Running a Restaurant/Sandwich Shop
For over 8 years my family and I have been thinking of the need for a Spanish sandwich shop in our area. We continue to think of it. We currently are business owners and understand that there are normally a lot of things involved in opening a business that we are not experts in. We want to open a sandwich shop near approximately 100 business (small and large) and target only breakfast and lunch Spanish sandwiches with Spanish coffee. Open from 6am to (2-3pm) The building we are looking at has to be built out and the lease is approximately $2100 a month. The sandwiches will have both hot and cold items, and the good coffee will be key. My biggest concern is that we do not plan it out right and fail. I know location is a big thing and although I believe this is a fabulous location (meaning all the businesses we can target) it seems too high to just think. How do you conduct research on the need for the shop? What is the approximate cost for the start up? What things do I need to know or look into since I am dealing with food and people, before we actually move forward? What are the biggest reasons why small shops don't make it for more than one year or three years?
Hello Stephanie and thanks for the question.
I don’t know that I will be able to answer all your questions in great detail in this forum, but I’ll try...
First the good news, you can open a sandwich shop fairly easily, if that is your dream. You just have to make a giant to-do list and jump over all of the financing, lease, licensing, build-out, equipment and staffing, etc. – hurdles. If you wish to make a success of running your sandwich business that is actually a whole 'nuther ball game.
If you remember nothing else we discuss, remember this – running the race to open and running the day to day operations are two separate lifetimes of a business. This is truly one of the major pitfalls of opening your own show. The demands are so great to “create the space” - that many fail to properly plan and detail their operations phase - because getting open - knocks the stuffing out of them. During the build to open - they find so little time to prepare for running the operation that after they open - they are staring up from “a gotta get caught up hole” - and never do.
At this point I might tell you to go work at a successful sandwich shop to see how it is really done or to save yourself a lot of headaches and buy a sandwich franchise as their de-bugged systems will make up a ton of ground for your lack of experience… but I won’t.
Go to the National Restaurant Association(NRA) website and mine their resources and talk to people in the business (chefs, owners, food suppliers) in your area. At this point you really need to get a better feel for your match (not just desire) to the demands of a opening and running a restaurant.
Below you will find advice that should be helpful your situation -
Just because you can doesn’t mean you should. You might have the idea, experience, desire, money, and location all lined up, but unless you have an absolute determination to do whatever it takes to make it happen, or an absolute passion for the industry/your product, or an absolute psychosis about working for other people, don’t open your own restaurant business!
Determine a realistic financial game plan—the earlier the better. Know every aspect of costs and controls…fixed costs (unaffected by sales volume changes), variable costs (clearly linked to business volume changes) and prime costs (food, beverage, payroll, payroll taxes, and benefits). Overanalyze every aspect and know what your breakeven point is from the “git go” by having a solid proforma.
Before passing go, can you get legal exclusivity or complete control of your brand? Is there a part of your idea that allows you to dominate your competition? Can you illustrate a limited downside for investors? Do you have a solid plan for taking on economic downturns? Does your plan include wiggle room for unforeseeable missteps? What is the period to profitability or rate of return on investment? Can you show the commitment and brilliance of the main players? These are some of the things that any experienced investor/operator will want to know.
Plan the divorce before the kiss — partners, investors, and relatives will all turn nasty if reality steps in to “jack up” your planned success. Be sure there is a legal agreement that specifically points the way to move others out, or for you to move on, before you take a penny of other people’s money.
Grow skinny. Startups almost always underestimate expenses and overestimate income. Try to have the business lose expense weight while gaining sales weight in the first year. Hold on to as much of your bottom line profits as you can. This is actually easier than trying to generate more gross sales while under duress.
You must focus your business efforts on those things that provide for the best chance to get people talking about you. The big five differentiators are (1) great product, (2) great value, (3) excellent service, (4) great location, and (5) sensationally brilliant decor. (We might now have to include data mining expertise and relationship-marketing flair but let’s stay old-school for a minute.) Bear in mind that you can be blessed with all “original” five and still not make any money. (Conversely, you can own a “hole in the wall” and be rolling in dough.) Our industry has been built by idea pirates who trolled around the world seeking the next big thing to bring back to their locale. This approach can help you generate ideas for your spot — or it can hurt you if a competitor clones your concept.
Piggyback onto attractions that are located in high-traffic areas. If possible, avoid buying or leasing locations in the middle of nowhere (backstreets, basements, etc.) just because you finagled some cheap rent (unless you are in a super-major metropolitan area). People are creatures of habit. Industry insiders know that there is no guarantee guests will visit the left side of the establishment if they are seated on the right, but most will hit the bathrooms, making that travel path a good place to market upcoming events. Cities and neighborhoods are the same. Do your homework. If you can, visibly plant your business in a traffic pattern in/next to an entertainment attraction, intersection, neighborhood, highway, or transit hub that draws a high-volume of your target audience. You cannot afford to hope you’ll change people’s habits.
Dream big but sweat the details. Manage your cash and work the operations as if you want to have a thousand locations and never intend to sell. This is also known as “keeping your eye on the ball” while developing an exit strategy. If you produce a successful business legacy, you will be approached to expand or sell. You can then decide to stay or go while you are still rising. This is the best of all scenarios.
Get the best lawyer, accountant, and insurance agent you can afford, but only if they are referred to you by a trusted source.
Pay your friggin’ taxes.
If you wish for further insight I have written a book for managers and owners of restaurants and you can find it here - http://amzn.to/guebkx
My best to you!