Basic Premise # 3

Restaurants Have EVERYTHING To Do With Money


Because most people in the restaurant business aren't motivated by money, there's a large segment of the foodservice worker population that thinks money is the root of all evil.  They sneer at owners and managers who fret about food cost, cry over broken dishes and harp about overtime.


They are quick to point out flaws and complain about the sluggish pace of upgrades, while privately expressing shock at the prices charged for food and wine that they know the owner gets in at wholesale prices.  They think to themselves that they could run a business way better than their greedy boss.  They start dreaming about opening up a little place.  Something simple where quality is high and prices are low.  When these same people become owners, they face a rude awakening.


A restaurant's most important tool, it's fuel, is money.  You can't start a restaurant without money.  You cannot operate a restaurant without money.  You can't grow a restaurant without money, and you most certainly can't keep it open without money.  


Restaurants cost a fortune to open.  Even the simplest concept needs at least a hundred grand to get off the ground.  Bigger places can cost more than a million.  Think about that.  You start off, having made zero dollars, at least a hundred large in the hole.  You've gotta make that back.  


Why?  Well, obviously if you have a conventional lender, they're going to be charging you interest as well as being in a position where they can demand repayment of the principle.  If you can pay down your debt you increase the money you keep at the end of the day, as well as insuring your business' financial stability.  If you borrowed money from family or friends, the motive is clear, you want to make good on their faith in you and protect them from financial damage.  Even if you have the kindest, coolest investors in the world, any long-term debt you don't repay will sit on your books, making your business unattractive for future buyers, investors and lenders.  


What it all boils down to is that the day you open, you already have the expense of debt servicing.  Then you add food cost.  Beverage costs.  Staff.  Power.  Rent.  Taxes.  Breakage.  Equipment.  Maintenance.  Light Bulbs.  Insurance.  Graphic Design.  Licenses.   Fees.  Uniforms.  Website.  Laundry.  Telephone.  Pest Control.  Storage.  Office Supplies.  Accounting.  Legal.  Don't forget that the credit card companies take a cut off of nearly every sale you make.  Oh, and were you planning on paying yourself?


If you're contemplating owning a business, I don't care what industry it's in, you have to be able to read the above four paragraphs and think to yourself: yup, that's what I want to do.  Being a business owner is a full-time job.  It's not something you can pass off to other people or do in your spare time.  If you don't know how or have never done it before, you can learn, but you'll never succeed without a commitment to pay attention to the financial end of things.  


Money doesn't have to be about greed or wealth, but it IS an essential tool that allows you to meet your goals and do the things you want.  Ignore it at your peril.


Next : The Proper Care and Feeding Of Investors