I can personally relate to their struggles to get a business going, retain staff, and to be one step ahead of everything when you're just trying to survive.
And I lived right next door to Renard.
It's hard to imagine that during the planning, budgeting, and all the upfront work that someone didn't caution him against the unscrupulous landlord. The landlord was a guy that wrapped a chain around our neighboring building to pull his building back onto its foundation. This is a guy that had public, outstanding violations and complaints on his building and unpermitted work.
And they moved in to a microscopic kitchen to do white-tablecloth dining in a local neighborhood. Yes, they moved in right after a hot restaurant, St Jack, moved out, but St Jack had a marketing/advertising/buzz machine behind it. They systematically created success, not the other-way around.
I guess the moral of the story is take this to heart:
>I told myself what I'm sure every single novice restauranteur tells themselves: I'll be in the 1 percent that make it, by sheer will.
Take the leap, but you've got to do your diligence. Listen to the feedback and concerns people voice about your endeavor.
> Take the leap, but you've got to do your diligence. Listen to the feedback and concerns people voice about your endeavor.
Absolutely, but there's never a situation of any kind without drawbacks.
A quote from David Chang of Momofuku, etc:
> I think almost everything we've done has been a failure from the get go. That's just the truth, and I don't think people see that. We have fucked up just about every opening in every restaurant we've ever done. We grind it out and figure out how to make it work as we go. That's what makes it a very organic experience and sometimes maddening. But I can't see any other way to do it than to engage with the world, make the mistakes, and pick up the pieces from there.
The landlord may or may not be a dick. I'd like to see some more on that chain story (because I'm really curious about the specifics physically) and the general statement about unpermitted work.
The hype machine thing you mentioned might be the real deal. As far as I can tell chef's food wasn't remarkable for Portland. His highlight pic was a french onion soup and a steak tartar, not even plated well. The rest of the atmos looked like snippets from "How to be Portland" magazine. They said "Keep Portland Weird" but that brand has been bought and sold and done with since Death Cab for Cutie had that song about answering machines.
It might be good food, it might be expensive, but man... Portland basically invented what we think of as the modern 'foodie' dickweed.
I'm not sure that any place that doesn't have extremely deep pockets isn't dealing with a landlord that wouldn't try some chain foundation voodoo, or even like real deal fraud, and chef still gotta survive plus overdeliver world class dining experience if he wants to be heard.
I have to agree, that was a very pedestrian food shot. There's nothing wrong with straight bistro fare but not at premium prices. I think the problem here was they went premium with the location and environment and preparations, but it didn't translate into an exciting experience.
Also the author sounds quick to blame external forces and the general malaise of the industry, which perhaps can cloud one's focus on identifying and fixing your own weaknesses.
Nothing that guy said was a fact, I am specifically questioning the facts as stated. Wrapping a chain around the neighboring building sounds crazy but if it happened at all there is definitely a story that involves more than a few sentences of detail. Like ... seriously, that is wild. He might have had an agreement with someone about using chain and a come-along to fix his foundation and it went sour. It might have been all legit and a neighbor just talked shit about something they didn't understand. There is no proof. You don't just freestyle chain moving of a building to sit on a foundation and expect it to work. If you did and it physically helped, like in a way that made your building uncondemned or something, you are either extremely lucky or a god damned wizard or probably fucking both.
I've had landlords that I sort of liked do unpermitted shitty work to fix electrical in my house that I had to argue with them about and get resolved, but it's not a reason to crucify them. Some cities and I think Portland is in this group only have like 3 inspection officers sometimes less for commercial and the wait list can
be astronomical and unavoidable. People still need stuff, sometimes with hard deadlines to make the property generate income. I'm not saying it's right, I'm just saying it happens... constantly, in almost every building you go in. Sometimes the work is completely up to code or better, sometimes it's all a gnarly fire hazards. If homie up here is gonna call shit out and smear a man, he really should be more specific. If he can't be, then it's really rude to just call the guy an asshole because he failed to pull a sticker for having posts put in for a deck.
He also might be Dick Dastardly roping up his own fiefdom with a network of chains to all surrounding office parks while building a tesla coil out of garbage in the attic next to a putrid leaking grey water line that dumps into the women's restroom sink sending random heart stopping voltage through a soap dispenser.
I'm still not sure he is UNIQUELY that dick so much so that it cost chef his golden ticket. I'm pretty sure chef's uninspired menu, inexperience, and refusal to adapt from his vision to appropriately match the costs he was not measuring vaporized the dream many months before chef woke up. If the landlord hung him so bad, then he really should have negotiated harder for an improvements clause that made sense for his budget and found middle ground to grow. Either that or open up somewhere that... you know... he can afford?
You can't just offhandedly condemn the other business party because some other dude you don't know says he saw him using a chain in his neighborhood once. Dude is basically already doxxed it's all so specific. Maybe landlord was trying to save the next house from a landslide or pull out a tree stump with a chevy nova you couldn't see. All I'm saying is I really want to see pictures of this chain operation.
The other moral of the story would don't assume that enthusiasm equals friendship. This poor fellow's erstwhile landlord fleeced him and I'm astonished that his investing partner didn't warn him away in favor of some less glamorous but more economically sustainable location.
Also, commercial landlords are not nice people. I see and hear a lot of similar stories here in the Bay Area, where it's now routine for landlords to jack up the rent by 100% at the end of a lease period. In cases like this landlords often plead that they have no other choice than to charge the market rate, and this is partly true - but they omit to mention that they are often leveraged to the hilt and are using their existing holdings as collateral to buy more property.
Even when property is sitting empty, it may still be 'working' for the landlord - commercial property can be depreciated for federal tax purposes over a 39 year period, so a building in a downtown area can sit empty but serve as a tax umbrella for profitable rentals elsewhere, as long as the costs of maintenance/blight mitigation stays low. I'm no accountant but as far as I can tell the tax code disproportionately favors property owners.
Novice restauranteur. . .. is just another word for failure.
You cannot purchase a restaurant without knowing the industry (eg by working in it), and expect things to just flow.
Don't take the leap, actually learn what the hell you're getting into.
As for the landlord, bloody hell. Needing to spend 20k on plumbing and they didn't think that was a bad place to rent ? There is no excuse for that, even if there was more than 20k of equipment on premises, they should have seen the warning signs.
Tldr: foolish investor thinks buying a restaurant is easy money, learns the hard way that it isn't.
From what I have read, margins are so thin in the restaurant business that doing an energy audit and tightening up costs that way can be the difference between running in the red and profitability. That doesn't leave a lot of wiggle room for a greenhorn to learn the ropes, to figure out this isn't working and pivot, etc. I imagine that's part of why franchises are so popular in this space.
The source I am remembering is specifically about catering, not restaurants per se:
The energy used in catering facilities typically accounts for 4-6% of operating costs. Many caterers work on a profit margin that is within this range, so it is obvious that saving energy can directly increase revenue and profitability without the need to increase sales.
I often wonder how these things are calculated. I just don’t know that there is enough time in a year and enough buildings in a city for there to be 100 times as many attempts as there are successes, unless you include everyone who has ever thought, “I’ll open a restaurant!” And goes back to watching TV. Put another way, if 10 restaurants were successfully launched in a year, that implies 990 failures.
I've thought the same thing, I think it's a national stat and there is a lot of stuff opening in markets that make no sense for a restaurant in the first place. It's invisible to me, maybe you, because we live in and frequent urban/suburban places of middle+ class economics where seemingly most restaurants succeed. The rural and <middle class areas is where a lot of the failure comes from. That's my hypothesis anyway.
There are a number of sources of statistics, and while they vary a bit, they all show that the popular story of a ludcirously high failure rate for new restaurants is not true.
That said, the majority do either fail or get sold within three years, which (given that owners generally aren't building them for an exit) suggest a high combined rate of failure or burnout. But nothing like the 90, 95, or 99% short-run failure rates often tossed around.
Okay it's time for me to chip in properly, forgive any typos I'm on a phone.
Preamble: I'm rated as an executive chef(my last 3 positions before leaving the industry), and I had worked for over 17 years in hospitality (from apprentice chef, to manager and executive chef - I also spent 4 years traveling to different restaurants to try and save them from foreclosure).
"That chicken is a confit (with duck fat, aka $$), then served with a stock/stew that takes days (of labor dollars) to prepare, plus cost of employees to serve"
I sympathised with the author until this point. No it doesn't take days in the way the author points it out, it takes minutes with a time to follow. (Eg you don't have to actually do anything after you prepare and set it). That's akin to saying a good jam or beer takes months - yes in pure time, but it doesn't take staff time(and $$ as the author said).
As for the hours? The author is correct, hospitality is a slug fest, there is no doubt about that.
What I take from this article? An unexperienced person tried to build a new business in an industry that didn't have the experience in.
Would you try to start a software business, a cloud storage or a trucking business without experience? No it would be foolhardy, and that's the biggest problem with hospitality.
Frankly if you're not a chef - dont purchase a restaurant. Anyone can cook one decent meal, now try doing 100 a day while managing costs and staffing. (That's just the basics, there are hundreds of things you need to do just to begin).
At the end of the day, I sympathise with the author, I have seen (and tried to help), a lot of people in that situation, but you cannot just jump into hospitality with money and assume that it will work.
That chicken is a confit (with duck fat, aka $$), then served with a stock/stew that takes days (of labor dollars) to prepare, plus cost of employees to serve, stuff to serve it on and rent to pay, not to mention the utilities (the water bills on that cursed grease trap were the opposite of "the gift that keeps on giving"). That damned chicken should be $40! But people won't pay $40 for chicken, so it's $29.
This seems to suggest that the author (who I sympathize with very much) doesn't have much understanding of cost accounting, and therefore pricing, which is near the top of mistakes inexperienced business owners make. The cost of the chicken is variable. The costs of rent, labor, and utilities are fixed on a per plate basis.
I'm friends with the owner of a very large and very successful restaurant and he once told me that he basically makes no profit on food and that the food is just a way to get people in to sell alcohol which is where the majority of his profit is made. It's also true that some foods are necessarily more profitable than others. People won't pay your costs for the chicken confit and you lose a few bucks on every one that goes out? Fine, add a few dollars to your pasta dish that costs far less to make and if you sell the same number you're even. Or, if the chicken isn't profitable and you aren't selling many of them, just accept that people don't want it and take it off the menu.
...he basically makes no profit on food and that the food is just a way to get people in to sell alcohol which is where the majority of his profit is made...
Swap "alcohol" for "soft drinks" and you're pretty much describing the entire fast-food industry.
No way that McDonalds is selling Big Macs or French fries at cost. Do you really think it costs McDonalds nearly €2 to serve you an order of fries? Or nearly €4 for a Big Mac.
McDonalds operates at a larger scale than any other restaurant in the world and by a very large margin. What works for McDonalds won't work for restaurants that must order supplies on a much smaller scale.
Also, in McDonalds' early days they didn't have the leverage over suppliers that they wield now, so its food costs have come down by orders of magnitude. This reminds me of something my cost accounting professor told me- to get to large scale businesses have to price items as if they are already at large scale. If you buy a stamping machine that cost $1 million capable of maximum output of 100,000 units, but currently only have sales of 5,000 units, do you price each unit at 1,000,000/5,000 or 1,000,000/100,000? If you opt for the former, you'll never get to maximum output because customers won't be able to afford your prices.
Given labor costs, packaging/disposables, energy (freezer, grill, holding cabinet, environmental, ventilation), franchise percentages, real estate lease, shrinkage/waste, promotional discounts/combo meals...yes. It comes very close.
You have to be a very clever restaurateur to get away with $29+ entrees. This is not something you just plunge into on a whim.
They should just have made darned turkey sandwiches or something. Charge 25 cents less than similar ones in a two mile radius. If everyone is asking $7, make yours $6.75.
Have an espresso machine and great coffee.
Don't hire any outsiders until business outpaces your sandwich-fu.
Encourage take-out and phone-in orders (or online). Take-out people don't take up seats and you don't have to do dishes after them or clean the table.
Don't know what coffee roaster(s) they were getting their beans from, but pictures show a Synesso espresso machine. Given it's Portland, that's probably not as remarkable as it would be in other restaurant/bars around the country.
Without having any experience in the area or knowing owners, this has been my exact assumption.
In a restaurant me and my girlfriend frequent, the main dishes are actually VERY affordable -- I'd even say cheap -- for what they offer. And many people flock to the restaurant in lunch breaks, but they are very careful to only order a beer plus a main dish.
Why? Because that restaurant's every single drink -- alcoholic or not -- is grossly overpriced. Desserts cost an arm and a leg. Salads are mostly okay but they most likely sell them for 3x the price of the ingredients as well.
The way I see modern restaurants is exactly like you said: food is just a bait so you can get in and buy the things that go with it, and they are the real profit makers.
I am perfectly okay with it. It was just an interesting revelation and I decided to chime in and thank you for confirming my observations.
It's a strange concept to have loss-leaders in a restaurant. If I were starting a restaurant, I would probably just want to sell everything at a profit. I don't have a burning desire to pay people to eat my food.
It seems counterintuitive to me too, but when you think about it it makes sense.
If you sell burgers, the food costs are pretty high. After all, good hamburger meat, cheese, and whatever else you are going to put in it is pretty expensive. If you charge your costs plus some fixed percentage to ensure profitability on every item, but your customers are used to buying burgers at similar places that charge for the food at cost and make their profits on french fries and drinks, you will quickly earn the reputation of being overpriced. If you can earn some sort of adoration that drives people to your place regardless of price, like Shake Shack or In N' Out, then you have the luxury of charging a bit more, but that's hard to achieve.
Side note: burgers are actually quite cheap to make (even top of the line burgers: eg waygu pattie, day fresh iceberg lettuce, Roma tomatoes and a good in-house made sauce will have a cost of less than $4 unless you are screwing up your ordering), it's the incidentals that will actually cost most of the income. (I have a post lower explaining more, but basically food should never cost more than 25% of your total sales price)
Adoration of customers is a nice theory. Never holds up in reality though. Those customrs go there because they know the quality and quantity for the price, and know that every time it will match that. If you have any doubt in that point, watch what happens to any chain that begins to serve lower quality or inconsistent quality food.
