E Burnside St (Kerns)

[bler144]

I'm a generalist whose dabbled in accounting and business loans and a number of areas, but to get down to this level of detail you probably want to consider hiring an actual consultant to look at your books/business plan draft. $250 bucks now may be a pinch, but it's better than getting tens of thousands underwater.

In general though, I wouldn't worry too much about what happens in 5 years - I don't have the stat handy but something like 50% of restaurants fail in the first two. So that's your real concern. If you're successful and 5 years down the road the lease either gets yanked or hiked out of your price range, well, then you have a name at least. A move might sink you at that point, but there are ways to spin a move and potentially use it to your advantage "new and bigger space!"

The trade-off of a 5 year lease on the upside is that you have some cost security for 5 years, but on the downside you likely have some cost to break the lease if you go under, which becomes an extra punch in the gut unless you can get out of that cost in bankruptcy.

But again, maybe take 1-2 more stabs at your business plan on your own, but then I think it's worth actually paying someone to go over it with a fine tooth comb. You could cheat a bit - build relationships with a few small local banks and go in and pitch your business plan and see what they say. While they'll probably turn you down at this stage, they may at least give you a few free pointers with the rejection. But at some point I think you'll actually need to evaluate consultants and pay one of them a few hundred.

Likewise, I think the thought about 'what happens in 5 years' is well and good, but your real hurdle is the first 2 years, and especially the first say, 3-6 [months], where even if you're having success you're probably seeing negative cashflow due to startup costs.

[oldtintype]

Originally Posted by bler144

I suspect economics play a big role in that. In making a business plan it's nice to imagine what you'd want to sell, but you have to have margins that will cover costs before you even think about profit/paying yourself.

An establishment that's been there forever on a long-term lease/fixed rent, or that owns a property outright on 1990s prices has flex to be whatever it wants because one of its three major costs (location/staffing/COGS) is dirt cheap compared to the market. A restaurateur who wants to move in in 2015 paying current market rent or purchase prices?

Yeah...the numbers probably force you to sell higher margin product.

That's not to say you can't be "more affordable" but probably not by much. Likewise, you could market to families, but you're still almost certain to have to target slightly wealthier families. It's a bit of a cycle - as higher-end services come in, rents rise, which more or less locks out businesses that want to serve the low end.

Fast food franchises can pull it off, but they have name recognition/free advertising, plus supply-chain advantages, etc.

I guess I wasn't clear--most restaurants there aren't friendly to kids or casual--it's all about fine dining/foodies. The neighborhood could support something that was more casual even if it wasn't low priced. If you spend time in the neighborhood you'll see most people dining are coming from other areas--the locals go to other neighborhoods for what's missing there.

[Silver8]

Thank you again oldtintype and bler144.

Excellent suggestion about trying to get a loan from banks!

Unless the the economy tanks and/or the seller lies big time about his numbers, this is a pretty safe bet. I'll be personally be monitoring the sales for a few days before taking the plunge.

Like I mentioned, my main concern is, if I want out a few years down the road, will my business be an asset sale or not. From a business broker I spoke with, as long as my new location is within a few miles of my original location and more importantly, my customers follow me, I should be fine.

Nonetheless, I'll certainly give that loan application a try.

bler144, should I go ahead with the buying that restaurant and if you're in the area, please drop by, lunch is on me.

[bler144]

Originally Posted by oldtintype

I guess I wasn't clear--most restaurants there aren't friendly to kids or casual--it's all about fine dining/foodies.

I'm not sure we're disagreeing - my point is that haute couture typically makes it easier to scale your margins. It's a slightly safer path in a business where failure risk is high right off the bat.

While the theory that you can make a family-friendly restaurant and still charge a premium is fine, I'm not sure it's readily doable on the ground for a variety of reasons. The average family generally is going to be squeezed on paying a premium, and the average wealthy single/couple is likely to steer away from something family friendly given other options.

There are some restaurants that can sort of bridge that divide between quality and family-friendly (Laurelwood Pub) but a lot of their margin is probably in the brewery, not the food. Plus, they've been established since 2001 in an area that was much lower cost at the time, and likely either own or have a LTL.

So sure, you could take a stab at trying to fill an unfilled niche, and it might totally pan out. But you'd want to go in with your eyes open and understand the market well enough to see why the trend in that neighborhood is currently going the other way. In much the same way that you could locate a boutique between a Walmart and a Target because it's an unfilled niche in that strip mall, but you'd want to do your homework on local demand and the finances to make sure it wasn't a doomed proposition off the bat.

[oldtintype]

I live in the north Pearl now and feel like I have a zillion more places to go with kids, even though the restaurants here aren't cheap and are definitely on the more expensive side. There's a difference between child friendly and no kids at all-- and there's an in between where you can take a kid or two in the early evening or lunch. Most of the restaurants in that area are more on the no kids side of things and several are literally NO kids EVER like Matador, Hillmans and several others. Sliding Door is an example of the "in between"--kids are fine in the AM/lunch but not really for dinner. That's a good compromise and one that would be good to see more of. I think your definition of "family friendly" is different than mine--I don't mean things like Laurelwood Pub, just a place that you feel like a kid or two would be OK at certain times. Laurelwood Pub has WAY too many kids