Running a small restaurant

I'll help if I can. I work in a small grill and espresso bar. We have about four to five people working at any one time, including the owners. However, we're part of the food court in an upscale farmer's market so we take orders at the counter, not the table.

Our cast of characters includes the owners -- kind of Yuppie-ish; me, a writer; a single-mom whose boyfriend is in and out of jail; a retired guy who's motto is "I'm just here to work ..." and a couple of teen-age boys with whom nothing is intuitively obvious. Such as, food must be cooked clear through before serving

One of the most fun things is when the owner is working on product development or trying to decide between two different products: "Here -- taste this." That can be fun

One rule of thumb about cash flow was that labor costs should be equal or less than 30 percent of the cash in. We're tight and as the seasons change and traffic patterns change at teh farmers' market, we don't know where it's going to end up.

The owner, Nettie, has an inventory sheet and makes regular orders from a restaurant supplier. But she also buys at Sam's and the grocery if she can get a better deal. Bulk frozen foods are delivered weekly. So are breads and rolls. A linen service takes care of all our dish towels, picking up once a week.

This is a small, low-volume restaurant.

Hope that helps. Probably others know a lot more.

Ann

PS -- We have a fry station and two grills. I never pictured restaurant stuff breaking down, but one side of the fryer doesn't work, we had one grill catch fire twice and the espresso machine had to be propped along for weeks until a part could come from California. That was frustrating.

HoosierCowgirl said:

...One rule of thumb about cash flow was that labor costs should be equal or less than 30 percent of the cash in...

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That's a great rule of thumb, for any business model. Lower is better but don't ever go beyond thirty percent in labor costs, or your business will most likely be doomed (sooner rather than later).

Actually, the "classic" business model for full-service restaurants back in the 1970s was 33% food cost, 33% labor cost and 15 to 25% on everything else (rent, utilities, china, glass, silver, maintenance, paper goods, franchise fees...). Beginning in the 1980s, the food and labor costs began drifting up. It's not unusual for a four-star restaurant today to have labor costs approaching 45%. Usually the labor cost is much lower in fast food or counter service. However, those establishments often have higher food costs (up to 45%) because their menu prices are lower.

More than 70% of restaurants go out of business in the first year. And, even a successful restaurant often has a profit margin of no more than 3% to 5%. I was in the hospitality industry for more than 20 years, managing restaurants, bars, catering operations and hotels. I'm always amused by the way, in novels, any fool who likes to cook can open a restaurant and make a ton of money immediately.

See? There you go ... Someone else showed up who knows what they are talking about.

I"m the fool that likes to cook and am NOT opening a restaurant because the margins are so tight. For that kind of return I might as well keep farming.

The restaurant is counter service, not full-service.

I will say, it's the hardest job I had other than milking cows, as far as on my feet and moving all the time.

The owners have already had to close a previous incarnation of this restaurant in another community b/c they shared space with a baker who pulled out and left them paying all the rent.

It's been an interesting experience.

Ann

HoosierCowgirl said:

I"m the fool that likes to cook and am NOT opening a restaurant because the margins are so tight. For that kind of return I might as well keep farming.
The owners have already had to close a previous incarnation of this restaurant in another community b/c they shared space with a baker who pulled out and left them paying all the rent.

It's been an interesting experience.

Ann

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Actually, Ann if you already know how tight the margin is, you're very knowledgable... and smart!

Some good advice and warnings here so far. I'll point out that a major mistake many restaurants make is underpricing themselves. Lots of business owners do it, but restaurant owners tend to do it more often--which might be why restaurants have one of the highest failure rates.

Product pricing is one of the struggles we've had at the grill. One of our team leaders -- to whom everything is doom and gloom -- kept saying the prices were too high all along.

We tweaked the entree prices and also, for breakfast, offered half-orders of some of our good sellers.

We got more traffic but the cash in is less b/c of the half-orders. At least, that's what they tell me. I just cook stuff, a lot of the time, but try to listen up b/c I want the grill to do well. I like working there.

Ann

Yeah, lower prices only work if you also have a way to increase the number of customers, like advertising. Even then, lower prices + advertising costs often = going out of business. It's really, really hard to compete with the mass franchises on the low end of the scale.

While in high school and college, I worked in restaurants to make ends meet. I moved up the employment chain high enough to appreciate what a lousy prospect owning a restaurant can be. No one I ever worked with who had been in the industry more than a year or two ever said, "Man, this is great. I'd love to own a restaurant some day."

If you want to age prematurely and die of a heart attack stressing over the price of your next case of lettuce, or why the cook didn't show up, or why silverware and plates are missing, and who's in charge of the overly-sensitive waiter who keeps telling customers off, and why the bus boys and girls are on strike, and why the hell can't I get a steak cooked medium rare, just the way I like it, in my own damn restaurant, well it's the perfect business for you.