There is customer comfort from repition, but even a moss covered stone can be moved for a good reason. Customers arnt moss covered stones though, they will try something new and if the price/quality point is better, they will move.
>...food should never cost more than 25% of your total sales price)
I'm in the food industry, and this pervasive food-cost mentality is one of the things I think people often do unwisely.
Here's a simple example with made-up numbers: The burger ingredients are $2.50 and the burger sells for $10. There's a 25% food cost. The filet of beef tenderloin costs $10 and sells for $25. The food cost is 40%.
Focusing on food cost means the burger is a better item for the restaurant. But I'd take the 40% food cost instead of the 25% food cost and then net $15 instead of $7.50. A percentage means nothing compared to cash in hand. That's nothing groundbreaking to say, but that discrepancy is often lost on food-industry people because they focus too much on the food-cost percentage.
Side note: if your paying that much for beef for a burger portion, your getting ripped off.
Look the basic principle is: 25% to each: food, staff, facility, profit. Now all experienced managers know that profit is a variable.
The point being, never sell for under, unless you can guarantee an over. Which is difficult to say the least. Yes, if you have gaming section and can rip off your customers from there, go ahead (nb: this is why I never working in venues with gaming facilities). If you have an amazing wine selection or just plain know your clients are going to order great pricepoint wine? Well, just be careful.
Otherwise, you better be selling a lot of overpriced stock with low staffing rates, otherwise son, your going to come undone(as was put to me during training).
Look, all rules are made to be broken, but there are reasons why there are general rules of thumb. At %40, how are your staff doing, with all that running. Is the service good enough? Is your kitchen overstressed? Maybe no, if so - I'm happy for you, but do you think every place can run at %40?
Focusing on costs is the main thing. If you don't, you will find yourself in water deeper than you can handle one day. I'm happy that you can run at %40, I just hope it doesn't go over your head before you realise.
I think we disagree that focusing on costs is the main thing. Figuring out what to charge is something I find easy—it's largely a one-time exercise for items—but executing on product excellence and even better service is where I put much more of my time and energy. More specifically, I simplify my employees' work down to five categories:
Great products
Even better customer service
Safety
Sanitation
Organization
I've set our rates so that staff can focus on those listed areas instead of sweating every cent, a common industry behavior which I think inhibits the customer experience and leads to lower-quality products. Certainly, costs matter (to me and to employees), but I want their focus to be on what they make and servicing our customers, and I'll do the bulk of the the economics. So far, for my food business as a wholesaler, that's worked.
I don't actually disagree with anything you have said there.
I was talking from a cost management point of view. If you would like to talk more about this(we're almost at the end of hn's threads haha), check my profile for my email :-) I'm guessing you're in the us(most hners are), so I can't exactly visit your place, but I would if I could :-)
Customer adoration is earned through consistency and branding. Not sure we're disagreeing. If Chick fil a suddenly started selling low grade meat they would surely lose their adoration but it's also true that there isn't a years long waiting list to open a Chick fil a franchise just because they're consistent.
I do agree with you, I just want to point out that it is a lot more ficle than tech. One bad service can ruin your reputation. No one forgets a bad meal, and a whole table with bad meals is a death knell
It kind of does. Most people come for the food and stay for the drinks, and it’s a lot easier to charge “a lot” for a drink (liquor, not beer) than it is for food because the number is smaller and people like small numbers.
It's no stranger than paying them with the use of your room, utensils, plates, tables, etc. to eat your food. The different menu items are fungible just like all the other costs.
To a large extent, yes. Fresh steak and seafood are among the most expensive items to obtain and prepare. The markup on a prime cut of steak will be much smaller than alcohol. Not zero, but definitely less than alcohol.
Anecdotally, I recently went to one of the top steakhouses in my city with my girlfriend for her birthday. We ordered a filet, some crab legs, some prawns, and a few sides. With the meal we had two martinis each. The four martinis accounted for about 20% of the bill but six ounces of Ketel One probably accounted for a few dollars of costs to the restaurant plus some Olive Juice so those drinks were nearly all profit in terms of variable costs. I'm sure there was a healthy profit on the food, but far less than the drinks.
To put it another way, most restaurants that serve alcohol would not be able to survive without alcohol sales with their current food prices.
So is a random business guy hiring a chef to run his restaurant kinda the startup equivalent of a business guy hiring a dev to build his startup?
Both seem in a similar boat. A restaurant is nothing without a good chef. A programming startup is nothing without a good developer. Both have cases where the chef/developer starts their own companies.. and many more cases where an outside guy with some money comes in and tries to make it happen.
You can succeed in both paths, but it sure as heck seems a lot harder! I cannot image funding a software startup if each MVP I wanted took say 30k to make (instead of a few hours of time). It seems reasonable that cooking is similar..
One difference is that you can be a decent food critic without being a chef. So I think it's theoretically more feasible to start a restaurant as Joe-rando business guy.
That said, I think in both cases the business guy needs to bring domain knowledge (or an insane amount of hustle) to the table. Figuring out the type, location, and marketing of a restaurant is just as much of a make-or-break proposition as having the right chef. Similarly, on the software side you need either pitching/fundraising or some kind of go-to-market skills, whether it be enterprise sales or consumer marketing. Entrepreneurial chefs and developers at the top of their game enough to offer something compelling may be able to do this themselves, but in most cases a partnership with the right business person will have a multiplicative effect on the results.
Infact I'd go as far as to say that a critic has no place running a restaurant. (Caveats below).
Someone who knows the industry and understands what the local population wants? Good chance, most critics (imho) don't, they want the best possible food and service for the (generally) lowesat price. (There is nothing wrong with that). A good critic doesn't make a good restaurant owner though.
Akin as a good blogger about tech wouldn't necessarily be the best person to run your startup.
You can be a great cook but a terrible chef. A chef is an experienced cook who can also manage a kitchen. Management ability without cooking skill is what you get at fast food franchises and meal manufacturers like Sysco. Being a foodie is a negative hiring signal in those contexts.
Actually it's a little more in-depth(well it useto be, I'll explain that lower).
When I started out it was:
cook: two years training(while on the job), basics of most styles of cooking.
Chef: 4 years training (most of the time, on the job), with a day of University each week. Learnt basic cooking skills. Plus how and why of ingredients, how to cost and manage a kitchen, basic logistics(to understand how distance effects produce and the best ways to minimise the effects to ensure top quality ingredients), and a whole assortment of similarly unthought of information (put it in way most techs would understand: backend coding).
Recently most chef's qualifications have been reduced to 2 years, But that's a whole 'nother story :-p
To sum up, a chef isn't an experienced cook who can manage a kitchen - they are someone with the training to manage the staff, costings, health and safety checks, menus, discover and cater to local and new tastes, research upcoming trends, minimise risk(be it personnel, upcoming laws, basic food and hygene, ingury management and mitigation etc), as well as prepare and cook every dish on the menu (in a timely and cost controlled fashion).
While some cooks can manage and run a kitchen, (and I have met some amazing ones over the years), to say they are eanywhere near chef's in general, is akin to saying a student programmer is a full stack dev
Agree completely - sorry for my lack of clarity. I meant 'manage' to include everything on the operational side of the business, vs the financial/investment aspect that an accountant or tax lawyer would be concerned with, without regard to the fact of it being a restaurant.
I would say yes. It's akin to running a successful port or delivery system, you can't just buy one and hope for the best, you need to actually either a) have experience and know what your doing or b) hire someone with that knowledge.
Hospitality is a little more difficult as the margins are so tight though, hence the most successful are owner/operators.
What I take from this article? An unexperienced person tried to build a new business in an industry that didn't have the experience in.
Few things wind me up more than people who've never worked in a kitchen/restaurant deciding to open one because it's their dream. They think they can do it better, or just that it will be fun and rewarding.
Over here it tends to be people buying a pub, because they like the idea of hanging out behind the bar serving the odd drink whilst the money rolls in. How hard can it be?
Being experienced is no guarantee either. I had a neighbor who was operating multiple successful restaurants at the Mall of America when he decided to quit and open his own place closer to home. He poured his heart and soul into that project, completely remodeling the space into something 100% better than what had been there before. I think it was the debt that did him in - the restaurant closed in 9 months, and he lost his house too.
Running a successful restaurant is -hard-. There are so many things going in, such a complex system with variables that change - sometimes within days - that sometimes I'm unsure how anyone actually runs a successful restaurant.
Otherdays, when I go visit a few friends places and see how things are organised, it's amazing how smoothly things operate.
But those same people, I know from being there with them, are constantly under stress, and have broken down to me after a few drinks after hours.
Is that supposed to be "trucking business" or is there some other business like souping up automobiles, referred to in a regional dialect I'm unfamiliar with?
EDIT: ...probably one of the anticipated phone typos, fat fingering 'i' instead of the 'u' key.
> That chicken is a confit [...] plus cost of employees to serve
Is that really a thing in the US? Honest question, I'm confused. The justification for requiring 20% tips (and considering you "nasty" if you leave any less) is that the waiters in the US are not even paid minimum wage, they rely on the customer tips to make a living. So, which one is it? If they rely on the tips, surely they don't cost the restaurant owners any significant amount of $$, do they?
Domain expertise (cooking, coding, whatever) - slow for one client
Logistic expertise - fast for large numbers of customers, not clients
Business expertise - becoming a legal and financial client
Financial expertise - pure cashflow and accounting with little regard for the specific business model
The skills applied in labor-intensive work are not automatically transferable to capital-intensive work as you move down the list. That's why the CEO of McDonalds trained as an accountant, and has probably never worked a grill in his life; for the job he does managing a global corporation, learning to cook would have been a waste of his time.
ISTM that a key difference in left/right political philosophy is that the left thinks its more ethical to start at the bottom and work up, whereas the right feels it's OK to leapfrog as far ahead as you're able. A libertarian economist would argue that this maximizes both individual freedom and value across the economy as a whole, whereas a Marxian economist would argue that such maximization strategies exacerbate boom and bust cycles, like a car with an accelerator but no brakes.
As someone in the food industry, I can appreciate the hardships and frustrations shared by the author. I've worked for others in restaurants and other consumer-facing food businesses, and now my company is a wholesaler. Some of why my company is like that comes from what I learned in prior industry experiences, but much of it is merely a reflection of my preferences and strengths, both of which compel me toward direct relationships with customers (wholesaling) rather than the fleeting, complicated interactions that come in restaurants, bakeries, etc.
So I can appreciate the frustrations the author shared. Many of them remain a part of my life—the crazy hours, bureaucracy, expenses, etc. Many of them are the nature of the industry. It is, after all, a service industry, and that means service to others. That’s typically a trying environment in the US, with its individual-focused culture. So I’m sympathetic to much of what the author described.
But it certainly reads like someone who didn’t know what he was getting himself involved with doing. Sadly—not critically—I’d even say it sounds like he (at the time of writing) only understands the symptoms of how things happened, not the actual causes. Just one example: He mentions lease negotiations covering four months but then describes the place as being in shambles. That indicates thorough inspections weren’t performed. Many of the self-described problems in the piece follow this pattern, him seeing what went wrong instead of describing what should have been done differently.
Maybe in the intervening time since publication he (and his partners) have learned from this. Obviously, what they went through came with high costs, emotionally, physically, and economically. I can only hope they’ve ultimately benefited from going through this and it improves their chances of success in whatever else they do. It’s never pleasant to read about someone failing, but it’s always great to hear when people turn disappointment into a stepping stone to success.
The story of the $29 chicken dish that should actually be $40 because of its preparation cost...why pour your own money down the drain? There has to be a market fit, and this is deliberately ignoring that. He writes that he didn't want anything but to stay open, break even, etc. This indicates a major blind spot to even attempting to implement that approach. Sounds rather like someone who loved the idea of being a "startup" restauranteur without really having any vision for what he actually wanted to do.
> That chicken is a confit (with duck fat, aka $$), then served with a stock/stew that takes days (of labor dollars) to prepare, plus cost of employees to serve, stuff to serve it on and rent to pay, not to mention the utilities (the water bills on that cursed grease trap were the opposite of "the gift that keeps on giving"). That damned chicken should be $40!
Maybe $60 even. But the restaurant has to look and feel like the restaurant which serves $60 chicken. Maybe there is a marketing problem there, people thought it was just plain chicken. Then yes, $29 is too expensive. If they were eating chicken confit, with carefully crafted stock which took days and a team of 3 chefs to make, and it came from some Sunny Mountain organic free-range farm in the next county then $29 sounds like bargain.
But as they say, everyone in Portland wants to open a restaurant. Probably anyone who could and wanted, already did. So there are plenty of options. At least I remember lots of options to choose from.
There is another element I noticed. If there are just a few good restaurants, and a plethora of other ones, people will just go to the ones they know. Not just because it is easy and a default choice. But also because they learned that trying new ones did not turn out as well, so they stop trying.
> bringing the plumbing up to code. $20,000 later we had a huge pit, filled with the gigantic, state-of-the-art grease trap the city now requires—all of which now benefit not us, but the landlord and his next tenant.
That sounds like they got swindled. They paid for an improvement to the rental property, how come the landlord didn't split that with them. It just seems unfair.
That sounds like they got swindled. They paid for an improvement to the rental property, how come the landlord didn't split that with them. It just seems unfair.
Eh, as a landlord myself, unless we agreed upfront to cover that improvement (usually by discounting on the rent), you're on your own. Renting to restaurants seems like a pain in the first place; considering their low expected lifetime, the property will have to be on the market again soon enough, losing money during the transition. Plus who knows if they won't go bankrupt with unpaid rent.
If this was prime location for restaurants, the grease trap would already be there. As it isn't, chances are the next tenant won't even be a restaurant.
I very much feel for this guys plight and what he's going through. He says the whole story right at the top. The venue is what screwed him. He didn't know all the things he learned about the food after he opened the place, but what he REALLY didn't know was about the operations of a building and the cost of the corner he wanted to end up on. That fucked him from the jump.
