OT-Any former or current Restaurant/Bar Owners on here

[HFrog1999]

Pretty sure sweat equity graduated TCU 3 years before I did. Sometimes I feel like he’s pulling our leg.

On the board of a major hospital(s). Working from Hawaii indefinitely. Owns 7 restaurants in New York. Bought a suite on the new east side. Hell, I can’t even remember many of the other claims.

Anyway. I’m over here pretty proud that my cars are paid off and I have more than 30% equity into my home.

Maybe I’m still just a few years away from being the proud owner of a few NYC restaurants.

Well maniac, you’ve got a lot of catching up to do in 3 years

 

[AroundWorldFrog]

I take no pride in *saying* I own the establishments - merely was offering advice. (And pls do not dox me. I know you know who I am.) And happy to transfer those NYC establishments to you...with the liabilities.

(And here is the view from this evening from a hike into Town.) I do not scheissing with anyone.

Were all 7 closed during the shut down? That's a tough pill to swallow if so. Are they open back up now?

 

[tcudoc]

I worked in a restaurant for 10 years and it put me through high school years and college. I had a friend who stayed in the industry and busted his butt. He was very successful and moved up the corporate ladder for that company, which exploded over a twenty year period. He eventually was ready to purchase a franchise and I was lucky enough to be an investor for 5% (corporate rules said he could only own 45% and no one other person could be more than 5%). He worked hard to make it successful, but it was a name that was almost always successful, so he just had to manage it tightly. My initial investment was returned in ~2.5 years and then I would receive about $20K a year of mailbox money. This went on until the company was sold to a larger corporation and they went on a 4-5 year mission to buy back all of the franchise stores back into the company. We basically had no choice, it was just a matter of when it would happen and what the buyout price would be. My friend negotiated the time and purchase price and got what was considered a fair price. The sale was negotiated and a sell date was set. The sell date occurred 10 days prior to the national mandated shutdown of all restaurants. The whole adventure including the sell date was likely the best decision that I have ever made and all I did was agree to invest the money. He did everything else in the day to day, so it was truly just mailbox money followed by a lump sum at the end of the adventure, just before the restaurant industry's collapse.

One word of caution about the restaurant industry. I don't know where the stat comes from or the exact details, but it goes something like this. Chain restaurants with name recognition typically succeed something like 90 or 95% of the time. One off, family owned, single restaurants typically fail 90-95% of the time within x number of years (maybe five...I can't recall). I may have the numbers wrong, but the general idea is correct.

Of course, with family restaurants, occasionally you could hit a home run and expand into an empire like the Pappa's family of restaurants did, but that is typically the rare exception. It is really hard to make it as a one off restaurant.

I have a couple of physician friends who invested in Home Slice Pizza on South Congress in Austin. It was the right product, the right time, and in the right location and it made a killing. They tried to branch out to a different location and had only modest success. The culture of South Congress was just exactly what they needed with low overhead (other than exorbitant rent for the space), a simple product, and a built in customer base from the hipster crowd on South Congress. Sometimes it is luck and other times brains for knowing what the right opportunities are. My friend that I invested with lives and breathes the restaurant business, so he can recognize good companies from poorly run companies based on industry information that is available.

 

[RollToad]

I worked in a restaurant for 10 years and it put me through high school years and college. I had a friend who stayed in the industry and busted his butt. He was very successful and moved up the corporate ladder for that company, which exploded over a twenty year period. He eventually was ready to purchase a franchise and I was lucky enough to be an investor for 5% (corporate rules said he could only own 45% and no one other person could be more than 5%). He worked hard to make it successful, but it was a name that was almost always successful, so he just had to manage it tightly. My initial investment was returned in ~2.5 years and then I would receive about $20K a year of mailbox money. This went on until the company was sold to a larger corporation and they went on a 4-5 year mission to buy back all of the franchise stores back into the company. We basically had no choice, it was just a matter of when it would happen and what the buyout price would be. My friend negotiated the time and purchase price and got what was considered a fair price. The sale was negotiated and a sell date was set. The sell date occurred 10 days prior to the national mandated shutdown of all restaurants. The whole adventure including the sell date was likely the best decision that I have ever made and all I did was agree to invest the money. He did everything else in the day to day, so it was truly just mailbox money followed by a lump sum at the end of the adventure, just before the restaurant industry's collapse.

