Starting a Restaurant in NYC

[JosephB]

Boy, there's a lot of negativity here.

I say don't supress your dream. But I think the scale of your project is too large for a first timer with no hands on experience. Focus on something smaller, with less variables, less complications, which requires less money, fewer employees, and a smaller investment. Hopefully, growth becomes an option. I worked in restaurants for a good number of years in my former life, and the desire to return to it slips into my consciousness with some regularity. And when it does, I think, 25 seats, a small open kitchen, and a small wine bar. Gee, sort of like entertaining at home, but a bit bigger.

[woodburner]

While not Tribeca, I have three personal friends who run seperate, successful restaurants, here in the Hudson Valley. All three have one thing in common.

They own and operate a thriving, completely different business as their primary source of income.

Best of Luck

woodburner

[Bux]

While not Tribeca, I have three personal friends who run seperate, successful restaurants, here in the Hudson Valley. All three have one thing in common.

They own and operate a thriving, completely different business as their primary source of income.

They have at least one other thing in common, they and their restaurants are not in NYC where rents and restrictions are very significant factors.

[Marlene]

Boy, there's a lot of negativity here.

I say don't supress your dream. But I think the scale of your project is too large for a first timer with no hands on experience. Focus on something smaller, with less variables, less complications, which requires less money, fewer employees, and a smaller investment. Hopefully, growth becomes an option. I worked in restaurants for a good number of years in my former life, and the desire to return to it slips into my consciousness with some regularity. And when it does, I think 25 seats, a small open kitchen, and a small wine bar. Gee, sort of like entertaining at home, but a bit bigger.

This is exactly what we want to do in the next 10 years, as hubby gets closer to retirement. Possibly in Niagara on the Lake.

[woodburner]

They have at least one other thing in common, they and their restaurants are not in NYC where rents and restrictions are very significant factors.

I'm not understanding your point. But to add to your comments regarding rents and restrictions in any given locale, would you agree that the competition, in this case similar restaurants, are equally burdened?

Restaurants fail, and succede all over the world, are you saying that NYC is the most difficult of all?

woodburner

[Pan]

"If I can make it there, I'll make it anywhere..."

Hey, someone was going to quote that; why not me.

[Mayhaw Man]

I can't speak for Bux, but I believe that that is exactly what he is saying. The real estate costs alone make reasonably priced restaurant start ups a very difficult proposition.

I have only been involved in one potential startup and that was a brewpub in Manhattan (which I ended up not getting involved in, but it did get off of the ground and was a spectacularly expensive and well documented failure) and the startup costs were mind boggling. I was involved in a number of projects (20 plus) in several parts of the US as well as a few in Ireland, Mexico and Hong Kong and none of them CAME CLOSE to the amount of expense and regulation involved.

It is very easy to see why Blue Smoke would charge a couple of bucks EACH for an oyster. They don't have any choice. I am sure that there are places that have real estate that is as expensive (Tokyo and pre crash San Francisco come to mind) but the combination of the prices and the regulations and permitting complications make New York like nowhere else I have heard of.

Of course, I am just another dumb cracker from the Southland and everything I say should not be taken as expert opinion, just as my reasonably well informed observations.

[beans]

Bond Girl--

I sincerely wish you the best. Despite another (I'm not sure who and isn't really important) stating a comment about all of the negativity, but take note.

I apologise, these are sort of random and disjointed a bit, but for your consideration:

I've worked for one restaurant owner that didn't have a stitch of restaurant experience. The heartaches he felt, and we, too, did as the opening team, were palpable. While we all emphathised, we had to continue to hand him the cold harsh reality of we need this, this, that and those to get the place up and running. He often worked 20 hours a day getting that place open in the early days and I won't sugar coat it -- it was hell. He had positively no idea of what energy went into it from ceramic tiling to finish the public restrooms, to building the back dock for the delivery of the outside walk in, to sitting down with the chef for menus and meeting and taking part with staff hires.

