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Opening a Restaurant

 

 Buying a Pre-existing or Turnkey Restaurant

Buying a restaurant that is already in use can be both financially rewarding if the right criteria are met or can be a money pit if they are not. One of the most important considerations when deciding whether to invest in a running establishment is: why are they selling? Are they retiring from the business or just want to move on to another project? Many entrepreneurs start restaurants, get them up and running smoothly and then move on and do it all over again.

Request a full inventory of everything that will be coming with the sale of the restaurant from ladles to toilet paper. There are inventory companies who may be hired for a small fee to come in and check inventories for you. If the establishment refuses to give you this information there may be things that they want to hide and you should stay away from purchasing this facility.

Will the existing staff agree to stay if the restaurant acquires a new owner? Are there any employees who have contracts with the current owner that need to be renegotiated and transferred? Chefs and General Managers generally will want to stay on as employees. They will usually take this opportunity to try to renegotiate their salaries and any benefits.

Where does the restaurant currently advertise? What have they found works for them and what has not? It can be very helpful to find out in advance that they have tried radio advertising in the area and it did not result in any additional business. Don't rule out previously tried advertising ideas because they may just have not been carried out correctly. They may have found niche advertising somewhere that is cost effective. If you don't ask, you may not find out about it.

You should request copies of bookkeeping records going back at least five years. Take these records to an independent accountant whom you trust and have them audited. If the establishment refuses to give you this information, a very large red flag should go up in your mind.

Does the restaurant have a website? Is it well designed and user friendly? When someone Googles "Armenian food Waterbury CT" does the website come up? Does the contract with the web designer need to be renegotiated? Is there a more cost-effective company with better service who you may be able to use?

Who are the current vendors that the restaurant is using? Are they on good terms with them? Are they reliable? Are there other vendors who the restaurant could be buying from and are not currently? Why not?

Do the current owners and staff have good relations with other area restaurants? If so, ask for introductions to these owners. A few examples of reasons to be on good terms with other restaurants: these contacts can be often called upon in a pinch to bail you out. You may need to borrow staff. You may have run out of food. Food may not have been delivered in time for the start of service. It is a very good idea to have friendly relations with other area hospitality operations.



 Buying a closed restaurant and things to look for

Restaurants that are closed and are for sale are worth looking at. They may have closed for a wide variety of reasons. The owners may have died or retired. It may have been mismanaged. It may have had a food poisoning outbreak and the business never recovered; it may have just been a poor choice of cuisine on the part of the owners and management.

When you are researching a closed restaurant that is for sale, here are some very important things to take into consideration.

If the restaurant closed because it was in a bad location or that is the explanation given to you by the seller or broker, don't write it off as not being a good option. Some of the finest and busiest restaurants exist in far flung, hard to get to places because the food is outstanding, the service excellent and the experience the diners have is always wonderful.

If the prior restaurant had a bad reputation in any way, simply changing the name and cuisine, even with all new staff, is a hard sell. There will be locals who will try it again once and they have even a slightly bad experience, they will not come back. So take into account the stigma of a bad restaurant may stay with it forever.

A closed restaurant is almost always easier to negotiate a selling price on then on a running establishment. Odds will be that the seller wants to make the sale and move on. Ask about negotiating a price that may be less then the price advertised.

You should research in depth why they closed. Try to find some former staff members and find out what they know. It is almost a guarantee that if the place closed for a negative reason it may have had many contributing factors. What were the factors and are they things that may have a negative influence on a new restaurant? Were they things that would be overcome if they were not repeated?

A closed restaurant can sometimes be a gem in disguise. For example, the former owner has passed away, leaving many happy customers and an excellent reputation. You as the buyer may come on the scene shortly after the owner's son puts it up for sale. There is a very good chance that most, if not all, of the former staff would return to work there if the place reopened. The former customers will often return and capturing that market segment is a terrific way to start off your new business.



