Starting an ethnic restaurant, how to proceed?

[dele]

I and some of my friends are in the process of starting an ethnic (African) restaurant in the New England area major issue is, none of us has any experience in the restaurant world, we are just seeing a great entrepreneurial potential in the market for this restaurant, not to mention that we are on a tight budget too.

So far, we are hunting for a place that is already built-out, and should sit about 25-35, any experienced advise you can help us with?

[weinoo]

Without sounding too flip, perhaps there should be some small business knowledge, some cooking knowledge, etc.

Has anyone taken any classes or worked in the business before?

[Chris Amirault]

Welcome, Dele. There are quite a few people around here (including me) with varying levels of experience and differing perspectives on this subject. However, I can say with confidence than anyone who has been through a restaurant start-up process will agree that it is an enormous amount of difficult work.

You'll need many different types of expertise, tolerance for inevitable but unpredictable delays and problems, a fantastic, dependable core team, and the ability to build a network of relationships throughout the different sectors upon which you'll be relying. Finally, you need an awesome amount of confidence, enthusiasm, and grit.

A well-known restauranteur here in RI told a chef friend of mine that chef/owners need to work 70-80 hour weeks for two years after the doors open -- and the lead-up to opening night typically requires months of even longer days. Even if you love this industry, it's an exhausting process. And if you see this merely as an investment -- and thus you don't want to eat, sleep, and breathe this restaurant for 2-3 years out of a sense of devotion and care -- get out now.

I'm happy to share whatever information I have, but, like Mitch, will need at least a few bare bones to comment with any detail.

[cat5fan]

Before opening the doors or signing a lease. Create your menu and have potential customers, friends and family comment on your dishes. Calculate the pricing for your dishes. Determine who will be partners in the business and your roles in the business and why. Go get restaurant jobs to see if you like it. Search for restaurants that will be similar, such as fast food vs full service dining. Sit down look to work at an Outback Steakhouse or Carrabba's. Fast food look at Chipolte's. Read the "E-Myth" and for any TV you should be watching is cooking shows and "Kitchen Nightmares". Restaurant has a very, very high failure rate. Most banks won't touch restaurants. People think it's as easy as just cooking food. Good luck.

[NancyH]

In follow up to all of the above - assemble your professional team and sit down with them before you sign anything - an attorney (preferably one with some experience in restaurant start-ups, or at least business start-ups) and CPA. Make sure you cover both ends: the relationships between/among you and your partners from the internal end (this should include forming a business entity right from the get-go), and a sound business/financial plan for financing and organizing each aspect of the restaurant-to-be. Make sure you have funding in place before you sign anything. If you have an "angel" helping with financing, make sure that your professionals are independent of that source.

[Holly Moore]

Dele,

You are starting out with three strikes against you - no restaurant management knowledge, low funding and you are doing the project with a group of friends.

Restaurant management knowledge - pricing and costing a menu, job descriptions and training employees, ordering, planning production, controlling waste, marketing and developing buzz. A restaurant is one of the few businesses where you both manufacture and sell products and where both many raw materials and finished products have short shelf life - must be used/sold within a day. Your group can hire a manager or chef with this knowledge, but you will be at that person's mercy because you won't be able to manage him/her due to your lack of knowledge and experience. The wrong person/people could ruin a restaurant or, even worse, rob you blind.

Funding - Under capitalization is, I believe, the most common reason a restaurant closes within its first year of operation. If you can't open with money in the bank to cover fixed costs for the first few months it is going to be tough. You will be hit with opening expenses you never anticipated. Suppliers will want cash up front. There will be deposits for rent, utilities and any equipment you lease or rent. You will have to pay salaries and wages during clean up and training. Inspectors will likely find plumbing, electrical, health or safety issues that must be rectified to obtain licenses.

Friends - It varies with group dynamics but there are going to be issues. Is everyone keeping their day job and not fully committing to the restaurant? Who is putting in their share of the work? Who messes up and how often? Consensus or majority decision making and who gets pissed off and discouraged when they are not in the majority or veto a consensus. Who is the boss? Do employees report to one person or to all the friends? More often than not friendships dissolve from the stress of day to day restaurant ownership of a struggling restaurant.

Many restaurants still open despite a knowledge these obstacles. Some may make it. More probably won't. My advice would be to hold off until at least some of the group gains restaurant experience and the group raises some additional funds to provide some staying power. If you are going to take the plunge, take the time now to resolve as many of the issues that I and others will raise.

Good luck and great success.

