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Read somewhere that restaurants operate at 0.4 to 3% profitability. This is LOW. I am not surprised that Chinese buffets here have their waiters working paid by tips only.
Makes me wonder actually, as there are so many of eateries around that have 2 clients a day, with one of them simply sipping free water while he's fooling with his laptop (free WIFI is provided), if most of those places simply were Al Capone' laundry style businesses. Along with a bunch of small stores and such, "boutiques", where owner sits all day long, feet on the table, reading something and is the only employee.
Given the odds, it must be a miracle that McDonald, Wendy's, In and Out Burger, Panda Express, Chipotle, and others somehow make it. Or perhaps they are losing money and hiding it.
Read somewhere that restaurants operate at 0.4 to 3% profitability. This is LOW. I am not surprised that Chinese buffets here have their waiters working paid by tips only.
Makes me wonder actually, as there are so many of eateries around that have 2 clients a day, with one of them simply sipping free water while he's fooling with his laptop (free WIFI is provided), if most of those places simply were Al Capone' laundry style businesses. Along with a bunch of small stores and such, "boutiques", where owner sits all day long, feet on the table, reading something and is the only employee.
I believe the average is 3-5% profit, for those restaurants that survive.
The restaurant business is incredibly difficult and competition is very tough, plus tons of restaurants skirting the law on taxes and labor.
I've been a restaurant owner for 2 years.
Key factors in being succussful.
1. Work ethic, be able to work 70-90 hours a week, few days off all year. I'll have taken off 20 days in 2015.
2. Patience and be nice to employees and customers while exhausted, complained at, stressed out.
3. Efficient, you can't waste anything.
It's the mental aspect that I believe makes most restaurant owners fail. People can say it's tough, but it really takes a special kind of person.
I know you already said you aren't investing in it, but there is no way I would invest in a restaurant if the owner didnt already have restaurant ownership experience. When I started my restaurant I took over a suite where the previous restaurant had failed. They dumped over $200,000 into the business and closed 18 months later. So far I've spent $50k or so, but I've already made that back. I would also say small efficient restaurants are the way to go, think like Dominoes, Papa Johns, or a mom and pop diner. Keep seating under 50, 3-4 employees tops. Even if you fail you might not lose everything. The restaurants that try to do 100-200 seats and 15-20 employees are far more likely to fail. They simply have too many expenses and liabilities, you fail to make your revenue goals and you're done. I have a good location, 2000 sq ft, rent $2500. I know restaurants that have rent in the $15-20K range, and most fail (I start making a profit at less then $15K). Stay smart and keep it small. Small restaurants can also run much higher then 5% profits.
I wouldn't back her without any restaurant experience. Tell her to get a job in a restaurant for 6 to 9 months, to learn the ropes and see if she still has the dream. Remember... some dreams turn into nightmares.
She sounds like a person that is good at business and thinks everything they touch will be successful. Then they learn a lesson. This will probably be her lesson. In 5 years she will use that to get back into the types of businesses that will succeed.
I dont believe it is as tough as people make it out to be. It depends on the type of restaurant you are trying to start. Lots of people try to be pretentious, and too fancy because they think Food Network is the only way to go.
She sounds like a person that is good at business and thinks everything they touch will be successful. Then they learn a lesson. This will probably be her lesson. In 5 years she will use that to get back into the types of businesses that will succeed.
I think you are right. She has done well, but a bit of a spender. Not sure why she needs to do this restaurant thing.
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