After almost five years spent working on the editorial team at Food Republic, I devoted my last nine months to a full-time, graduate-degree program studying Restaurant Management at the Institute of Culinary Education in New York City. While in school, which was targeted towards eventual first-time restaurant owners, I learned about the day-to-day operations of the business side of restaurants via units such as menu design and concept, marketing, food safety, staff management, purchasing, financials and accounting and wine certification. Though the program was intended to be taken over the course of two years, I opted for the “expedited track,” graduating just earlier this week. So here I am, about to become a restaurant-industry professional.
If I envisioned a life in such a fast-paced world, I figured, why not tackle the necessary first step in the most efficient way possible? This choice resulted, predictably, in lots of days spent pouring over seemingly nonsensical numbers and nights spent wide awake, wondering just why I ever envisioned a successful future as a restaurant owner, coupled with repeated realizations that one must be equal parts passionate and crazy to devote a life to this career.
And yet, despite countless warnings from chefs and restaurateurs alike about the severe, multifaceted difficulties of entering the hospitality industry, I emerge today more excited and determined than ever to crack into the field. Naïve? Absolutely. And can classroom lectures, readings and projects actually prepare me for the tireless hours I plan to soon spend working in actual restaurants? Absolutely not. After all, hospitality professionals — rightfully — dislike nothing more than a culinary-school graduate who believes that he or she already knows it all. I can say with certainty, however, that I’ve learned a great deal about the challenges that lie ahead. Well, one of the first lessons was to be aware that one cannot possibly prepare for all of the challenges that lie ahead. So, let’s amend that and say just some of the many, many challenges. With that clarified, here are some interesting, mostly general tidbits for aspiring restaurateurs that I can offer from my studies. Good luck! You’ll need it.
1. “80% of you will fail.”
Remember when your high-school teacher told you some seemingly unbelievable statistic about you and the two students seated on either side of you? This statement — which one professor greeted us with on our first day of class — is sort of like that, except chances are that all three of you will strike out, should you each decide to open a restaurant. Welcome to the industry! (Yes, tuition had already been paid in full.)
2. Have a general capital budget in mind? Now double it, add ten…
Sure, there are basic opening-budget templates out there for different sized restaurants, but each spot is obviously incredibly unique. It’s impossible to anticipate each and every delay in construction (and there will be lots), but in the incredibly wise words of renowned Boston chef Tony Maws: “Plumbers, carpenters, masons, electricians, equipment installers, multiple engineers of every specialty, architects, HVAC experts, designers, painters, tilers, floor layers, window installers, sign hangers, computer wirers, telephone technicians, point of sale system programmers: all working in the same building, often at the same time, and their collective efforts need to be coordinated.” In other words, be sure to have a plethora of money set aside for working capital and contingencies.
3. Break even in Year One? Congrats!
Seriously, well done! The majority of restaurants will find themselves in the red after the first year of operation…if they’re not already shuttered. Keep your expectations low while preparing for and expecting the worst. If you manage to generate zero — yes, zero — net income in your first year open, feel free to give yourself a pat on the back. And then shoot for the stars and thus a 2-3% increase in income per year, until you reach the impressive profit margin of somewhere between 6-8%. This figure means you’ve effectively made it. Keep in mind that even the slightest of miscalculations or the smallest of decisions can lead to a significantly lowered bottom line. Let that all sink in for just a moment. Along with the fact that you’ll have been and will continue to work harder and longer than ever before.
4. Social media is a blessing…and a curse.
Yes, everyone from your colleague to your neighbor to your grandmother is posting his or her thoughts (ramblings?) daily on Facebook. While it may feel like we’re more disconnected than ever with the rise of technology, social media does bring us together — for better or for worse — in a multitude of ways. What does this mean for you, the first-time restaurateur? Sure, you’ll certainly receive some free (or low-cost) publicity from social-media “influencers” that will hopefully drive new customers through your doors. But it’s your job to make sure these diners actually come back.
