Restaurant start-up

JohnAndersen · #1 03-10-2007, 12:46 PM

Myself and a couple others have been having some serious discussion about starting a Doner Kebab restaurant in our college town after seeing its popularity throughout Europe. If we can find a location with high pedestrian traffic close to our central bar area this idea seems like it could be profitable.

I am currently looking for information everywhere I can find it on starting up businesses and have sought out some of our entrepreneurship specialists in our business school as well but I thought I would ask 2+2 and see if anyone had some thoughts or ideas.

Are there any other options for start-up capital besides selling the idea to family and getting a loan? (I am pretty sure I don't have the credit history for a loan of this size)

What are some common problems that arise with restaurant start-up?

We are putting a business plan together as we speak, is there anything that should be included that we might possibly overlook?

Does anyone have experience with restaurant startup specifically that could give me some specific tips or ideas?

Also, feel free to comment on the initial concept as well if there is something about it that I am overlooking.

Thanks in advance,

John

Acorn Sigma · #2 03-11-2007, 09:59 AM

John, I seriously considered doing something very similar after I went to Europe with a different kind of restaurant.

The restaurant business is not an easy one. (So I hear...) I have no experiance, but you can imagine the problems.

With something like this, foot traffic (like a college town) is key. Someone opened a restaurant similar to my idea in a suburb, not a college town, and when it fails I think no foot traffic will be a big reason.

Where is your college? I would like to quit my job and go start a business like this and contribute capital.

JohnAndersen · #3 03-11-2007, 04:20 PM

Columbia, MO

spex x · #4 03-12-2007, 09:50 AM

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Are there any other options for start-up capital besides selling the idea to family and getting a loan? (I am pretty sure I don't have the credit history for a loan of this size)

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There are not really any other major funding sources than either family or banks. Unfortunately, those are your options. On the bright side, this is exactly what the SBA is for. You will need a significant chunk of change though - at least 30% of the total loan cash on hand. The SBA doesn't provide loans unless you've got about 30% in the game. For the 30% you can go to family/friends, or you can try www.prosper.com.

One thing to consider is that neither the bank nor the SBA will be too impressed with your inexperience both in entrepreneurship generally, and the restaurant business specifically. Restaurants are difficult to run and it is a tough, competitive business. You'll very likely need to get someone on board with you that has experience in the restaurant industry in order to secure funding from a bank.

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What are some common problems that arise with restaurant start-up?

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You need to watch out for a few things. First, undercapitalization is a huge problem. As I said, restaurant is a tough business - you'll need to have plenty of capital on hand to get yourself estblished. Be sure to get a loan for enough to cover both your living expenses and your business expenses for a MINIMUM of one year, two years is better.

Second, staffing is a major cost (especially kitchen staff) and you need to consult with someone who knows how to run a kitchen in order to appropriately guage how much kitchen help you'll need. An example is the recently popular spanish tapas restaurants. There is a reason that you spend $40-$100 per person at these places. Its because they make such a large number of dishes that they need more kitchen staff than other types of restaurants, thus higher costs. You should be careful not to underestimate your staffing needs.

Third, you can't spend too much on a great location. Consumer studies have consistently shown that people won't stray more than about 3 blocks to go to a restaurtant. In other words, if you're not where people are already, then its real tough to get them to come to you. Just think about your own experience - when its time to choose a restaurant, how often do you forget about that little sidestreet Ethiopian place that you've been meaning to try for a year? It happens to me all the time, and I end up eating at the same stupid 6 or 7 places all the time.

Fourth, you can't spend too much on marketing - especially in the restaurant business. You should plan on spending 5% of gross on advertising. One thing that works real good is to give away a lot of food - after you've been open for like 3 or 4 weeks, have a big 'grand opening' party where you give your first 100-200 customers free lunch. Create a lot of hype about it - call journalists, hang flyers, get the radio station to come out and broadcast live, promise to give 10% of net back to a local charity. Just create a lot of hype. This kind of thing can get expensive, but IMO, it is easily worth the money.

Part of the difficulty in trying a new food concept is that you have to do a bit of educating your customers. People can be reluctant to try new things. If you allow them to try the food for free it will go a long way to help you get established.

The charity angle works real good in college towns - tell everyone that you give 10% of profits back to a local charity every Teusday. Its a small monthly expense, and it does net some results. In the first year, you just want to concentrate on selling people on your high quality, unique food. Whatever you can do to get them in the door, you should try.

BradleyT · #5 03-12-2007, 01:46 PM

There's a dummies book for running a restaurant - "Running a Restaurant for Dummies" - that you should probably read.

JohnAndersen · #6 03-12-2007, 03:04 PM

thanks for the reply spex, and I've been reading like a fiend, just havent seen that one yet, Ill order it off of amazon

Acorn Sigma · #7 03-12-2007, 09:32 PM

Good stuff spex. Yes, I wouldn't want to do something like this without someone with experience. However, I don't think it would be too tough to find a manager with a background in the fast food industry.

I think the general idea or big marketing in the beginning is key.

~AS

TheGrifter · #8 03-12-2007, 10:25 PM

Oh my god...I haven't had a Doner Kebab since I left Germany....if this happens, I will drive any distance to find you and eat Doner Kebabs every [censored] day.

maxtower · #9 03-13-2007, 01:04 AM

There are probably better businesses you can start besides a restaurant aren't there? What are your goals for owning a restaurant? The downside is owing a lot of money. The upside of a restaurant isn't that great. You'll make some money, but not a ton. If you don't have a lot of experience, why not look into something that will result in higher margins?
Please don't just open a restaurant because you are dreaming of these Doner Kebabs. Thats definitely the wrong reason.

JohnAndersen · #10 03-13-2007, 08:00 AM

[ QUOTE ]
There are probably better businesses you can start besides a restaurant aren't there? What are your goals for owning a restaurant? The downside is owing a lot of money. The upside of a restaurant isn't that great. You'll make some money, but not a ton. If you don't have a lot of experience, why not look into something that will result in higher margins?
Please don't just open a restaurant because you are dreaming of these Doner Kebabs. Thats definitely the wrong reason.

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Its not because I am dreaming of them it is because I live in a town with a lot of late night pedestrian traffic great for this kind of concept. Late night food where I am at is huge and I think this could be profitable in the right location.