Latest / Chef's PSA Podcast / Opening a Restaurant Part 1 Ep. 43

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Opening a Restaurant Part 1 Ep. 43 · Chef's PSA Podcast

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Hello chefs, you're listening to chefs Pasa podcast.
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On today's episode, we're going to talk about the critical path.
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You need to take when opening up a restaurant.
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Stay tuned. So before we begin I'm going to
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give you an update which I don't have a major update because I'm
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actually recording this podcast earlier than I normally would
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because I'm doing some traveling going around doing some public
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speaking events. And I'm not going to have time
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to record. So I'm recording this
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preemptively. But one thing I could tell you
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that if you want to follow along in the things that that I'm up
0:41
to, if you want to get some weekly, inspirational leadership
0:44
tips, Chef mindset, weekly chefs.
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A advice and links to the podcast and other things that I
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have working signed up for the chef's, PSA newsletter.
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You could go to Chef space, a.com scroll to the bottom of
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the page and there's a newsletter sign up there.
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It's a Weekly Newsletter that I send out.
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It's a good way to keep in touch with me.
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If, for whatever reason, chefs, PSA gets banned on Instagram.
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Obviously, you could find me here, and if I ever do get
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banned on Instagram, for whatever reason, I'm sure I will
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let you know here on the podcast anyway, today's episode is going
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to be about Go path to open it up a restaurant.
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So I should probably say my experience with opening
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restaurants, I've opened up. I think five restaurants
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independent restaurants total not always as a chef partner.
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Other times, it was as a consultant.
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I've also opened up probably 20 restaurants within a hotel group
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and as a corporate Chef traveling and and opening up
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hotels. I've opened up hotels and I've
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opened up restaurants within hotels and then, lastly, I would
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say that I've done only once in my career, but I have done a
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merger and acquisition with a hotel group where we'd gone in
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and rebranded a hotel and took over.
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So I do have experience with openings.
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However, I can't sit here and say I am the foremost authority
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when it comes to openings, but I have more experience than a lot
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of people. Now, granted, if Michael Mina,
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was doing a podcast on how to open up a restaurant, Grunts
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then obviously you listen to that one but if you don't have
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anywhere to start I've opened up several.
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Whether we're talking inside hotels or whether we're talking
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out on the street, I could give you a good starting point and
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really what this podcast is going to be about this, given
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you a critical path. So, so I think the first thing
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that everyone needs to get familiar with is the term
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critical path. This is something that I'm going
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to use throughout this podcast and if you're not familiar with
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it, here's what it is. Basically, in a nutshell, now
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this isn't the official dictionary term but Whenever you
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have to complete something, there's an order of steps that
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need to be taken to complete something from start to finish.
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So starting with step one all the way through, you know, step
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10 and a critical path. Is that sequence from one, two,
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three, four, five, all the way up to 10 of the steps that you
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need to take in order to complete the specific task.
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So it's called a critical path because clearly these things on
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the path are critical, they are critical to get to the next step
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in their critical for the completion of the project.
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So This is this is just a simple term and that's a that's a very
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simple way to explain it, but that's what a critical path is.
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And like, all things that need to be accomplished.
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Whether you're writing a book, you're starting a podcast or
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you're opening up a restaurant. You need to have a critical path
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to stay on track to stay organized and to know what you
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need to do, step by step, by step in order to get there.
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So that's what a critical path is.
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Now when it comes to opening restaurants, granted, I don't
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know where you live. And I know that my audience is
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global but it's predominantly. In North America.
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So the critical path that I'm going to give you is going to be
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geared towards the United States in North America.
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If you were opening up a restaurant in the u.s., what
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would that look like? And first and foremost, I think
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that what people need to understand is if you're want to
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open up a restaurant, need to develop a business plan.
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You can have an outline of what your restaurant concept is going
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to look like who's the target market?
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Who's your competition? What's your marketing strategy?
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What is your structure? Look like, what type of Cuisine
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are you going to serve? And are you proficient in?
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Types of Cuisines. Do you have funding write?
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All these things need to start going through your mind.
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So the first thing is to develop a business plan.
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And there's resources online, you could Google business plans,
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or you could just honestly could use aii these days to help you
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create your business plan, but step one, you need to have a
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business plan and then from business plan, that would be
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step one in the critical path. The Next Step would be to raise
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capital, and I think raising capital is something that I
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think shocks a lot of people. If you've never opened up a
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restaurant, how expensive Civ. This can be.
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I know a lot of young chefs sometimes.
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Go to culinary school in there. Like, why are you going to
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culinary school is like I want to open up my own restaurant?
