Restaurants as a way of life

With the current challenges the world faces and with those who mouth-open prevaricate over everything they don’t understand, it’s sad to see so many restaurants going into administration.

I just wrote this and it may be of interest.

Jon.

 

RESTAURANTS AS A WAY OF LIFE

I find it amazing that the doomsayers out there are actually believed when they pontificate at length about not being able to make money in a restaurant.  Glib statements like, ‘Make a small fortune by opening a restaurant with a big fortune’, don’t help.  That is re-said by those echoing others lack of knowledge.

Indeed they blame the economy, war, sunspots and/or anything except their own inability to run a business.  Yes, run a business, not just buying a few tables and hope, but run a business.

Personally we do just that, unlike a past life in finance, hospitals, downsizing and litigation, we have fun.  We run a business which happens to be a restaurant and we have been doing it in just this restaurant for some 23 years and we only seat 16 inside.  I am the cook whilst my wife runs front of house.  Just the two of us and no staff. 

Luckily people like what we do and we are full most of the time and it’s not life threatening as we only trade some 25 hours a week spending quality time travelling around the world about 8 weeks a year whilst attempting golf, archery and pickle ball. [‘Hopeless’ at all three but still fun’].

Our boutique business has won many national and international awards reaching ‘institution’ status by and through longevity if nothing else.  It’s the business itself which funds all our excursions and we are very very careful with all costs including rent, cost of sales and margin pricing which reflects our chosen business focus, defines us and anchors our reputation.  We have no debt, no leases and controllable costs.  This is not cook and hope but planned with zero waste of any kind. If we have quiet night or two it doesn’t affect or worry us

If we can do this whilst I am approaching 80 then imagine what a mere lad of say 50 could achieve?

Is it cheap?  No.  Can risks be controlled?  Yes.  Is it a business challenge?  Yes. Is it lucrative?  Yes.  Are results guaranteed?  No.  Is it fun and life affirming?  Absobloodylutely!

Ambition is a wonderful thing but ‘planned’ ambition is indeed life affirming.

Apart from all of the above, be careful buying a cheapish dud with discernible ‘bad-will’ as the risks are significant.  Any business is only worth it’s fair value assets plus nett profit for a prospective owners ‘hands off’ returns.  Do your homework and understand capitalised future earnings as a valuation tool as well as scrutinise claimed revenues [BAS is good] and overheads [independent landlord provided] and complete a margin analysis to get a good idea of what’s actually happening.  This is simple good business purchasing as is scanning past booking records for any anomalies before purchase. 

Then cook your heart out and love the experience because you are financially in control with low risk.  It won’t always work.  Some years ago we also had a dud.  Bugger!   Life doesn’t come with guarantees but life without controlled challenges would be as boring as that well known bat excreta.

Restaurants are fun and you are dealing with happy people rewarding them with an ‘experience’ and they even pay you for the privilege!   Wahoo.

Go after the brain dead keyboard dropkick negative reviewers if they are not warranted, live with an attitude of gratitude for the good reviews and ‘fill every hour with sixty minutes worth of distance run’ albeit not too many at work. [With apologies to Kipling for his masterpiece of a poem, ‘If’].

Life is good.

AN ALTERNATIVE POINT OF VIEW AND RESPONSE TO ‘RECIPE FOR DISASTER IN HOSPITALITY FORECAST’ PUBLISHED IN THE AGE NEWSPAPER ON MAY 25TH.

From a restaurateur of too many years.

The major issue for aspiring restaurateurs is a lack of understanding of what’s actually required to open their romantic you-beut restaurant where customers line up to savour their galaxy leading cuisine whilst the owner swans around bathing in the glory of their accomplishments.

This is seen as a birth right by many a swanee.

Unfortunately, that’s a fantasy driven by blind romance not wanting to deal with the real world.  If 5,000 restaurants are in danger of collapsing within say 12 months then another 5,000 hopefuls will see an opportunity and shoulder the mantle. Then another 5,000 will drop off the perch and another 5,000 swanee’s will have a whack.  Most are ego driven wannabes who will not take advice and will fail.

