Starting a Restaurant in NYC

[Bond Girl]

Things just keeps getting better each day. At least, life is not dull when you are trying to get a restaurant investor. I met another broker yesterday who makes the bully you met at school looks like a class dork. Before, she even read my business plan, I was told to refrain talking about my business to anyone, not to compare the terms that other people have told me, not to compare the terms that my friends who owns actual restaurant have with their investors, not to talk to investors on my own, and leave everything to her.

Right! And, I'll take that bridge in brooklyn that she just tried to sell me.

Meanwhile, an investor friend called asking for advice on union negotiations. Once again, I am faced with an ideology versus profitability problem. As a personal belief, I want all workers to have minimal wage, set increases, benefits, and someone to fight for what they cannot fight for themselves. As an aspiring business owner, I want to minimize labor cost, keep everything as low as possible, stretch the working hours, and drive profitability....Man, I haven't seen this much personal conflict since high school.

[intraining]

i haven't read all through this, but why not form a corporation? find others with very similar dream as yourself, sell it to them, and go for it.

[SobaAddict70]

Because then, Ya-Roo won't be the sole owner of said business, she'll have to have others in the mix if there's a corporation involved. Kind of defeats the purpose of the thread I believe.

It does sound appealing -- to find others with a similar vision -- but then you run into the danger of having that vision diluted.

Soba

[intraining]

that's a good point soba - lol

but maybe the prospect of a partner to sacrifice full ownership might ease the burden and actually help for a future project?

[herbacidal]

Because then, Ya-Roo won't be the sole owner of said business, she'll have to have others in the mix if there's a corporation involved.  Kind of defeats the purpose of the thread I believe.

It does sound appealing -- to find others with a similar vision -- but then you run into the danger of having that vision diluted.

Soba

←

I think it's unreasonable to expect most people to be the sole owner of a restaurant business, especially of the caliber that Ya-Roo is trying to build.

The successful establishments are that way in large part because the management team works together well.

Many restaurants fail because the management team is not deep or strong enough in one or more areas.

One of the best ways to ensure that the (hopefully capable) management team stays together is to give everyone some equity.

I think it's easier and more appropriate to dilute/modify that vision, in part because no vision is ever fully formed. Inevitably, changes/sacrifices need to be made.

The key point is making sure those sacrifices actually improve the final product.

Edited October 27, 2004 by herbacidal (log)

[Bond Girl]

I don't want to be the sole owner. I do want to find other people with similar dreams and visions. The problem is choosing the right person...so far the process is worse than dating in NYC....The constant mantra is I know there is someone out there, I just haven't met that person.

[scottpollack]

I, too, am an aspiring restaurateur who recently came upon this thread, so hopefully there is still some juice left in the discussion here -- it's been a while since the conversation died down, but I think it's time for an update!

BondGirl, I'm sure the entire eG community would love to hear how the saga continued (securing investors, refining the concept, identifying potential partners, etc.), where you are now with your restaurant plans, and especially how you got there.

Regards,

Scott

[ChefSwartz]

There is a saying, "The Harder I Work The Luckier I am."

[SpaceGhost]

I, too, am an aspiring restaurateur who recently came upon this thread, so hopefully there is still some juice left in the discussion here -- it's been a while since the conversation died down, but I think it's time for an update!

BondGirl, I'm sure the entire eG community would love to hear how the saga continued (securing investors, refining the concept, identifying potential partners, etc.), where you are now with your restaurant plans, and especially how you got there. 

Regards,

Scott

←

Scott,

I too would like to know how the saga is unfolding.

I imagine like yourself there are other "aspiring restranteurs" here who would like to know and share their experiences.....new thread perhaps?

[SpaceGhost]

I don't want to be the sole owner.  I do want to find other people with similar dreams and visions.  The problem is choosing the right person...so far the process is worse than dating in NYC....The constant mantra is I know there is someone out there, I just haven't met that person.

←

Hey Bond Girl,

There are at least a couple of us interested to know the latest on how your restaurant plans are evolving.........???

[Lazrowp]

I am interested too!!!!!!! Did you do any significant financing activity?