I know he's frustrated, as anyone would be, but the deck was stacked from the get go and it's no one's fault but his. Not the landlord or the grease trap. That was writing on the wall about unknown unknowns.
He starts by saying how "hot" the market is, like that's a good thing for his persuit. He starts with talk of it being saturated. The landlord doesn't need to take any risks on that hot corner for your grease trap or electrical.
I've taken a bath on a few things where I over invested in fixed costs. I've had to take a couple years off after a six year startup struggle because of burnout. I will say that when I've come back around, after really fucking kicking myself and licking all wounds, it was a VERY expensive lesson. Emotionally, fiscally, and socially. Usually cheaper than a masters degree though and infinitely more applicable to future runs at the real goal.
You want to get free and run a creative operation? Great. The world does not give a shit. Worse than that, it hates you and wants you to fail. The path to real freedom is paved with bloody miserable failure. Bad leases will eat you, which is not the landlords fault. If you want to make money, buy a Chick-fil-a franchise. They have a great track record and financing. If you wanna make art, be prepared to suffer for it and have no one give a flying fuck about how much it hurt to try.
The desire to blend art and commerce is something that very few people succeed at. Just because you have worked in a kitchen and scored a half million in inheritance doesn't mean anyone needs to care. No matter how much you spent. You could have put the cash in an account and get so good at cooking that someone else will take the ops risk to open your counter or take the risk yourself and learn hard what you don't know. The world sheds no tears either way.
Bunk Sandwiches in Portland didn't start with a $40 chicken. They started with a hole in the wall and a Cuban Sandwich that would make you slap your grandma. Also they could make them fast for $12 and had a line out the door. Eight years later they have several locations and a concert venue. The sandwich isn't as good anymore, but they made a legacy out of thing that could support itself and can continue to grow. I don't know anything about their owners, but I bet they can tell you some shit about surviving upside down leases and kitchen costs.
I seriously wish this guy the best. I'm sure some days that chicken was one of the best things anyone has ever tasted.
> but what he REALLY didn't know was about the operations of a building and the cost of the corner he wanted to end up on. That fucked him from the jump.
However, his family investor 'with nearly a decade in the biz' should have known this stuff from the outset. The same goes for the lopsided income vs outgo. Was that investor just not worth it? Was their advice ignored?
I know people that work in the high end restaurant business in Portland and I've heard them talk about how and why they have had to close things they really cared for.
He's right about the razors edge in the biz he chose to get into. Also, with the judgement he shows about other things in the article, I'm not sure if his family investor is the actual utility he says he is. Propping up 'family' and '10 years' doesn't really say anything about track record. I've got family that have been in things for 10 years and they are still middling or just straight up bad at their jobs. Some of them have even made a lot of money at jobs they are bad at.
This is a high stakes and risk endeavor that not only is OPs dream, but it's a dream he's stapled his name to. To me, it sounds like he took himself on a ride with an inheritance and had poor cherrypicked counsel or he ignored them because he was 'the leader of the band'. Even if they were good, the entire article is about how the environment he chose is the problem, not his own judgement. I think he'll come around to what really happened eventually and I bet he's going to try hard/weird shit again because this is a really crazy idea packed full of hubris. The guy dreams big dreams.
To say his family investor 'with nearly a decade in the biz' was an insulator against failure is like saying that having the best Wingsuit Skydiver in the world showing you how to jump the first time will keep you from turning into a crater.
I think it's good practice to almost never work with family on building commercially melded creative dreams. Their goals, by relation, are inherently stacked against you because what you need in a hostile creative operation is sober and careful partners that challenge you to stretch your abilities. Family cannot, by definition, be that. They care to keep you safe and similar.
If you do engage with family on that level, you really have to be aware that you might permanently damage an important relationship that you might not get back and treat it with that respect. Close family and friends are something you can't recreate by meeting a replacement. You can always start another biz. Any family that might engage in a business/passion idea with a caviler attitude could be taking your familiarity for a ride that you don't want to go on. Intentionally, or more destructively, ignorant as fuck to the consequences.
I think it's good practice to almost never work with family on building commercially melded creative dreams.
> One counterexample would be Stoneyfield Dairy. In a recent Startup podcast the owner talked about repeatedly borrowing money from his mother-in-law against the strong objections of his wife.
Contextually my point is that what family is should be weighted correctly by all parties before taking the risk. Good practice and almost never. Like anything, if you've got a handle on your fit, then you can run with it. But family/friends are more often an albatross than not when trying to do something radical.
I can't think of a more terrifying loan shark than a mother-in-law. I also can't fathom risking my marriage over a loan for an idea. The only reason you bring it up is because it worked. There's not a book on failed mother-in-law loans, but if there was it would be a sad fucking book.
"This is a high stakes and risk endeavor that not only is OPs dream, but it's a dream he's stapled his name to"
It wasn't his dream, bot in reality. If it was, he would have actually researched. Then he would have actually worked in the industry.
Instead he thought throwing money at a problem would make it work. Not in this industry. You can't fake running a restaurant, (at least I have never seen it, I'd love to be proved wrong!), and if you don't have the experience, well, guess what? You're shit out of luck and there is no way you can do it profitably.
To hazard a guess: a supportive angel investor who wasn't deeply involved in the day-to-day and gave a considered thumbs up to the early plans that were a bit more grounded in concept yet totally untethered from the real-world costs?
I mean... a decade working at the airport is not a decade spent building airports. Even a successful floor manager at a restaurant could be miles away from the issues of ownership and entrepreneurship.
Plus, and we all see this in young devs, it can be haaaaard to sprinkle sense into someone in love with an idea.
I honestly doubt that decade was actually working in a restaurant. Every restaurant owner knows how tight the margins are.
Either that or it was a money throw to sate some other family member, (seen that before, a 100k thrown at someone to give them something Todo - a little too common in hospitality unfortunately).
Oh I love it when a landlord and a restaurant owner, each facing competition or "his own set of problems" just figure out that it's better to kill each other rather than trying a little cooperation...
The funny part is, he(the author), wasn't actually facing any problems. He just straight up screwed up on his property rental.
There is no excuse for not looking up the relevant laws, and comparing them towards the property. If he did that, well then he has nothing to complain about, as he went into that ;ntract knowing the facts.
Either way, in my opinion, he just screwed himself from day one.
Yep. I was making my comment because it relates to things I heard in my town. Basically, there are many young people willing to open restaurants, shops, bars etc. but the landlords own most of the city center. Given the rent, many young starters just can't start. So the city center is closing more and more shops, slowly asphyxiating. So I guess the landlords will reduce their prices when nobody will rent anymore. One could say that it's a basic offer/demand situation looking for an equilibrium. But it's not because everybody in town pay the price of this missing equilibrium.
So the landlords, while protecting their assets, make life hard for starters, slowly kills the city center. So I wouldn't call that a successful "invisible hand".
The landlord's positions are probably because restaurants and bars have to make a lot of changes to existing facilities, and also generally go under fairly quickly.
That can leave you with a large bill to retool your location to a more neutral design.
Also, side note, lots of young people think starting a restaurant or bar is easy. It isn't. (Fyi 17 years experience). It's brutal, difficult and requires a lot of control/micromanagement. It's not something you can do when just out of school.
>>> That can leave you with a large bill to retool your location to a more neutral design.
make sense.
>>> Also, side note, lots of young people think starting a restaurant or bar is easy.
Yeah, I sure don't think that. I always wonder how the chef make it : prepare dishes for noon and evening easily consume eight hours. Then you have to check your suppliers, the accountant, brief the employees, make sure the restaurant is clean, handle bookings, handle taxes,... Or you have to hire a partner but then you'll have to share the benefits/losses which may add another level of stress.
But cooking under stress, damn, it's not like coding :-)
Either this guy didn't get his contractor on site before signing a lease, or the contractor is at fault for not mentioning this $20k problem. This is what happens when you skip your due diligence, because any contractor who should be building out restaurants would have known about the grease trap regulations off the top of his or her head.
For anyone else thinking of renovations, it's really worth it to get a contractor onsite before you commit. Any competent one will be able to tell you things like hey, widening those door frames 2 inches to bring you up to code is going to be far more expensive than you think it ought to be. etc etc etc. And just wait until you see how much a bit of asbestos on your ceiling is gonna cost you to remediate...
The mistake you are making there is assuming that those improvements add any value to the landlord or property. They don't. That $20,000 grease trap is an anchor that the next tenant has to have pulled out at great expense. They probably want different lighting so the electrical will have to be redone as well.
In any commercial property I have ever dealt with the tenant is responsible for any renovations because every tenant is looking to outfit the space differently. If the market is heavily in the favor of the renters at the time, I have seen landlords offer discounts on the rent to help cover certain renovations, typically expanded electrical service and the like, but even that has it's limits as landlords typically have costs associated with ownership they need to cover out of the rent.
Malls and (high cash flow) retail spaces will often provide tenants with money for renovations upon lease signing. For a 10 year lease on a proven business, it's not uncommon to have $20,000 - $100,000 build out on the space. This is, of course, priced into the lease.
Yeah, I don't know if the photos were stock or pictures of the real premises. But I wouldn't be very keen on 40-50$ entrees in a restaurant serving things in styrofoam cups.
> They paid for an improvement to the rental property, how come the landlord didn't split that with them. It just seems unfair.
In business, the landlord is renting a space, and the company renting fits it out. You could spend more than several years' rent on a fit-out, why should the landlord goes halvsies in that case?
The difference between "the rent for this space" and "the rent for this space plus a new grease trap" is going to be nowhere near recouping money on the trap. Like a car, expensive upgrades generally mean very little to future worth.
It also works in reverse though - when you leave a premises, you don't have to strip out your custom fit-out and put the space back into how it looked before you left. The landlord can't say "I never liked your choice of lighting, so put it back the way it was", for example.
Sounds like an opportunity to educate them (before the city inspectors show up, at least)
Though, yeah, depending on the area I don't expect adherence (or enforcement) to be much effective, which doesn't seem to be the case for where this restaurant was located though
That sounds like they got swindled. They paid for an improvement to the rental property, how come the landlord didn't split that with them. It just seems unfair.
Landlord splitting a cost with the renter? I about spit my coffee out.
While that’s true with residential housing (where the landlord pays all of the bill) it is not at all like that in commercial real estate.
I’ve worked at a number of startups where we needed an improvement. Electrical, computer wiring, knocking down a wall between two adjoining units that are now one. Not once has the landlord even offered to pay for any of it.
They can do this as they hold all the cards. Employers or shopkeepers need a physical space. There’s a limited amount of it in a desirable area. Ergo they can get away with it.
This isn’t true in residential as there is always more inventory coming online. Plus people will decide to move farther away. You can’t easily do that with a business.
What this does mean is that when opening a restaurant look for a place that previously had a restaurant in it and use their improvements. You’ll probably get a deal from the previous failed one to buy the movable equipment.
Maybe $60 even. But the restaurant has to look and feel like the restaurant which serves $60 chicken.
However margins on high end fine dining are reportedly even worse than most of the sector. If they're selling you $40 chicken it's probably still at a loss, counting on you making it up on wine and pastries.
Leasehold improvements aren't always split; it's better to negotiate those during the lease discussion. In our restaurant, we got ZIP back from the landlord for leasehold improvements.
I see a lot of comments concentrating on "maybe they didn't have a good plan/experience/whatever". But having some experience close to non-fastfood restaurant staff (in the UK though), I can only confirm a lot from the article. That business is more messy and the environment can be more toxic than anything I've seen in the IT.
The margins are way too small and staff is underpaid and overworked. Think paid for 7.5h, but working whole week of split shifts (morning, long lunch break, evening till closing) at close to minimum pay. Stockholm syndrome and "that's what working means" thinking is rampant. Abusive staff, back/front restaurant conflicts, etc. are standard. Rockstar developers are nothing compared to chef who makes the service staff cry and can leave with their kitchen staff to anther place when they want.
The lower management comes from people who survived enough of this to advance - they already know this is how it works, so not much gets changed.
Just recalling this makes me really angry. If you get a good service - appreciate it.
Hospitality as a whole preys on, young people needing money and older people, needing status.
(While I say our/we, I have left the industry after 17 years).
We hire the cheapest students to scrub dishes and carry food, for the lowest possible we can. If they argue, then we replace them with the ever available student market.
We will hire the lowest bidding chef's , from any region, as long as they can cook the dishes, and if they argue or want a raise, we will replace them with the ever available students/new visa holders.
I was lucky, I met people and got out of the direct cooking business. Despitr getting out of the business, I had my first stomach ulcers at 24, a friend of mine had a heart attack at 25, and too many friends to note have been driven to drug use.
I'm resisting the urge to be bitter here btw :-p
Oh for the record, I worked (at a high rank), for some of the top restaurants in Australia. Also it's not just aus, I see the same thing in Japan.
Abuse in hospitality, not sure I can actually say anything about this except : yes, constant.
I have seen it from the female chef's, walking behind people with a wooden spoon and trying to jam it in their arse, to kitchen hands having hot pans thrown at them for being too slow. It's not a one off, and it's not infrequent.
I just hope a few of you guys think about this, next time you order a meal.
>>We hire the cheapest students to scrub dishes and carry food, for the lowest possible we can. If they argue, then we replace them with the ever available student market.
When I visited US I once has a small chat with a Indian student studying in the US. From what I heard an entire range of restaurants and grocery stores in the US run on super cheap slave wage labor, who work without complain. There is no scope to complain actually because there is always the next batch of those ever available student labor that could replace you.
Id like to think if I met anyone that bitter in real life, that I would commit to their on their grave.
Yeah waiting on tables is hard work, often with very little positive feedback or money but shit, they make it sound like slugging through he damn fields of Normandy on dday.
No I'm sorry, but just fucking no.
It's a shit paying job, you get abused, it's looked down upon - which I think is a crime, it's a difficult job! - but it's not that bad as the author makes out.
Philly is similar to Portland in that there's a huge restaurant scene here. Yeah, there's a lot of failure, but some people seem to "make it" not just once but multiple times as chef-owners who operate 2 or more restaurants. Yes, if you look at overall failure rate for new restaurants it is very high and it is sad to see first time owners fail, but there are some who enjoy serial success (who also fail sometimes, but can afford it).
