Has anyone here opened up a restaurant?

[thinkfloyd14]

A friend of mine and I are about to graduate college, myself with the more business background, while he is graduating with a biology major. We both have realized that we don't want 9-5 jobs, we want to do something with our lives that we will enjoy every day, even if it means lesser $ and lesser Porsches.

So enough of that... we have a pretty solid idea on a restaurant in downtown Los Angeles that we think if approached right will work. I don't want our idea to be stolen, probably won't but you never know, so I will not put details on this post.

Besides building a business plan, what do we need to start? How big of a loan will we need to take out? etc...

I know I haven't written much here but I want some thoughts to rumble before I dive in.

-sammy

[sailchef]

A business major and a Biology major?

Does your concept need to have an owner that knows food?

[onlycafe]

i have been running my place for the last twenty four years. if i can help out please let me know.

have a look here.
The Only Cafe | Facebook

[McLovin]

There are a few here that have restaurants, but they seem to be in small towns/cities.

In DT LA, you are going to have a significant lease obligation (and others). The first thing is, it will be very difficult to get a bank loan. You'll need to show a significant amt of working capital, and it will have to be backed by some serious personal guarantees. And maybe by some hard asset collateral. If the venture fails, the bank will come after the collateral. (You and your friend will of course have to personally guarantee - the total lease obligation (total term x monthly rate) is likely to be a pretty big number).

That's on top of being able to give the bank some comfort that people with experience and a good chance of success are involved.

IMO in this lending environment, you're going to need significant private backing, by some people who put real money up and are willing to risk losing it all.

You may know all that already and have the ability to get through it, I don't know.

(5 years ago when banks were giving money away to anyone with a heartbeat, you'd have been golden. You could have had a free chance at it. Not today, though)

[Shaun @ Tru6]

it would be very helpful if you could share a little of the concept. Restaurants can be rewarding and profitable, but for you to start out fresh out of college, you will need a bucketful of cash supplied by wealthy parents and their friends who have a strong desire to lose all of their money.

Does your concept require a fixed location or is the food itself the secret? For two young entrepreneurs who want to break into the restaurant business, I would find an old ice cream truck/food truck and run your restaurant out of that. Cheap, hip, high-end street food concoctions served out of the side of a truck at lunch time is all the rage these days. make some money there, get a loyal following, do the facebook thing, then get a fixed location. You could probably get up and running for under $30K.

[ben parrish]

I have owned and ran restaurants for many years. I currently work for Sysco Foods; specializing in helping restaurants get started and helping them become profitable.
I would recommend going to work for someone else for at least a year to get a feel for the business.
Labor will eat you alive. Fixed costs must be kept in check. Quick rule of thumb is $500 per sq' foot per year to make money. In other words, a1000 sq' place needs $500,000.00 yr in sales to have a chance. Theft and over portioning are real problems for operators.
Rule number one...have enough money to last you at least one year without taking a dime from the business. It will take you twice as much to start as you think.
It is a great business but it is not a business for the lazy or apathetic. It must be managed like no other business due to the low profit margins.

[greglepore]

Downtown LA? Neither of you have paid culinary dues or have a solid biz background?

Lets start w/ basics-something like 90% of these ventures fail in first 3 yrs. 3 yrs is the general payback curve, unless you are an instant flash in the pan, and frankly, you don't want to be that cause you can't handle it. As a result, there is no traditional lending for these ventures, unless its 100% secured at like 9% on a 5 yr. balloon, with a pg and even then you won't find many lenders. Oh yeah-did I mention that 95% of the folks you'll hire to run the back of the house for you have major substance/personality issues? Not that their bad people-spend 12 months on a line and see if you don't....
Do a BYO or what Shaun suggests, figure out how hard/life destroying the biz really is, then maybe if you survive personally and financially, go for it.

BTDT.

[wcc]

Probably way different then what you are thinking and in a small town. But I opened a small ice cream store in Michigan last year...

Anyone own an ice cream parlor?

I figured a budget and doubled it. Still wasn't quite enough. Again probably way less then what you are thinking too. But if your space is already set up as a restaurant that'll save some money remodeling. Also ask yourself why didn't they make it. Location?

Also, for me I haven't quit my job so I have to have people working it while I'm not there. Honestly, labor costs are killing me because the volume hasn't picked up yet because we are new and the word is spreading around. It'll get there as summer approaches here...

Lastly, it was a lot of work and pain in the butt to get open with inspections, etc, and you are never really 'off' of work. But it was also very rewarding and exciting to take the plunge. My only serious recommendation is not to borrow/spend more then you can pay back or, if you have a family, affect them too much.. For me, it would have been much harder if my 6 & 4yo had to give up there activities and the wife gave up some of her stuff to make it happen.

[Dottore]

Where to start?

First this is the wrong forum. Become a subscriber to eGullet.com. There you'll find lots of good hard information for someone in your position, including business-plans, budgets etc.

Second, good luck. I cannot think of a tougher business in which to succeed.

[Rick Lee]

Must watch.

