JAKE ROWLAND-GALLERYSTOCK
Food & Drink

Everything that goes wrong when you open a restaurant

To open a restaurant, you have to be a crazy person. It’s not just the closure rate. Around one in four restaurants fail in the first year -- daunting, but far rosier than the infamously apocalyptic myth of “9 out of 10”. Insanity’s required because of the nature of the failure: it’s brutally expensive, shamefully public, and usually follows years of slavish devotion to simply getting the dream off the ground. Thank god for crazy people then, because as of 2014 there are 990,000 restaurant locations in the U.S. That’s almost 100,000 more opportunities than ten years ago for Americans to let more talented people do the cooking for them. To help keep this trend going, we talked to restaurant owners, operators, and chefs across the country about the staggering number and variety of landmines lying in wait for anyone wanting to take the plunge -- and got some advice about dealing with them. If you’re thinking about opening a place, or just want to hear a hilarious story about "Shirtless Edgar," read on.

Dollar Dollar Ills Your War Chest Won’t Be Full Enough “The only two times in life when you can use the word ‘hemorrhaging’ are in the operating room and when you open a restaurant.”
- Bradford Thompson
If restaurant startups were a poet, they’d be e e cummings, because almost every one of them starts out undercapitalized. The sums needed to get a place ready for service are always astronomically higher than anticipated, and then comes the post-opening. “You think you’re in the clear,” says James Beard-winning chef Bradford Thompson of Manhattan’s Heartwood, “but money flows out at such a high rate over the first three months... I’ve never seen a restaurant that had enough.” Thompson, who’s opened or consulted on 11 restaurants in the past four years, advises securing 3-6 months of operating expenses on top of your opening costs, which in New York could mean an additional $300,000. If you’re thinking that’s what banks are for, keep dreaming. “Banks are the least risky institutions in the world: if you’ve got collateral, they’ll gladly give you money, but if you’re an upstart, no one will give you the time of day,” says Scott Youkilis, who’s experienced the highs (Hog & Rocks), highs + fires (Maverick), and lows (Hi Lo) of restaurant ownership in San Francisco. To avoid getting waylaid by the number-one startup killer, that leaves you with two choices: find a partner who shares your passion but is fully prepared to make cold, hard decisions; or beg friends, family, and acquaintances. Thompson describes the latter as “humbling, agonizing… you’re one step short of being on your knees, while letting them know that if it all works out they still won’t get their money back for three or four years." As for the former, don’t get 20 silent partners -- half of them will expect a return on investment in 20 days, and the other half will sit at the bar sucking you dry while silently telling everyone they own the joint. “Pick someone you’d want as a marriage partner,” says Tracy Rathbun of Dallas’s Shinsei, “because if it doesn’t work out it will end your business." As for who you should marry, well, “if we all knew beforehand we’d have a 20% divorce rate." Continue Reading

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"?" Marks The Spot Location Hunting Will Not Be... Good “No deal's attractive enough if you can’t make rent SON!”
- Nguyen Tran “Location Location Location” is simplistic nonsense -- most newcomers can’t afford can’t-miss locations, the optimal spot can be hugely dependent on your concept, and no location is can’t-miss. The essential dilemma, according to Nguyen Tran of LA's Starry Kitchen, is that on the one hand, unless you’re confident that you’ll be an immediate hit -- or that you or your product “is SO ****ING AWESOME that you can eventually become an anchor” -- you don’t want to blow everything you have on the “super hot” location. On the other hand, “cheap rent is attractive, but it ain't if you can't get anyone to come out to ya.” Anointing a set of coordinates as “perfect” requires location-whispering most humans aren’t capable of. Scott Youkilis had three spots on the same two-block stretch. Two were successful, but the third happened to be on the other side of the same street, and apparently geography is just that fickle. Then again, you might find your ideal space only to be denied. Restaurants scare landlords just like they scare banks -- unless they’re proven concepts. Todd Horowitz, an organic meat purveyor who just opened an NYC culinary art-meets-nutrition science concept called ReViVer, had the additional misfortune of location-hunting during Chipotle’s grand expansion. Any space with 1500-2800 square feet and venting capacity, the chain was either taking it, or the landlord wanted them to take it. Even though Horowitz’s chef-partner was a borderline celebrity chef (Scott Leibfried, Gordon Ramsey’s right hand on Hell’s Kitchen) and his money-partner was a co-founder of Under Armour, it still took him two years to secure a space he could live with. The one thing you don’t want to do as a first-timer is settle into a location not already licensed as a restaurant. Those spaces can seem cheaper at first, but whatever you save in rent, you could end up blowing a hundredfold. For his first spot, Wyeth Lynch of Boston's SoulFire Barbeque converted a former convenience store, only to discover just how expensive installing HVAC, plumbing, and proper electrical work can be -- 90% of his costs, versus 10% for kitchen equipment, furniture, etc. You can’t skimp, either. Whereas if you rent a pre-existing restaurant space you can keep it as-is, Change of Use regulations require you to bring any converted space fully up to current code. As you're about to find out, that process can completely suck.

