Cooking Up Success

By Alan Hughes and Bridget Mccrea

designed and installed most of the equipment and handled my own electrical and plumbing work,” he says. “I wound up saving a lot of money.” Angus’ efforts paid off in February 2002 when the doors to his 100-seat establishment opened. Billed as “fine Jamaican dining with a healthy twist,” the restaurant offers skinless, boneless jerk chicken, jerk tofu, grilled vegetables, and seashore salmon. “Our service is excellent,” he says. “We offer a complete dining experience, as if you’re in the islands.” He expects the establishment to generate $800,000 in sales for 2002 and close to $1 million for 2003.

“There’s a much lower failure rate in buying an existing restaurant location than building a new one,” says Cannon, who is president of Birmingham, Alabama-based consulting firm Restaurant Operations Institute Inc. He notes that choosing a non-restaurant location is a mistake many restaurateurs make.

Angus continues to cater from his new, four-employee location and has an eye on expanding into fast-food later in the year. But when expansion time arrives, he says he’ll look for a pre-existing restaurant: “The laws, regulations, and codes that come with converting existing space into a restaurant can kill you.”

Most people know the reasons restaurants fail: bad food, bad service, and poor advertising. Cannon believes that high failure rates are due to poor financial habits, bad decisions early in the startup process, and unrealistic expectations on th
e entrepreneur’s part.

According to Cannon, the U.S. has almost 844,000 restaurants and adds 13,000 to 17,000 each year. Roughly 81% will eventually fail, he says, adding that most go astray on the cash management side. “New owners often go out and spend the cash without realizing that, in 30 or 60 days, they have to pay their staff, their vendors, and their landlords,” says Cannon.

To avoid falling into such traps, Cannon and Kharasch offer the following suggestions:

  • Retain a good accountant. “A good accountant can help the restaurateur keep score and help them stay in the game,” Cannon advises.
  • Hit the streets. Speak with at least five local independent (not franchise) restaurant owners about the pros and cons of the business, the area, and the market. “These entrepreneurs are usually very involved in their communities,” says Cannon, “and will go through hoops to mentor an aspiring restaurant owner.”
  • Determine how much time and energy it takes to run a restaurant. “Get out there and work in the industry,” says Kharasch. “Then go to a culinary school and take a few management courses.”
  • Create a solid business plan. Be sure it takes into consideration the initial investment and amount of income it will take to reach profitability and success. “Get the appropriate capital together to make it work,” says Kharasch, who estimates the average startup costs for a new restaurant at over $1 million.

Despite the pitfalls and challenges, owning a restaurant maintains its appeal, regardless of the economy. “The restaurant industry grows because people are eating out more and more, which means there’s plenty of money to be made,” says Cannon. As restaurateurs

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