 Finding a Location
Finding a location is an integral part of a restaurant and does play a major role in whether your operation will fly or fail. The location is only one of many key components that make up what happens in the long term to your restaurant's future. Finding a good location does not mean your restaurant will necessarily succeed, many factors contribute to a restaurants success or failure, the location being a primary key issue but not the only one to consider.

Write an outline for the type of restaurant you would like to open. Many people write their business plans before finding a location for their projected restaurant facility. For example; you would like to open a one hundred seat restaurant featuring Indian-Hunan Fusion cuisine. The only locations in the area you would like to be located in either have 50 seats or less or are right between a Chinese restaurant and an Indian restaurant. Obviously you need to rethink some things.

Research the locations available and then write several business plans based on those locations. Banks and Investors will want information on both your business plan and the location it is based on to see whether they think the idea will be a good investment for them before investing or giving you a business loan.

Find out if the location is easy to reach from major roads? Will you get any foot traffic to the location or is it accessible only by motor vehicle? This is not a make or break question, but can be an important factor if your business plan is based on walk-in customers vs. reservations only.

How long does it take to get there from your home? This is an important factor for a variety of reasons. If you are going to be an owner present in your restaurant for most of the time it is open for service, you may not want to consider a place that is far from your home. In emergencies, staff will call you at home and in some cases the quicker you can be there, the quicker a problem or issue can be resolved or handled.

Research the competition in your proposed area. Can the area support another restaurant of the cuisine type you wish to have? On the coastal areas there is a larger proportion of seafood restaurants compared to the inland. Depending on the area and the customer base. It may be able to support many of the same types of restaurants side by side or it may not.

If the location is in a tourist area, can the restaurant sustain itself if it is a bad season? Many tourist driven areas suffer badly in a bad season. Make sure your restaurant will have a back up plan in place to sustain itself in the event of a rainy summer or snow less winter by offering substantial discounts to locals for instance.

Research your target market; is your customer base going to be tourists, a mix of tourists and locals or local people with an occasional out of towner passing through? Dinding this out is important because it will be a key factor in your advertising strategies.

What vendors deliver to your area? If you are an ethnic restaurant and the supplier for the ethnic ingredients does not deliver to your area, what are you going to do? Making frequent buying trips to an area that may have these ingredients will probably not be time and cost efficient. Make sure the vendors you will need to buy from deliver to your area.

Is the location on regular delivery routes for the vendors you will be using on a regular basis? This is an important factor because certain companies, depending on your location, may make you the last delivery they make on a day. Try to find a location where the majority of your deliveries can take place in the morning or early part of the afternoon.

Does the location have the available staffing base to draw from? Most restaurant employees try to find jobs under an hour from where they live. Getting home at 3 AM after working a double shift and driving for an hour and half is not very appealing to most of them. Make sure your location will have a sufficient employment base to draw from.

What are the demographics of the area the proposed restaurant is going to be in? Can the populace afford to eat at your restaurant? Will they want to? Opening a Thai restaurant featuring spicy food may not be the right fit for a retirement community. Opening a Mom and Pop home cooking diner may not fit in very well in an upper middle income area, but opening a fine dining French restaurant may do very well.



 Having a Point of Sale System

It is highly recommended that you have a POS (Point of Sale) system in your establishment, be it a small Mom and Pop café with six seats to a 300 seat, high cover turnover restaurant. If a POS system is not something you can afford when starting up, the use of a computer and Excel can be utilized.

POS systems can make tracking sales, your profit margins and, in some cases, inventories easier to track. Many POS systems have time card systems integrated into them, so tracking employee's hours becomes more manageable for yourself and your payroll person. Employees punch in and out of the POS system, making a time clock with time sheets obsolete and time sheets harder to fudge when an employee comes in late.

POS systems also make cutting down on employee theft easier. It is much more difficult to fool a computer system then using the old fashioned method of writing dupes for food and drink orders.