I've also personally know of each trial and tribulation from a friend who was, at the time, my fiance's banking coworker and buddy. They were both Assistant Vice Presidents, undergrad and/or MBAs in finance so they knew how to crunch the numbers and write a sound business plan. As a favour to this friend, his own employing bank agreed to give ample consideration to underwriting the loan for this restaurant venture he wished to open. They were hugely hesitant due to the amount of risk based upon his own lack of experience with a restaurant and micro brewery. The restaurant and brewery in question was no other than Great Lakes Brewery. It, too, was not an easy road, especially with the soon to be former employer advising him about expecting total failure.

I really have to agree, even those in the biz wonder why the heck anyone would want to be in it!

Perhaps, Chef Fowke's Opening Soon thread may help?

Regarding the theft thing -- it can happen at every level. Servers, bartenders, barbacks, managers, chefs, cooks, pantry or other partners. (Yes, I've got first hand experience in stories with all of that too!) Are you prepared for that?

Really, be sure you are willing to deal with all of the above and much more. If you still feel strongly about doing this, then you must do it girl!

Plenty of support here.

[jackal10]

I think whoever said get some experience first was right.

Maybe go to a cooking school; or do some stages.

Best of all work with your prospective investors in some of their other projects, getting to know each other.

Its a lot cheaper way of finding out if you like or don't like the life. If you are running a restaurant you neither eat well or have time for a social life.

Many restaurants are family affairs for good reason: cheap labour and sunk capital cost. If you are not born to the trade, or have worked your way up through it, it is tough.

If what you know about is food, then be a food critic instead. You eat better, and it is a lot easier life.

[Bond Girl]

I am actually very glad for all the negativity, because as a finance person and risk manager, I want to know all the risks involved. Irwin's advice makes sense, the rent is killing me. I either need to look into a lease/buy back situation or try to figure out a way to lower my rent. I am also looking to find a part tiime internship at some restaurant so that I can learn the operations. Does anyone know how I can go about doing that?

This weekend I decided to put finance on hold and look into the "concept" part of the business plan. The chef who wanted to go into this venture with me changes his mind according to his moods, the general condition in the world and may be even the phases of the moon. This week he is having trouble figuring out exactly what he wants, but he is gun-ho on going into business with me. He's what Mayhaw would call an adrenaline junkie. All he knows is that he does not want to do Japanese food and 500+ covers per night anymore but beyond that he does not know what kind of food he wants to cook, which mean I can't precisely define my market. He has a lot of experience with some of the finest restaurants in NYC, but I think I am going to call back up chef of choice next week just to know I have options.

We did, however, get general staffiing requirement somewhat mapped out. For a 60-80 seat restaurant, operating 6 days a week, we need about:

4 servers (15 covers each)

a buser

a runner

1 bartender

2 host/hostesses

1 manager

1 sommelier

For the back of the house, we need:

1 Sou-chef

3 line cooks

1 expeditor

1 pastry chef

1 pastry cook.

We also need prep cooks, stewards and dishwashers.

Having been through business school during the height of the dot-com era, I would like to use the Bill Gates philosophy of management, which roughly translates to if you treat people well, they will work hard in return. I want to offer full healthcare benefits, paid vacations and other perks to everyone....that is until I was told that my full payroll including worker's compensation cannot exceed 35% of my gross revenue. Okay, employees will get part time shifts, and partial health benefits.

Still can't find a way to improve on the 16% return for my investors.

[Nick]

Hate to say it, but even if you offered me a 30% return, I'd say the same as now. Good luck.

[JosephB]

I am actually very glad for all the negativity, because as a finance person and risk manager, I want to know all the risks involved. Irwin's advice makes sense, the rent is killing me. I either need to look into a lease/buy back situation or try to figure out a way to lower my rent. I am also looking to find a part tiime internship at some restaurant so that I can learn the operations. Does anyone know how I can go about doing that?

