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Location Is Just One of Many Factors to Consider In Opening a New Restaurant
By Michael Stadneck | July 4, 2009
Opening a restaurant is not rocket science but a few simple mistakes especially in the early stages can mean success or failure. Deciding to become a restaurant owner is always risky business. Opening up is the easy part. Keeping the doors open and the seats filled is where it gets tricky. There is a whole smorgasbord of things to consider before blindly rushing forward.
The most important factor in establishing any new business is the location. A typical restaurant owner is generally required to commit to a long term lease, and he had better hope and pray he makes the right decision, because if he doesnt, he will be stuck in that location for a long time. Or pay a hefty penalty to get out of the lease early. On the other hand, the operator of a mobile food concession has the ability to change locations, without penalty, at any time, as conditions warrant. If business slackens off in one location, he can readily fold up his tent, so to speak and tow his trailer to another location.
Unless you are taking over an existing location, the build out costs for leasehold improvements, equipment, seating, flooring, lighting and related capital outlays can easily exceed $150,000. These are what some in the business call sunk costs, meaning they are expenditures that take years to recover assuming your business is able to survive that long. Either way these are upfront costs you will incur, and if you are fortunate enough you will be able to amortize these expenses over a period of many profitable years in the future.
If your idea of fun is constantly worrying about money, hiring consultants, training and managing employees, complying with government regulations, setting up systems, balancing the books, taking inventory, preparing menus, controlling theft and working 18 hour days, then you are a natural born restaurant owner. If this doesnt appeal to you, you might consider the simplicity of owning a mobile food business. Did you know that many hot dog vendors working downtown areas make more money than the majority of struggling to survive restaurant owners? And most of them work only 4-5 hours a day. Talk about a low stress job with a fraction of the risk.
Hiring, training and managing restaurant employees are probably the most difficult tasks that the new restaurant owner must face. If you are an easy going individual, your employees will take advantage and walk all over you. If you are overly strict, they will leave and go somewhere else. The restaurant business is one where your employees, from your cooks to your busboys can either make or break your business. In many cities and even smaller towns, newspaper columnists write articles about the local eating establishments. A great review will usually bring in new business for a week or so at the most, whereas a bad review could ruin your business entirely. An unfavorable report from your local health department could also be devastating.
Managing a restaurant staff is a difficult task. It can be one headache after another. Employers find that many restaurant employees are unreliable and uncooperative. The restaurant business is plagued with staff turnovers. To add insult to injury your good employees are often wooed away by your competitors.
In order to achieve the status of an excellent restaurant, the new owner must wear many hats. He must learn everything he can about his business. He must be able to perform every job and he must be prepared to devote countless hours to his new career.
As you might have gathered by now, opening a restaurant is a ton of hard work. It can be a long road full of potholes. Opening a restaurant is a challenge in any economic climate. Even in a booming economy it can be a bold and risky business venture. You would be well advised to do your homework, investigate every aspect very thoroughly before signing the lease.
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