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It's like, great. Do you know how much that costs
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and do you have investors and do you know how to get investors?
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Like, it's not as simple as just waving your magic wand and
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walking into the bank and they're going to give you money,
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it doesn't work that way. So open it up.
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A restaurant can be extremely expensive.
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Now, here's a little side tangent.
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Story years ago, I don't know, let's for the sake of
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conversation, like, 15 years ago, someone had reached out to
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me because Is it was hot shit as a chef and I was on to come up
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and they asked me if I wanted to come in and they were a are
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basically a real estate group and they wanted to talk to me
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about opening up a restaurant. So I was super excited because
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you know, it was I was a chef but I wasn't a chef owner so I
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went in and I was like great. These people want to invest in
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me and we sat down and they started talking to me about what
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kind of ideas. I had to open up restaurants and
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a lot of ideas that like I want to do this, then the other
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they're like great location. And so, you know, I basically
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had a business This plan or at least or at least a concept in
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mind of what I wanted the restaurant to look like.
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And I pretty much thought of everything except the finances
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and then they said to me, they said great, how much money do
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you have? I so hot.
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I don't have any money and they're like, oh, you don't what
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do you mean? You don't have any money?
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I was like, yeah, I don't have any money.
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I thought that's why you guys were calling me.
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That you guys have where the, where the money and the backers
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are like, no, no, go get some money.
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So we get started. So we get some loans going as
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well. How much money do I need?
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They're like, I don't know, can you raise like a hundred and
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fifty thousand dollars? And I just like, Okay.
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So I mean it was basically over at that point I think I had like
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a hundred dollars in the bank at the time.
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Like how am I going to raise a hundred fifty thousand dollars
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when we have like a hundred dollars in the bank.
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Anyway, long story short is, it's expensive to open
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restaurants and I think a lot of people don't realize how
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expensive it can be. So I'll give you some ranges
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when it comes to opening restaurants.
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Now this is not exact but usually a small Independent
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Restaurant like food truck or a cafe or something like that.
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You probably looking at anywhere on the low end.
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Fifty thousand dollar initial startup cost to probably on the
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higher end. Closer to 200,000, this is start
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up cost, right? So something a little bit more
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midsize like a casual or a family dining restaurant.
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You're looking anywhere from two hundred thousand to about half a
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mil and maybe up to a Mill and then if you want something more
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upscale it's usually over a million dollars, right?
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So usually something that's going to be more upscale is
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going to be over a million dollars.
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Bigger restaurants, obviously require more so you could be
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looking at 5 million. All the restaurants anywhere
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from 1 million to five million dollars.
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So now when you think about that that changes everything where
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you can raise that money, do you have investors right?
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So looking for investors is a part of the process and it's
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something that I think a lot of chefs don't think about until
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later in their career. So if you're the chef of an
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independent restaurant or wherever you're the chef of, you
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should start making relationships with your regular
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Diners, right? Because you never know, maybe
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they're doctors, maybe their lawyers, maybe their investors,
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right? People that have money.
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That may want to invest in you later.
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On also talking with the restaurant owner, sometimes
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restaurant groups will give you a part ownership if you are the
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chef. So, something to think about
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that's that's usually a shorter way to find the the funds behind
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it if you don't have funds. But the fact of the matter is,
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it's going to cost a lot of money.
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You got to go to the bank, you got to get loans, Etc.
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So there are options, you know, you go everywhere from your
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personal savings, right? So that's, that's always in your
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best interest. If you have money, other people
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other people's money as always, better than your own money.
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My opinion, you get bank loans, low interest rate loans, Etc.
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They may require some sort of collateral.
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Obviously, you need to have good credit, there are SBA Loans,
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there's crowdfunding which is good, but again, do you have a
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large enough Network where you could get crowdfunding?
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Which, you know, when you think of your raising a million
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dollars? It's gonna be very difficult to
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crowdfund a million dollars. I think, unless you have a
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really good story behind it, so think about all those things I
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think. Raising Capital might be one of
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the most difficult parts of opening up a restaurant.
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So anyway you go to if you're in the u.s. you can go to I think
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sba.gov if you're looking at funding and stuff like that.
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So now once you have funding and you have a business plan, you
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need to start looking at locations, right?
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And location is probably one of the most critical factors when
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it comes to open up any restaurant.
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If you're in the right location, it could be a game-changer,
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right? So you want Prime real estate?
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That's obviously more expensive, but you I want to make sure that
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your concept aligns in the style of food that you have is going
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to align with the location in which your restaurant is.
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So if you have a high-end restaurant, going to be a
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high-end neighborhood, if you're in a, maybe you have a food
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truck, maybe you want to be in a food truck Park.
