Restaurant subject that was posted recently.

[Joel Owens]

I wanted to put my response here as the subject was removed.The original poster I think was trying to ask for money which is not allowed. I wanted to put my reply here so others could learn a little about the restaurant biz.

The original poster:

"Hello my name is REMOVED I am the exe Chef of bin 68. I am running a 22% food cost at the moment I took over the restaurant three weeks ago and we were at a 120% food cost Labor was 100% and it is now at 34%. I have been in the culinary business for a little over ten years. I have worked for five star resorts, mom and pop shops, cheese cake factory.

I am using quick books to track whats going on as well as spread sheets for day to day and week to week. we have been open only a month and am finding that not very many people interested in month old baby. I have a gm that has ran Multi million dollar restaurants as well as smaller ones.

Last month we had a positive cash flow of 6k after entering all our bills and invoices. The LLC only has one trade line because the owner does not know how to build Bushiness Credibility. To him 6k cash flow on first month is not enof and wants to change the concept to sushi if I cant buy him out at the end of month. I have been spreading the word and trying every path that I can take, Chamber of Commerce, Business fund ability, bbb, Score, Banks and so forth trying to see if some one can help me out. If you can help me out or need more info Plz call or email me about it."

My Response:

Do they own the real estate (building and land) with this restaurant or on a lease??

If it's just a lease the terms can make it good or bad.If you have a new business all you have is the equipment which liquidates at 10 to 15 cents on the dollar.

You have not created a salable commodity yet because buyers want at least a year or longer of stability to buy a business based on cash flow.

Usually you get 3 times net earnings.So a business making 33,000 after expenses would trade at 100,000 etc.

SBA loans are almost impossible right now so most business transactions happen with all cash down or the current owner carrying 10 to 50% of the paper.The owner generally will not sell getting only 10 to 20% down.

The reason is they might be living off that income stream and have to live off the money or might have to get a certain amount to franchise and grow their concept or reinvest in other opportunities plus the commission comes out of the down payment for the business listing broker and the fee runs from usually 8 to 10 percent.

In some instances if the list price is low commission could be 12%.

Being a chef and OWNING a restaurant are way far apart from each other.I used to own a restaurant and have real world experience.The value of a restaurant is based on the lease terms,how new it is,available parking,saturation of similar concepts in the immediate area. How far the consumer travels out to eat will be based on urban,suburban,rural locations.

All of this and many other factors need to be considered running a restaurant.The biggest issue a one off restaurant faces is food quality and pricing.Small places can't order in massive quantities so do not have long term food contracts locked in at a set price like chains do.

Instead food cost fluctuations can hurt a small restaurant plus the quality you get from a supplier might be good one week but the next a new company came in to the food supplier and gave them a cheaper deal to use their product and try it out.The new product may be better,the same, or worse.

The problem is you pay the same price and charge the customer the same price as before but it might not taste as good.I don't know how you will buy this restaurant as you have no experience as an owner.

You can't just open a restaurant and expect people to come in.A few will but not enough to make a great business.You have to pound the ground and press palms and get the product with free samples into people's mouths.This will generate buzz for your restaurant and create customers with a relationship.Customers are habit creatures.Get them a great experience,great food,decent price and you will get repeat business.