One word of caution about the restaurant industry. I don't know where the stat comes from or the exact details, but it goes something like this. Chain restaurants with name recognition typically succeed something like 90 or 95% of the time. One off, family owned, single restaurants typically fail 90-95% of the time within x number of years (maybe five...I can't recall). I may have the numbers wrong, but the general idea is correct.

Of course, with family restaurants, occasionally you could hit a home run and expand into an empire like the Pappa's family of restaurants did, but that is typically the rare exception. It is really hard to make it as a one off restaurant.

I have a couple of physician friends who invested in Home Slice Pizza on South Congress in Austin. It was the right product, the right time, and in the right location and it made a killing. They tried to branch out to a different location and had only modest success. The culture of South Congress was just exactly what they needed with low overhead (other than exorbitant rent for the space), a simple product, and a built in customer base from the hipster crowd on South Congress. Sometimes it is luck and other times brains for knowing what the right opportunities are. My friend that I invested with lives and breathes the restaurant business, so he can recognize good companies from poorly run companies based on industry information that is available.

Tl;dr

 

[geezer]

I worked in a restaurant for 10 years and it put me through high school years and college. I had a friend who stayed in the industry and busted his butt. He was very successful and moved up the corporate ladder for that company, which exploded over a twenty year period. He eventually was ready to purchase a franchise and I was lucky enough to be an investor for 5% (corporate rules said he could only own 45% and no one other person could be more than 5%). He worked hard to make it successful, but it was a name that was almost always successful, so he just had to manage it tightly. My initial investment was returned in ~2.5 years and then I would receive about $20K a year of mailbox money. This went on until the company was sold to a larger corporation and they went on a 4-5 year mission to buy back all of the franchise stores back into the company. We basically had no choice, it was just a matter of when it would happen and what the buyout price would be. My friend negotiated the time and purchase price and got what was considered a fair price. The sale was negotiated and a sell date was set. The sell date occurred 10 days prior to the national mandated shutdown of all restaurants. The whole adventure including the sell date was likely the best decision that I have ever made and all I did was agree to invest the money. He did everything else in the day to day, so it was truly just mailbox money followed by a lump sum at the end of the adventure, just before the restaurant industry's collapse.

One word of caution about the restaurant industry. I don't know where the stat comes from or the exact details, but it goes something like this. Chain restaurants with name recognition typically succeed something like 90 or 95% of the time. One off, family owned, single restaurants typically fail 90-95% of the time within x number of years (maybe five...I can't recall). I may have the numbers wrong, but the general idea is correct.

Of course, with family restaurants, occasionally you could hit a home run and expand into an empire like the Pappa's family of restaurants did, but that is typically the rare exception. It is really hard to make it as a one off restaurant.

I have a couple of physician friends who invested in Home Slice Pizza on South Congress in Austin. It was the right product, the right time, and in the right location and it made a killing. They tried to branch out to a different location and had only modest success. The culture of South Congress was just exactly what they needed with low overhead (other than exorbitant rent for the space), a simple product, and a built in customer base from the hipster crowd on South Congress. Sometimes it is luck and other times brains for knowing what the right opportunities are. My friend that I invested with lives and breathes the restaurant business, so he can recognize good companies from poorly run companies based on industry information that is available.

Longest #humblebrag ever posted on KF.c

 

[BABYFACE]

To expand on Doc’s numbers. 50% of all new start ups (one offs) fail in the first first 6 months to a year. 95% fail within the first five years.

Many reasons involved for this. The first year failures are mainly these:

1) Started out with not enough capital and proper planning.
2) Didn’t know what the frick they were doing in the first place. Had the money and thought it would be cool to do.
3) Poor concept and not feasible financially.

Not lasting over five years:
1) Competition is a witch.
2) The lease becomes cost prohibitive and not worth it or affordable to move to a different location.
3) Loss of passion for it.
4) No reason other there are so many things that can sink you.

