CHOOSING YOUR RESTAURANT
RESTAURANT CONSULTANTS OF AMERICA™
Choosing Your Restaurant Buying an existing restaurant versus starting fresh
The facts about franchising
Places to find information
Why you should hire a concept design team
Menu, price, and service questions
Guess what? Opening a restaurant means actually opening a restaurant. This means opening in a building with a concept and a menu and a staff. We’re talking real stuff now. No more dreams.
In the last two chapters, we concentrated on the big picture. Now it’s time to focus. It is astonishing but true that, like America itself, the restaurant business offers a chance at a great life in a million ways. What do you want to be? That, in life and in the restaurant business, is always is your best option. Find a passion and go for it.
Of course, at least in the restaurant business, it helps to find an opening.
This is a chapter about options and how to measure your passions against the opportunities available. There are many types of restaurant opportunities—franchising, buying an existing business, creating a new business in an existing building, or building a new creation. Location is also a consideration. Opening a restaurant means actually making decisions. So, if you decide to, read on.
Wet Floor!
Beware of inaccurate bookkeeping (sometimes called “cooked books”) if you’re considering buying an existing restaurant. Discovering too late that there is a lot of debt or no real equity can quickly turn a dream into a nightmare.
Wet Floor!
If you’re buying an existing business, insist that your accountant receive all the necessary information to thoroughly investigate the official books for the business. Ask to see past tax statements and determine whether all tax obligations are in order and current.
Start from Scratch or Buy an Existing Restaurant Business?
Starting a restaurant from scratch takes a lot more planning, designing, and developing than buying an existing restaurant does. A new restaurant requires you to do everything that has already been done in an established restaurant. You must establish the business licensing and structure, find and analyze the location, develop and design the concept, purchase the equipment, develop the systems, hire and train your staff, set up your vendors, and more. You will also be entering the world of the unknown. Will anyone know you are open? Will your location and signage be visible? Will you be able to compete? Will the consumer like your menu?
The big advantage to starting from scratch is that you can do things your own way with your own unique flair. You don’t have to live with past transgressions, poor decisions, and past customer opinions.
Buying a pre-existing restaurant requires a significantly different approach than starting one from scratch. To buy a pre-existing restaurant, you must be a sort of private investigator. You must take care to ensure that you do not make a poor choice. If you buy a restaurant with a tarnished reputation, you are buying the reputation. If the restaurant has, for one reason or another, an incompetent staff, a poor lease, an abused appearance, nonworking equipment, or even inaccurate bookkeeping, those problems become yours also. So do some investigating and find out exactly what you are buying.
Buying an existing restaurant can have a ton of upside. This upside can include immediate cash flow, well-trained and motivated staff, effective and efficient product and service formulas in place, and reduced start-up costs.
Both building a restaurant from scratch and buying an existing restaurant have advantages and disadvantages. Yet with hard work and focus, either way could be a road to success.
Recipes Revealed
Franchising is a system for expanding a business and distributing goods and services.
Going It Alone Versus Franchising
Franchising works. It has made a long and lasting positive impact on the restaurant industry, providing an opportunity to operate a business under a recognized brand name. But it’s not for everybody.
So what exactly is franchising? A franchise is born when a business (the franchisor) licenses its trade name and brand (like McDonald’s or Pizza Hut) to a person (the franchisee) who agrees to operate the restaurant according to the terms of a contract (the franchise agreement) and within the guidelines of company policies and procedures (the operations manual). In exchange for these rights, as well as a certain amount of support and even training and expertise, the franchisee usually pays the franchisor an initial entry fee (franchise fee) and an ongoing fee, usually based on sales volume (known as a royalty fee).
Ideally, the concept of franchising reduces your financial risk by providing you a clear road map to follow toward success. But it also limits your unique concepts and designs and provides less in the way of total creativity and flexibility. You buy a franchise to get a canned process to buying, building, designing, and even operating a restaurant. You are a part of a greater company.
All franchisors are not created equal. They provide significantly different services and have significantly different guidelines and support structures. Study what you’re getting into before jumping into a franchise.
We have probably all heard war stories from people who purchased a franchise expecting more of a support structure than what they got. This usually happens when the franchise agreements are not read thoroughly by the potential franchisee. In today’s legal and franchising community there is so little room left for misinterpretation that most everything is spelled out to the umpteenth degree; however, these things are not as simple to read as the books in The Complete Idiot’s Guide series, so employing the services of reputable legal counsel is prudent.
I’ve seen franchise systems where you purchase only the name and concept rights and everything else is up to you—purchasing, marketing, site selection, and so on. Yet there are other franchises that use what is referred to as a “turn-key” system. The franchisor does virtually everything for you. You get a key to the building and you operate the place per their preset system. They do the site selection and the marketing and set up all the purchasing guidelines. All you do is “turn the key” to the front door and operate. Of course, there is every combination in between as well. The true “key” is to read and reread your franchise agreement, so you know what you’re getting into.
Tip Jar: The Standard Periodical Directory, 24th Edition, lists 187 trade publications for the restaurant industry. Each of these publications has lots of information about very specific subjects in the restaurant industry, ranging from site selection to product knowledge and from human resources management to menu design.
Food for Thought: The best place in the world to study your restaurant reading material is in a restaurant. Sit down in a mall food court, a coffee shop, or a sports bar. Absorb some atmosphere, ask some questions, and study.
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