This weekend I decided to put finance on hold and look into the "concept" part of the business plan. The chef who wanted to go into this venture with me changes his mind according to his moods, the general condition in the world and may be even the phases of the moon. This week he is having trouble figuring out exactly what he wants, but he is gun-ho on going into business with me. He's what Mayhaw would call an adrenaline junkie. All he knows is that he does not want to do Japanese food and 500+ covers per night anymore but beyond that he does not know what kind of food he wants to cook, which mean I can't precisely define my market. He has a lot of experience with some of the finest restaurants in NYC, but I think I am going to call back up chef of choice next week just to know I have options.

We did, however, get general staffiing requirement somewhat mapped out. For a 60-80 seat restaurant, operating 6 days a week, we need about:

4 servers (15 covers each)

a buser

a runner

1 bartender

2 host/hostesses

1 manager

1 sommelier

For the back of the house, we need:

1 Sou-chef

3 line cooks

1 expeditor

1 pastry chef

1 pastry cook.

We also need prep cooks, stewards and dishwashers.

Having been through business school during the height of the dot-com era, I would like to use the Bill Gates philosophy of management, which roughly translates to if you treat people well, they will work hard in return. I want to offer full healthcare benefits, paid vacations and other perks to everyone....that is until I was told that my full payroll including worker's compensation cannot exceed 35% of my gross revenue. Okay, employees will get part time shifts, and partial health benefits.

Still can't find a way to improve on the 16% return for my investors.

Sounds like you're planning a dinner only place. I assume that's only the initial phase, because with the high rents, that's a luxury most restauranteurs cannot afford.

[Moopheus]

Still can't find a way to improve on the 16% return for my investors.

Is a 16 percent return reasonable for a successful restaurant? How often do restaurants make that?

A guy I know in Springfield (MA), a chef, lost his house because he financed his own restaurant with it. I've eaten his food, he can cook, but he had a lousy location. I, on the other hand, lost a small pile of money publishing a literary magazine. It's great take risks and pursue a dream, it really is cool when people tell you this thing you did is good, just don't put up anything you can't really afford to lose.

[Bond Girl]

Joe, doing lunch means increasing costs without promise of return.

[Pan]

Ya-Roo, you don't have promise of return for dinner, either.

[herbacidal]

Joe, doing lunch means increasing costs without promise of return.

i think BG meant return as in profit. regardless, from a cash flow basis, it may be necessary to open for lunch. plenty of profitable businesses have failed b/c of cash flow.

also, as far as New York City costs, I would say NYC is by far the hardest place in the US for an entrepreneur to start a business that requires significant upfront capital and physical space (ie not as hard for graphic designers/etc. who decide to start their own out of their existing space), let alone a restaurant that also requires additional considerations with regard to zoning, HVAC, licenses and inspections, etc.

The increased costs in real estate, not to mention the increased costs in other areas leave no room for making mistakes, which inevitably will come up.

Your staffing requirements assume that everyone in the FOH is working every night.

Probably shouldn't hire a sommelier b/c of costs; either the manager should do it (preferable b/c cheaper) or a consultant can do it for a regular fee.

I think you're probably wasting money on an expeditor; you can't afford it. Probably better to do it yourself, or have your partner.

[herbacidal]

Still can't find a way to improve on the 16% return for my investors.

Is a 16 percent return reasonable for a successful restaurant? How often do restaurants make that?

I believe 16% is reasonable, if slightly above average, although that may vary based on market.

[Bond Girl]

Thanks Herbacidal. Hey, weren't you suppose to come up here one of these days?

[herbacidal]

well, haven't talked about since our lines last got crossed, beginning of november.

right now, i think i'll be up sometime in january. i'll let you know.

[Bux]

They have at least one other thing in common, they and their restaurants are not in NYC where rents and restrictions are very significant factors.

I'm not understanding your point. But to add to your comments regarding rents and restrictions in any given locale, would you agree that the competition, in this case similar restaurants, are equally burdened?

Restaurants fail, and succede all over the world, are you saying that NYC is the most difficult of all?

woodburner

The most difficult of all? Let's just say well above average in terms of difficulty.