If starting out with a mom and pop establishment:

1) Find your niche that would make you desirable or unique.
1b) Need to have something signature about your future establishment that creates an identity and attracts customers.
2) Financial feasibility.
3) BEVERAGE sales. This is the easiest way to make a profit. Liquor is an expensive license and maybe not best choice to start out with. Beer and wine license more affordable. Draft beer will make you more money than bottled beer. Wine can kick your ass because of waste. Do not forget how much money is made off non alcoholic beverage sales. Soft drinks, lemonades and tea sales boost profits. Letting customers only order water will kill you. Get a paid beverage in their hands.
4) You need to build up and nuture your regular customers. They will keep your doors open.

 

[FinanceFrog]

Pretty sure sweat equity graduated TCU 3 years before I did. Sometimes I feel like he’s pulling our leg.

On the board of a major hospital(s). Working from Hawaii indefinitely. Owns 7 restaurants in New York. Bought a suite on the new east side. Hell, I can’t even remember many of the other claims.

Anyway. I’m over here pretty proud that my cars are paid off and I have more than 30% equity into my home.

Maybe I’m still just a few years away from being the proud owner of a few NYC restaurants.

i bet he has a bigger package than you too.

 

[AroundWorldFrog]

To expand on Doc’s numbers. 50% of all new start ups (one offs) fail in the first first 6 months to a year. 95% fail within the first five years.

Many reasons involved for this. The first year failures are mainly these:

1) Started out with not enough capital and proper planning.
2) Didn’t know what the frick they were doing in the first place. Had the money and thought it would be cool to do.
3) Poor concept and not feasible financially.

Not lasting over five years:
1) Competition is a witch.
2) The lease becomes cost prohibitive and not worth it or affordable to move to a different location.
3) Loss of passion for it.
4) No reason other there are so many things that can sink you.

If starting out with a mom and pop establishment:

1) Find your niche that would make you desirable or unique.
1b) Need to have something signature about your future establishment that creates an identity and attracts customers.
2) Financial feasibility.
3) BEVERAGE sales. This is the easiest way to make a profit. Liquor is an expensive license and maybe not best choice to start out with. Beer and wine license more affordable. Draft beer will make you more money than bottled beer. Wine can kick your ass because of waste. Do not forget how much money is made off non alcoholic beverage sales. Soft drinks, lemonades and tea sales boost profits. Letting customers only order water will kill you. Get a paid beverage in their hands.
4) You need to build up and nuture your regular customers. They will keep doors open.

Very good synopsis. I've never been in the restaurant business myself, but have been involved in multiple restaurant acquisitions and know several owners very well.

Having enough capital and beverage sales will get you through any startup hiccups. There are industry standards for lease, labor, food costs. Don't let any of those get out of hand.

Man, there's a lot of different types of permits and licenses in Texas for alcohol. Arizona was much simpler.

 

[FrogCoach84]

Very good synopsis. I've never been in the restaurant business myself, but have been involved in multiple restaurant acquisitions and know several owners very well.

Having enough capital and beverage sales will get you through any startup hiccups. There are industry standards for lease, labor, food costs. Don't let any of those get out of hand.

Man, there's a lot of different types of permits and licenses in Texas for alcohol. Arizona was much simpler.

I’m in commercial real estate and have dealt with a ton of restaurants over the years. AroundWorld is right when bringing up industry standards for your overhead costs.

On the real estate side it varies but typically falls between 8-12%. That is, your rent should be no more than 8-12% of your revenue. This is where a lot of restaurants make their first fatal mistake. They want the shiny digs but don’t realize if you climb much higher than that on your rent/revenue ratio you have little chance of surviving.

The importance of those percentage of revenue numbers applies to your other overhead costs as well.

The other thing just from seeing who makes it and who doesn’t; you need enough cash to at least run your business for a year regardless of whether you’re making money or not. Those reserves are huge in an industry as volatile as food service.

