CHAPTER 1
INTRODUCTION
• Reasons to Open a Restaurant
• French Culinary History
• The Birth of Restaurants in
America
• Challenges of Restaurant
Operation
• Buy, Build, Franchise, or
Manage?
• Starting from Scratch
• Restaurants as Roads to
Riches
•
•
•
•
•
•
•
•
WHY GO INTO THE
RESTAURANT BUSINESS?
Money
The potential for a buy-out
A place to socialize
Love of a changing work
environment
Challenge
Habit
Too much time on your
hands
Opportunity to express
yourself
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FRENCH CULINARY HISTORY
• 1767:
– M. Boulanger:
•
•
•
•
The father of the modern restaurant.
Sold soups “restorantes” (restoratives).
Boulanger vs. the French Parliament.
The opening of Le Champ d’ Oiseau.
• 1782:
– Grand Tavern de Londres
– Aux Trois Freres Provencaux
• 1794:
– The French Revolution
• Chefs to the former nobility suddenly had no employment.
• Some chefs stayed & opened restaurants, some went to
Europe; many chefs fled to America.
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THE BIRTH OF RESTAURANTS
IN AMERICA
• 1794:
– Paypalt brought the term restaurant
to the United States.
• 1827:
– Delmonico’s, thought to be the first
restaurant in America, opens.
• Closed during the early years of
Prohibition.
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CHALLENGES OF RESTAURANT
OPERATION
• Long hours
• Excessive fatigue can
lead to health problems
• Little security for
managers who work for
others
• Family life can suffer
• For owner, possibility of
losing investment and
investors
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REASONS FOR RESTAURANT
FAILURE
• Lack of management
traits/skills
• Lack of sufficient
capital
• The expansion &
competition from
other restaurants
• Family problems
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THE RESTAURANT FAILURE
RATE
• Results of Dr. Parsa’s
study:
– Highest failure rate
during first year- 26%
– Second year- 19%
– Third year- 14%
– Failure rate of 59% for
a three year period
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BUY, BUILD, FRANCHISE, OR
MANAGE?
• There are several career &
investment options in the restaurant
business:
– Manage for someone else.
– Purchase & operate a franchise.
– Buy an existing restaurant & operate it
as is or change its concept.
– Build & operate a new restaurant.
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ADVANTAGES TO BUYING
• Satisfies an aesthetic personal desire.
• High rewards if successful.
• Risks are somewhat reduced with
knowledge of why the previous
restaurant failed.
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DISADVANTAGES OF BUYING
• Difficult to overcome a poor reputation
or poor location.
• High financial losses if restaurant fails:
– A fully equipped restaurant that seats 100
people costs anywhere from $6000 to
$10,000 + per seat (or $600,000 to $1 million
+) in addition to the site being bought or
leased.
– In contrast, a sandwich shop can usually be
opened for less than $30,000.
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ADVANTAGES OF FRANCHISING
• Least financial risk
(other than managing).
• Building design, menu,
and marketing plans
are already created
and tested in market.
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BUY / BUILD / FRANCHISE / MANAGE
ADVANTAGES & DISADVANTAGES
Original
Investment
Needed
Experience
Needed
Potential
Personal
Stress
Psychological
Cost of
Failure
Financial
Risk
Potential
Reward
Buy
Medium
High
High
High
High
High
Build
Highest
High
High
Highest
Highest
High
Franchise
(A) Ex.
Subway
Low to
Medium
Low
Medium
Medium
Medium
Medium
to High
Franchise
(B) Ex.
Applebee’s
Manage
High
High
High
High
High
High
None
Medium
to High
Medium
Medium
None
Medium
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BE A COPYCAT!
• Analyze existing restaurants
that are successful.
• Borrow good points &
practices.
• Modify & improve borrowed
points & practices if possible.
• The successful mix = one that
is better than the competition!
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QUALITY CONTROL
• Error detection, based on
industrial systems, tends to
be product oriented rather
than service oriented.
• Critical in the restaurant
business.
• All managers should carry a
thermometer in their pocket
so they can check that the
food is being served at the
correct temperature.
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STARTING FROM SCRATCH
• Would be restaurant
operators come with a mix of
different experiences in the
business.
• The industry does not have
nearly enough employees &
turnover rate is high.
• The business is highly
competitive, requires
inordinate energy, the ability
to work long hours & the
willingness to accept a low
salary!
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RESTAURANTS AS ROADS TO
RICHES
The most
common reason
people seek
restaurant
ownership is the
possible financial
rewards.
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THIS BOOK IS DESIGNED TO HELP
YOU WITH:
– Ownership: Sole proprietorship, partnership, company or
franchise.
– Development of a business plan: A good business plan
may take a while to develop, but you’re not going to
obtain financing without one.
– Marketing/Sales: You need to know who your guests will
be and how many there are.
– Location: Will your location be free standing, in a mall,
city center, suburban, or ?
– Who’s on your team?: Your Chef, staff, lawyer,
accountant, insurance, sales, marketing and PR.
– Design/Ambiance: What design/ambiance will you select?
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THIS BOOK IS DESIGNED TO HELP
YOU WITH:
– Menu: What will your menu feature, how many appetizers,
entrees and desserts will you offer?
– Beverages: Who will develop your beverage menu and
what will be on it?
– Legal: What permits do I need?
– Budgets: What will my budget look like?
– Control: What kind of control system will I have and how
will it work?
– Service: What style of service will you select and how will
it operate?
– Management: How will your restaurant operate?
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The End
Copyright © 2008 John Wiley & Sons, Inc.
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