The ones which I know personally who are successful all had LONG histories of working under-the-wing of a master, literally starting as a line cook and progressing to sous-chef. Along the way they get savvy to the business, make an enormous set of connections and learn their market intimately. When they break out, they start very small and later take calculated risks to expand as they're able to survive failures.
Other ways people have found success is by starting as food trucks or as catering services or as suppliers (eg bakery, patisserie) to restaurants.
I'm not in the restaurant business, so take what I say with a grain of salt (heh), but from the people I know in that business there's a wide variance in the actual business knowledge they possess.
You need enough capital to actually open the doors - that means not leasing the space with knob and tube wiring, residential drainage and a leaky roof. If that's all that's out there, you could simply not open yet and keep looking. In the OP, it sounded like that money was burning a hole in the owner's pocket and he had to open now. Patience.
Then once the doors are open, you need detailed, ongoing knowledge of your costs. There is no $29 chicken if it costs out to $31. If no one is going to pay $35 so that you can make a profit, it doesn't go on the menu. But you don't, as the author put it, sell $40 in cost for $29 simply because no one would pay $40. Then you get into ordering and spoilage, where even me as a total outsider, could tell you there's often money rotting in the walk-in. Point is, you must know your real operating costs before you ever even stand a chance.
Then you have to go out there and not suck. For a chef opening a restaurant, this is probably the part they're focused on. Problem is, you could be sunk before you even get to this stage. The guys that are successful and worked under successful people for a long time probably learned quite a bit about running the business, and is why they have better odds.
tl;dr - Under-capitalization is a leading cause of failure for many businesses. You can't make up your operating losses in volume. Don't open any business if you aren't prepared to live and breathe the minutiae of your costs.
I was in the restaurant business for a long time. You are definitely on the money.
So many businesses I went to, were not able to understand the basics.
Hospitality, while it can be profitable, is a game of small numbers.
The smallest overlooked number can be your downfall.
The margins are slight, but with the right team they can pay out well.
What I mean is: take for example a simple bistro style meal of beef steak, vegetables and salad.
Let's use for example the following costings:
Beef: $3.00
Salad: $0.50
Vegetables: $0.40
So that gives you a base plate cost of $3.90, the standard practice is (at the lowest level) $15.60. (this - on a well run bistro will just cover your bills including staffing costs).
What a lot of first time restaurant owners don't realise is the side costs. I'm not talking staffing, rent or anything like that(which is a whole nother issue to keep an eye on), I'm talking the incendentals - broken objects, garnish, facility repairs and upkeep. These are just a few of the things that I have seen (many times) not accounted for.
Add on top of that a few weeks of unexpected less covers (clients basically), and you have a recipe for disaster.
While hospitality seems like an easy business to purchase (I have rescued/helped sell a lot of business whose owners thought it was), it is actually a massive investment in micromanagement.
If you don't micromanage, it will fail. If you overdo it (re pushing staff too much) you will lose your best staff, and fail.
As you stated, if you arnt willing to live and breathe your restaurant, don't do it.
Which is why I left the industry, why would I lose out on my time with my family, just to make less money than I could doing anything else?
I've always wondered this and hoping you can answer - what's the biggest cost driver on restaurants and can the lease rates play a significant impact? I wonder how much high lease rates are killing our local establishments and replacing them with giant franchises.
As always there is a big differential as to location and rent. That aside though :
Yes rent can be a killer, the lease can have a lot of effect on a restaurant, I'd say more so than any other business.
As for the biggest cost? Assuming the owner doesn't try to rent a bad location(eg high competition with long term customer base), I would say it is staffing. But that is a double edged blade. Hiring top quality may be necessary where you are located, or may break the businesses back, if in a different location.
Hospitality is such a locale based business there isn't a specific rule that can cover everything.
A lot of people will look at their food costs as the biggest cost, (and it can be if not managed properly), but I have seen more businesses fail from bad staff management than anything else. This isn't to say it's an easy thing to control though, you are talking about an industry where you won't actually know the number of covers within a large percentile from day to day. (yes you can estimate, but a table of 30 walk-ins without reservation isn't as rare as you would think).
My father-in-law has been a restaurant owner for his whole career. He has told me that it's quite common to have dished on the menu that are simply a loss (he is in a very price-sensitive market). They're countered by other dishes that have substantial profitability. In short, I agree with most of what you wrote, but each dish doesn't have to have the same profit margin on its own.
That's a fair point, and I'm a bit ignorant there. My exposure is mostly mid- to fine-dining, mostly family friends who were owners. Food costs tended to be higher for them, as did labor - they weren't the kinds of places that people would work at just to stamp their resume, but needed good FOH and BOH talent. It seemed to me they wanted no part of bargain shoppers - they understood their fully burdened costs and priced accordingly. Some items had thinner margins than others, but they didn't put loss leaders out there.
I once read that McDonalds for many years sold burgers and shakes basically at cost and made almost all of its profits on french fries. This seems to be a fairly common practice on high volume stores. I know that bars typically make next to nothing on food in hopes of making it up on alcohol sales.
Well, there are good reason for selling stuff under-cost if the loss can be more than made-up for in other charges. Doing this is as old as retail itself-- a "sale" in the retail world. In the restaurant business under-cost prices for a particular item can get more people in the door who then buy drinks, appetizers and other menu items while enjoying the great deal of a $20 chicken. That's easier said than done, of course.
Free breadsticks?(okay if you produce them in house or have a massive amount of locations), $15 worth of produce sold for $14? Hell no.
25% - that's the sales price you can put towards food costings, this should give you a rough idea of the unforseen costs.
If your kitchen isn't running at better than 25% food costings, your kitchen isn't profitable. Some places you can take a cut from this if you are working with another industry(such as gambling), but for a pure restaurant/cafe, don't even think about not hitting that point.
I find it interesting how you can narrow profitability analysis down to individual areas within a business.
As an example: Look at the walk in fridge as a business that 'buys' food from grocers and 'sells' food to the chefs when they need it, 'losing' money when food is wasted. Similarly front of house 'buys' food from the kitchen.
You're argument would be akin to the keyboard buying from the user to write code.
I think I realise what you are leaning towards, and it is like that.
Any piece of equipment has a direct relation to the ROI, honestly it's not pleasant to think of staff that way, but when the margins are that tight, it has to be done. (that's one of the reasons I left hospitality.)
It's not like advertising where you can charge someone 20k for a dm campaign, people will only pay so much for food, and the 'whales' arnt really there (at least not enough to keep an entire restaurant running at a loss).
When you're profit margin is less than 25%, and you can't guarantee the number of users per day, let alone per week, then you're damn eight everything is calculated as a cost down to the cent.
> When you're profit margin is less than 25%, and you can't guarantee the number of users per day, let alone per week, then you're damn eight everything is calculated as a cost down to the cent.
If you cannot project within your margin of error the number of covers you would turn per day or per week then you do not have a restaurant business, you have a hobby.
Selling for a loss in a retail as a lot of benefits that don't really translate well to restaurants though. One of the biggest I'd think is the 'shelf life' of products. In retail items move in and out throughout the year but an item in stock doesn't really go bad so the main reasons to sell at a loss are just to clear out space for other newer items that might sell better. (Also even fairly deep sales aren't even necessarily actually losses for the business because wholesale prices are much cheaper)
In the restaurant business there's not really a good analogue on a regular menu, a loss leader isn't clearing out any stock because the items are constantly just degrading naturally so you'd be better off just pulling the item if it costs more to make and not constantly making it.
It'd be like if JiT manufacturing was a thing and stores made shirts for a loss in the store from raw materials, it just doesn't make sense unless that item has consistent accessories (your drinks and apps) that sell for much larger margins. It's a dangerous game because you're counting a lot on consistent consumer behavior.
People need something to chew on while drinking the wine that has a very large markup on it. Consumer expectation is a big part of pricing. For whatever reason, people are OK shelling out cash for wine and beer at a restaurant, so those get a big markup. That gives you wiggle room to sell some entrees at cost or a loss, which you need because consumers aren't as comfortable with a big markup on chicken since "I could cook this at home" (even though, like the article states, their home-cooked chicken probably hasn't been marinating in duck confit for the past 48 hours...).
Restaurants also need to have a certain amount of variety on the menu to deal with the one picky eater in a party. That's why every seafood restaurant still has one token chicken dish, every steakhouse has a vegetarian dish, etc.
FWIW, the universal mark-up for wine in US restaurants is about 4x-6x.
That is, the PRICE of one glass of wine is roughly equal to the COST of one bottle of the same wine. Restaurants, of course, source their wine through commercial distributors. They get price breaks in volume that consumers can't typically get.
True but then you have to make absolutely sure that the customers you attract are going to order those make ups consistently and that's really hard to do.
As for picky eaters usually those will be one of a handful of cheap easy to make meals where the restaurant just aims to have something reasonably acceptable for those. There's no reason to make those dishes loss leaders.
I responded downthread to someone else making the same point. I'm sure there are some restaurant models that support that idea. My only exposure is to mid- and fine-dining where at least these particular owners weren't putting loss leaders out there. Some items had higher margins than others, but nothing on the menu had a negative margin. There are some exceptions like "holy shit I need more avocados and they're $100 a case all of a sudden" but that situation wouldn't last long.
Bargain hunters, I'm told, are bad customers for restaurants. The person coming in for a great deal on $20 chicken is also squeezing a bowl of lemons into a glass and asking for more sugar packets. That's what they tell me, anyway!
However, my overarching point would be that a restaurateur needs to understand operating costs in great detail. If a loss leader is going on the menu, you need to be engaged enough to know it's a loser, by what margin, and also the benefits of keeping it around. The article in the OP suggested no such CBA was really occurring.
Building a restaurant around bargin hunters, oh the stories I could tell about that. It never works as well as the owners think it would, infact I have seen it work opposite(early bird special, 5 pm dinner for seniors, who ended up not leaving and taking up higher margin table space for 3-4 hours).
Cheap people aren't the type of client you should try to attract to a restaurant, once the deal goes away they will move on to the next sucker. I worked at a place that sold dollar cheese steaks as a way to get people in the door, the dining room was full but a party of 4 would order something like 4 cheese steaks with 4 waters and leave a 50 cent tip. They changed the price to two dollars and the cheapos revolted, left bad yelp reviews and everything.
> I remember clearly the day when the accountant showed me that we could effectively double our monthly sales and still not have enough to meet our eventual payroll obligations and that's about when you just finally sink into it: You're done.
The article doesn't really go into this part, but it does mention an extensive business plan. Was it that the labor costs were not foreseen, or that the revenue was much lower than expected? To be off by half is significant. It would be interesting to hear with hindsight what could have been done differently to avoid this (even if the calculation came out to "don't open a restaurant").
>
The article doesn't really go into this part, but it does mention an extensive business plan. Was it that the labor costs were not foreseen, or that the revenue was much lower than expected? To be off by half is significant. It would be interesting to hear with hindsight what could have been done differently to avoid this (even if the calculation came out to "don't open a restaurant").
If doubling your sales wouldn't make next month's payroll, my first guess without any additional info is that margins are too thin (or possibly negative). Unless no one is coming in, it's not really a revenue issue, it's a cost issue.
Whatever your business is, know your costs and the drivers of those costs. You have to know whether the prices you can charge will cover the costs and provide enough profit to keep going. It's not even specific to restaurants.
Indeed I'd argue that their margins were off by a lot. It's not uncommon for non-hospitality trained people to screw that up (and in their defence, it is a lot more complex than most people think).
I sympathize with his difficulties, and don't want to shit on the guy. Trying to read between the lines, I sense that one of his core problems was weak negotiation skills, or the ability to have tough conversations. He negotiated a lousy lease. He hired a chef who wouldn't do the necessary work. Fundamentals that poison the whole downstream.
Like other commenters, also wondering how his elaborate business plans (made w/ experienced restaurateur's input) could be so wildly inaccurate.
Maybe another lesson is, don't rush to the "hot spot." Maybe find a market that has no good scene instead. Be an early gentrifier. By the time newspapers are writing about "hot spots" "hot jobs" etc, it's almost always the high-water mark.
Multiple times I've spotted tops of commodity bubbles by noticing when news articles talk about the absurd wages being paid the labor force. Miners and crane-operators being paid $250k/year during the initial Western Australia mining boom. Low-level labor in North Dakota being paid crazily during the initial part of the Shale Boom, etc. The news coverage is always breathless and euphoric. Wonder if we could build some sentiment analysis that can detect these sorts of articles in a generalized way?
Another way I've heard it described, "whatever industry the current class of graduating MBA is racing to join--avoid it."
> Like other commenters, also wondering how his elaborate business plans (made w/ experienced restaurateur's input) could be so wildly inaccurate.
I think the author commented on this pretty clearly in the article when they described themselves as someone with "...more money than sense". I've had many friends who are pretty insistent they have what it takes to make a successful run with a restaurant business with some gimmick on the side to bring in audiences, and every time I hear their pitch I can't help but be let down by the lackidasical pitch. I think in general people just don't really understand what it takes to get a restaurant just to "stable", neverminding profitable.
I'm often reminded of the difference between producing something and production something at a production scale; my partner is a chemist, and she tells me how their applicants don't always understand why a 1% impurity in a product matters immensely when you're producing 1 metric tons of the stuff. It's the same with a restaurant, I imagine, and trying to produce the same quality dish rapidly and consistently without much waste or flubbing the process, and being able to also rapidly adjust the volume you produce on a day to day basis with no strong indicator as to which way the demand is going to swing.
But none of that really registers when you read advertisement pieces from cities about booming restaurant scenes and how largely demand can be overstated when a city just wants some fresh air in their night life, and it's really appealing to people to imagine themselves as successful restauranteurs when inundated with such material.
A lot of is is that restaurants are largely built by wealthy people for their own social niche. They aren't designed to be profitable businesses, but more as a social device for their owners.
If you're wealthy in New York City, you will eventually be asked to fund a restaurant.