POS systems can reduce the time spent by your wait staff away from the customers. By utilizing a touch screen to enter orders instead of manually bringing them into the kitchen and dropping them off, it becomes a time saver which can be a make or break situation if you have a high cover turnover.  It makes life easier for the waitperson to have the computer add up and total a customer's check and makes the margin for error almost disappear. In the kitchen, computer printed dupes are easier to read and clearer then handwritten ones.

It is very important to have all your front of the house staff trained fully on the POS system. New hires should not be allowed to use it until they are fully trained. A computer is dependent on people to enter the information correctly and mistakes can cause confusion and lost revenue.

It is vital to have at least four people on staff and two on every shift who know how to program and make changes to the system.  POS systems are wonderful tools to use but it is a hindrance when an item is in the computer improperly.  For example: the soup of the day's price may vary day to day and the computer may print out sales slips for Lobster Bisque at $2.50 a cup, when the correct price should be $5.50 a cup.  If you have staff who can enter but not change the information and no one there to change it for them, this wonderful tool becomes a GIGO (Garbage In and Garbage Out) program.

Make sure your Chef and Sous Chef, if you have one, are some of the people who can program the POS system. They may want to enter specials on their own or they may be the only ones available in a pinch to fix an error in the system.

POS systems are one of the best things to have happened to the restaurant industry since the invention of the meat thermometer.  But it is a tool that can be occasionally prone to software glitches and acts outside of your control.  It is a good idea to have your staff trained on using a backup system of handwritten dupes. If a tree falls on the power lines down the road and your customers are now eating by candlelight, it is essential to have a system to fall back on in an emergency.



 Point of Sale Information and
Why Using One Will Help Your Business

It is highly recommended that you have a POS (Point of Sale) system in your establishment, be it a small Mom and Pop café with six seats to a 300 seat, high cover turnover restaurant. If a POS system is not something you can afford when starting up, the use of a computer and Excel can be utilized.

POS systems can reduce the time spent by your wait staff away from their customers. The utilization of a touch screen to enter orders instead of manually bringing them into the kitchen saves time and increases customer satisfaction. In the kitchen, computer printed dupes are easier to read and clearer then handwritten ones.

POS systems can make tracking sales easier. In addition, your profit margins and inventories will be easier to track. Many POS systems have time card systems integrated into them. Tracking employee's hours will be more manageable for yourself and your payroll person. Employees punch in and out of the POS system, making a time clock with time sheets obsolete.

POS systems also make cutting down on employee theft easier. It is more difficult to fool a computer system then using the old fashioned method of writing dupes for food and drink orders.
Train Your Staff:

It is very important to have all your front of the house staff trained fully on the POS system. A computer is dependent on people to enter the information correctly and mistakes can cause confusion and lost revenue. Make sure your Chef and Sous Chef are some of the people who can program the POS system. They may want to enter specials on their own. They may be the only ones available in a pinch to fix an error in the system.

It is vital to have at least four people on staff and two on every shift who know how to program and make changes to the system. POS systems are wonderful tools, but they can be a hindrance to business when someone enters an item in the computer incorrectly. If you have staff who can enter but not change the information and no one is there to change it for them, this wonderful tool becomes a GIGO (Garbage In and Garbage Out) program.

POS systems range from a minimum of $3500.00 and can go as high as $30000.00. Pricing depends on the system capabilities, number of touch screens and terminals, printers and add-ons for the system.

Here are a Few Recommendations When Selecting a POS System for Your Business:

Does the POS system have 24/7 technical support available with an 800 number?
Is there a trainer who is available to come in and train your staff on using your system? Is it included in the package?
Is there a backup system included in the software package? If the system crashes you will need a way to recover all of your data.
Does the POS system have integration capabilities that will mesh with your accounting software?

Top Rated POS Systems:

There are literally hundreds of small POS systems available for the industry. Many of their websites have free demonstrations or offer a free demonstration CD. Don’t be scared off by the high prices of POS systems. Very good systems can be found on E-bay, refurbished, from restaurants in the process of closing or at restaurant auctions.

Some of the top rated POS systems for the restaurant/hospitality industry ranked in the order of number of users.




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