Hello chefs, you're listening to chefs Pasa podcast.
On today's episode, we're going to talk about the critical path.
You need to take when opening up a restaurant.
Stay tuned. So before we begin I'm going to
give you an update which I don't have a major update because I'm
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speaking events. And I'm not going to have time
to record. So I'm recording this
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let you know here on the podcast anyway, today's episode is going
to be about Go path to open it up a restaurant.
So I should probably say my experience with opening
restaurants, I've opened up. I think five restaurants
independent restaurants total not always as a chef partner.
Other times, it was as a consultant.
I've also opened up probably 20 restaurants within a hotel group
and as a corporate Chef traveling and and opening up
hotels. I've opened up hotels and I've
opened up restaurants within hotels and then, lastly, I would
say that I've done only once in my career, but I have done a
merger and acquisition with a hotel group where we'd gone in
and rebranded a hotel and took over.
So I do have experience with openings.
However, I can't sit here and say I am the foremost authority
when it comes to openings, but I have more experience than a lot
of people. Now, granted, if Michael Mina,
was doing a podcast on how to open up a restaurant, Grunts
then obviously you listen to that one but if you don't have
anywhere to start I've opened up several.
Whether we're talking inside hotels or whether we're talking
out on the street, I could give you a good starting point and
really what this podcast is going to be about this, given
you a critical path. So, so I think the first thing
that everyone needs to get familiar with is the term
critical path. This is something that I'm going
to use throughout this podcast and if you're not familiar with
it, here's what it is. Basically, in a nutshell, now
this isn't the official dictionary term but Whenever you
have to complete something, there's an order of steps that
need to be taken to complete something from start to finish.
So starting with step one all the way through, you know, step
10 and a critical path. Is that sequence from one, two,
three, four, five, all the way up to 10 of the steps that you
need to take in order to complete the specific task.
So it's called a critical path because clearly these things on
the path are critical, they are critical to get to the next step
in their critical for the completion of the project.
So This is this is just a simple term and that's a that's a very
simple way to explain it, but that's what a critical path is.
And like, all things that need to be accomplished.
Whether you're writing a book, you're starting a podcast or
you're opening up a restaurant. You need to have a critical path
to stay on track to stay organized and to know what you
need to do, step by step, by step in order to get there.
So that's what a critical path is.
Now when it comes to opening restaurants, granted, I don't
know where you live. And I know that my audience is
global but it's predominantly. In North America.
So the critical path that I'm going to give you is going to be
geared towards the United States in North America.
If you were opening up a restaurant in the u.s., what
would that look like? And first and foremost, I think
that what people need to understand is if you're want to
open up a restaurant, need to develop a business plan.
You can have an outline of what your restaurant concept is going
to look like who's the target market?
Who's your competition? What's your marketing strategy?
What is your structure? Look like, what type of Cuisine
are you going to serve? And are you proficient in?
Types of Cuisines. Do you have funding write?
All these things need to start going through your mind.
So the first thing is to develop a business plan.
And there's resources online, you could Google business plans,
or you could just honestly could use aii these days to help you
create your business plan, but step one, you need to have a
business plan and then from business plan, that would be
step one in the critical path. The Next Step would be to raise
capital, and I think raising capital is something that I
think shocks a lot of people. If you've never opened up a
restaurant, how expensive Civ. This can be.
I know a lot of young chefs sometimes.
Go to culinary school in there. Like, why are you going to
culinary school is like I want to open up my own restaurant?
It's like, great. Do you know how much that costs
and do you have investors and do you know how to get investors?
Like, it's not as simple as just waving your magic wand and
walking into the bank and they're going to give you money,
it doesn't work that way. So open it up.
A restaurant can be extremely expensive.
Now, here's a little side tangent.
Story years ago, I don't know, let's for the sake of
conversation, like, 15 years ago, someone had reached out to
me because Is it was hot shit as a chef and I was on to come up
and they asked me if I wanted to come in and they were a are
basically a real estate group and they wanted to talk to me
about opening up a restaurant. So I was super excited because
you know, it was I was a chef but I wasn't a chef owner so I
went in and I was like great. These people want to invest in
me and we sat down and they started talking to me about what
kind of ideas. I had to open up restaurants and
a lot of ideas that like I want to do this, then the other
they're like great location. And so, you know, I basically
had a business This plan or at least or at least a concept in
mind of what I wanted the restaurant to look like.
And I pretty much thought of everything except the finances
and then they said to me, they said great, how much money do
you have? I so hot.
I don't have any money and they're like, oh, you don't what
do you mean? You don't have any money?
I was like, yeah, I don't have any money.
I thought that's why you guys were calling me.
That you guys have where the, where the money and the backers
are like, no, no, go get some money.
So we get started. So we get some loans going as
well. How much money do I need?