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Pandora’s Fuse Box Inspectors Will Turn $500 Into $15,000 “I thought you were here to look at a toilet!”
- Jason Bernstein Mechanical. Electrical. Plumbing. MEP for short. Those are the inspections you’ve got to pass, and no matter how buttoned up you are, there’s a good chance you won’t. For starters, inspectors can be arbitrary, calling you out three days before you open on something they should have noticed two months prior. They can also contradict one another, with different departments delivering conflicting edicts. The most tragicomic situations arise from the "you break it, you bought it" scenario, explained to us by Jason Bernstein of LA’s Golden State: If you move into a space that’s already permitted as a restaurant, you can generally leave everything as-is, even if it’s not up to current code (did we mention that codes change all the time?). But once you make one change, you’ve got to change everything. Pull a permit to move an outlet up three feet -- an $80 job -- and if the inspector signing off on the work sees that the conduit’s the wrong size, he’ll make you open up the panel, at which point he’ll discover you’ve got the wrong breakers, and next thing you know you’re out $3000. Worse, if the plumbing inspector you’ve got looking at your commode walks by, peeks inside your now open wall, notices that the waterline doesn’t meet code and tells you it’s time to break concrete, you’re suddenly out $10-15K and in no mood to laugh that a plumber sent you up a certain creek.

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Advantage: Them Your Contractors Are Out To Get You “That won’t happen again. Something else will probably happen, but that won’t happen.”
- Todd Horowitz For the most part, though, inspectors are well-meaning, and, says Bernstein, in their own perverse way serve to keep some of the more unscrupulous or inept people you’ve hired honest -- or at least keep you from hiring them again. Wyeth Lynch can relate. An architect drew him plans for a bathroom he claimed was more than ADA compliant; an inspector discovered that the door actually swung into a handicapped area, and Lynch was forced to spend $20,000 fixing the problem. The third-party inspector he brought in failed to notice glaring electrical issues, turning $600 for new lights into $6000 for rewiring. Todd Horowitz hired an architect, who hired an expeditor, who didn’t bother doing a violation check, particularly galling since expeditors are often former inspectors who get paid big money thinking about the many ways their former selves might have sidelined a restaurant-in-progress. When it turned out the landlord’s “free and clear” assertion had failed to mention plumbing violations from 1999, a four-month delay ensued, during which everyone -- staff, consultants, general contractor -- had nothing to do but curse bureaucracy.

Slim Pickings Your First Hires Will Be The C Team “Who the **** are you to disrespect me?”
- Edgar, former server If a restaurant makes it, it’s thanks to a dedicated staff that worked long hours for little money for the chance to be part of something special. And it’s also in spite of employees who didn’t feel they were making enough money to care, or cared plenty but left for a higher paying gig because, as Nguyen Tran beautifully puts it, “people have to pay their bills, ‘cause that’s life, mo’fo”. Whether you’re frugal or cheap, startup wages mean some of your earliest employees will be just terrible. Todd Horowitz recounts one gem who screwed up the most basic task, lied about it, and then, in the middle of an open kitchen in full view of customers, ripped off his own shirt and threatened to fight his boss when he called him out on it. Assuming you can’t afford seasoned vets and aren’t a particularly skilled boxer, the trick is to quickly spot people with character and invest in their development. The start of that process is, according to C.K. Chin of Swift’s Attic in Austin, “a delicate dance”. Hire too early before opening, and your front- and back-of-house team will drain your bank account, while your servers starve for tips that won’t be coming for months. Hire too late, and no one gets trained. Once you do hire, Scott Weiner of Chicago’s Fifty/50 Restaurant Group advises making decisions quick. “Your employees and managers will typically put their best foot forward in the first two weeks. If you see any warning signs, it’s only going to get worse.” On the other hand, when you do find stars, Weiner says you’d better let them know they're valued; otherwise you’ll learn that, like most baseball teams that aren't the Yankees, you'll lose all the talent you discovered. The end game is to weather all that personnel chaos and build the rigid systems that will ultimately define your operation. "A restaurant is like a religion," preaches Charlie Green of Olivella's in Dallas. "All must sing from the same hymnal, and the heretics must be excommunicated." Allied What's this?When you see 'Allied' on a story, that means we were paid to write it. It does not mean it's not wildly entertaining, because it almost certainly is.?

CNBC

Restaurant Startup Industry Insiders Will Grill You Okay, so getting raked over the coals by industry heavyweights Tim Love and Joe Bastianich doesn’t happen every time someone opens a restaurant, but it’s exactly what’s going down on CNBC’s new series, Restaurant Startup. Following Shark Tank on Tuesdays, it’s a competition for dreamers whose ideas you can really sink your teeth into: every week would-be culinary entrepreneurs battle to see who gets to open a temporary spot proving up their concept. If that proves successful, Love and Bastianich will compete against each other to become an investor. The time's 10p Eastern -- tune in if you've got the stomach for it.