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So make sure that your food and your restaurant concept makes
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sense for the area that you're trying to put it in location.
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Is a huge thing. When I was young, I used to
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think. Oh, that space is open and be
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like a terrible locations. Like I could do great food there
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in retrospect would be like, why would I try and do really
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interesting food in In, you know, in a strip mall, right?
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It doesn't always work because there might not be the crowd to
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support their. So you need to search research,
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the location, the demographics of the area and all that.
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The next thing is you need to figure out what type of legal
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structure or licensing. You're going to have, you need
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to you to decide what's best for you.
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Are you a sole proprietorship? Are you a partnership?
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Are you an LLC or a corporation? All these things matter you need
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to obtain not just the correct legal structure, but you also
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need to obtain The correct licenses that you need.
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So, let's stick with legal structure and by the way, a lot
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of the things that you could do now is like there's a lot of
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this can be done online like on ink file or LegalZoom stuff like
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that. You could you could establish
10:30
your LLC or your partnership. They could give you a lot of the
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documents that you need, maybe not everything.
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But Inc file is a good place to start.
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If you're looking for an LLC, they don't sponsor the show.
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I need to make sure I say that I've just used them in the past
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and that's that's why I bring them up.
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However, if Inc file wants to sponsor the show feel free to
10:47
reach out to me. What are some of the differences
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if LLC versus partnership? So an LLC is basically a limited
10:54
liability company. That gives you limited liability
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protection. That's it in a nutshell, then
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there's a partnership which is pretty easy to establish, but
11:03
partners are personally responsible and liable for the
11:07
business debt. And again, this all depends on
11:10
your local city, or your local government.
11:12
So this is something that you need to look at, but while we're
11:15
on the subject of Licensing, right?
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So it's not just your LLC. The and things like that, you
11:21
have to obtain other license and permit.
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So you also need to look at your general business license, your
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food service licence, your liquor license, your sales, tax
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permit, all these things need to be factored into your critical
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path, so make sure that you have a checklist and you've gone
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through those. And, you know, you could look up
11:35
your State's requirements as needed.
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The next step in the critical path is going to be the lease or
11:40
purchase agreement. So you need a negotiator sign
11:42
the lease or purchase agreement for the location that you
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choose. And there's some Current
11:49
options. So obviously, if you're leasing
11:51
a place, it's lower upfront cost, there's flexibility to
11:54
relocate but a lot of times when you're leasing you don't have
11:58
Equity or in. You also don't have control over
12:00
the property if you purchase the building outright or maybe it's
12:03
a new build, you have much more control.
12:06
There are some tax benefits but it's a higher upfront cost.
12:11
And also you have the responsibility of maintenance
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for the building. And everything that goes with
12:16
that. So maybe you're looking at this.
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Also from a real estate investment aspect, right?
12:22
So something to think about because your restaurant, like I
12:25
think if you've ever watched the movie about the McDonald's guy,
12:28
he I can't remember a crock, right?
12:30
So I think it was called the founder and he shows how he
12:33
basically turned all the McDonald's into.
12:36
It was a real estate business, more than it was a fast food
12:39
business. So maybe that's an option for
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you. Think about the, the real estate
12:44
because sometimes restaurant, That profitable but maybe as a
12:46
real estate deal, it's more profitable.
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Maybe the bank is more likely to give you a loan.
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I don't know that something that you would need to work out, but
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those are, those are different things that you need to consider
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the other things that you need to consider again, assuming that
12:58
you're leasing the space or what are the different types of rent.
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So there's fixed rent, which is basically a set amount.
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Everything's realistically, predictable.
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You're not going to have much fluctuations without at least
13:08
being notified or some sort of Renegotiation on the contract.
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And there's also something called a percentage rent which I
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think is good, so it's basically a rent.
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It's basically your rent plus a percentage of sales but
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sometimes it's just a percent of sales if they really want you in
13:25
the location. But the downside to that is
13:28
sometimes it could potentially be higher if you didn't really
13:34
read the fine print. So you're going to need to get
13:36
some advice on this. Obviously, I don't know the type
13:38
of restaurant that you're thinking about and there's a lot
13:40
of nuance in this, but those are just some examples of the
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different types of rent. So fixed rent or a percentage
13:47
rent to something that you want to look at next thing that
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you're going to want to look at on the critical path is going to
13:52
be the design and the renovation.
13:54
So the plan, the layout, the design of your restaurant, you
13:57
have to consider all the factors, right?
