By Doug Radkey, Foodable Industry Expert
Going through the motions of starting your first restaurant requires an incredible amount of time and financial management. Discovering opportunities to save on both will effectively result in less stress and a generous opening day budget.
Before officially getting started, ensure that you complete a feasibility study, concept development plan, and business development plan. Although developing these can be time consuming (approximately 30-45 days), it will allow you and your potential investor to avoid financial burden.
Feasibility study. Informs you whether to move forward with your dream restaurant/bar or if you should re-evaluate your idea to fit and support the specific market space and start-up budget.
Concept development. Gives your proposed property an identity with visual design components and list of potential suppliers and contractors that can execute your vision.
Business development. Outlines your action plan, including: the details of your restaurant, the permits you will need, the time frame for completion, and the project’s overall budget and financial projections.
During start-up, you want to save time, but you don’t want to cut corners or take uneducated shortcuts leading to future complications. Utilize and trust your developed plans and any expert advice.
Supporting cast. First and foremost, don’t try to do everything yourself. Whether you’re building a small bistro or a large full-service, 150-seat restaurant, you want to build a supporting cast and delegate tasks based on each individual’s strengths and weaknesses. Pro Tip: Work with someone who has “been there, done that” in terms of starting a restaurant. For example, a consultant, development agency, or close friend to be used as a mentor.
Checklists. Complete a milestone checklist with appropriate time frames for completion, in addition to listing who is responsible and the budget for each task. Pro Tip: Hold weekly meetings and consider using an online project management dashboard to promote effective communication within your start-up team.
Money management during start-up is vital. Numerous startup restaurants overspend during this stage, leading to a delay in opening, zero to minimal funds for marketing and advertising, minimal funds for training (paying) staff, or a combination of the three.
Hire an accountant. Prior to signing a lease or hiring a contractor, build a relationship with a trusting accountant. This is your opportunity to stay on top of budgets and control your spending. Pro Tip: Hold weekly meetings with your accountant to review, adjust, and then communicate with the entire start-up team.
Lease negotiations. First, always review your lease with a lawyer. Look for additional concessions. For example: “Free rent” opportunities (for renovation period and first operating month), lease transfer opportunities (in case the restaurant fails), and negotiate other property maintenance and fixture costs (such as air ventilation systems). Pro Tip: When seeking a new location, ensure it is feasible to be zoned for foodservice operations.
Permits and licenses. Receive all of your permits and city requirements by visiting your city clerk’s office. Review federal, regional, and municipal requirements for operating a commercial foodservice business. Receiving a surprise infraction two weeks prior to opening can be costly and detrimental to your startup. Receive each permit’s time frame for approval, initial fees, and any ongoing or future fees. Pro Tip: Receive architect approvals from the start to ultimately save time and dollars dealing with local property drawing requirements.
Contractors and vendors. Most new restaurateurs begin by hiring a lead contractor, who then hires the remaining trades required (plumbers, electricians, engineers, carpenters, and more). Though this may seem the easiest way, it often leads to an increase in costs because you are no longer in control of that spending.
The best practice is to build your own trades team by receiving 2 to 3 quotes each, while measuring their experience, value, references, and overall cost. Pro Tip: Hire your lead contractor last to manage this team, thus leading to further control of these costs that often amount to 15 to 25 percent of your start-up budget.
Kitchen equipment. A key tip to remember is that not all of your equipment needs to be brand new. Consider used prep tables, deep fryers, and lightly-used refrigeration and freezer units. Depending on your start-up budget, consider equipment leasing opportunities versus purchasing upfront. There are pros and cons to this strategy in terms of assets, depreciation, and tax write-offs, so it is best to work with your accountant. Pro Tip: Ensure your menu concept is developed and a chef is part of the kitchen development process to ensure maximum efficiency in terms of food production.
Menu development. Customers today are seeking smaller menus. Ensure that you engineer a small menu with re-purposed ingredients, leading to less waste, easier training, and reduced start-up inventory costs. Pro Tip: Discuss payment terms with your food and beverage suppliers, and don’t be afraid to ask for samples to reduce start-up training costs.
HR management. Refrain from hiring your entire kitchen and front-of-house team until you have a very clear start date. This is likely 3-4 weeks prior, allowing for effective training and for administrative tasks to be completed. Hiring your team too early will lead to increased administrative costs and time in potentially needing to rehire. Pro Tip: Holding a job fair not only assists in time management, if you execute in an organized manner, but it also works as a marketing tool to develop community awareness for your new restaurant.
POS systems. Ensure you set aside a budget for a point-of-sale system prior to opening. It is surprising how often this is overlooked. Pro Tip: Look for speed and user-friendliness, plus a detailed revenue, staffing and inventory report system, POS support, and hidden costs for future POS updates.
Effectively using this list will undoubtedly save you and your start-up team hundreds of hours and thousands of dollars in unexpected costs, leading to a larger and speedier return on investment.