They're like, I don't know, can you raise like a hundred and
fifty thousand dollars? And I just like, Okay.
So I mean it was basically over at that point I think I had like
a hundred dollars in the bank at the time.
Like how am I going to raise a hundred fifty thousand dollars
when we have like a hundred dollars in the bank.
Anyway, long story short is, it's expensive to open
restaurants and I think a lot of people don't realize how
expensive it can be. So I'll give you some ranges
when it comes to opening restaurants.
Now this is not exact but usually a small Independent
Restaurant like food truck or a cafe or something like that.
You probably looking at anywhere on the low end.
Fifty thousand dollar initial startup cost to probably on the
higher end. Closer to 200,000, this is start
up cost, right? So something a little bit more
midsize like a casual or a family dining restaurant.
You're looking anywhere from two hundred thousand to about half a
mil and maybe up to a Mill and then if you want something more
upscale it's usually over a million dollars, right?
So usually something that's going to be more upscale is
going to be over a million dollars.
Bigger restaurants, obviously require more so you could be
looking at 5 million. All the restaurants anywhere
from 1 million to five million dollars.
So now when you think about that that changes everything where
you can raise that money, do you have investors right?
So looking for investors is a part of the process and it's
something that I think a lot of chefs don't think about until
later in their career. So if you're the chef of an
independent restaurant or wherever you're the chef of, you
should start making relationships with your regular
Diners, right? Because you never know, maybe
they're doctors, maybe their lawyers, maybe their investors,
right? People that have money.
That may want to invest in you later.
On also talking with the restaurant owner, sometimes
restaurant groups will give you a part ownership if you are the
chef. So, something to think about
that's that's usually a shorter way to find the the funds behind
it if you don't have funds. But the fact of the matter is,
it's going to cost a lot of money.
You got to go to the bank, you got to get loans, Etc.
So there are options, you know, you go everywhere from your
personal savings, right? So that's, that's always in your
best interest. If you have money, other people
other people's money as always, better than your own money.
My opinion, you get bank loans, low interest rate loans, Etc.
They may require some sort of collateral.
Obviously, you need to have good credit, there are SBA Loans,
there's crowdfunding which is good, but again, do you have a
large enough Network where you could get crowdfunding?
Which, you know, when you think of your raising a million
dollars? It's gonna be very difficult to
crowdfund a million dollars. I think, unless you have a
really good story behind it, so think about all those things I
think. Raising Capital might be one of
the most difficult parts of opening up a restaurant.
So anyway you go to if you're in the u.s. you can go to I think
sba.gov if you're looking at funding and stuff like that.
So now once you have funding and you have a business plan, you
need to start looking at locations, right?
And location is probably one of the most critical factors when
it comes to open up any restaurant.
If you're in the right location, it could be a game-changer,
right? So you want Prime real estate?
That's obviously more expensive, but you I want to make sure that
your concept aligns in the style of food that you have is going
to align with the location in which your restaurant is.
So if you have a high-end restaurant, going to be a
high-end neighborhood, if you're in a, maybe you have a food
truck, maybe you want to be in a food truck Park.
So make sure that your food and your restaurant concept makes
sense for the area that you're trying to put it in location.
Is a huge thing. When I was young, I used to
think. Oh, that space is open and be
like a terrible locations. Like I could do great food there
in retrospect would be like, why would I try and do really
interesting food in In, you know, in a strip mall, right?
It doesn't always work because there might not be the crowd to
support their. So you need to search research,
the location, the demographics of the area and all that.
The next thing is you need to figure out what type of legal
structure or licensing. You're going to have, you need
to you to decide what's best for you.
Are you a sole proprietorship? Are you a partnership?
Are you an LLC or a corporation? All these things matter you need
to obtain not just the correct legal structure, but you also
need to obtain The correct licenses that you need.
So, let's stick with legal structure and by the way, a lot
of the things that you could do now is like there's a lot of
this can be done online like on ink file or LegalZoom stuff like
that. You could you could establish
your LLC or your partnership. They could give you a lot of the
documents that you need, maybe not everything.
But Inc file is a good place to start.
If you're looking for an LLC, they don't sponsor the show.
I need to make sure I say that I've just used them in the past
and that's that's why I bring them up.
However, if Inc file wants to sponsor the show feel free to
reach out to me. What are some of the differences
if LLC versus partnership? So an LLC is basically a limited
liability company. That gives you limited liability
protection. That's it in a nutshell, then
there's a partnership which is pretty easy to establish, but
partners are personally responsible and liable for the
business debt. And again, this all depends on
your local city, or your local government.
So this is something that you need to look at, but while we're
on the subject of Licensing, right?
So it's not just your LLC. The and things like that, you
have to obtain other license and permit.