You’ll also have to learn pretty quickly how — and perhaps more importantly, how not — to deal with negative public feedback, be it on Facebook, Instagram, Twitter, Yelp or an (gasp) actual publication. Hiring a PR firm is, by all accounts, a smart and necessary step, but this is your project and you’re going to want and need to be involved in direct customer interaction. This is the hospitality industry, after all. You’ll be required to juggle the intricacies involved in being seen as hospitable, the challenges of resolving disputes amicably and the ultimate need to turn a profit.
5. The longer the lease, the better. Mostly.
Don’t hold back when negotiating the length of your restaurant’s lease. You might have heard that a handful of acclaimed New York City restaurants closed in the past year or two because landlords were demanding up to ten — ten — times the rent following the lease’s expiration. Look for a space — ideally, an existing restaurant space with working ventilation — that offers something in the range of a ten-year lease. Or, at least, a slightly shorter period with the option to renew for a previously agreed-upon price. Then count on your legal team to work out specifics regarding the terms of breaking the lease early (typically not a big deal) — which often includes the option of transferring it to another business. And remember that it’s a two-way street: Good landlords really do appreciate good tenants.
6. Staffing a restaurant properly is a complete mess.
Complicated shift schedules. Lack of flexibility. Unreliability of employees. Massive turnover rates. Constantly changing and confusing wage laws. It’s a downright nightmare to ensure that your restaurant is staffed properly at every hour of the day. We’ve all eaten at an establishment that’s clearly understaffed: It’s not a fun experience for anyone. But in an industry with razor-thin profit margins, you also don’t want to be doling out extra hourly shifts at less-busy hours of the day. It’s a very, very fine line that might take a while to figure out even remotely effectively. Along with food costs (for which you’ll struggle to find a “par level” of purchasing), plan for labor costs to be higher in the first year while you learn on-the-go and navigate through difficult days and weeks.
7. Vendors really know what they’re doing, a.k.a. “Be careful.”
This isn’t your vendor’s first — or tenth — rodeo. Chances are that the company provides products to tens, hundreds, even thousands of restaurants, depending on the size of the city. It’s important to check all deliveries thoroughly, whether that requires a scale and/or personal inspection for each individual package. Don’t feel bad sending back products for any and all reasons you determine to be worthy. Cultivate a personal relationship with your deliverymen, and be aware that they are sure to report back to their companies which clients gloss over certain details or regularly accept spoiled products. Put it this way: If there are 1,000 heads of lettuce on a truck, somebody’s going to receive the 999th and 1000th freshest ones. Don’t let that somebody be you!
8. Being first isn’t necessarily best.
So you have an idea for a concept that you’re sure does not yet exist in your target market and you believe has massive potential? Great, you might very well have just that. The demand might be out-the-door (figuratively and literally) over the first few months, but is it sustainable? Or might you just be touting a “fad” food that has a short shelf life, soon fading into oblivion after some time headlining Instagram feeds and “trendy” food articles? And even if your concept does stick, realize that you don’t have any sort of patent or trademark on the signature item. You might have a leg up on the competition due to building name and brand recognition, but what’s to stop a stream of others from replicating your concept, all while using their ideas about your perceived strengths and weaknesses to improve upon it? That’s right: absolutely nothing.
9. Internal theft is a legitimate, significant problem.
Almost every restaurant owner will confirm that he or she has lost sizable amounts of money at some point due to internal theft. The phasing-out of cash payments has limited this issue somewhat in recent years, but there are still myriad ways that employees can steal from right under you. Whether it’s charging for a top-shelf drink but only ringing up a well-drink sale (and pocketing the difference), voiding receipts after closing out or simply skimming petty amounts of cash from the register here and there, bartenders, servers and managers who have spent time in the industry are at least likely aware of how to make some extra money at your expense.
10. Steakhouses’ food profit margins are surprisingly low.
Selling a ton of Porterhouse-for-Twos might do wonders for your total revenue, but the fact is that quality steak is one of the highest-cost items out there (generally, a decent amount over the rule-of-thumb 30% food-cost target). So, just how do high-end chains like Ruth’s Chris Steakhouse and institutions like The Palm not only continue to thrive, but expand to other cities? High-priced sides. High-priced desserts. And, most importantly, super-high-priced cocktails and wine. Lots and lots of wine.