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Adapt and Live, Change and Die The Public Will Not Buy Into Your Dream! "If one person says it’s too loud but four people say they love the energy, maybe don’t change the playlist just yet."
- C.K. Chin Insanely enough, once you open, people might not warm to your concept. Jason Bernstein had planned on opening a craft beer destination with a 9pm rush. The people from the neighborhood liked the food menu, and by persistently showing up at 7pm, made it abundantly clear that they wanted the spot to become more of a restaurant. Bernstein obliged, but still serves plenty of craft beer. Scott Youkilis had plotted out a bar program based on simple cocktails done right, but his customers wanted more progressive mixology. Youkilis had no problem with that, as long as the “done right” part of the equation didn’t disappear. When your original vision doesn’t take, it’s not necessarily about “what went wrong?” -- rather, says Bernstein, it’s a question of “how much went wrong, and how much is just different than what you expected?”. Making panicked changes could spell your doom, but obstinacy could seal your fate just as effectively. The key to survival is learning to adapt without losing your identity in the process, an art to which Bradford Thompson devotes an entire section of a French Culinary Institute class. “If you’re a Lyonnaise gastro-bistro serving tripe and the neighborhood isn’t having it, you don’t want to turn into a sushi bar.” Walking that fine line that requires thick, yet temperature-sensitive skin. For starters, take individual Yelp reviews with a grain of salt (this pun is impossible to avoid, by the way). Assume that maybe 2% of your customers use it, and that at least some of their feedback might be constructive (something Nguyen Tran thinks restaurant owners should be thankful for, since before the Internet, if a customer didn’t like something, he’d just quit showing up and you’d never find out why). Instead of living or dying by every gripe, Scott Weiner suggests looking for patterns of praise and criticism, the roots of which might take half a year to materially affect your business. Ignoring those patterns because things seem to be going great could prove fatal. “Don’t be fooled by a strong first six months. The public will tell you how you did in month seven.” As for professional critics, if they don’t give you at least 30 days to get your act together, they’re just not that professional. Even a month grace period is pretty harsh (“I can’t think of any other profession where you’re in business for 30 days, and you think, ‘okay, we’ve nailed it, we’re done,’” says Youkilis), but given that the prevailing philosophy is now “if you’re open for business, you’re open for critique”, that’s just a reality you’re going to have to live with.

Wear. Tear. Everything Falls Apart "Power outages, backed up pipes flooding the restaurant, car crashes into the patio..."
- Charlie Green After about a year, the push-button men’s room lock at Jason Bernstein’s restaurant broke. It was a little thing -- $40 at Home Depot -- but it was a frustrating little thing, because the lock was guaranteed for 25,000 turns, which sounds like basically forever. So Bernstein did the math. Making liberal, beer-friendly assumptions about bathroom usage, he realized that even in his relatively small restaurant customers probably turned that lock over 60,000 times a year. “At first I begrudged it for breaking,” he says, “but it turns out it’s the Timex of bathroom locks.” After a restaurant opens, even the stuff that works like it’s supposed to falls apart. The most pedestrian problems -- like the Internet going down -- can wreak havoc. “Restaurants aren’t like retail,” explains Tracy Rathbun. “When you do all your business in a four or five hour period, it doesn’t take much to screw things up.” It won’t stop with the little things. The city told Rathbun her alley’s transformer was too small for the neighborhood, and quickly found her restaurant subject to rolling blackouts. Charlie Green typed out an incredible laundry list of terrible happenings -- from that patio car crash to an employee filing for unemployment after getting fired for missing work while he’d been in jail for assaulting his girlfriend -- before finally cutting himself off with “sorry, thumb is cramping”. Rathbun says all you can really do is change what can be changed, accept what can’t be, and try not to let anything diminish the experience of all those new customers. If you can’t run credit cards, write the numbers down and tell diners you’ll process them as soon as the Internet’s back. If a car crashes into your patio… well, hopefully it’s raining outside.

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Never Give Up You Should Definitely Open A Place The first thing Bradford Thompson does when someone hires him on as a consultant is spend an hour trying to convince the person that they shouldn't open a restaurant. Fortunately for our stomachs and his bank account, he's not always successful. There are a lot more bumps in restaurant row than the ones covered here -- little things like "the price of eggs went up 73% in 2008, so maybe be prepared for massive spikes in food costs" -- but there are also a lot of hungry Americans who'll be very appreciative if you refuse to be dissuaded.


Editor's Note: Everyone quoted above gave us responses so thorough we were not able to do them justice, even though this story is pretty damn long for the Internet. Please help us pay them back for their time and thoughtfulness by eating way too much at their restaurants.