So you also need to look at your general business license, your
food service licence, your liquor license, your sales, tax
permit, all these things need to be factored into your critical
path, so make sure that you have a checklist and you've gone
through those. And, you know, you could look up
your State's requirements as needed.
The next step in the critical path is going to be the lease or
purchase agreement. So you need a negotiator sign
the lease or purchase agreement for the location that you
choose. And there's some Current
options. So obviously, if you're leasing
a place, it's lower upfront cost, there's flexibility to
relocate but a lot of times when you're leasing you don't have
Equity or in. You also don't have control over
the property if you purchase the building outright or maybe it's
a new build, you have much more control.
There are some tax benefits but it's a higher upfront cost.
And also you have the responsibility of maintenance
for the building. And everything that goes with
that. So maybe you're looking at this.
Also from a real estate investment aspect, right?
So something to think about because your restaurant, like I
think if you've ever watched the movie about the McDonald's guy,
he I can't remember a crock, right?
So I think it was called the founder and he shows how he
basically turned all the McDonald's into.
It was a real estate business, more than it was a fast food
business. So maybe that's an option for
you. Think about the, the real estate
because sometimes restaurant, That profitable but maybe as a
real estate deal, it's more profitable.
Maybe the bank is more likely to give you a loan.
I don't know that something that you would need to work out, but
those are, those are different things that you need to consider
the other things that you need to consider again, assuming that
you're leasing the space or what are the different types of rent.
So there's fixed rent, which is basically a set amount.
Everything's realistically, predictable.
You're not going to have much fluctuations without at least
being notified or some sort of Renegotiation on the contract.
And there's also something called a percentage rent which I
think is good, so it's basically a rent.
It's basically your rent plus a percentage of sales but
sometimes it's just a percent of sales if they really want you in
the location. But the downside to that is
sometimes it could potentially be higher if you didn't really
read the fine print. So you're going to need to get
some advice on this. Obviously, I don't know the type
of restaurant that you're thinking about and there's a lot
of nuance in this, but those are just some examples of the
different types of rent. So fixed rent or a percentage
rent to something that you want to look at next thing that
you're going to want to look at on the critical path is going to
be the design and the renovation.
So the plan, the layout, the design of your restaurant, you
have to consider all the factors, right?
The efficiency of the kitchen, the location of your dining
room, the ambience FF and E, which is Furniture fixtures and
equipment, the types of Ovens that you're going to use or do
you have a mixer all these things matter and they all cost
money. So And your I'm sure you're
working off some Capital that you're that, you have, you have
a budget. So is that's that's the
difference between like you know, the off-brand oven and the
Heston oven, right? So these are things that you
have to consider. You have to factor in all the
costs that are going with it. So not just the design, right?
And you have to hire designers, something that you need to think
about. You have to think about things
like being compliant. If again, if you're in the
United States, the Ada, the American with Disabilities Act,
you have to consider that you might have to hire a actor to
complete the renovations that complies with local building
codes. So these are things that you
have to consider next, you have all the equipment and supplies
that go into the restaurant. So, this is everything, right?
This is your kitchen, appliances is your blenders, your
robo-coupes, your sous, vide machines, all of that, your
circulators are cryovac, your Ovens.
That also includes the furniture chairs tables, POS systems, all
of that has to be throughout through, including maybe even
opening inventory. So maybe you have, maybe you're
going for a very expensive wine list and you need to curate a
very, you know, wine spectator award-winning list which is
going to be 100 Grand, or something like that.
These are all things that you have to consider all the other
supplies, the small Wares pots, pans Etc, right?
That has to be, you have to have a very good budget.
When you're doing that, you have to think everything through.
You have to work with someone. It's a good idea to work with
someone. So a lot of these big companies
like again, I don't work with any of them.
At least they're not sponsoring me.
But companies like Trimark, if you're in the United States or
washer strong, you know, they could, they could help you
curate that if you, if you could go work with them, the Edward
Don's of the world, they're good at that.
And also, another thing to point out is, you could also lease
versus purchase equipment. So, again, some of the pros and
cons is leasing would be lower upfront costs and it's easier to
upgrade your equipment, you don't own it sometimes they work
in deals where you know the repair is less or you could
purchase it again. There's potential tax deductions
when you purchase it but again it's Higher upfront, cost, and
then the maintenance responsibilities depending on
warranties etcetera, things that you have to think about.
Next thing is going to be the hiring and the training of
staff. So you have to recruit.
How are you going to crude? All these people right?
Usually usually your recruiting from other restaurants or people
that maybe you've worked with in the past, you're calling
everyone up. But open up a restaurant is not
easy. You think and I'm telling you
I've opened up a lot of places. You think everyone's going to go
with you when you go to the new place, not always the case.
Let's say I've worked at a place that had 20 Cooks, I'm I'd only
get four, and I thought the rest would surely come, but, you
know, a lot of people are set in their ways.