Paul (the hopefully soon-to-be-restaurateur & guy who started the thread "Starting a Restaurant in Philly")

Paul

[Bond Girl]

My accountant told me that if I seriously want to, I have enough money to put in about 10% of what I am looking for, but he advised against it. I've also talked to a fund that will invest in ventures in downtown New York, but then the fund itself was having trouble getting started.

Small business administration is an option, but the maximum loan they will give you is nominal.

I am downsizing the kind of place I want.

Then, another investor came around that seemed interested but wanted to do trendy mediocre restaurants with high volume turnover, thumping music and nice looking service staff....oh dear, haven't I heard this a thousand time before.

Next week, I'll see what I can round up in the West Coast area.

[hathor]

Dear Bond Girl, I've been following this thread as I've got my own issues to work on (namely an albergho in Italy), but I thought I would throw my 2cents in for a moment. Its going to be extremely difficult to attract investors when you aren't putting up a significant portion of the money. Typically investors want to see that you are heavily staked to the project. I'm sure your accountant has your best interests at heart...but not even putting up 10% is a warning sign. Not to depress you.... honestly, I hope and pray everyday for a guardian angel or sugar daddy, and I'd be happy to include you in my prayers!

[Bond Girl]

I am planning to put in 10% of what I need, against my accountant's advice, and would like to be included in your prayers... Please tell me about your albergho! I love to hear more about it!

[SpaceGhost]

Bond Girl,

I have a restaurant downtown, and part of the financing was an SBA loan. That loan was quite significant. They are very hard to get, as they only give out one per year for a restaurant in NYC. What is your restaurant track record?

[Bond Girl]

Therein lies the problem, I've never owned one. I have a finance background and understand how a business needs to work but have not worked in the industry.

[SpaceGhost]

My business partner had never owned a place before we opened our place last year but had opened two other places in Manhattan working for someone else. This not only gave him experience but more importantly, a record of success, connections, and an entrance to the industry. Fine Dining in NY is very much an insider scene. not to mention pretty incestuous, even if it is "Casual Fine Dining" as you mentioned.

The reason I mention this is, one of our partners joined our team to get into the industry. He may have only been an investor at first, but now he has the experience, the connections, and a huge success under his belt. Having the business experience that you possess is incredibly important to planning and opening a place. Many teams actually lack that (perhaps we did). It is a huge piece of that mysterious NYC fine dining puzzle of success, but do not overlook the other pieces mentioned, which are key to your success after you open. So perhaps instead, or along with, of an intership, you may want to find a team that is well on their way to opening a place that has what you envision in yours, two star food and exceptional service etc.

As we are now in the middle of opening our second place, we find ourselves facing the issues you face all over again. It is slightly easier having been down the road before, but only slightly. I very much look forward to hearing about how you handle the hurdles ahead, as I know it will certainly help us.

Edited June 15, 2005 by SpaceGhost (log)

[bandy2010]

Hi Bond Girl,

Interesting thread...

It sounds like you got a lot of great advice from folks here at eGForums regarding your idea and venture.

I just recently opened a Korean restaurant with some friends here in Vancouver. It seats aproximately 200 people and often there is 15-20 minute wait due to sellout.

It's still early, but I have a good feeling that our restaurant will do fine.

For more information you can see a few pictures of our restaurant, menu (available in 3 languages) and a map at website:

http://www.insadong.ca

or our Blog site

http://spaces.msn.com/members/bestkoreanrestaurant/

If you are ever in Vancouver feel free to drop by and say "hi". Our live seafood aquariums and traditional Korean art displays are attracting a lot of tourists to the area!

Good luck!

Bandy

[ada]

I was so interested in this thread. I am curious to know how you work the numbers out. You have to have some idea of how much a restaurant of the type you want will bring in, or at least hope to bring in. I haven't heard anyone say anything in those terms. Gross sales, as we call it in retail.

[Bond Girl]

I think different type of restaurants will bring in different type of gross sales but also have different cost structures. A four star restaurant may have huge gross sales figures but also huge expenses to go with it. On the opposit end, a little dessert bar may only have sales in the few thousands range, but with very little overhead, it can be more successful.