On the subject of wealthy people having restaurants for "social reasons," this article is an interesting read: "The Thrill of Losing Money by Investing in a Manhattan Restaurant":
Wonder if we could build some sentiment analysis that can detect these sorts of articles in a generalized way?
What would you do with the data?
The canonical example I always turn to is a friend of mine who realized one day that he was being paid $25/hour to sweep the floors in a factory (union job) and there was no way that was sustainable over the long term.
He started going to college at night and graduated and got a good job just before they shut the entire plant down!
My friends and I have a saying: "boring makes money". That it's really hard to pull off the success of a Facebook, etc. but it's only moderately hard to do consulting and spin off some kind of related product as a service, or micro SAAS.
I'm curious what the "boring" food venture is?
- trucks?
- catering?
- middle brow family style Italian?
I'm aware of a couple of food businesses that rent kitchen space in the morning/evening from restaurants to make prepared paleo/keto meals that are then distributed through gyms/fitness centers (genius resource utilization).
There's also a really interesting little business in the Outer Banks that sells you a metal pot full of uncooked seafood that you then put on the stove for an hour and let steam at your beach house. It costs something like $100 and I'm pretty sure it's about 50% profit for them.
While good advice in general, I'm not sure this applies in the Portland restaurant market. Renard was pretty boring - good French food, but the same food you've eaten at a dozen other French restaurants - and that, for me, was its problem. So many more interesting places to go!
The cautious thing to do in the Portland restaurant market, as far as I can tell, is to do periodic pop-ups or a food cart and try to build up your repeat clientele to the point where you can justify a brick and mortar location of your own.
Don't fool yourself. "hire a manger" is insanely challenging. Also, your going to need 2-3 assistants(vacations, lunch,days off etc) and what happens when he threatens to quit. Also, you don't walk in day one and start making money hand over fist.
The reason franchises work is because they vet 99% of the owners.
Yep, and they own & work multiple franchise locations. The margins are insanely thin that you'd be lucky to support yourself and a GM at every location.
Maybe a Subway franchise, but having employees that require self-provided functional vehicles, of which the business owner is liable in the event of an accident during working hours, seems "stressful".
I hope you're joking about the whole stressful thing there.
If you own the business, of course it's going to be stressful, on top of that, you are talking about a sect of hospitality that hires untrained and junior staff with sharp objects, hot surfaces and dangerous chemicles. There isn't much about that, that I can consider not stressful haha
Are there boringly profitable restaurants? My impression is restaurants are always skating on the edge of bankruptcy. It's wildly competitive because everybody thinks they can run a restaurant (and a hefty number of them actually can), there is significant regulation because of food safety issues, and the labour force is ill-paid and therefore not entirely reliable.
Yes there are. As dismissive as I am of a lot of hospitality related posts on hn(and comments), it is actually possible to have a good (and profitable ) restaurant that is nice and boring(there is bothing" wrong with that).
Unfortunately, there are 20-30 high risk/let's give this a go/I wanna say I'm an owner style restaurants that pop up for each one.
If you focus on quality food at a good price with consistency and quality control, and in a good location, you have a good chance. You would have to run it yourself though (best chance is to be in the kitchen). These are far and few between though.
As a chef, there isn't much more I enjoy, than to go to a family owned restaurant, have a great meal and to talk to the owner.
It really is a special experience, especially when I have spent so much time in the industry. To be invited into someone else's kitchen, see their ingredients and how much effort they out into it? It's amazing.
But it isn't something that I have ever seen done with a owner that doesn't work there. Ever.
To put my above into context, my job for 4 years was being paid to goto a restaurant and fix the problems. I cannot begin to explain how bad some of the things I have seen at some of those places.
But I have also seen owners who really want their restaurant to succeed. Only one, that I went to, whose owner didn't have hospitality experience, is still open. And she put so much effort into learning (infact she still emails me to ask for advice and information), that I believe she could succeed at anything.
But on the flip side, you could purchase an existing mom+pop business, but without an amazing manager who is willing to work for peanuts+, you're screwed.
+If they were that good, why are they willing to do that instead of working a larger site for more money, or opening their own.
The cliche about McDonald's is true- Use the restaurant as a mechanism to pay for the real estate it's on. My brother did that with a burrito place and now a bbq place. He learned it from the father of a friend, who had done with with several Dairy Queens. Instead of rent, you're building wealth with your lease payments (to yourself).
Of course, now you have to qualify for the mortgage too, which is hard starting out, but once the machine gets running for you, it's not too bad to expand it to other locations.
> and the labour force is ill-paid and therefore not entirely reliable.
Or just in college.
Tbh, I believe age (read: maturity) is the best predictor of reliability. When I worked food service (we all made ~$10/hour) you could bet the adults who had kids to feed would show up. Same with the girl who was busting her ass to go to law school. The college kid living at home? Coin flip. High schooler? Same.
Not too long after I left, the store got bumped up to $15/hour. According to both a family member and former coworker who both work there, they're having the same problem—only worse.
I don't wanna sound all high-and-mighty, because I was in college too. But man, if you make $15/hour, live with your parents, and can't be reliable at work it's not the pay...
I'd really like to know this as well. I have the same impression, but recently someone here on HN, who had experience owning a restaurant, wrote that the opposite is true.
Slightly off-topic, but this article reinforced the impression that there is a serious shortage of decent pastry bakers in the US. The guy was paying $1.25 wholesale for croissants? The consumer price in France is around $1.05-$1.25, and that's a country with very high labour costs.
It's an interesting dilemma - Croissants have a shelf life of a few max, so they can't be imported. I'm guessing immigration rules + cost of expatriation would make it hard to fly in french boulangers-patissiers? Then I guess the money would be in opening "viennoiserie schools" in the US...
Damn there is a shortage of pastry chefs everywhere.
Biggest issue is, as apprentices (in general), they have to be at work at 2am. (Situational I know, but in general their hours are rather inverted).
I had the option to specialise in pastry when I was an apprentice, but the hours looked so bad.
Now I'd give my left trsticle for a decent pastry chef(well before I left hospitality), so I guess that's karma.
Also croissants - you can get rather high quality par baked fairly cheaply, you can import/export them, as long as they are snap frozen(and most people can't tell the difference). - yes there is a difference before anyone tells me off, I'm just pointing out an alternative
I always wondered why pita bread is so stale/bad in middle-eastern restaurants in Germany and Austria, being that baking pita bread is not that difficult (almost every falafel/shawarma place in Israel have decent pita bread and they can't all be genius bakers).
"Tony would pick one of his hardworking employees and sell him a franchise, loaning him the money through a 10-year mortgage. He’d work out the math so the former worker could make a decent salary in addition to covering all his costs, including making his note payments with interest to Andrade. After busting his butt for 10 years, the former employee would own an investment that today is worth $1 million or more."
I wrote a few responses, then I deleted each one. The more I think about it, the more I realise that there really isn't any low hanging fruit in hospitality.
A few examples:
Food truck: a proper food truck can be ran quite well, but so, so many are ran badly. If you are just reselling prepackaged food to labourers, at first you can make a good sale, but anyone making their own(at a good quality point), can undercut you. (Side note: yes, you can undercut prepackaged food if you control the production from start to finish, the difficult point is quality and consistency).
Cafe: good coffee, good food and a good price point will get you a stable customer base - but this isn't low ha ginger fruit, you will be there 12+ hours per day and using your own time to offset wages.
Bistro(low end restaurant): high output and middling quality will get you a high turnover, but again, you are at a huge risk of being cut out by a slightly higher price point and exceptionally better quality restaurant (or even a one chef show, I've seen that before - more later).
High end restaurant: you need exceptional quality, which means(ibitaly) high turnover until you find the right staff, then paying more than your competition for those staff members (I have many times sniped good chef's from other restaurants). Also you need an amazing head chef to do this - many will say they can, very very few can actually follow through with this.
Goverent contacts (or private) for such as hospitals: good luck, to beat their rates you need to hire under current min wage and/or cut corners somewhere - it's a race to the bottom, as quality is never a consideration compared to the books.
As for cleverness, I have seen that work. Infact the best example is a small restaurant I saw once(and spent a lot of time talking to the owner), it was a 30 seat, one sitting restaurant with a set menu.
You had to book two days in advance, the chef/owner purchased everything that day and they charged quite a lot.
Imho this is how restaurants should be, and he was quite successful (for someone who only worked 3 days a week in his retirement). But that's not low hanging fruit, he was a 40 year experienced chef who has probably forgotten more about food than I'll ever hope to know.
Long winded I know, but I hope that gives you an idea about trying to be clever in an industry that is probably one of the most cutthroat around.
> As for cleverness, I have seen that work. [...] But that's not low hanging fruit, he was a 40 year experienced chef who has probably forgotten more about food than I'll ever hope to know.
Do you think you can say anything more about this restaurant? I don't have any questions in particular, just curious about any anecdotes or interesting things you may have learned. Thanks.
Sure, I'm kicking back with a drink, and it's really interesting how he does it. Note: I'm changing his name and location(he asked me to a long time ago, I dont understand it either).
It's a small place, about the size of a two car garrage, and you have to book in advance by two days.
A little history, I had just arrived at the town a few days ago, and on my lunch break I was walking around, checking out the competition, when I saw this chalk board above a little building. All it said was: $60 pp, and a phone number. Fyi this was about 50% above the restaurant I was working ats price. Also the most expensive in the area that I ever found.
So I called up, and booked for my gf and myself. Turns out he only too reservations for at least 2 days previous, you didn't get to pick the menu (although any allergies had to be stated), and you were seated with other people.
The first time I met him, I was in my uniform. I was on my break, and I knew he had a booking, so I ducked down (it was only a few blocks), to see if I could meet him.
An hour later I had learnt, he was an ex fine dining chef. Retired with his wife to a seni-tropical location(eastern coast Australia, up towards the north), and he only worked 3 days a week.
He didn't need the money but it paid for their luxuries. What he would do is take up to 24 people (three tables of eight if I remember correctly), and give them a dinner party.
They would arrive at 530-600 and he would serve them 5 courses. Just him, no kitchen hand, no assistant.
The diner would go until about 1030-1100, and he would join them for the last course.
It was amazing, this wizened old French chef, his hands like knarled claws of some prhistoric creature, would turn out all these beautifully prepared dishes - all from local ingredients mind you - from a kitchen that is about the same as mine at home. Note: I live in Japan now the kitchens here are small.
So three nights a week he would do this, punching out these perfect meals, and when I say perfect, realise my background: executive chef, head chef,and I worked in all capacities in some of the top restaurants in Australia.
The most surprising thing I learnt? I was invited to his house, where I cooked for him(God's wasn't I nervous!), After a few wines, I learnt from his wife that they didn't need the money.
This guy, running one of the most exclusive dining experiences in the area (and that's what it was, it wasn't dinner, it was an actual experience certificate, not just a marketing term), was doing it, purely for the joy of cooking and meeting the clients.
The biggest regret in my life, is that I didn't meet him earlier.
He passed away a few months later, we were cooking at the time.
I honestly think, meeting him was the best experience in my life, and what made me quit cheffing.
This HEAVILY reminds me of Texas Star Diner. Their format is exactly the same. Their menu is set, you book up to two days in advance, and you pay $50pp NOT INCLUDING DRINKS for a really nice show and really good food. The dinner and dessert are made by a bar next door (I think they are co-owned). When we went, it was a full house of 100 people.
The one and only surefire way to make money hand over fist in the food business is authentic American Southern-style fried chicken & BBQ in China, made by actual Americans living there. You could start an empire rivaling KFC if you do it right.
Actually I know someone who went out of business doing this! Jokes aside though, you are correct(my friend went out because he made he location so popular the owner grippled his rent and sold it to someone else).
I've noticed this about BBQ at Bay Area places--liquid smoke and a broiler. I suspect doing it right requires a degree of patience and sustained labor (meat must be tended all day long) that I've only seen at $50+ per head places in cities, and few people are willing to pay that for BBQ. Also IIRC wood fires are harder to permit.
You know, I have been really tempted to go over there (us), and start a business doing that - with a mandatory 3 day previous r eservation system. (Also I'd get to travel around and try all those amazing smoking houses in the us!)
I own a food truck, and I can say it's definitely not a 'boring' food venture, although it's definitely a lot cheaper than starting a physical location. You have to ensure that you can get decent parking spots for lunches, book good evening events or be willing to deal with drunkards on weekends, and be able to put out a good quality product quickly and efficiently. Getting the truck built out and going through inspections is nowhere near as expensive as doing so in a storefront, and you can run a much leaner crew (ours is me, my partner, one employee, and occasionally our spouses helping if needed - and I still have a day job on top of this).
We're doing fairly well for ourselves - nobody's getting rich, but it's fun and the income is enough to keep us from wanting to shut down, so I guess we're doing something right.
As of now, I do not. Also, I feel my perspective would be a bit less interesting since my partner is chef rather than myself (I'm more the client-side interface, as it were)
From limited personal experience (I chair a community-owned deli/cafe - that's deli in the British English, gourmet food sense):
"Boring" is getting the location right. If you're competing with 50 other restaurants, you've got to be special. If you're the only one in town, and the demographics are right, you're sorted.
Perhaps things like a mid range franchise in a underserved city. Or a low end franchise with a captive audience (highway service, travel intersections). Industrial cafeterias.
Or a low end franchise with a captive audience (highway service, travel intersections).
Low-end franchise with captive audience seems to be a winning combination, and sometimes you can even get a captive audience with low rent: One example of a McDonalds franchise that was reportedly doing quite well is a small rural town (population ~1500) whose biggest feature was the nearby prison (population ~2000), got a significant amount of its traffic from travelers coming to visit inmates. Location kept rent (and labor) costs quite low.
On the other end of the cost spectrum, you have airport eateries, which are high-cost real estate that more than make up for it in volume. Fast food franchise are especially advantaged (compared to other types of eateries) in airport venues, partly because there are a ton of airport-related restrictions (all dangerous utensils like knives have to be tethered to cooking stations, lack of gas lines at many airports) that tend to affect them less due to the way they handle food prep. And fast food's best features (convenience, low turnaround time) is at a premium for folks in airport terminals, such that they're willing to pay inflated prices for low-end food.