They may concern amount of money and openings are difficult, and
I will talk about once you're open and what to look for in the
next podcast. So I want to kind of make this a
little bit of a series. So this is like part 1.
The critical path to open up a restaurant and then part two
will be. Okay, now you're open shit has
hit the fan. What do you do?
So anyway, let's stick with part one, right?
So you need to get the staff, you have to include the
recruitment or you can have job fairs where you can.
Advertise, make sure you have a good organizational chart.
So you know what the responsibilities are.
You have to think about everything that you're going to
need from bar staff to service staff, to culinary staff, to
stewarding, team Etc. You have to think about all the
Sops that you need to create employee handbooks, right?
What are the rules of the game? And I've talked about this on
another podcast, think about, when you're opening something
you're developing a culture from Ground Zero, which sometimes is
better, because there's no bad habits to Begin with, but you
need to have a plan and you need to be able to execute it.
So if you're starting from zero, you have to have something to
give them. If not, people will make it up
as they go. And then as we move on after
that you have the health inspection.
So in order to open you're going to need some sort of health
inspection, you're going to schedule it and you're going to
pass it. I know many times the health
inspector in the openings that I've done.
They come they say okay this is good but you need to correct
these 10 things and I'll come back and then I correct the 10
and they're like, okay you've corrected 10 but I found some
Once you need to correct these or you didn't correct that one
up to standard. So the health inspections
sometimes, can they could be a little bit of a delayed.
They're constantly pushing back and finding new and new things.
And it's like, I know one and this was years ago.
So like I said, the internet wasn't what it is, today wasn't
as powerful. But, you know, we were looking
at Sushi and they're like, okay, do you have a hassle plan?
For a sushi bar is like, nope. Like then you need to make when
I was like, well, where do I start to, like, I don't know.
You need to figure that out. Like shit.
I've never wrote a hassle plan for a sushi bar and I didn't
have any friends that had one for me.
So I had to, I had to create that same thing with a lot of
places, you might need a hassle plan for cryovac and, and
cooking sous vide, and using numbers, and immersion
circulators. So, you need to think about
that, if those are things that you're going to do, our cooking
chill, right? So a lot of a lot of places will
cook and chill. So what I mean by that is like,
let's say you are cooking something and then reheating it
later. A braised has a good example of
a cooking show. Will you break something?
It cools down, and then you reheat it, you do to make sure
you have a, has a plan for all that because when the health
inspector comes and asks you that and you say, yeah, we're
doing that. They say, okay, great, I need a
hassle plan for and that just slows down everything to go with
it, right? You obviously want to check with
your local Health Department for inspections and licenses Etc.
So having a good relationship with your local Health
Inspectors. Going to be key when you're
opening up a restaurant. Anyway, moving on.
We're going to talk about marketing.
So now you're in the final preparations.
You're getting ready, it's time to Market your restaurant.
You everyone's in place, you have a concept.
The next thing you're going to do is like, well, you need to
spend money on marketing and that is the reality because you
need to have hype behind with what you're doing.
So hiring the best marketing firms, especially if you're
going to like play in the world of trying to get a James Beard
award or Food & Wine, best new chef and things like that.
A lot of that you need a good marketing team to get your name
out there. If not, you're not going to get
discovered by these organizations.
So having a marketing agency, think of them as an advocate for
you, and your restaurant, there are going to go out there and
speak on your behalf to those other organizations about why
they should take a look at you. So whether it's putting you in a
magazine, whether it's, again, like I said, Bon Appetit, or
something like that, or the Esquire best new restaurants in
America. Whatever the case, maybe they
need to look at that, right? And you Don't have those
contacts. The reason your pain a marketing
firm isn't necessarily for them to do all this for you.
It's because of who's in there Rolodex?
It's because they could just pick up the phone and call
someone that works at Food and Wine and you can't, that's why
you need marketing firms and the best marketing firms, you know,
that's what they do. And they're great at, they have
a Rolodex and when, when a lot of these companies are coming to
a city. So when I say companies, I mean
like Magazines and people food writers and people that nominate
people for awards when they arrive in cities, a lot of
times, what they do is they reach out to the marketing firm
that they know and are familiar with and say, where should we go
eat? And they say, go eat here.
Here here, which are usually their clients.
So if you want to be in the conversation, you want to make
sure that you have a good marketing firm on retainer.
And then, of course, make sure you have an Instagram page.
Social media, you're showing the behind the scenes of the
opening, the build up the the the different iterations of The
dishes that you're working on and then, you know, time to
launch. So that is an oversimplified
version of a critical path that you would need to open up a
restaurant. So there will be a part two of
this. Part two will be once you're
open. Oh shit, what do you do?
So anyway I hope you enjoyed this episode.
Thank you very much if you want to support the show make sure
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