I can't speak for Bux, but I believe that that is exactly what he is saying. The real estate costs alone make reasonably priced restaurant start ups a very difficult proposition. ...

I am sure that there are places that have real estate that is as expensive (Tokyo and pre crash San Francisco come to mind) but the combination of the prices and the regulations and permitting complications make New York like nowhere else I have heard of.

It looks as if you can speak for me. With the rent and overhead that must be faced with a Manhattan operation, you can't go too many months without a profit unless you've got deep pockets. It will cost a hell of a lot more to ride out any unforeseen problem or downturn in the local economy. It's a high stakes gamble.

It's not just the rent, it's the codes, laws and regulations that make the initial investment so costly and the required inspections always make opening day something you can't always plan too far ahead.

... let alone a restaurant that also requires additional considerations with regard to zoning, HVAC, licenses and inspections, etc. 

The increased costs in real estate, not to mention the increased costs in other areas leave no room for making mistakes, which inevitably will come up.

Exactly, and as far as restaurants failing and succeeding all over, sure they do, but they fail a lot harder when they require the kind of investment required in NYC and they fail when they might ride out a similar problem in an area that required less startup and overhead costs.

[NYCCHEF]

Bond Girl,

There are many sources available to learn how to properly put together a business plan. You could also have a controller or restaurant accountant help you put one together or show you a "Template" which will give you an idea of where to start. Typically with restaurant business plans, you start with the numbers (projections) and work backwards. You said that you want a place downtown. How many stars are you going for? How long have you known the Chef? Do you have your management team in place?

Also, if you have limited practical restaurant experience, you need to pick a restaurant to stage at. Choose a "model" of the restaurant that you envision. If, for instance, you wanted to open a high end restaurant, it would be best to stage at a high end restaurant. The more experience in the type of place you envision, the better.

I can share some info with you because Ive been planning my own place for a while and I identify with you. I remember not knowing how or where to start, and some very generous and good people gave me some excellent advice. These are some pointers that Ive learned. There are many ways to go about this, but this is the way Ive learned.

-Sign the lease, at least 15 years, with the right to assign

- File for Certificate of Occupancy and Liquor license.

-Review Architect and Design bidding proposals

-Hire the Architect to design the front. Kitchen Design company to design and construct the back.

-Architect and Kitchen designer develop a book of specs and a master blue print. ( floor plan, kitchen, prep area, dish area, storage areas, bar, service stations, POS placement, HVAC, coat room, offices, ect.)

-General contractors are interviewed with the designer, due diligence on the contractors is performed and a G.C. is hired.

-Assign a site manager to oversee all aspects of pre opening and build out including budgeting and prioritization of projects.

-Begin construction.

-Decide on restaurant employees and start dates.

-Begin menu and beverage program.

-Begin permit and license processes (through expediter)

-Set up credit with purveyors.

-Set up utility accounts (gas, electric, phone, water)

-Stationery development (logo, business cards, menu covers, ect.)

-Set up, through accountant, Federal and State tax filing

-Set up employee payroll and checking account

-Purchase equipment (tables, chairs, lighting, bathrooms, sound system, office computers, refrigeration, POS systems, service equipment, ect.)

-Finalize service and employee spec. manuals

-Final staff hiring

-Small wares list development and pricing

-China and glassware list development and pricing

-Sign service contracts and finalize credit terms with purveyors

-Uniform decisions and order

-Credit Card and service terminals in place (inc. back up system)

-Develop all forms ( reservation sheet, sales sheet, inventory forms, order forms, bank sheets, schedules, managers log )

-Set up financial/accounting system with tie ins to POS , accounts payable, payroll, food , liquor and labor costs.

-Set up office supply account and initial order.

-Set up reservation systems and book, mapping out limited reservation slots the first week. Hire and train reservationist.

-Complete new hire paperwork

-Finalize construction and detail decisions, prioritize remaining projects and set a final time line and budget.

-Set up website

- Get restaurant insurances (building, loss of business. Equipment, theft, fire, workman’s comp., health, ect...)

