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I’ve found an ex restaurant located in a busy part of the city in a shopping complex surrounded by a Wal-Mart, a hair studio, a paint store, another restaurant(They serve American food.. I’m serving Italian.), a busy laundromat, a bakery, a karate studio, banks and more. The place is fully furnished and includes everything besides a conveyor oven(I’m buying a tri-level from a friend of mine) and a dough mixer(I’m buying a 40qt. from him as well).

I have $ 24,500 to invest on opening the place up for a gas & utilities deposit, a security deposit & first months rent, food & beverage purchasing, deposit for garbage services, a sign, food supplies(pizza pans, boxes, forks, plates, etc..), costs forming an LLC, a health and fire inspection(including a balloon test on my oven hood), money for my tax attorney starting out, and everything else.

I own a local cleaning company and make only about $ 450 a week working 2 days a week. I plan on keeping my clients even after my restaurant is up in case I need the money. I don’t have any debt at all. My only bills are rent which is cheap, cell phone, tv, internet and food. $ 24,500 is what I’ve saved over the last 3 years and I’m wanting to go further with my life and open a restaurant with the assistance of my dad. He managed a restaurant for a guy(the guy selling the oven and mixer to me) but had to quite because the guy closed the place from having too many restaurants on his back being an individual. My dad is now a painter and if I open the restaurant, my dad will be my manager and will run my dining room during rush part of each day.

I’ve added up all expenses that are required to open the place and I’ve estimated it to be in between $ 16,000-$ 18,000 just to open, and my monthly expenses that include employee compensation will be in between $ 12,000-$ 14,000(I hope I’m over-projecting.).

So, if it takes $ 18,000 to open that leaves $ 6,500 left over. My main concern is making enough money to pay bills. I have a “what if” in the back of my mind. Since my bills will be approx. $ 12K each month, since I only have $ 6,500 left over, what if I can’t even afford my bills in the first month? I know the first month will be incredibly stressful and rough, but I believe after all the businesses in the area find out my dad is back in a restaurant, business for me will be as good as it once was when my dad worked for the other guy. My dad established his name with EVERYONE that went in there, and every time my dad sees an old friend they always ask where his restaurant is, and if he isn’t in one he needs to open.

So what would you do if you had to rely off the first months pay to pay bills after the first month alone? I don’t wanna have to close and ruin my credit and be out of a lot of money.. money I’ve saved for 3 years.

I know I can easily bring in $ 1,000-$ 1,200 each day, but the first month WILL be rough due to my place being new.

Thanks for reading.

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3 Thoughts on Financially speaking, what would you do?
  1. Reply
    .................
    December 1, 2011 at 11:54 am

    i think you can give it a shot

    If you invest hard work and determination into your restaurant and provide value and guality of goods and excellent customer service including specials like you can have a $ 2 special for opening ( one 1 specific meal or item) then people would swarm your restaurant like crazy.

    24 grand is in my openion not a comfortable amount to start out with.
    I would invest the money into a loan.
    If you invest it you can get a loan upto $ 60,000

    which means yould be owing the bank 30,000 which could easily be paid off in a short time
    providing to dont allow it to grow interest due to mis payments.

    Since the restaurant is already equiped you have excess advantage but at the same time you have to think about employeee wages and salaries.
    and other financial difficulties that may arise.

    6,000 wont last you and you didnt mention the montly rent or if you leased it.

    I think you should give it a shot but you would be more self assured if you had more cash to work with.

    I wish you the best
    im working towards my dream of opening a fine dine restaurant 😉
    i actually start free entrapenourship classes on monday
    i dont know where to get the cash yet but im workin on a loan.

    I hope everything works out for you.

    and one word of advise, get a family member to help you out in the start and when your on your feet you will be able to hire staff

  2. Reply
    rayt721
    December 1, 2011 at 12:05 pm

    It sounds like you’ve put a lot of thought into the venture but consider two things: (a) the restaurant business is highly competitive with a very high failure rate (which you already know); and (b) you are not mentioning various expense categories (ie renovations to the building, marketing/advertising, taxes (business and personal) and insurance, also business and personal), and probably alot more). The $ 6,500 left over amount from your budget will quickly and easily be zapped out of your bank account. Do you have a formal business plan or just the calculations that you’ve done which you’ve shared in this posting? You might consider a trip to the library for a book and/or computer software on business plans. There are so many big and little expenses that are going to beat you up financially that will eat up that $ 6,500 in no time. You may consider applying for funding or taking in a partner which will eat your profits and possibly eat your control of the business. There are people with years of experience in restaurants that get into legal and financial trouble so, while I don’t want to be negative, I do want to be practical… and so should you. If you can write a business plan and make it work on paper you’ll have a good shot of making it in the real world. Don’t give up your dream but fine tune it. If you are doing this for passion, it’s a great idea. If you are doing this for the money, think again and think ahead. Remember, planning makes perf… um, profits!

  3. Reply
    Money and Risk
    December 1, 2011 at 12:42 pm

    Restaurants are one of the most difficult businesses to operate and make profits from. Failure rates even for long time experts are high. One of our long time restaurateur (20 years) just went out of business due to the lack of business in this economy. Note that he has a silent partner who was dumping $ 20,000 / month just to keep it open in the last 6 months.

    I commend you for saving up the money. Most people don’t have the discipline to do that much.

    Before you make this decision. Do some research. Actually sit down and plan out every cost for the next 12 months. I already see several expenses that you didn’t factor in such as liability insurance, worker’s compensation and fire insurance. Don’t assume that business will come. I work with a lot of restaurants and they are struggling right now. Remember that eating out is a luxury.

    Talk to the US Small Business Administration SCORE office first. They have volunteer retired executives who will help you with your business plan. Go to the Business.gov site listed below. It will have a lot of detailed resources for you to read.

    http://sba.gov
    http://score.org
    http://business.gov
    http://moneyandrisk.com

    Keep an open mind for other ways to invest your savings. Good luck. I’ll be frank that running a restaurant is not something that I would ever recommend unless someone has lots of money to use up or knows the business very well from working in the industry.

    These are just some of the pitfalls:

    1) Out of control perishable food costs
    2) Liability from complaints of food poisoning
    3) High competition
    4) Price sensitive
    5) High overhead (utilities, wait staff, cook staff)
    6) Expensive worker’s compensation insurance (one company with 4 restaurants had their WC insurance premium go up by $ 250,000 overnight with one fraudulent claim. Their cost previously was $ 122,000/year.)

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