“””
I remember clearly the day when the accountant showed me that we could effectively double our monthly sales and still not have enough to meet our eventual payroll obligations and that's about when you just finally sink into it: You're done.
“””
If you need your accountant to tell you this, you were doomed from the beginning.
"I'd worked several jobs in all kinds of food; I had capital from my grandfather's estate"
This sounds like a few of my friends, minus the capital. In fact, it sounds like a fantasy every guy has probably had, at least once in their life; ohh to have that feeling of walking into a place like you own the joint.
I wonder if the very high failure rate in the restaurant biz has anything to do with this. Food is something everyone knows, and seems to be a common fallback job for those without better prospects. When one of those people happens upon a windfall of cash, it’s probably natural to think “I’m gunna open up my own restaurant” - it’s perhaps something they have been daydreaming about whenever their manager gives them any shit. Or maybe they see some inefficiency and think “if i owned this place, I would do X different”. It’s not clear that’s what happened here, and I do give this guy some credit for his earnest attempt at due dillegence, but I wonder if things would have been different for someone who could start an article with... "I had 10 years experience managing restaurants of a similar niche, and was backed by professional investors." At least the management part I think is key.
All that said, I hope the best for this guy. He just gained some very expensive but invaluable experience, and I’m not sure this type of experience can be gained any other way.
Fascinating looking at those Yelp reviews. Pretty uniformly positive: "Holy smokes- I can't believe this place wasn't bursting at the seams with a line out the door."
But then look at https://twitter.com/renardpdx. Just 62 followers, which even allowing for the passage of time (restaurant closed 2 years ago) is crazily low.
In a crowded market you need buzz; you need to get those people through the door. I wonder if it wasn't the food, or the rent, but the marketing that did for Renard.
"I wonder if the very high failure rate in the restaurant biz has anything to do with this."
It's a massive reason of failure. Next biggest I would say is the inability to realistically calculate costs over time compared to dynamic income. Eg overspending on staff at bad times, the. I spending when required
Yes I agree, the inexperience with balancing expences and revenue were ultimately what led to the restaurant’s demise. He didnt leave himself enough runway for this project to succeed. $20k for the grease trap installation was a sunk cost that could have otherwise went a long way, better served on other expenses. He fell in love with this particular location and that was it. He went for the home run - a high end restaurant. I feel like he should have started smaller, something less posh, somewhere people could afford to get lunch every day, rather than a place where half the draw is based on ambiance and the ‘dining experience’. This would have allowed him to figure out a lot of important details - how to make $20 chicken for $5, finding good vendors, crafting good tasting food with low cost ingredients, creating dishes and a menu that dont require a team of chefs, building a buzz, managing a stock of perishable products, etc. Master those intangables then step into the big leagues. Basically learn to crawl before you attempt to sprint.
>Mostly, it's labor. Not only does $9.50 hourly, plus tips work out to a fair amount of money for front of house staff (my partner was horrified to learn we could not do a tip credit). But the more the front of house makes, the more our valuable back-of-house staff demands in pay (or tipshare tribute). At a premium, you can't afford to lose your core cook staff, you have no room to negotiate salaries down 'until we get stabilized,' and meanwhile they have three other prime job offers waiting. The labor costs alone were enough to sink us, especially once we got to the taxes.
It is not like overnight the average pay of waiters and kitchen people doubled or increased 50%, more or less that pay has remained the same over two-three years. Either the hourly pay was underestimated or more people were needed than planned.
And the "we could not do a tip credit" coming out as a surprise?
And "surprise", the kitchen brigade wants some money to be on par with the waiters?
And - again "surprise" - you have to pay taxes?
The "unexpectedly expensive renovations"?
Hey, you took months of making business plans, negotiating and what not, no matter how expensive is the renovation it cannot come out "unexpected", you should have put some allowance (10%-20% at least in a project of this kind) for unforeseeable added costs.
Anyway the business plan was "wrong" on the "other" side, the income, simply it could not reach the target, either because it was set too high or because you weren't capable (for whatever reason) to attract enough customers and serve the intended number of meals.
If this was an IT story, it would be about someone with SAP skills only, wondering why his startup wasn't turning in a profit like the Perl guy's next door...
Running a company is always a compromise between stubbornly doing what you think is best and trying to please everyone involved with limited means. If you can't afford much of the former and can't stand the latter, it's probably not for you.
I know, right. And yet you see so many people starting restaurants because they think it's easy. I can't imagine the mess if I tried to start a software company haha.
From the comments: "I walked away not because of the lack of TIs, but because it had a pizza hood and I needed a class 1 hood and if I put one in it would trigger a building permit that would require a bazillion other upgrades and possibly make that patio illegal."
You want to know why its so hard? That. Everything else is figuratively (and literally sometimes) cake.
You want local restaurants that aren't Chili's? Stop making them exist in some kind of Kafkaesque Clown-world where an oven hood can make a patio illegal.
There was a recent Granola Shotgun blog post talking about a new wine tasting room being stuck for months in a local board review process over the proposed color of white for the building, and being required to have a parking space for each bar stool. These kinds of regulatory hurdles really put into perspective how good software developers have it.
>>> According to Lahlou, “Once we were closed past 60 days, the restaurant was seen as an entirely new business in the city’s eyes. They are asking for all kinds of upgrades.” Among them: a new fire wall and evening out the floors so that they’re all on the same level for ADA compliance.
That last requirement might be debilitating. “Contractors have given me estimates and it’s cheaper to demolish the whole building than to level off the floors in the existing structure,” said Lahlou. Estimated cost for demolition is $3 million — a bill that Lahlou says he can’t take on “if he ever wants to pay investors back.”
I grew up in the high-end restaurant business. It is a nightmare. If you have friends or family that dream of doing this, it is your duty to prevent them.
The only people who succeed in this, in the long term, are what I call the Artists.
The Artists have no choice. Restaurants and food are the only thing they can do. They live or die there. Success of their own or a lifetime of working in a subordinate position in the same business.
No user lock in, no real possible moats, challenging staffing problems, razor thin margins, heavy regulatory burden, very touchy customer base and extremely dependent on logistics. How restaurants survive even a few months is beyond me.
> "I told myself what I'm sure every single novice restauranteur tells themselves: I'll be in the 1 percent that make it, by sheer will."
Sounds like every startup founder all over the world who builds a mobile or web app these days. Many just see the 1 in 999999 success stories and think that having an idea for an app is a licence to print money.
I would far rather see more stories like this, but from app founders. Not to discourage or dissuade anyone from trying at all, but merely to set the expectations at a realistic level.
Well, it is and it isn't, because (at least to me) it's a lot easier to fail with a virtual product and no physical space or employees outside the founders. It feels a lot easier to fail multiple times in that way and keep trying when it's just you taking the loss. Having to let people go, watch stuff get sold at auction and wind up paying on a huge note or going through bankruptcy is a lot more painful[0].
I've been a dev for almost two decades as an employee and as a solo contractor and somewhere in the middle my wife and I with 3 friends started an event space. Even though it was a success, we suffered through a lot of the same issues. We found a fantastic, disused space in a mill building; the landlord was incredibly sketchy and his physical plant people were hard to deal with. Because we did weddings and similar events (birthdays, anniversaries) almost exclusively we wound up dealing with lots of outside vendors who varied wildly in quality. And we couldn't simply "Oh well" when an event planner was an idiot or a caterer screw up: the guests don't know anything about how the place works. Anyone who screws up is on us.
There were a few things that made us a success:
1. We were good business planners and cheap. I had experience from helping my dad run his business, we got a mentor from the local business school and we had lots of connections in the area so we could work around the shitty level of quality we got from the internal craftsmen.
2. I am good at being tough. I don't like doing it and my non-spousal cofounders mistook my talent at it for liking it which led to conflict, but it saved us a lot of what the author seems to have run into in this article. I had a standard speech for vendors who were mistake repeaters that started, "I am fully capable of stepping on my own dick, I don't like it when people do it for me".
3. General business sense: we put together a fully-functional restaurant kitchen for the caterers. Not one item was new. We got lucky by running into a few pieces but most of the stuff was bought second-hand at an auction. I learned a lot of things at that auction (and if you are anywhere near Peabody, MA you should go as it is open-air theater[1]) but the main takeaway was, "A whole lot of restaurants and coffee shops fail". There had to be 20 espresso machines that month alone.
[0] Not that you can't wind up in hock starting a virtual company, just guessing the average exposure is a lot less.
> If you app is the next Facebook or tinder, or anything that relies on network effect, then yeah you'll probably fail...
Unfortunately, that seems to be what many people want to create when they start making an app. Or a website in general. Seen tons of people think it's incredibly easy to replace the likes of Facebook/Twitter/Reddit/YouTube. They then quickly realise it isn't.
It is a LOT cheaper to build an app though; $100 for Apple Dev privileges + your time
So you can try loads of times (assuming the capital is there) and fail whereas for most restaurant owners, they only have enough money to do it once, and that money isn’t enough...
The owner of the restaurant was clueless. That's the real news.
If he or she did not grow up in a restaurant business, then the only way for him or her to know about it enough not to lose the shirt is to go out for breakfast, lunch and dinner, daily, for twenty years.
Yes, $29 dollar chicken dish is insane outside the market such as NYC. It is definitely insane in a dump of a place pictured - yes, it is a dump if a chicken is $29. If he actually went out daily he would have known that a place with $1 cutlery can't get away with it while a place with $5 cutlery can. So buy $5 cutlery to be able to raise prices by $5 per dish, i.e. forty dollars for a two top per dinner.
Spending much of my youth in Vegas and, at the time watched a number of restaurants appear and vanish, a person I met at the culinary union said something that my high school self didn't understand but later made much more sense. "All the successful restaurants in this town were started for laundering money for the mob."
If the author spent a few months just working for some restaurant it could've helped him to estimate risks correctly and maybe stopped him from opening a restaurant at all. People with experience are much less into super-detailed business plans because they have the empirical knowledge. I suspect the desire to have a super-detailed business plan is a subconscious replacement for empirical experience.
Restaurants rarely succeed, they are a notoriously tough business. The successful restaurateurs I know are selling commodity products with high margins; pizza, hot dogs, burgers, alcohol, etc, which is much less glamorous than a boutique trendy eatery.
Also, despite being the trendiest city in America, Portland is still the most overrated city in America.
I had been in the management side for 16 years, and my partner had sold his software company so he had some money. He had always dreamed of owning a restaurant, so he ponied up a large % of the money.
Our food was good, our location was okay, our service was pretty good as well. We closed 3 months later.
It is perversely fun to read stories of people who started their own business in order to not have a boss, only to realize that they suddenly have a dozen bosses who don't even coordinate with each other to keep their combined demands reasonable.
I've never met a franchisee in the food business who was passive in any way. Most worked very long hours, ironically, more hours as they became more successful.
this is just a story of very poor planning and forethought. this guy not only paid way too much for a building, but was also suckered into upgrading it. this guy probably bought brand new furniture, and he probably bought really nice quality furniture to boot. it doesnt sound like he ran the numbers to figure out how much hed have to sell in order to pay taxes and payroll. i dont want to sound mean but this guy was doomed from day one.
If you've never actually worked in a restaurant, do everyone a favor and don't try to open one. It's vanity a play, that's all.
Owning a restaurant for some reason has this prestige attached to it. I think it's the media that has consistently portrayed kitchen life using an Instagram lens, leaving out the day-to-day. The author is correct, it's horrible, but some people actually thrive in that environment. Those that get that lightbulb moment and think, "whoa, I should open a restaurant," should stop.
Eating at a dining location run by amateurs is like getting your haircut at the vocational high school.
There are so many finer points that you have to collect with experience before trying it yourself, the odds of succeeding for DIY restaurant owners is hilariously low. It should say something that even world-renowned chefs struggle to keep their doors open.
I love the restaurant business, it's difficult and I admire people that can do it well—it's nearly impossible.
>"You have to love stress to work in a kitchen. Have you ever stared down a line of Friday night dinner tickets after your sous just walked out of the shift crying because her mom died? No? Then you don't know stress."
Case in point. Yes, that's stressful. You want to know what's more stressful? Working Friday and Saturday nights every weekend for 5 years straight, taking ticket after ticket, order after order. When you get good at being a restaurant owner, it's a whole different kind of stress, exhilarating I'm sure, but a stress that requires an incessant amount of detail and attention. The author didn't make it that far.
I would never open a restaurant in Portland, just for the following reason. A couple of ladies went to Mexico, got interested in how the old grandmothers made such good consistent tortillas and followed them around to try to pick up and learn as much as they could.[1] They then came back to
Portland and opened up a burrito shop. Cue protests and cries of cultural appropriation.
If in Portland, that can happen to your restaurant on such a flimsy reason, AND they're increasing minimum wages by 20% on such a low margin business [2], the value proposition quickly changes from "risky gamble" to "credit score suicide".
Many people here saying something to the effect: "What a fool, going into this sort of thing without knowing much about the industry."
What would be the best way for someone to learn about the restaurant industry and gain the experience needed to open a restaurant without quitting a (non-restaurant) day job? [to work more hours at restaurants, etc]
There is no way to learn without actually doing it.
If you want to experince it, sign up as a dish washer, evening shifts. They start after day shift work hours, and while you will get wet and sweaty, you will see what goes on in a kitchen.
It wont give you the experience to purchase a restaurant, but it will give you an inside.
If you want to go further, after a few weeks, tell the chef's you want to learn to cook. Ask about prep specificly, you will hopefully get a few shifts to prep vegetables before the dish shift.
Why prep and not cooking? Because you can't cook without knowing the basics of the produce. Give it a few months and you will hopefully be able to cook on quiet days.
Now this may all sound dismissive, but I don't mean it to be. I have trained up one of my kitchen hands (fancy for dish washer), from there to the point where I took him on as an apprentice and he was able to proove competency to finish his first two years in as many months.
It's easy to spend money that you didn't earn on a business that has no legs. If he'd earned that money the hard way I'm pretty sure that he would have made damn sure he wasn't wasting any of it.
