Restaurant Management and Operations

A person considering the restaurant business has several career and investment options:

■ To buy an existing restaurant, operate it as is, or change its concept
■ To build a new restaurant and operate it
■ To purchase a franchise and operate the franchise restaurant
■ To manage a restaurant for someone else, either an individual or a chain

In comparing the advantages and disadvantages of buying, building, franchising, and working as a professional manager, individuals should assess their own temperament, ambitions, and ability to cope with frustrations as well as the different risks and potential rewards. On one hand, buying a restaurant may satisfy an aesthetic personal desire. If the restaurant is a success, the rewards can be high.

If it fails, the financial loss is also high, but usually not as high as it would have been if the investment were made in a new building. When buying an existing restaurant that has failed or is for sale for some other reason, the purchaser has information that a builder lacks. The buyer may know that the previous style of restaurant was not successful in that location or that a certain menu or style of management was unsuc-
cessful. Such information cuts risks somewhat. On the other hand, the buyer may find it difficult to overcome a poor reputation acquired by the previous operator over a period of time. There are no quick fixes in overcoming a poor reputation or a poor location, but clearly, knowledge of these circumstances decreases risk. Figure 1.2 illustrates the restaurant career and investment options.

FIGURE 1.2: Restaurant career and investment options

Without experience, the would-be restaurateur who builds from scratch is taking a great risk. Million-dollar investments in restaurants are fairly common.

Finding investors who are ready to join in does not reduce that risk.
A 100-seat restaurant, fully equipped, costs anywhere from $6,000 to $10,000 or more per seat, or $600,000 to $1 million. In addition, a site must be bought or leased. Examples can be given of inexperienced people who have gone into the business, built a restaurant, and been successful from day one. Unfortunately, more examples can be given of those who have failed.

By contrast, a sandwich shop can usually be opened for less than $30,000.
As one entrepreneur put it, “All you really need is a refrigerator, a microwave oven, and a sharp knife.”

Franchising involves the least financial risk in that the restaurant format, including building design, menu, and marketing plans, already has been tested in the marketplace. Some franchises require less than $10,000 to start, including the franchise fee and other operational expenses.  Even so, franchises can and have
failed.

The last option—being a professional manager working for an owner— involves the least financial risk. The psychological cost of failure, however, can be high.
Luckily, no one has to make all of the decisions in the abstract. Successful existing restaurants can be analyzed. Be a discriminating copycat.

Borrow the good points and practices; modify and improve them if possible.
It is doubtful that any restaurant cannot be improved. Some of the most successful restaurants are surprisingly weak in certain areas. One of the best-known fast-food chains has mediocre coffee; another offers pie with a tough crust; yet another typically overcooks the vegetables. Still another highly successful chain could improve a number of its items by preparing them on the premises.

The restaurant business is a mixed bag of variables. The successful mix is the one that is better than the competition’s. Few restaurants handle all variables well.
Michelin has been in the business of evaluating and recommending restaurants and hotels for over a century.  For restaurants, Michelin stars are based on five criteria: quality of the products, mastery of flavor and cooking, “personality” of the cuisine, value for the money, and consistency between visits. In all of France, only 18 to 20 restaurants are granted the Michelin three-star rating. In the United States, hundreds of restaurants do what they were conceived to do and do it well—serve a particular market, meeting that market’s needs at a price acceptable to that market. The advantages and disadvantages of the buy, build, franchise, or manage decision are shown in Figure 1.3.

FIGURE 1.3: Buy, build, franchise, or manage—advantages and disadvantages

The person planning a new dinner house should know that even huge com- panies like General Mills can make big mistakes. Once owner of two profitable dinner house chains, Olive Garden and Red Lobster, General Mills bombed with Chinese, steak, and health-food restaurants.

The small operator lacks the purchasing power of the chain, which can save as much as 10 percent on food costs through mass purchasing. The new operator is usually unsophisticated in forecasting. Compare this with Red Lobster’s system, which provides the manager with the number of each menu item to be prepared the next day. Each night, the manager uses a computer file on sales records to forecast the next day’s sales.
Based on what was served on the same day in the previous week and on the same day in the previous year, sales dollars for each menu item are forecast for the next day. Frozen items can be defrosted and preprepped items produced to meet the forecast. Wholesale purchasing and mass processing give the chain an additional advantage. The Red Lobster chain processes most of its shrimp in St. Petersburg, Florida. Their shrimp are peeled, deveined, cooked, quick-frozen, and packaged for shipping daily to Red Lobster restaurants. Swordfish and other fish are sent to several warehouses, where they are inspected and flown fresh to wherever they are needed.

Quality control is critical; all managers should carry thermometers in their shirt pockets so they can check at any time that food is served at exactly the correct temperature. For example, clam chowder must be at least 150 ºF when served; coffee must be at least 170 ºF and salads at 40ºF or lower.Swordfishis
grilled no more than four or five minutes on a side with the grill set at 450ºF.

A 1-pound lobster is steamed for 10 minutes. In chains, illustrated diagrams tell cooks where to place a set number of parsley sprigs on the plate.

Individual operators can institute similar serving-temperature and cooking controls. They may be able to do a better job of plate presentation than chain unit managers can. Independent operators can develop a personal following and appeal to a niche market among customers who are bored with chain operators and menus. This puts individual owners at an advantage over chain competitors.

Being on the job and having a distinct personality can really make the difference.
The restaurant business has both the element of production (food preparation) and of delivery (takeout). Food is a unique product because in order to experience the exact taste again, the customer must return to the same restaurant. The atmosphere is important to the patrons. Some would argue that restaurants are in the business of providing memorable experiences. Successful restaurateurs are generally streetwise, savvy individuals, as evidenced in The Life of the Restaurateur , attributed to a former consummate restaurateur, Dominique Chapeau, of the Chauntaclair Restaurant, Victoria, British Columbia:

It’s a wonderful life, if you can take it. A restaurateur must be a diplomat, a democrat, an autocrat, an acrobat, and a doormat. He must have the facility to entertain presidents, princes of industry, pickpockets, gamblers, bookmakers, pirates, philanthropists, popsies, and panderers. He must be on both sides of the “political fence” and be able to jump the fence ... He should be or should have been a foot- baller, golfer, bowler, and a linguist as well as have a good knowledge of any other sport involving dice, cards, horse racing, and pool. This is also useful, as he has sometimes to settle arguments and squabbles. He must be a qualified boxer, wrestler, weight lifter, sprinter, and peacemaker.

He must always look immaculate—when drinking with ladies and gentlemen, as well as bankers, swank people, actors, commercial travelers, and company repre- sentatives, even though he has just made peace between any two, four, six, or more of the aforementioned patrons. To be successful, he must keep the bar full, the house full, the stateroom full, the wine cellar full, the customers full, yet not get full himself. He must have staff who are clean, honest, quick workers, quick thinkers, nondrinkers, mathematicians, technicians, and who at all times must be on the boss’s side, the customer’s side, and must stay on the outside of the bar.
 
In summary, he must be outside, inside, offside, glorified, sanctified, crucified, stu-pidified, cross-eyed, and if he’s not the strong, silent type, there’s always suicide!