Yet, this is exactly the type of people we need, the risk takers who have a vision and are willing to risk the house to fulfill it.  Wow!  Trouble arises when ego takes over from reality.  A restaurant is not about cook and hope, it’s about running a business which happens to be a restaurant.

It’s sort of hard-ish work, mentally and physically challenging but bloody good fun!!

Obviously, negativity sells newspapers but the more we pontificate on doom and gloom the more people believe it and the more they retreat into some sort of protective cave.  Negative and emotive statements in this article such as ‘Do they want to lose their house or go out for breakfast?’ are not helpful and just prove that this quote is there to sell a story rather than deal with reality. 

In terms of restaurants, there will always be doom and gloom perpetrated by those who can’t distinguish between running a business [which happens to be a restaurant] versus just providing tucker and hoping someone turns up.  In the same vein, clients [not mere customers] who risk losing their house because they went out to breakfast is an obfuscation fantasy and are not the clients anyone seeks.  This hasn’t changed.  Restaurants are a business and, the same as any business, target their market to clients who can enjoy the experience.  This hasn’t changed.  No one is suggesting this is foolproof but it’s a long way from the ‘hand wringing set’ of misplaced hope over business savvy.  It’s not easy. This also hasn’t changed.

Covid knocked us all around where takings plummeted by perhaps 75% which forced cost cutting and closures.  The lockdowns in Melbourne were disastrous not helped by the somewhat spurious statistic that restaurant margins are just 4.3%.  Blink and you’re broke. This is insane!!  I don’t know how anyone calculates this figure because no one in their right mind would take on a restaurant or any business with so little margin and zero cash backup.  Yet there are apparently some 36,000 restaurants in Australia.  Perhaps we are all loopy?  Indeed, during covid we were humbled by the support we received as people flocked to get ‘take-home’ just to make sure we survived.  Wow!

We have been in our current restaurant for over 21 years with just the two of us tootling around – [big is not better] sporting a normalised extrapolated ROI [based on a business valuation using internationally recognised capitalised future earnings] of 20%+ after wages whilst open just 30 hours a week, achieving international recognition and enjoying life.  Our total overheads come in at 12% of revenue including rent and our normalised COS is at 30% leaving a nice margin - a far cry from 4.3%!!.  We have almost zero plate waste indicating something is correct and bugger all stock waste.  80%+ repeat clientele also says something I feel.  Indeed, I am 76 and consider work as ‘life affirming’ and fun rather than a hardship.  Wahoo!

Our revenue hasn’t recently shifted by a great deal despite the doom and gloom, margins are very very closely guarded and we don’t charge clients just for using their credit card [being in my opinion a devious and shallow business ethic].  Some idiot said recently that we need to get used to paying $60 for a main course.  What crap.  All that says to me is that they are not running a business, have little understanding of finance and don’t manage margins. Out of control!

Apart from keeping an absolute focus on margins etc there are, in my opinion, three basic tenets to running a restaurant and all the while enjoying life.   Really important – enjoying life!

Firstly, the restaurant’s ambience must absolutely exude at first glance to a potential client ‘I want to be in there enjoying myself’.  Secondly, service must be instant, friendly and professional being focused on the client and their experiential enjoyment.  Thirdly, the menu offerings must be fantastic remembering there are 35,999 other restaurants where people can spend their dollar.  As an adjunct, ‘specialise’ in something which will differentiate you from the rabble.

Note that food is last!!  Creating and running a business is first and that business must understand people and margins.  Not until then does food rear its glorious head.  Clients want a total experience they can salivate over in all aspects. 

The restaurateur wants a good life.

At the end of the day, we enjoy people by providing an experience which cracks the smile dial. It doesn’t matter what it is but, love what you do and do it well!!  We, at least, love what we do.

Covid and restaurants

Why do we do things in hospitality driven by knee jerk reactions and short term thinking?

