Planning for a successful first quarter and new year doesn’t start on January 1st. And if your doors aren’t even open yet and your restaurant is just a concept on paper, then you know that successful planning may take months or even years. Recently, Synergy’s co-founder Dean Small, was invited to speak on the CareerDay Blueprint podcast on how to create a successful restaurant. He shares his insights from his thirty plus year career as a restaurant consultant, including common mistakes new restaurant owners make, the importance of restaurant training and how to get restaurant funding. We’d like to share with you some of the interview. To listen to the entire segment, please go here.
Note: The interview below has been edited for clarity and brevity.
Dean Small: Having system standards and organizational infrastructure allows operators to maximize their productivity and their efficiencies, and reduce their labor costs, which are really big needs in the industry today.
Ashley Twible: Oh, I’m sure, I think you hit probably every major area, where some people just starting out struggle with. So tell me about some common ways that people use to find funding in order to open a restaurant. I think that’s one of the primary questions most people have is, “How do you pay for it?”
Dean: Well, if you’re not a seasoned restaurateur, and have experience it certainly becomes a little more challenging and you have to basically go to the old-school approaches using your own personal resources, maybe SBA. But even with SBA or banking you really need a good concept book and financial model to in order to get you funding.
Other ways is, you know, there’s obviously friends and family, there are banks, there’s trying to find a partner, investor but anybody who’s going to loan you money is going to want to see a rock solid—not even a big business plan—but more of a concept strategy and a financial model. What they want to know is, “What’s in in for me? When am I going to get my money back? When is my return on investment and what’s my upside?” So understanding that that’s what the investor’s looking for, you need to be ready to address those issues, otherwise it’s going to be challenging for them to write those big checks.
Ashley: And I think, would you agree, that probably it takes a bit a of time for a restaurant to start turning a profit?
Dean: Well it depends if it’s properly structured, it can start being profitable in the very early stages like like five to six months, you know, if not sooner. If it’s properly designed. Obviously, you need some run way if you want to get to that level. If you don’t incubate it the right way, it can take it significantly longer and in some cases never because you never get the model right. At the end of the day, the restaurant business any other business–there’s a financial model and you need to be able to put so much money into the bottom line in order to make it a viable concept. And if you can’t accomplish that then there never be an ROI. So that’s how you have to think about it. It’s not just serving great food, it’s really about how do you turn that great food and beverage and hospitality into a winning financial strategy.
Ashley: Well six months with good foundation and good structure and good guidance, I think, is relatively encouraging. I was anticipating a bit longer, actually, for some ROIs. So Dean, can you tell us some things to keep an eye out for when you’re choosing a physical location?
Dean: First off, you need to determine who is your target market. You want to find a location that really addresses who you’re targeting with the understanding that people like to basically choose restaurants that are within a three to five mile radius of where they live or where they work. So, that’s one piece. The other piece is you have to again understand your financial model because you don’t want to have your rent more than seven percent or eight percent of your projected gross sales. So if you think that you’re going to have a concept that’s only going to be doing about a million dollars a year in sales, then you need to have a rent factor of around sixty, seventy thousand dollars so that your financial model works. You shouldn’t be looking at real estate opportunities will not fit within the financial model of the business.
Ashley: Tell us some of the most common mistake you’ve see owners making when opening a new restaurant.
Dean: They don’t get professional help they, they let their egos in the way. They think they know a lot because they’ve eaten at a bunch of restaurants. They don’t really understand the business portion of the business in terms of how to make money. They get real estate that are much bigger than their needs are and then they get upside down on the rent really quickly.
To listen to the complete interview with Dean Small and hear more of his tips for a successful restaurant, please click here.Restaurant Management, Restaurant Start ups, Restaurant Training