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The efficiency of the kitchen, the location of your dining
14:01
room, the ambience FF and E, which is Furniture fixtures and
14:05
equipment, the types of Ovens that you're going to use or do
14:07
you have a mixer all these things matter and they all cost
14:11
money. So And your I'm sure you're
14:12
working off some Capital that you're that, you have, you have
14:14
a budget. So is that's that's the
14:16
difference between like you know, the off-brand oven and the
14:20
Heston oven, right? So these are things that you
14:22
have to consider. You have to factor in all the
14:24
costs that are going with it. So not just the design, right?
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And you have to hire designers, something that you need to think
14:30
about. You have to think about things
14:32
like being compliant. If again, if you're in the
14:36
United States, the Ada, the American with Disabilities Act,
14:39
you have to consider that you might have to hire a actor to
14:42
complete the renovations that complies with local building
14:45
codes. So these are things that you
14:46
have to consider next, you have all the equipment and supplies
14:50
that go into the restaurant. So, this is everything, right?
14:53
This is your kitchen, appliances is your blenders, your
14:55
robo-coupes, your sous, vide machines, all of that, your
14:58
circulators are cryovac, your Ovens.
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That also includes the furniture chairs tables, POS systems, all
15:07
of that has to be throughout through, including maybe even
15:11
opening inventory. So maybe you have, maybe you're
15:13
going for a very expensive wine list and you need to curate a
15:16
very, you know, wine spectator award-winning list which is
15:21
going to be 100 Grand, or something like that.
15:23
These are all things that you have to consider all the other
15:26
supplies, the small Wares pots, pans Etc, right?
15:29
That has to be, you have to have a very good budget.
15:31
When you're doing that, you have to think everything through.
15:33
You have to work with someone. It's a good idea to work with
15:35
someone. So a lot of these big companies
15:37
like again, I don't work with any of them.
15:40
At least they're not sponsoring me.
15:42
But companies like Trimark, if you're in the United States or
15:44
washer strong, you know, they could, they could help you
15:46
curate that if you, if you could go work with them, the Edward
15:49
Don's of the world, they're good at that.
15:51
And also, another thing to point out is, you could also lease
15:53
versus purchase equipment. So, again, some of the pros and
15:56
cons is leasing would be lower upfront costs and it's easier to
16:00
upgrade your equipment, you don't own it sometimes they work
16:02
in deals where you know the repair is less or you could
16:06
purchase it again. There's potential tax deductions
16:10
when you purchase it but again it's Higher upfront, cost, and
16:13
then the maintenance responsibilities depending on
16:15
warranties etcetera, things that you have to think about.
16:18
Next thing is going to be the hiring and the training of
16:20
staff. So you have to recruit.
16:21
How are you going to crude? All these people right?
16:23
Usually usually your recruiting from other restaurants or people
16:28
that maybe you've worked with in the past, you're calling
16:30
everyone up. But open up a restaurant is not
16:32
easy. You think and I'm telling you
16:34
I've opened up a lot of places. You think everyone's going to go
16:36
with you when you go to the new place, not always the case.
16:39
Let's say I've worked at a place that had 20 Cooks, I'm I'd only
16:42
get four, and I thought the rest would surely come, but, you
16:44
know, a lot of people are set in their ways.
16:46
They may concern amount of money and openings are difficult, and
16:49
I will talk about once you're open and what to look for in the
16:53
next podcast. So I want to kind of make this a
16:54
little bit of a series. So this is like part 1.
16:58
The critical path to open up a restaurant and then part two
17:00
will be. Okay, now you're open shit has
17:02
hit the fan. What do you do?
17:03
So anyway, let's stick with part one, right?
17:05
So you need to get the staff, you have to include the
17:08
recruitment or you can have job fairs where you can.
17:11
Advertise, make sure you have a good organizational chart.
17:15
So you know what the responsibilities are.
17:19
You have to think about everything that you're going to
17:21
need from bar staff to service staff, to culinary staff, to
17:26
stewarding, team Etc. You have to think about all the
17:28
Sops that you need to create employee handbooks, right?
17:31
What are the rules of the game? And I've talked about this on
17:33
another podcast, think about, when you're opening something
17:36
you're developing a culture from Ground Zero, which sometimes is
17:40
better, because there's no bad habits to Begin with, but you
17:43
need to have a plan and you need to be able to execute it.
17:45
So if you're starting from zero, you have to have something to
17:47
give them. If not, people will make it up
17:50
as they go. And then as we move on after
17:53
that you have the health inspection.
17:54
So in order to open you're going to need some sort of health
17:57
inspection, you're going to schedule it and you're going to
17:59
pass it. I know many times the health
18:01
inspector in the openings that I've done.