My wife and I own and run a small restaurant which has been forced into just 8 diners per sitting because of very appropriate Covid restrictions.  In order to survive from day 1 after the reopening we ran two sittings which we are fortunate enough to have oversubscribed.

We do not force people to book online with a credit card and draconian penalties and we don’t stupidly surcharge a bill for using that credit card.  Both of these very very short sighted actions assume people are basically dishonest and financially stupid.  We do not have no-shows and welcome our guests as friends – some for over 17 years.  Friends who are indeed financially astute and honest and who enjoy and indeed respect the trust placed in them. 

Further, there is a trend to try and make people spend more money through the use of set multi course menus and/or minimum spends.  Once again a negative short term cash flow ‘solution’.  Except, it’s not a solution as people rightly don’t like having choice removed.  We have clients who don’t spend much [non drinkers usually] and lots who do.  The balance is appropriate at around $120 per head.  The key is that it’s a ‘balance’ and people spend because we spend a lot of time developing a product which people want to buy, not forcing something they don’t want.

Wonder why there are so many restaurant failures?  One reason, among many, is that restaurateurs show no respect for their clients devolving their offering to their own perceived bottom end financially stupid and disrespectful thinking.  When we opened some 17 years ago Telstra failed to connect our EFTPOS et alia so we had no method of taking credit card payments.  At the time we said to all clients, ‘don’t worry, just pay us next time you pass’.  Every bill was paid within the week.  I have a very healthy respect, for respect and no, it’s not earned, it’s a God given right.

This whole Covid thing is a real bugger on so many fronts causing real financial and emotional stress.  Restrictions placed to protect us against disaster are appropriate but then we see 10,000 people allowed to protest ‘cheek and jowl’ by our government.  Mixed messages from the idiots in power obviously with a brain-thinking disconnect.

We as a nation are going to ‘bolt’ out of this forced conundrum because as that nation we DO have respect for all peoples, we are not idiots and we live in the best country on earth with freedoms of everything. 

People choose based on how they are treated.

We choose Australia and people choose our little restaurant because we respect them without demanding and without hidden charges.

Owning a restaurant

Be in no doubt.  Owning and running a restaurant is not purgatory or life threatening.

What it is, is fun, profitable and enables a lifestyle the envy of most.

People who perhaps should rethink their ability to be successful tend to blame mutually exclusive factors for their demise such as restaurant over-supply , long hours or even Uber-eats.  It’s simply not true.

People tend to blame ‘others’ after they have failed to deal with all the ‘fun’ challengers.  Beware the pontificating dross!   

The first key concept is that owning a restaurant is actually real hands on work not to be confused with just sitting at home directing the minions to achieve.  They won’t!

Secondly, restaurants fall over because they can’t deal with inevitable quiet times or their offering does not meet the ‘wow’ factor or they remain undifferentiated with no discernible focus to attract spenders.

Thirdly, there never were days gone past when all you had to do was open the door and people would throw money in.  It’s a myth perpetrated by those seeking solace or the ‘oh woe is me’ syndrome.

It’s not what happens, it’s how you deal with it!  Obviously there are no guarantees and success can be sometimes a fleeting goal but these failures are nothing compared to the many restaurateurs having a ball.  We had a failure a few years ago but we dealt with it and moved on to more fun than you can shake a stick at.

Currently we have a tiny bistro seating just 16 people which we open 5 days and perhaps 30 hours a week for around 44 weeks a year and we have just been awarded out of London, ‘Australian restaurant of the year’.  Our product is differentiated with just my wife and I working, open short hours, travel the world and, we own the bar!  Did I mention having fun?

The thought challenged with a distracted ego fail on many fronts to deal with all the issues involved expecting to just open the doors and all will be tickety boo.  Life and restaurants are not like that.

I play golf badly, failing all the time to whip that grass into shape.  But it’s still God’s sport and it’s fun.  There is no greater challenge in playing against an opponent you can never beat!  And, it’s just bloody grass!  Restaurants are the same – good days, bad days, fun days and abject misery days.  

Good, isn’t it!