cafe, Gramercy Tavern and Eleven Madison ParkÑanother restaurant that opened last fall. "One of our chef/partners, Michael Romano, went to India," says Swinghamer. "When he came back, he started experimenting with using Indian spices in some of the dishes at Union Square Cafe. People reacted favorably to it. And we said, ÔHey this thing has a life of its own.Õ"
Ultimately, you should be able to define your concept in a few simple words, says Swinghamer. That way you can ensure that your restaurant has a strong identity that is likely to attract customers. "TablaÕs food, we said, is simply American food with Indian spices. For example, we might sell a dry-aged strip steak rubbed in Indian spices," he says. "So much of the rest of the restaurant takes it cues off the food." For example, TablaÕs decor has "an Indian feel with red-toned woods, colorful mosaics and curved walls.
"WeÕre blessed with so many different restaurants in the United States that you really need something new that people havenÕt seenÑsomething special that will stand out in the customerÕs mind," says Swinghamer.
Location, location, location
Once you know the type of restaurant you want to open, the next logical step is to select a location. Factors to consider include demographics, the labor pool, traffic flow, availability of parking, competition in the area and infrastructure.
"Some restaurants donÕt lend themselves to a [particular] area," says Schneeweiss. "For example, where I live there are a lot of senior citizens. A fine-dining, white-tablecloth restaurant probably wouldnÕt work. The senior citizens are looking for low- and medium-price places."
Examining the demographics is essential, echoes Adam Bershad, food-and-beverage division executive vice president for Hospitality Services of America a company that provides service training, manuals and consulting to hotels, restaurants and caterers in Pembroke Pines, Florida. "If you have $30 dishes and youÕre thinking about locating in a neighborhood where the average income is $19,000, youÕre not going to succeed," he says.
Local chambers of commerce and departments of transportation as well as the National Restaurant Association Information Services and Library are good sources of information. Restaurant consultants and market-survey companies can also provide you with valuable data, for a fee.
A realtor can also assist you with demographic information and help you to locate an area that best meets your needs. You might want to consider using a restaurant brokerÑan agent who specializes in properties suitable for restaurants. "They really know whoÕs going out of business and whatÕs available," says InsigniaÕs Abes. His broker helped him find a place in AtlantaÕs Buckhead area. "I had built up a lot of clientele [in that area]. People knew me. ItÕs also an affluent area. And thereÕs lots of hotels there, so we could get the tourist business," he explains.
Other factors to consider are the proximity of the site to where you live and to other restaurants you may own. Aquagrill is a block from the MarshallsÕ residence. And Eleven Madison Park and Tabla are both in close proximity to Union Square Cafe and Gramercy Tavern. "That way we can get to them easilyÑit [makes] managing them easier," says Swinghamer.
And sometimes a location just speaks to you, says Swinghamer. He and Meyer considered other sites for the Eleven Madison Park restaurant, but chose the current site because it overlooked Madison Square Park, offering a unique setting that would help define the restaurant. Throughout the restaurant, old photos of the park adorn the walls. "A real important part of starting a restaurant is to understand the relationship of the restaurant to the settling. For an extreme example, you wouldnÕt put a Mexican restaurant in the base of the Eiffel Tower," says Swinghamer.
YouÕll also want to consider how much money and time it will take to transform the property into a restaurant. Of course, the easiest option is to take over an existing restaurant, says Schneeweiss. If you want to launch your own concept, you should still consider locating it in a facility that has housed a restaurant, says restaurateur Joe Bartolotta. He says that strategy has been a substantial cost saver for all three of his Italian restaurants in the Milwaukee area.
The Woolley family, which opened the Antero Grill in Salida, Colorado, in July 1998, also selected a property that had served as a restaurant previously. "It was a great building. It had new equipment," says co-owner Mark Woolley. "We really had to do very little to the place. That was key." The restaurant features modern American-cowboy cuisineÑa mixture of Southwest, Native American and South American cuisine. With a fresh coat of paint-both inside and outside-the addition of a smoker and a slicer in the kitchen, cowboy artwork on the walls, and reupholstered chairs, the site was transformed from a pub into a cowboy restaurant.
And although itÕs something to be wary of, youÕre not necessarily doomed to fail at a particular location simply because other restaurants have. Several restaurants had failed in the Antero Grill siteÑsome lasting no more than six months. "It had quite a checkered past," says Mark Woolley, who conducted extensive research before settling on the site. Sales are up 25 percent since opening and are on their way to reaching the WoolleysÕ highest expectations.
A helping hand
Opening a restaurant requires a wide array of skillsÑsome of which you might not possess. DonÕt be afraid to get help. You might need to hire an accountant to get your financial statements in order and to create a business plan, a designer to help you decorate your restaurant, a lawyer to get a liquor license and trademark your name, and a restaurant consultant to help you create your menu.
"DonÕt try to wear all the hats. Nobody can be good at everything," advises Bershad.
For example, Jeffrey Yarbrough calls on a business coach for guidance. "ItÕs an extra expense, but itÕs one well worth it for everyone," he says. Among other things, his coach helped him recruit LibertyÕs executive chef, Annie Wong. Yarbrough, who is past president of the Greater Dallas Restaurant Association, also recommends seeking assistance from fellow restaurateurs. "Join your trade association. Network with others."
As for the Marshalls, they received help writing a business plan from the Service Corps of Retired Executives (SCORE), a volunteer group that provides free business advice.
Money makes the world go Õround
There is no way around itÑopening a restaurant requires money. Before you head to a bank or to potential investors, youÕll want to create a business plan that spells out your restaurantÕs concept, expected costs and projected revenue.
"Before you try to get a loan, have a plan, have it in writing, have a menu, have a layout of the restaurant," says Yarbrough. "YouÕve got to have your dog-and-pony show for other people. And itÕs also good just for preparing yourself."
Meyer and Swinghamer created detailed business plans for both Tabla and Eleven Madison Park prior to signing the leases. "We did extensive modeling, all the way down to estimating how many customers would come on Tuesdays for lunch," says Swinghamer.
And plan ahead so that youÕll get enough financial backing to cover all your costs. "The biggest mistake I see people make is that they underestimate their working capital," says Schneeweiss. "They might think that they need $25,000 in equipment and it turns out that they need $50,000 or $75,000.
"DonÕt go in there by the seat of your pants," advises Yarbrough. "DonÕt go in thinking you have a big fat checkbook and then when youÕre 80 percent done, realize youÕre out of money. . . . Have enough capital to cover you if the first four to six months are slow."
And if the numbers arenÕt coming out the way you want, you may need to reevaluate. Perhaps opening a restaurant isnÕt right for you after allÑat least for the time beingÑas was the case with Jeremy Marshall 12 years before he opened Aquagrill. Or you may need to reduce some of your fixed costs to create a workable situation. After three banks turned him down for a loan, Abes went back to the drawing board. "I asked for way too much money. When I was turned down, that was the wake up call that I needed to rethink things," he recalls. He selected a new, smaller site for his restaurantÑone that would require $700,000 to open rather than $2 million. He reworked his business plan with new numbersÑand this time he was approved.
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Beth Panitz is an assistant editor at the National Restaurant Association.
© Copyright 2009 National Restaurant Association. All rights reserved.
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