-Set up soft opening date and develop family and friends invite list

-Set up storage and Security ( including cameras) and begin receiving orders ( glassware, silverware. chemicals, ect.)

-Review floor plan and finalize

-Finalize menu and pricing

-Train the staff ( service, menu tasting, wine seminar, operating and service philosophy)

-All inventory on computer file and ready for updates

-Set up opening week staff schedules

- Set up weekly and long term goals with a weekly review of achievements

-Organize and hire public relations firm. Begin marketing the restaurant.

- Open for business.

This timeline is not necessarily chronological.

Good Luck

[Franky2Times]

Already way too much useless info on these replies but let me add mine. HOLD ON: you want an 80 seat place with a Chef, a sous, 3 line cooks and 2 pastry cooks. I haven't read anything here about labour costs but right here, I can tell you that you're out of your mind. Unless you pay these people about 2 bucks an hour, just these wages will kill you. Your chef should be on the line with no more than 2 other line cooks. Do you know that only about 20% of your customers will order desserts even if they are fabulous. How will you justify your 2 pastry cooks salaries to your investors? I've worked in places where we were only 2-3 guys on the line for 150 covers a night and these are places still rated 25 to 28 for food by Zagat. I would not work for these places anymore but these are the only guys I know who make money.

[beans]

We did, however, get general staffiing requirement somewhat mapped out.  For a 60-80 seat restaurant, operating 6 days a week, we need about:

4 servers (15 covers each)

a buser

a runner

1 bartender

2 host/hostesses

1 manager

1 sommelier

******

Having been through business school during the height of the dot-com era, I would like to use the Bill Gates philosophy of management, which roughly translates to if you treat people well, they will work hard in return.  I want to offer full healthcare benefits, paid vacations and other perks to everyone....that is until I was told that my full payroll including worker's compensation cannot exceed 35% of my gross revenue.  Okay, employees will get part time shifts, and partial health benefits. 

Still can't find a way to improve on the 16% return for my investors.

I don't agree with your assessment of your staff needs, primarily for FOH. You will need more than one bartender, one runner and four waitstaff. Again, I'm not sure you would want the expense of a sommelier. (Consider this, we rotate our service staff to work as food runners during peak busy season -- everyone does this 1 shift a week, like it or not; and during our slower times, you run your own food!)

Consider those that only want part time and work only 3-4 of the shifts, when someone is ill and cannot report to work, etc.

And full healthcare benefits for everyone? Wow, I'll move to NYC and make an application! Paid vacations?

Not sure if that is the norm for NYC waitstaff, is it? Crap, our servers are paid $2.13 an hour and are not offered any medical healthcare benefits and that is bascially the norm in Ohio, with a few hourly variations here and there.

edit: quick fix for a quick post on the run... my apologies for it being so to the point and a tad abrupt (short on time today)

Edited January 12, 2004 by beans (log)

[Pan]

I like the fact that Ya-Roo's heart is in the right place in that she wants to do well by her employees, even if some of her concepts of humane employment may not be affordable. Seems to me, it would make sense to start with relatively low pay and give the employees raises and increased benefits as the restaurant, hopefully, shows profits. But Ya-Roo's decency shows through, and I salute her for it.

[beans]

I like the fact that Ya-Roo's heart is in the right place in that she wants to do well by her employees, even if some of her concepts of humane employment may not be affordable. Seems to me, it would make sense to start with relatively low pay and give the employees raises and increased benefits as the restaurant, hopefully, shows profits. But Ya-Roo's decency shows through, and I salute her for it.

I wasn't questioning her decency, or generous heart, but what is common in the biz. Unless it is a hotel chain, a stadium sort of food and beverage (i.e., Aramark), health benefits are usually not provided. That is a huge expense and why bother with the revolving door of FOH staff?

Trust me, if $2.13 an hour is inhumane, and working without paid vacations or health benefits, which can suck at times -- but our servers walk out with an easy $150+ cash per single shift (which may average only six hours, and they often work doubles), an still collect a paycheck.