Seems like pretty big mistakes were made from the start...
- A city as suburban as Portland seems suboptimal, even if entry costs are lower. Not to mention it's actually a fairly small city, with probably far higher supply than demand. Even if it is growing.
- Sounds like lots of mistakes were made in the real estate (landlord situation, renovation costs, etc).
- And, the ownership situation seems like it could have used some work... If you want buy in from your chef, maybe have them be an owner...
All of that on top of the normal rate of failure, which isn't that bad for restaurants. On average, they survive for a little less that five years...
The system is not designed for normal shops/restaurant etc. anymore. It's geared towards multinational corporations with enough money to pay fancy lawyers and accountants to save them money on every corner.
The immigrants running tiny ethnic places have done the sensible thing and relocated to the suburbs. Of course, in time they'll be priced out of there too. There's a new type of "food desert" emerging, maybe "foodie desert" describes it. It's when the only places that can exist in central districts are siege-type operations with extremely technical western cuisine that eventually converges to some weird bouquet of (bland) "subtle flavors" and vertical food in an empty white plate that everyone pretends is really good. While the immigrant food with gusto that makes you feel alive migrates farther away out of town.
Restaurants just seem like an intrinsically bad type of economic activity. To create the experience, the chefs and waitstaff and support people labor and labor and labor. Then the customer eats the duck confit, drinks the wine, and that's it. The labor isn't wasted, but neither is it invested for the future. Compare the situation with a simple real estate construction company. Your architects and construction workers and electricians labor and labor and labor, and then you have a house that people can live in for a hundred years or more.
I've never thought about it exactly that way, but that may just sum up why eating out feels like such a waste of time and money to me. It is all a big show. In the end, I leave with a full belly. I can do that at home for less and have time left over for building something useful (physical or software).
Somehow I can understand his frustration, but I do wonder if he actually draw the right conclusion from this failure. Because there is only one reason this couldn't work: He was under capitalized. Maybe initialy he had an intuition that there wasn't enough capital around but in the end convinced himself into this miserable situation.
So the question is why didn't he invested more time and effort into raising capital? He weakened his negotiation position right from start. The notion that you can substitute the lack of money with skill is naive.
That's an interesting way of looking at it. I don't agree though.
No matter how much he invested, it wouldn't change the fact that he wasn't profiting. You can't just throw money at restsurants, and expect a return.
For example: say he had paid off his bills then upgraded all the plates, cutlery, glasses etc, to make it seem more upmarket. Notw throw more cash to hire a trained high end manager, and build up his existing staff.
That doesn't change the fact that people were not spending what he needed to profit.
From the whole bullshit confit chicken, that he either a)had a bad head chef or b) was dictating what he wanted, based off of what he had seen, despite any actual hospitality sense (this I think is more likely, from the articles tone).
You can't just demand the highest quality ingredients, throw money as your staff, and expect patrons to flock in.
Sometimes customers don't want what your selling, no matter how good you think it is. Dreamers start up restaurants without being businessmen, then are surprised when the customers don't show up, or don't return.
The fact that this guy switched chefs pretty early was a tell for me. People aren't dumb, they know the price of chicken, and expecting them to pay $29 was just dumb/naive.
It's hard to go through a failure like this, I can sympathize with him. It took me 20 years to get over my restaurant, and I still daydream about all the "what-ifs" and "wtfs" that I experienced. Then I look back and realize that I was far better off getting out of hospitality and into IT. The burnout I was already experiencing would have killed me.
Hmm I'm willing to give him a go-through on switching chef's - I have seen some pretty bad head chef's haha.
$29 chicken is a . ... Difficult sell though.
Yeah I agree with the what-if's, i think everyone has them about their history though, try not to let it get you down. (especially about hospitality!).
Any recommendations for an ex-chef by :-p. (and re:burnout, yeah I have my collection of stomach ulcers :-p)
I'm always amazed at the naive optimism of people when I see them open restaurants in "hot" markets. I see this in NYC where the first year failure rate for new restaurants is something like 80%.
Gordon Ramsay has a lot to say about running a restaurant as a business. I'm kinda amazed that there are people (this being a general comment, not directed at the OP) who would actually learn something just by watching a few episodes of:
- BBC's The Restaurant Man [1]
- Kitchen Nightmares (US or UK)
Gordon Ramsay has a pretty simple formula for a restaurant. When you divide up your revenue you need to be looking at:
- One third for food
- One third for labour
- One third for gross profits
If your plan doesn't look like that, throw it away and start again.
A few things stuck out to me, not just about the post but from several other comments here:
1. This is commercial rent. As opposed to residential rent, a commercial lessor provides the property as-is where-is. The lessee is responsible for maintenance and any improvements they want or need to do. If you didn't factor in the cost of improvements then that's really on you.
2. As someone else mentioned, you can sell $60 chicken but it needs to belong in an area that can support it (eg in NYC terms, open such a restaurant in the Upper East Side not Flatbush). Likewise the decor and the service need to be to a standard that someone ordering $60 chicken demands.
3. Gordon Ramsay really harps on the point about controlling food costs and gives some pretty good examples of dishes that might have 2-3 pounds in ingredients that people would pay 10 pounds for where the restauranteurs want the "best ingredients" that might cost 15 pounds... for an appetizer. Now I don't mean this in the sense that you use cheap/bad ingredients, just that not everything has to be white truffles.
4. Marketing is super-important. The UK Kitchen Nightmares has some pretty good examples of this. Holding a sign up in a tourist area saying "5 Euro Vegetarian 2 course lunch" generating hundreds of covers. Handing out free samples at a commuter train station as people come home from work. I think a lot of people play the "review game" and rely on an audience magically happening. It's bizarre.
5. Finding a good chef is hard. When you do, you want to keep them, even build the restaurant around them. This isn't just about cooking good food. It's about consistency, building the kitchen staff and managing a kitchen. You probably want to give such a person, if you find them, a share of the business. As in you want a cofounder not an employee.
6. Boring is good. Another commenter mentioned this. Hot markets are high risk but high reward. People get captivated by the high reward part. Years ago, I came across a cafe in a suburban main street. No amazing location or anything like that. Just a nice atmosphere, good food and a captive local market where the residents liked to go there regularly. Friends of family owned it and I was surprised to learn that place had a gross profit of $13,000/week.
Anyway, this is the interesting part about working in tech. You see how much money you can make either by working for one of the tech giants or even working for yourself and it's nowhere near as stressful as running a restaurant but the rewards are so much higher that it makes doing anything else or running almost any other sort of business a complete financial nonstarter and basically a lifestyle choice yet these can be really good options for many of those outside tech.
Gordon Ramsay has so much experience and good advice in controlling costs. As he says, you can make the best food in the world but if your restaurant can't turn a profit how stupid are you going to look?
Back in his starting out days he was so concerned with portion control and food costs he wouldn't even let the pasta dough that gets stuck to your fingers go to waste. Just every little detail. He couldn't afford truffles so he'd buy the broken pieces from the truffle dealer at a huge discount.
He talks about when he worked with Marco Pierre White at Harvey's that MPW had to have the best of everything and the food was amazing. But that place never really made any money despite being sold out every night.
He breaks the restaurant business into 4 weeks per month: Week 1 you make enough to pay your staff for the month. Week 2 you make enough to pay your food costs for the month. Week 3 you make enough to fund the operation (rent, bills, etc) for the month. Week 4 should be your profit.
When. I was an apprentice Gordon Ramsay was the man I looked too, his TV series (sans kitchen nightmare), was so informative, especially his UK series. It reinforced so much that I hadn't really paid attention to in college, and I don't think I would have ever gotten anywhere near as high as I did without his knowledge.
This is commercial rent. As opposed to residential rent, a commercial lessor provides the property as-is where-is. The lessee is responsible for maintenance and any improvements they want or need to do. If you didn't factor in the cost of improvements then that's really on you.
Serious question, what are the responsibilities and risks of the landlord?
This should be top comment not mine, he didn't control anything by the sounds of it, and insisted on top quality items when the customer base didn't support it.
Now take out taxes and your left with roughly $100K/year to pay yourself and any partners... Not exactly living high on the hog. And the hours for that pay can easily top 80/week.
Why the downvotes? This is basic accounting, not judging. Having a gross of $13K/week is a tough tough nut especially if you have any debt to service (SBA loans etc), or an equity partner expecting more than a free meal once in a while.
Ah... I also mentally transposed that to monthly net. I've never heard of someone referring to that as "gross profit"; my accountant would have lectured me for hours if I made a reference like that.
The fundamental misunderstanding of economics here is this:
The more competition in a market, the lower the profits. In perfect competition businesses operate at marginal revenue = marginal cost, so the guy was never going to make any money.
The only reason to run a restaurant in a market like this, then, is because you are batshit passionate about food, like Gordon Ramsay or possibly even more.
This guy obviously wasn't so the result is expected.
If you'd like to know everything about opening a restaurant in equal parts gruesome and hilarious detail (at least when only reading about it), Tyson Ho's posts about opening Arrogant Swine in Brooklyn are a great read.
Opening a restaurant in a "hot" market is mostly a zero sum game. To succeed you have to wrest market share from other local competitors. A better strategy might be to open in a "cold" market with a lot of unfilled demand.
Maybe an hastly judgment, but the guy doesn't seem to like food. Why open a restaurant in a first place? Specifically "renard" (fox in french) is not a good name for food.
This is my question too. How to restaurants and cafes in Australia manage to do it, with wages in the $17-$22/hr range, AND penalty rates (double time on Sunday etc.)? [0] (PLUS 10% superannuation etc.)
I’ll take the lady friend to the local (nice) pub and buy us both a steak & chips, half a pint (to drink while we wait for the food), and a bottle of house Shiraz (to drink with), and it’ll be $110.
I’m lucky that I can do that, because I work in IT, but every time I do I think “holy shit, $110 for a pub meal”. That’s just what it costs.
$50 for a decent meal out w a beer isnt that far off. Rule #1 of eating out on a budget is to limit booze, wine for example is often a 10x markup for the same product you can buy at the store.
We also cut down on staff (I have delivered food as a chef before), and watch our costings.
I'd prefer to take the food out, than to know my wait staff are starving though.
At the same time though, I have haif my own waitstaff come in for lunch in their days off(as they can afford it). I'm sure they spent that extra money on other businesses too.
I can't really comment more on the follow through from that on a more financial position though, not my training, but as I mentioned earlier, it was nice to know my wait staff weren't starving.
Those figures might not be quite that high. Actually, the site you linked says "The average wage for a Waiter/Waitress is AU $15.84 per hour (median is $16.45 AUD)" [1]
But you're right, AU front-end staff are paid higher wages, even after adjusting for currency exchange rate:
$16 AUD = 12.50 USD
Maybe median income accounts for this? Different sources are giving different numbers for median income, but google is saying that...
All of the above (except lower costs, not a thing for anything in Australia).
In particular, in essentially all (non-chain-fast-food) restaurants where you can get a meal for less than $10, nobody is making award rates. If you're lucky the staff is family, if not they're exploiting students or illegal immigrants.
It's amazing how much better we Software folks have it when it comes to starting a business.
Last I checked, the profit margins for my single-player SaaS business were somewhere around 90%. And the interesting thing about that isn't even the number. It's that SaaS is so profitable that you don't even have to calculate your margins. To an order-of magnitude, every dollar a customer pays for the service can be considered profit.
Real Businesses have expensive office or retail space. We have "wherever we happen to be living at the moment".
Real Businesses have employee salaries. We have an industry where a single person can plausibly run every aspect of the business from writing the code to marketing to racking servers to high-touch Enterprise sales. That single "employee" can have his "salary" set to (Total Profit) / 1.
Real Businesses have equipment and other recurring costs. We have those too, but they're tiny compared to other types of business. Like, single-digit-thousands per year tiny. All in, for servers, software, dev hardware, etc.
It's almost unfair, how Software wins in pretty much every category against pretty much everything else.
This is the back side of much lower success rates. Somewhere like 10-20% of offline businesses survive and thrive for decades, for online startups success rate is much lower. Say, i am 38 and have been coding, and had a large network since i was 18, and i have never seen a person who 'hit it' - even in the most limited sense, meaning consistently made more from his own product(s) than he could do on the Upwork. I mean, i know a ton of such people - some of them make up to $2M a month - but i know them since after, and _because_ they made it (so it can't be used to estimate success rate). Never someone who i knew _before_. And nearly everyone of my coding friends tried. Most tried seriously - the more seriously they tried, the more they lost actually, sometimes being forced to leave the profession completely for the lack of valuable skills (spent 5 years working on own startup with a limited stack and didn't catch up with what the freelancers code with), and need to make money.
Online startups are infinitely scalable, meaning something which is just barely worse than the best probably doesn't survive (see 90%/9%/1% rule), but if it does, it hits big. Neither is true for a restaurant.
It's sort of apples and oranges though, because it's much harder to liquidate and reuse assets from a brick and mortar than it is a software concern.
Every thing I've ever built, in a very tangible way, becomes a stepping stone for me with software. Be it businesses I create or people I work for. Also I can start multiple concerns in parallel and traditional business cant.
Most people, even if they are good at something, cannot start a business of it. That still includes software. There are so many things about running a business that don't directly reflect being good or not. That's excluding people that just aren't any good.
Wanting to be the owner of a business you designed yourself is a crazy persons dream. Software seems to make it more accessible because you can fuck off and get to death much quicker without the same cost, but I bet if you averaged it, what comes out in the wash is the same. A balance of having enough delusion, skill, stickiness, and luck.
I've got a mentor who subletted me some office space for a small thing I had once that I needed a few desks for. Recently he told me how close he was at the time to losing everything and us being there was a desperately needed life raft. Until he told me that, I always thought he was doing me a favor. His business is now at the top of his field. I still can't see the difference. Everything is bullshit until it's real and nothing that is real is permanent. Is success a marker of an IPO or a thing that allows you to take your children on neat vacations and affords time to paint? People only call it a failure when you exclaim you quit or someone else certifies that you've been removed.