YouTube - Midnight Run (Part 4)

[look 171]

I don't want to burst your bubble. I built a high end stake house called Michale's in Old town Pasadena for them a few years back. I had no business building restaurants, but they were nice folks and I really got to like them. So I made sure it worked and got done on time for the grand opening. My wife and I walked in there had dinner and a drink and over 140 bucks when we got out. They folded 3 or 4 years later. the wife, comes from a family with a long list of high end resaurant owners (2 more in Old Town) with tons of experience. Michael put in lots of money in that restaurant. he later claims that it was hard to make money in the restaurant bussiness. Really think it through. I wanted to buy and have someone run a high end coffee cart in the business district like 7th and Figueroa. don't discount the little cart, they make bucks, very low key and low overhead. My buddy's Bro-in-law used to sell coffee like I discribe and made great tips just selling coffee. The owner turn a great profit every month.

The grass is always greener on the side. My friends all think it great that I have a small business, but I have always think that it would be really nice to have a 9-5 job that I can earn 100k and know what the traffic will be like when I go home everyday. Still, I like the freedom.

[thinkfloyd14]

It's really hard to talk about this without giving away my idea, it's pretty unique, but financially challenging.

Originally Posted by Dottore

Where to start?

First this is the wrong forum. Become a subscriber to eGullet.com. There you'll find lots of good hard information for someone in your position, including business-plans, budgets etc.

Second, good luck. I cannot think of a tougher business in which to succeed.

Thanks, lots of help.

[Sunroof]

Looking at the businesses for sale in greater Atlanta, their must be hundreds of restaurants for sale. With so many closed, it makes you think owning one is just a crap shoot.

My college buddy made a small fortune selling french fries at the regional carnivals and fairs for a summer. He made them and sold them out of an old RV he converted and lived in. I always wondered how successful those "Italian Sausage" vendors are that serve the best damn Italian Sausage on the planet at the carnivals and fairs. If I had to have fun in the food industry, the kiosks and traveling food carts would seem like the way to go.

[asphaltgambler]

I have experience (indirectly)

ALL is true as said above..................Sage advice my young friend. I'd say first and foremost is: To be really successful you have to have a passion for food and the preparation. IE - Live it, breathe it, eat it. If it is soley for the money.....you'll never make it.
This business is one of the few -MO- that is more difficult and challenging than the car busniess......with even less net profit per dollar turned.
The hours are very long......... your "on time" is when your 9-5 customers are off. Two words: evenings, late nights and weekends

[Dixie]

Here's how to be a restaurateur while bypassing all the hassles and costs.

1) Gather all your money.
2) Pile up half in your back yard.
3) Light it on fire and watch it burn.
4) Be glad you didn't open restaurant and still have money.

[peppy]

Sammy, all of this advice is good....read it over and over.

Don't underestimate the hours 40 or 50 will not cut it.

I lost a lot of money in a failed restaurant. I just did not know when to close it down, I kept it open 2 years to long.

I opened a location in 1996, I rented the building and still had $130K in equipment.

[scottmandue]

Originally Posted by asphaltgambler

I have experience (indirectly)

The hours are very long......... your "on time" is when your 9-5 customers are off. Two words: evenings, late nights and weekends

I don't work in resturants... but I know people who do...

heed what is said above.

You will work everyday early in the morning till late at night weekends and holidays...

[not sharp]

Well.. Bought a golf course two years ago and that included a failed restaurant. I do not run the restaurant I hired experts, I provide "direction", we did sports bar, of course. The restaurant thus far outperforms the golf facility. In fact it made money while its counterpart lost cash.

Well, all the equipment was worn or broken, the equipment we replaced was used. Saved 60%. If you and your partner are to be the vital organs, get experience on $$$ that are not yours.

The comment about maladjusted, dependent type employees was kind. They are torment to you and anyone within 1000yards.

I AM

[RWebb]

of all biz'es these have the highest failure rate in the first 2 years

you have to LOVE it to do it - never buy a bunch of new equipment and do not get a lot of remodeling done either - buy the equip. of one that failed (maybe not the lease tho - after all, maybe the location was part of why they failed...)

my father owned a place for several years - I don't know if he lost more money on that or on his Quarter-Horse operation...

[jhynesrockmtn]

I worked my way through high school and college in restaurants. If you have not been a busboy, dishwasher, cook, waiter and bartender yet go do that for someone else for a year or two and then report back. The people I worked with were some of the nicest but most screwed up folks I've ever met. Brilliant people with advanced degrees slinging burgers, steaks and salads because their personal lives were too screwed up to hold a 9-5 job. Some of them loved it, but many were there as a last resort.

A buddy I worked a corporate gig with took a bunch of his money from stock options and investors money and put a concept together in London that was doing great for a year or two. When he tried to replicate and expand the whole thing cratered. The one location that did well didn't translate 2 tube stops away. He was smart, in his late 30's, had a ton of business experience, was a CPA, researched the thing to the 9's and had great initial success. He's back to doing CFO stuff now.

It's a tough life, live it first and then decide.