[HungryC]

Might I suggest a softer entry into the food business world? Look around your area for an "incubator kitchen" or commercial kitchen you can rent by the hour, and use it to prepare foods for sale at a local farmer's market. You can test the market's interest in your fare, gain experience in commercial-scale production, and find out the various organizational skills & strengths of your group.

Does any of you possess the requisite food safety training? ServSafe and similar courses are usually offered by the local restaurant association; this basic sanitation training is essential.

[thirtyoneknots]

My knowledge is mostly with bars, but I have seen my share of peoples' business plans and known more than a few hospitality entrepreneurs. Just to throw out a figure, even here in Texas where real estate tends to be cheap, anything under a half million seems to qualify as a shoestring budget. My observation is people who can make it with that tend to be the most capable and dynamic minds in the biz.

[dele]

Fantastic responses, thank you all! I want to answer some question specifically:

@weinoo: in the group, some of us own our own businesses, we haven't taken any classes though.

@Chris Amirault & Holly Moore: Very solid points, we each do have the personal skills to make business happen (we are not novice to that) and we do understand the challenges...

to @NancyH point on financing, we are actually boot-strapping and have that part covered, and again, we understand those risks.

@cat5fan: I've personally read the E-Myth (though I personally find "the Toilet Paper Entrepreneur" more interesting), we however don't have the time to literally work at a restaurant.

@HungryC: none of us do, but I like that idea of "incubating" a lot, can you please expatiate.

A follow-up question is, since we each have our own jobs/business, what is the best approach per management to balance this (again considering we have little to no experience)?

Thanks again all.

[thirtyoneknots]

If you're not completely wedded to the idea of the thing needing to be your own concept, perhaps you can put yourself in a position to be an investor/silent partner in someone else's business plan. Scout the up and coming restaurant talent in your area, focus on the ambitious folks who have experience and a record of successfully running a kitchen and/or foh. And if it can be people inclined towards the type of food you are thinking to do, all the better.

[Tri2Cook]

Might I suggest a softer entry into the food business world? Look around your area for an "incubator kitchen" or commercial kitchen you can rent by the hour, and use it to prepare foods for sale at a local farmer's market. You can test the market's interest in your fare, gain experience in commercial-scale production, and find out the various organizational skills & strengths of your group.

That's pretty much what I was thinking. Maybe even a food truck/cart or something. I've been involved in a startup, not as an owner, and I would have been happy doing 70 - 80 hrs/week. It would have been a nice break. But having owners with no previous restaurant experience basically meant put up or shut up.

[ScoopKW]

we however don't have the time to literally work at a restaurant.

Well, find time then. You are going to wish you had if you try to open a restaurant with nobody involved having any experience. I can guarantee that much, at least.

Working in a restaurant requires FAR fewer hours than opening one. And there is a very real good chance that either you or your partners or everyone involved learns that they hate the restaurant business. Then what?

[Broken English]

Before you open, at the very least you need a good chef and a good front of house manager, both of whom can recruit decent staff and generally organise. Without those two, you are doomed, a restaurant's opening often makes or breaks the entire enterprise.

Owning a restaurant is a lot like being the parent of a newborn, they require all your time and dedication, and if you can't give it that, then I wouldn't bother. My father opened a restaurant a few years back, and found it far harder than he had ever imagined. Luckily though, with an amazingly talented and dedicated chef and a keen eye on the front of house, the place is a success, but not without cost.

The biggest mistake you can make is assuming that because you eat in and enjoy restaurants, you are qualified to own and operate one. It can and will bite you in the arse.

Good luck.

[HungryC]

@HungryC: none of us do, but I like that idea of "incubating" a lot, can you please expatiate.

Again, I stress that you should all sign up for ServSafe training. You don't list your geographic location, but Google your state's restaurant association, call them, and sign up for the training. In most states, you will need this sanitation training to work in a kitchen, bar, food truck, or even to sell food at a farmer's market.

RE: food incubators, many such enterprises exist around the country. Generally, there will be a commercial kitchen you can rent by the hour, plus some training in the business end of things. Here's a link to Kitchen Inc in Houston as an example. If you have trouble finding one in your area, contact your local farmer's market organizers--they may be able to point you in the right direction. Or contact your county's Cooperative Extension Service agent (aka "agricultural agent")....most Extension programs are plugged into farm-to-market value-added activities, so they'll know if such a food-business incubator is operating in your area.

The food truck idea is a good one, if you reside in an area that's food-truck friendly. Fully equipped, used trucks can be purchased for less than $20K in my area...again, this would allow you to build a market/name recognition before you invest in a bricks-n-mortar restaurant. It's also a great option for areas with wild seasonal fluctuations in demand (resorts, college towns).