18:03
They come they say okay this is good but you need to correct
18:05
these 10 things and I'll come back and then I correct the 10
18:08
and they're like, okay you've corrected 10 but I found some
18:11
Once you need to correct these or you didn't correct that one
18:14
up to standard. So the health inspections
18:18
sometimes, can they could be a little bit of a delayed.
18:22
They're constantly pushing back and finding new and new things.
18:24
And it's like, I know one and this was years ago.
18:27
So like I said, the internet wasn't what it is, today wasn't
18:31
as powerful. But, you know, we were looking
18:32
at Sushi and they're like, okay, do you have a hassle plan?
18:35
For a sushi bar is like, nope. Like then you need to make when
18:39
I was like, well, where do I start to, like, I don't know.
18:40
You need to figure that out. Like shit.
18:42
I've never wrote a hassle plan for a sushi bar and I didn't
18:45
have any friends that had one for me.
18:47
So I had to, I had to create that same thing with a lot of
18:50
places, you might need a hassle plan for cryovac and, and
18:55
cooking sous vide, and using numbers, and immersion
18:57
circulators. So, you need to think about
18:59
that, if those are things that you're going to do, our cooking
19:01
chill, right? So a lot of a lot of places will
19:03
cook and chill. So what I mean by that is like,
19:06
let's say you are cooking something and then reheating it
19:09
later. A braised has a good example of
19:11
a cooking show. Will you break something?
19:12
It cools down, and then you reheat it, you do to make sure
19:14
you have a, has a plan for all that because when the health
19:16
inspector comes and asks you that and you say, yeah, we're
19:18
doing that. They say, okay, great, I need a
19:20
hassle plan for and that just slows down everything to go with
19:24
it, right? You obviously want to check with
19:26
your local Health Department for inspections and licenses Etc.
19:30
So having a good relationship with your local Health
19:33
Inspectors. Going to be key when you're
19:35
opening up a restaurant. Anyway, moving on.
19:38
We're going to talk about marketing.
19:39
So now you're in the final preparations.
19:42
You're getting ready, it's time to Market your restaurant.
19:45
You everyone's in place, you have a concept.
19:47
The next thing you're going to do is like, well, you need to
19:51
spend money on marketing and that is the reality because you
19:54
need to have hype behind with what you're doing.
19:57
So hiring the best marketing firms, especially if you're
19:59
going to like play in the world of trying to get a James Beard
20:02
award or Food & Wine, best new chef and things like that.
20:05
A lot of that you need a good marketing team to get your name
20:09
out there. If not, you're not going to get
20:10
discovered by these organizations.
20:11
So having a marketing agency, think of them as an advocate for
20:16
you, and your restaurant, there are going to go out there and
20:18
speak on your behalf to those other organizations about why
20:23
they should take a look at you. So whether it's putting you in a
20:25
magazine, whether it's, again, like I said, Bon Appetit, or
20:28
something like that, or the Esquire best new restaurants in
20:31
America. Whatever the case, maybe they
20:33
need to look at that, right? And you Don't have those
20:36
contacts. The reason your pain a marketing
20:38
firm isn't necessarily for them to do all this for you.
20:42
It's because of who's in there Rolodex?
20:44
It's because they could just pick up the phone and call
20:47
someone that works at Food and Wine and you can't, that's why
20:51
you need marketing firms and the best marketing firms, you know,
20:55
that's what they do. And they're great at, they have
20:56
a Rolodex and when, when a lot of these companies are coming to
21:00
a city. So when I say companies, I mean
21:02
like Magazines and people food writers and people that nominate
21:08
people for awards when they arrive in cities, a lot of
21:10
times, what they do is they reach out to the marketing firm
21:12
that they know and are familiar with and say, where should we go
21:16
eat? And they say, go eat here.
21:17
Here here, which are usually their clients.
21:19
So if you want to be in the conversation, you want to make
21:21
sure that you have a good marketing firm on retainer.
21:24
And then, of course, make sure you have an Instagram page.
21:27
Social media, you're showing the behind the scenes of the
21:30
opening, the build up the the the different iterations of The
21:34
dishes that you're working on and then, you know, time to
21:37
launch. So that is an oversimplified
21:40
version of a critical path that you would need to open up a
21:43
restaurant. So there will be a part two of
21:46
this. Part two will be once you're
21:48
open. Oh shit, what do you do?
21:50
So anyway I hope you enjoyed this episode.
21:52
Thank you very much if you want to support the show make sure
21:55
you leave five stars, go to chefs PS a.com you can find
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22:00
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22:01
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22:03
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22:06
Thank you. All see you next week and hit
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