Created by: Johnny Branch CPA, MBA Certified Business Analyst Veterans Business Outreach Center SBA Region IV Gulf Coast State College

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1 Created by: Johnny Branch CPA, MBA Certified Business Analyst Veterans Business Outreach Center SBA Region IV Gulf Coast State College

2 Before you begin any serious planning you must choose a Concept.

3 Concepts let patrons know what to expect at your location Seafood: can be a risky concept due to seasonal price changes and fluctuating availability Your Description Goes Here Steakhouses: can be part of midscale or upscale markets Family-style: reasonable prices and comfortable atmosphere appealing to families and seniors Casual-dining: generation Y to Baby Boomers with appetizers to desserts at midscale pricing Pizzeria: to-go with limited menu and service or full-service with Italian entrees Sandwich Shop: high gross profit margins and can easily change menu to adapt to current tastes Coffeehouse: coffee is the world s most popular beverage

4 Your Description Goes Here Styles of service for these Concepts Quick Service or Fast Food attracts Generation Y who were born and account for more than three times the size of Generation X Midscale, casual and Family operations attracts Generation X who were born and have strong family values thus looking for good food value Fine Dinning attracts Empty Nesters and Seniors who have the most discretionary income and appreciate excellent service an outstanding food

5 Carving your Niche Early risers or morning people may want to consider a casual breakfast-and-lunch operation. Night owls are going to be drawn to the hours for bar-and-grill operations, fine dinning and even pizzerias People pleasers need interaction with customers at a casual to fine dinning style of service Non-people lovers might want to consider Fast-Food. Bakery or Catering in order to deal with more operational issues

6 Can you sell alcohol? Be sure to self analyze yourself on religious feelings towards selling alcohol. Remember every employee involved in alcohol sales must be 18 years or older.

7 Franchise or Independent Before Investing in a Franchise The decision to purchase a franchise involves many factors. To help you explore if franchising is right for you, we've provided a list of important questions to answer. Do you know how much you can invest? Buying a franchise requires capital. Determine how much you can realistically afford. How much money do you have to invest? How much money can you afford to lose? Will you purchase the franchise by yourself or with partners? Will you need financing and, if so, where can you obtain it? Do you have a favorable credit rating? Do you have savings or additional income to live on while starting your franchise?

8 How large should your location be? Optimize seating comfort by allocating 12 sq ft for each customer. Total size allocation is 60% for inside dinning 30% for kitchen and 10% for office or storage.

9 Choosing a Location Traffic density: High traffic counts at peak times could contribute to sales volume. Park at potential locations at different times of day to assess volume then order traffic counter from DOT Accessibility to customers: Consider how easy it will be to drive in, park and exit for customers. Will your business need foot traffic to survive and will the surrounding area provide enough pedestrians

10 Choosing a Location Proximity of other businesses: Neighboring businesses can be of benefit by cross-marketing non-competing products Rent-Paying capacity: Rent expense should not be more than 15% of sales Terms of Lease: Always have an exit with an option to renew for more Health Inspection: Has location ever been inspected as a restaurant before?

11 Creating a menu Be aware of trends that could influence menu items such as locally grown, organic etc. Your Description Goes Here Size of menu is dependent directly on the size of the kitchen Keep the number of items in check using concise, straight forward descriptions which provide customers with easy choices

12 Creating a menu Family and casual concepts need a children s portion without all of the frills to discourage adult downsizing Your Description Goes Here Comfort food which take customers back to their childhoods Include local favorites and popular ethnic foods

13 Menu pricing Add up all of costs for the ingredients used in a menu item and divide this total cost by the FOOD COST % you are trying to achieve. For example divide your desired food cost% by your cost of an item to derive the sales price of that item. Food cost $3.00/.30=$10.00 Sales Price

14 Menu pricing Competitive pricing: Seeks to match what other competitors are charging for the same product. BE CAREFUL NOT TO FOLLOW FOOLS ex: $4.95 for lunch with beverage The Factoring Method: Multiply cost of ingredients by 3 will result in a 33% cost of goods sold

15 How to determine start-up Sales? Anticipate.5-1.0% of drive-by traffic as potential customers. From total seats assume a maximum of two turns at breakfast, three turns at lunch and four turns at dinner. Divide total capacity by two. Be conservative, new customers have to break old eating habits.

