Food for thought
It’s natural to think about making big changes in our lives this time of year. Many of us want to lose weight, spend more time with our families or make more money. When it comes to making changes in the money department, we typically consider the pros and cons of changing jobs or even changing careers. Some of us, actually a lot of us, not only contemplate but actually start up our own businesses, and not just at the New Year. According to a recent Forbes magazine article, approximately 543,000 new small businesses (those classified as having less than 500 employees) get started in the US each month. While many of us may have heard some dire numbers about how many of these new businesses fail, the numbers are actually better than many of us might think. According to the same Forbes article, “7 out of 10 new employer firms survive at least 2 years, half at least 5 years, a third at least 10 years and a quarter stay in business 15 years or more.”
Crunch Time
Speaking of new business statistics, there is probably no industry that suffers from bad data being spread about it more than the restaurant industry. One statistic that seems to make the rounds is that 60 percent of all new restaurants fail within the first year. According to the U.S. Small Business Administration (SBA), “For employer businesses, survival rates as businesses age followed similar patterns for manufacturing, retail trade, food services & hotels, and construction. The fact that the food services industry shows no greater propensity to fail runs counter to the myth that restaurants are a relatively risky business.”
But while opening a restaurant seems to be no riskier than starting any other entrepreneurial endeavor, if you want to open a new restaurant in 2018, then you better know that there are some serious changes afoot in the industry. Perhaps the biggest one is that Restaurant Business Online has named the delivery component as the new “fast-casual” in the restaurant industry. “It has caught on fast and won’t be fading anytime soon. It’s posting the highest growth rate,” said Senior Vice President of Research and Innovation Services for the National Restaurant Association Hudson Riehle. Dunkin’ Donuts CEO Nigel Travis agreed in a recent statement, calling delivery the “Holy Grail in the next few years.” So what does this major shift mean for restauranteurs? It means that in addition to making delicious food, provide a clean and inviting location, and hiring and keeping motivated staff members, they will need to maintain a technological infrastructure that will integrate one, or several, delivery options.
The pesto’s yet to come
So, with major changes on the menu for the upcoming year and beyond, how should a potential restaurateur get off on the right foot? Greg Kalina is a restaurant industry and small business startup expert based in the Dallas/Fort Worth area. He has worked internationally on startups, owned and run food service carts and trailers, and has worked with clients on ongoing development in areas of restaurant , health and nutrition. While the industry does see its fair share of changes year over year, Kalina stresses that the foundation of a successful restaurant is in its sound – and simple – business concepts. “I stress to my clients what Warren Buffett says – ‘I am looking for a business that my idiot nephew can run,’” said Kalina, adding that having enough capital is also key. “Not having enough funds is probably one of the main factors for causing a restaurant to close within the first 14 months. Opening a restaurant always takes three to four months longer than you thought and 40 percent more in operating cost then you figured from the beginning. Therefore, when you open the doors you’ve already spent a lot of your capital and you are already behind in your financial projections.”
Besides having a solid financial footing, Kalina says that every potential restaurant operation also needs to be built on a partnership. “One of my suggestions that I wholeheartedly believe in is finding a partner if you’re going to be in the restaurant business. This is a very time intensive business and the burnout rate is incredible. You need to find someone who shares your passion for your concept. In the restaurant business there are two main components - the front of the house and back of the house. If you are a strong front of the house person then you need to find a partner who is just as strong in the back of the house. Neither area can be neglected,” Kalina said. “I counsel with Nabil Saad and he brings a different skill set to our counseling session that I do not possess. If I was to open a business I would only do it if Nabil was part of it with me. Running a business is very difficult. Having someone like Nabil with me increases my chance of success.”
The restaurant business is a lot like the real estate business, where a big piece of the success equation is location. Being based in Dallas/Fort Worth, Kalina was also able to shed some light on the challenges that potential restaurateurs face with finding the right location here. “Right now one of the biggest problems in Fort Worth is one of finding suitable locations. There are locations available just not at a dollar figure the operator can make a profit. One of the main reasons a number of restaurants fail at one location is that the rent is priced too high for the concept,” said Kalina. That’s why he also advised working with a real estate professional that knows the market well. “Working with a professional commercial agent, it can take anywhere from four to six months to find a viable location. At any given time we probably have two or three operators who are ready to launch restaurants and are looking for suitable locations for their concept,” Kalina said.
But perhaps Kalina’s biggest concern when he works with his clients is to make sure that they aren’t bringing a concept to the market that’s played out. “The biggest misconception about restaurants is someone will come in and say, “I cook at home for my friends and family everybody loves my food.” There is a big difference between a hobby and running a profitable restaurant. Please don’t come to us and say I have a great idea for a restaurant and it’s either a Mexican or a barbecue concept. The Dallas-Fort Worth area does not need another Mexican or barbecue restaurant. We are oversaturated with these two concepts. What is going to separate your restaurant from the others that are already existing?” said Kalina.
From finding the perfect location, to knowing how to write a business plan, to making sure that your finances are in place to make it a success, starting a restaurant is no easy task. Fortunately, there is help. Kalina is a mentor in the Fort Worth SCORE office, which provides free business counseling, mentoring, and coaching to existing and emerging businesses in the Fort Worth area. He is also hosting the SCORE seminar, “How to Start a Restaurant and Food Truck Business,” that will cover many vital aspects of the restaurant industry. The seminar will be Saturday, January 13, 2018 from 9 a.m. to 2 p.m. at Pinnstation, located at 201 E. Abram Street in Arlington.
For more information on the seminar, visit:
http://events.r20.constantcontact.com/register/event?llr=fg4jspcab&oeidk=a07eewg769j516ff364
This story was originally published December 31, 2017 at 12:00 AM with the headline "Food for thought."