Lastly everyone loves second gen restaurant space and for good reason. It keeps your startup costs much lower than tackling a cold dark shell buildout. But research the location very well if it’s second gen. When one restaurant doesn’t make it in a location, you can write it off as a poor operation; once you get to two or more restaurants blowing out there’s a psychological effect on your potential customer base. They associate the location with failing businesses and you get lumped in.

Best of luck!

 

[Sweat Equity]

Were all 7 closed during the shut down? That's a tough pill to swallow if so. Are they open back up now?

Still closed. It was a side venture and my Partners and myself are eating the overhead (As we should.). People that work with us love us now more than ever...oddly? But I do not fault, I love them, too.

 

[BrewingFrog]

When one restaurant doesn’t make it in a location, you can write it off as a poor operation; once you get to two or more restaurants blowing out there’s a psychological effect on your potential customer base. They associate the location with failing businesses and you get lumped in.

Location of Death. I just find that odd sometimes, because I have seen a lot of places move into a space and do well, but some spaces are just guaranteed death. Whether it be bad access, parking, weird building, whatever, some locations are just bad through and through.

 

[Paul in uhh]

I take no pride in *saying* I own the establishments - merely was offering advice. (And pls do not dox me. I know you know who I am.) And happy to transfer those NYC establishments to you...with the liabilities.

(And here is the view from this evening from a hike into Town.) I do not scheissing with anyone.

Thanks for the inspiration to get off the freaking internet

 

[AroundWorldFrog]

Location of Death. I just find that odd sometimes, because I have seen a lot of places move into a space and do well, but some spaces are just guaranteed death. Whether it be bad access, parking, weird building, whatever, some locations are just bad through and through.

There was a location in Flagstaff that was like that. It was literally half a block from the popular areas of downtown to walk around. Great building, but no foot traffic and was 4 different restaurants over about 15 years and empty probably 3-4 of those years. But people kept trying, thinking they were the ones that could change it.

 

[tcudoc]

There was a location in Flagstaff that was like that. It was literally half a block from the popular areas of downtown to walk around. Great building, but no foot traffic and was 4 different restaurants over about 15 years and empty probably 3-4 of those years. But people kept trying, thinking they were the ones that could change it.

We have one of those in our city. I tell my kids it must have been built on an Indian burial ground.

 

[AroundWorldFrog]

We have one of those in our city. I tell my kids it must have been built on an Indian burial ground.

In our case it was an Indian restaurant burial ground.

 

[BrewingFrog]

In our case it was an Indian restaurant burial ground.

"Oh, honey! The Tandoori Chicken is to die for!"

 

[tcudoc]

In our case it was an Indian restaurant burial ground.

I believe you may have curried that joke a bit too far...

 

[YA]

My dad's retirement was spent investing and starting Wendy's locations in East Texas and Northern Louisiana. Opened his first one in 1985 and it lasted thru my TCU days in mid-1990's. He sold them all and most of them to a Whataburger franchisee. It was not an easy business with Wendy corporate mandating breakfast and supper salad bars that just ate profits.

I would steer clear if you value $$ and your sanity.

 

[Paul in uhh]

My dad's retirement was spent investing and starting Wendy's locations in East Texas and Northern Louisiana. Opened his first one in 1985 and it lasted thru my TCU days in mid-1990's. He sold them all and most of them to a Whataburger franchisee. It was not an easy business with Wendy corporate mandating breakfast and supper salad bars that just ate profits.

I would steer clear if you value $$ and your sanity.

I’ve heard CFA units print the money but you basically never have the time to spend it

 

[netty2424]

My dad's retirement was spent investing and starting Wendy's locations in East Texas and Northern Louisiana. Opened his first one in 1985 and it lasted thru my TCU days in mid-1990's. He sold them all and most of them to a Whataburger franchisee. It was not an easy business with Wendy corporate mandating breakfast and supper salad bars that just ate profits.

I would steer clear if you value $$ and your sanity.

Had a co-worker who owned a Subway. Said all of the promotions, like $5.00 foot long, were corporate driven, and required despite being money losers on every $5.00 foot long they sold.

He eventually sold it because he had no control over his restaurant.