16 Your Description Goes Here Write a Business Plan Gain practical experience by working in a similar restaurant: Get paid to be educated and learn what not to-do through other peoples mistakes Map out everyting before you buy the first spoon: According to Rich Melman, chairman of Lettuce Entertain You Enterprises, Inc., 80% of what will make your restaurant a success will take place before you open the doors Utilize SBDC resources: In our computer lab, we offer unlimited free use of Business Plan Pro plus a Certified Business Analyst can review and help edit your plan as you progress

17 Funding your Restaurant From your business plan you now have estimated how much money you will need to start your first restaurant Now add 25% to that total for mistakes, incidentals and cash flow while you build your customer base Banks do NOT like start-up independent restaurants and will only lend for some franchises

18 Funding your Restaurant Inventory your own resources such as retirement accounts, equity in real estate or personal assets that can be liquidated The next step is family and friends who believe in you and want you to succeed. All arrangements should be in writing and interest paid in a delayed method on all monies received The last resort is considering a Partner who wants to team up with you. Remember a partnership is very similar to a marriage be sure to create a written agreement spelling out all duties expected from each person

19 Buy used equipment except for refrigeration and freezers At auction brand new restaurant equipment is only worth cents on the dollar. In the northwest Florida area around 95% of start-up restaurants fail within first five years. Why? Under capitalization!

20 Register your fictitious name or LLC at Every restaurant in Florida must collect then remit State Sales Tax. Sign up for a license at Restaurant employees are subject to State Unemployment and Federal Payroll Taxes Register at for Payroll Taxes and for unemployment taxes Registering your business name and filing for taxes

21 KISS Keep It Simple Stupid LLC is the simplest setup that will still protect the members personal assets. Remember you can always change to a corporation when your business becomes extremely successful. Always consult with a qualified CPA before moving forward

22 Hire right: Take time to thoroughly screen applicants. Do background checks especially for cashiers Create Job Descriptions: Don t make employees guess about their responsibilities and who they report to Provide Initial and ongoing training: Well trained employees are happier, more confident and more effective Hiring Employees

23 Understand wage-and-hour and child labor laws: tml Establish a pay scale: Minimum and Maximum for each position Lease or Pay Direct: Leasing companies provide hiring documents and file all necessary State/Federal filings including workmen s compensation. Their fee is usually a up charge on each employee s hourly gross pay rate. Direct means in-house by you or through a payroll processing company with a per pay period charge. Hiring Employees

24 Gross Payroll should not be more than 24-34% of Sales Employees of a new restaurant need to be flexible because duties will cross over from one category to another. The Manager needs leadership skills and familiarity with local buying sources.

25 Marketing and Promotions The first step in creating a marketing package is to know your target demographics Donate gift certificates and coupons to be used as door prizes or raffle prizes at notfor-profits or professional meetings Discount coupon books and support local education plus sporting activities

26 Marketing and Promotions Provide gift certificates to Radio stations and TV stations that reach your target demographics and will promote your name and location Research by National Restaurant Association (NRA) reveals that word-ofmouth is still the best method of advertising Create a WOW in order to generate word-of-mouth

27 WOW is not the lowest prices Value is the key to impressing and retaining new customers. Food prep labor is expensive pick only a few items to prepare fresh in-house. Make these items your signature dishes.

28 Summary of ideas First choose a concept and style of service Carve a niche based on your personality Franchise Pick a location that can be profitable Alcohol sp?chboard=true&sid=&boardid=400&professi onid=4006

29 Summary of ideas Create a menu to match your location Price the menu with the factoring method (3 times food cost) Write a business plan Find a mentor to help locate the RIGHT deal Purchase used equipment and house supplies Begin hiring employees Decide to lease employees or generate payroll inhouse Start and never stop promoting and marketing. You are the billboard for your new restaurant.

30 QUESTIONS? Contact Information: Brenton Peacock; VBOC Business Analyst Utilize Free VBOC Counseling