I've forgo the idea of owning my own place for now and decided to invest in a restaurant instead. The biggest issue with the number of business plans so far is the cost of the place., and how realistic I think it is.

[bandy2010]

Location and food quality are still proving to be "key" for our restaurant's success. We are actually now known as the "Best Korean Restaurant", primarly due to those "two"specific items... (marketing on my blog site has also helped attract non-Koreans interested in trying something new....- see my profile for the link).

While owning and operating a restaurant is expensive and a lot of work, patience and a passion for quailty make it all worthwhile...! The "numbers" for our new restaurant are strong enough for us to start considering other investment options after only 4 months.....

We are thinking of taking a visit/tour of restaurants in the New York area next year. You'll have to keep us posted in this thread as to where you decide to invest!!

Good luck!

[paul o' vendange]

From a practical standpoint, a portion of the investment would be recouped upon the sale of the business.

I wonder how many restaurants sell the business and at how much profit or loss. My uneducated guess is that most sales occur when the restaurant goes out of business and is forced to sell the assets at a loss. Is this a fair assumption? How often has a new restaurant evver moved into an old restaurant location without renovating the dining room extensively? I wonder how much kitchen renovation is done as well.

Wear and tear on chairs, carpets, tableware, etc, is very high anyway and successful restaurants look shabby rather quickly anyway. It would seem that a good part of the investment much be depreciated and affect the real bottom line, but I don't really know about this.

←

Sorry to bump an old thread, but this is all very salient for me, and this thread is marvelous. We closed our doors last November after starting great guns. The first authentic bistro in our region, likely doomed from the start due to a host of variables. Hindsight is marvelous, except for the excruciating pain involved in such a debacle. The absolutely insane thing is that whereas I only months ago swore off ever picking up my knives, much less crossing the culinary portal, again, I am reconsidering and beginning to muse on the possibility - another place, another plan.

The sleepless nights are hell, as is the sinking knowledge that no matter what you do, your aim was amiss and you cannot turn the ship around, to the detriment of yourself, your partner-wife, your family. But the freedom to create, to use all you have to make a go of it, to give over something of real worth, cannot be replicated anywhere else, in my experience. So you stop, and leave forever, or you say screw it and with lessons learned, try again. Such is the dilemma.

Bux, I would venture that most sell-profit is gained on the valuation of the business, in terms of yearly revenue, than physical plant. If you can build a yearly revenue from scratch to something of real worth, have paid down whatever note exists, you can likely convince someone, somewhere, that they are entering into a stable enterprise, so long as they don't rock the conceptual boat too much. IMHO, of course. A helluva lot more humble than it used to be.

Edited September 12, 2006 by paul o' vendange (log)

[paul o' vendange]

Went to see a VC veteran about the ins and outs of restaurant funding.  Apparently, this is big business in asset based lending.  I wonder how much does a bank examine the business plan. 

As for private investors, the clawback structure is a norm.  They key here apparently is in the negotiations.  Hmmm, looks like I need to crack the finance text books again.

←

I know that in our case, financing was a drop-kick. They didn't examine it at all. People were so keyed that we wanted to open a French bistro our way that they threw money at us even saying, and I quote, "we appreciate you being conservative in your numbers. But you're going to blow those numbers out of the water."

This, from the BIDCO in our area, an institution normally predisposed to grilling the would-be restaurateur for being too optimistic. This should have given us pause, my wife and me, but we bought into it as they were the local pros. A stupid mistake, one we will not repeat if we do it again.

[paul o' vendange]

I think I am beginning to learn that your investors not only need to have money, they need to be food-smart as well.

Actually, it strikes me that a little bit of knowledge can be dangerous. Either the investor should help to run the restaurant (and have the background to be helpful), or s/he should entrust that responsibility to those who do. I haven't opened a restaurant, but in most fields, investors who dabble in substantive decision-making can be the kiss of death.

←

It's the same for lenders. Perhaps even more so.

Edited September 12, 2006 by paul o' vendange (log)

[paul o' vendange]

Sorry, double post.

Bond Girl, if you're still out there, care to revive this fascinating thread?

Edited September 12, 2006 by paul o' vendange (log)