This is so true. In the world of online businesses, it does often seem like "winner takes all". This might be because online business can compete globally, so the "winner" can literally take over the world (except China) like facebook did. A restaurant cannot do the same - the closest would be a big franchise like McDonalds.
Fixed costs vs. variable. Man it's insane. I was just talking to a friend about what it takes to run his high end construction company. He does very well and has 20 some odd years in the biz. The amount of work and plate spining. Literally having to take physical possession of sometimes hundreds of thousands of dollars of materials and move and assemble them. Even with insurance, an accident quickly followed by a second could destroy the whole business because of a premium hike.
I can test ideas with zero risk and inventory and make that a mediation to build out my business. Pivoting, changing, blending operations. I'm not as successful as he is by any means, but I can't imagine myself having to shoulder that burden to get where I want to go.
Dude maintains a fleet of trucks. Physically, like with the wrenches.
Do you think the insurance risk to your friend's company would be mitigated by automating parts of the labor? I've always wondered where a construction company would stand on this topic. On the one hand, there's a fear of replacing the human labor, especially when you have close relationships with your employees and they have a specialized skillset or trade. On the other hand, it seems like workers compensation and accident insurance are really substantial costs and appreciable risks for these companies.
The amount and skill that exists in high end construction is crazy. Not just in the individuals but also how they work as a team. Also how few people are qualified and want to do the work. Half of his team are undocumented Mexicans that have been with him for over a decade. I won't even get into the risks and costs associated with that.
The work is hard, physical, requires precision and attention to all sorts of details while being creative and getting up really early in the morning.
Just to give you an example of how not automatable it is. $37,000,000 home that the entire building is clad in a bespoke red aluminum paneling that the architect designed. It doesn't fit in a repeatable pattern and each panel is between 3x4 and 12x7 feet. They need to be hung with a tolerance of less than an eighth of an inch on a cantilevered split level structure with some odd pitched faces. Any drift in the assembly will mean a later piece will not fit correctly and you might not find out until the end. If say a single piece got maybe dropped or run over by a work truck it will have to be custom replaced at a huge cost because the panels were made in batch, also this would effect the overall timeline of completion. The contracts you take with a job like this sometimes come with bonuses for finishing early and penalties for delays. The process to even get to build them is highly competitive as well.
Just to get this on the wall involves coordination to make sure everything is true and to spec as it gets to the skinning. Every variance effects your adjustments for hanging the clad. Sometimes with your own guys involved in the internals and sometimes you depend on workers you have nearly no control over. Either way you have to deal with and adjust.
All of this has to be done without trampling the feeder roots just under the soil of the 250 year old oak tree in the middle of the job site because it's irreplaceable and a couple desire paths can kill it inside a year after the job is over, cutting off 80% of the work area you have access to.
I'm not saying you can't automate a job like this, but we are so far away from being able to. It is possibly on an infinite horizon in skilled human labor.
I would agree that the finish work, cladding, drywall, etc are definitely the hardest part of the construction automation problem. And maybe they never get solved entirely, especially things like the red aluminum panel example. In some sense, the uniqueness of the project is central to its value as an architectural statement. And uniqueness doesn't jibe well with our current approach to robotic automation.
There are a few intermediate tasks that may be doable with autonomous machines. Framing and concrete come to mind because they are tasks where lots of heavy stuff has to go to the right place in a repetitive arrangement.
So maybe a highly bespoke job like a multi-million-dollar house doesn't have any tractable tasks for automation. But a skyscraper might. Or at least, I'd like to think so.
Thanks for taking the time to share your perspective and awareness of the topic with such a substantive and vivid example.
I think there's definitely a mint to be made in making the hardest of it easier. I think that's the only way we keep building higher and more interesting.
If you make that tool though, it just becomes another hammer and the guys like my friend will still sit at the same risk level to use the new hammer in ways people haven't seen. He definitely wants your automation, but only so they can increase dynamism. I suspect that his job will always hold a static high risk and I find that kind of awe inspiring as a bit jockey.
Nothing about his work force is "illegal", they are undocumented. Anyone who works in the field also works with a considerable amount of people in a similar position in the same roles.
The "house" I described is an amalgamation of several.
I guess I would say to that "bored" person, go fuck yourself. There are plenty of other people to track down, harass, and get your target completely wrong on the internet. /b/ is thattaway.
This is the thing that so boggles everyone in "normal" business. They can't understand how I make any financial plans or decisions like investing resources in new capabilities or hiring consultants. I've got stable, long-term customers on annual maintenance contracts. Draw down substantially slower than it fills up. Done.
It's trivially easy IFF you can control yourself. I want to stay in business, so I do.
Bookkeeping is a similar non-event. Pay for everything on one separate credit card and blip the CSV of the annual statement to my accountant. Done.
Edit > Reading through the comments here reminds me of the hyper-importance of finding a viable niche, then occupying, preserving and defending it (_barriers to entry_), plus the high value of: a) "good" versus "wacko" clientele, b) loyal repeat customers that you can move to auto-renewing maintenance contracts, and d) frugality.
But, unless you found a niche or have a really strong brand, ten other competitors can pop up at any time, using the same cloud infrastructure you do and undercut your prices. The worst case is that GoogleMicrosoftOracleAdobe will just put a small team together and outcompete you in no-time. It's almost unfair, how Software wins...
This seemed like a plausible fear when I first started 10 years ago. People have indeed cloned both of my rent-paying products over the years (possibly helped by the fact that I've released step-by-step instructions for building one of them).
But then, as you say, software is easy to write. Businesses are less easy to duplicate.
Is the kid who saw your Show HN and cloned your thing "in a weekend" going to stick out the years of work it will take to build a business off of it? Is Google really going to decide to focus on executing in the "Hook Twilio into a Calendar Scheduler and have it automatically robocall people so they remember to be home when the plumber arrives" space so that they can smoosh your little $10k MRR business?
I hear your fear expressed a lot from people cautioning against building software businesses. But I'm skeptical that we should really be scared of it.
Some MBAs caution against it because they BUY software businesses or programming services. If you know how to write software you can start them and fail quick with so little risk.
I have worked on about 20 projects between $100,000 and $3,000,000 where the primary stakeholders felt that writing a check was enough to run a software company. Like somehow buying bespoke software creation was like buying a used Honda and the key will just start it later if you ever get it out of the garage. A buddy of mine describes the trap as "It's easy to imagine, so I imagine it's easy."
By contrast I've seen non-technical guys with $30,000 take an interest in the work and not just listen to the creators, but inspire creativity, turning that to millions.
I've seen some developers deploy a beloved idea how like OP sold $20 chicken and are surprised when no one gives a shit. If you polish your turd like Duke Nukem Forever or Chinese Democracy, you might not get the response you want and it misses the utility we have in software to engage quickly while correcting course to get the thing on it's feet.
The comment I remember from Joel Spolsky when he released CoPilot(?), the product built by interns over the summer was that he would be thrilled if it made $500,000 over its lifetime. But if it was built by Microsoft and made $500k, they would shut it down in an instant. Even if it made $5M, they'd probably still shut it down since it wouldn't be worth the time.
You worry about Google, Microsoft, etc when you're building a $50M business. Below that, it won't probably even register on their radar.
One advantage of a legacy software / SaaS business is vendor lock-in and the conveniency hurdle. So it is easy to retain existing customers. And if you are the first in the market, you might have enough customers so that your business remains profitable for a long time, even when your growth is stalling because of new competition.
But I don't want to be pessimistic. Because there is no excuse for not having tried to build that business.
I write code for Arduinos in my spare time. There's no shortage of online competition. But yet, even though clients keep reminding me that I cost more than everyone else, they still keep sending me work...
The same things that make it great to be in the software business make it extra-difficult. All of your competitors have the same advantages you do, and pretty-much anyone in the world can become a competitor to your business!
One advantage that local businesses have is a proximity lock-in. A restaurant in Portland just needs to be good enough relative to other restaurants in its neightborhood to survive. A SaaS headquartered in Portland needs to be globally good enough.
Personally I think a skilled plumber/electrician/tradesman would have an easier time starting a successful business than a software developer would. It's hard to generate demand for software, but those skilled trades are things that everyone definitely needs.
I think a skilled plumber/electrician/tradesman would have an easier time starting a successful business than a software developer would. It's hard to generate demand for software
Me, I'd think I was going about it wrong if that turned out to be the case.
A very, very large flip side to that, is there are extremely few winners in any given segment in software / online services.
There are 150,000 convenience stores in the US.
How many successful online auction sites are there? At least dozens!
How many CRM companies that successfully compete with Oracle and Salesforce? At least several!
How many successful competitors to Slack? A couple!
How many successful competitors to Github? At least a few!
Your odds of building just a million dollar sales business in online services or software, is extraordinary small. And if you're in a successful niche, your niche is either likely to disappear entirely in a short amount of time, or otherwise be consumed into a larger company's product.
Meanwhile every single McDonald's ($2.5m avg) location does over a million in sales. Most Burger King ($1.3m avg) and Wendy's locations do as well. That's 27,000 franchise locations in the US just between those three.
Zoom in a bit and things look better. You don't need a million dollars a year to raise a family on a single-person software business with 90% margins.
I know of at least four successful businesses that started as S3stat clones. No idea why they chose my particular niche either, as there are tons of better things to build.
You don't need to build a Slack. You can live quite nicely on the profits of "Basecamp for X", for hundreds of as-yet unaddressed X's.
- Developing can take a lot of time, especially in a market where a lot of players are already active and have had years to come where they are (time unpaid, without guarantees), and
- When growing past what one person can do, your margins will decrease, because you'll need office space and employees.
"the profit margins for my single-player SaaS business were somewhere around 90%. "
Thos are not 'profit margins' - not even remotely.
Maybe you mean 'gross margins'.
But even then, software is an inherently IP-based business, it's about as appropriate as saying: "Hey, this $25 book only costs $1 to make".
That 'software' is open to anyone, anywhere, means it's just that much more competitive, and margins are not 90%, on average they are probably negative.
Twitter has yet to make a dime. They are a few billion in the hole still. I think the same with Square.
Has Uber turned a dime in profit yet?
It's only a very hardened and entrenched few that get into solid, positive margin space.
It's still Income minus Expense, right? For a single founder, it's exactly as though the $25 book costs $1 to make, because you are the printing press, binder, paper supplier, ink supplier, distributor and author.
Yes, you can arbitrarily drop that number by having the business pay you a "salary". But the end result is the same. The money going out the door (to people other than you) is a tiny fraction of that going in.
The 90% figure refers to 'gross margins' and really means 'income minus cost of goods sold'.
In software, usually 'gross margins' are meaningless - it's a term used in most other industries and from classical economics wherein most of costs were actually COGS.
"Yes, you can arbitrarily drop that number by having the business pay you a "salary"."
No, it's not 'arbitrary' at all salaries and operating costs are the relevant costs to the business.
Software (and books) are IP businesses - the 'cost to make the book' or to 'run a website' are not useful in terms of understanding the business or profitability.
FYI - for most 'software businesses', net margins (i.e. after 'salaries and operating costs') are negative.
... so if salary is zero, gross margin and profit margin are the same. Which is the case for a single person business.
I understand the point you're trying to make, but it's still a bit silly to suggest that my business is not profitable because I may eventually spend some of the money it makes.
one interesting thing is how people are trying to operate a business and hire local people to do things are assaulted by taxes out the wazoo, and software companies like apple hide their profits overseas and avoid taxes almost entirely.
Yes, well, fortunately, the Important people in this story (The landlord) have plenty of tax loopholes they can take advantage of - which they will hold over the tenant's neck when it comes time to renew their lease.
Our tax and financial system has incredible benefits for landowners, at the expense of everyone who actually does useful work.
I'm not sure a comparison between a multi national and a local business is apt. Granted they could probably be treated more similarly but multinational software and multinational hard goods seem to get similar tax treatment...No?
The article is from 2016, and when it came out I remember a ton of industry folks griefing the owner for basically failing to understand the market and understand what people were willing to pay for. Weird to see this on HN...
I realize now that most of what I was remembering was in the comments of the article. I had some other fb friends who run restaurants echo similar notions. But it all boiled down to
"But then, of course, there are the people who complain that your $29 chicken dish is "amazing… but it's too expensive for chicken."
"people complaining" means the owner didn't understand the market. At all. If you don't have enough people willing to pay 40$ for a dish that is only profitable at that price point, then you really shouldn't keep trying to sell a dish like that.
I'm guessing you just don't follow local restaurant news (Renard's opening got quite of coverage because it was in St. Jack's old space) or live in that neighborhood.
Portland's a pretty local place. I walk by where Renard used to be almost every day, and can tell you about every restaurant along all of Clinton Street (on that stretch, Burrasca is clearly the standout). But apart from a few very well-known places I've got no idea what's up on, say, Alberta.
Yeah I don't really follow restaurant news. I am just a terrible cook, so I am always looking for new restaurants to eat at, and while I live in SE, I will drive anywhere for the food I want.
In the US things are pretty extreme (1, 2). It doesn't seem like a stretch to suggest that some food-related regulations don't add value to justify their cost. This was part of the problem the owner felt was unjust.
You can also compare it to other countries. A number of affluent countries with high quality of living are comparatively lax, and it doesn't seem to be a problem.
With respect to food, Japan seems like an ideal country to learn from. I know for a fact it has great (and so simple) national zoning laws, and I believe it is much simpler and cheaper to open a restaurant (you still pay some fees, and you need to do some yearly training). And if it isn't smarter zoning laws and more supportive government, then it's something else worth emulating.
Not everything that poses a danger needs to be regulated. You need to look at the benefit in relation to the cost. Not just the economical cost, but also the social one.
“I know no safe depository of the ultimate powers of the society but the people themselves ; and if we think them not enlightened enough to exercise their control with a wholesome discretion, the remedy is not to take it from them, but to inform their discretion by education. This is the true corrective of abuses of constitutional power.”
Regulations (or the lack thereof) becomes a tool to serve the few (1)
The only way to offer the middle-class non-commodity non-factory foods is to reduce labor costs. It's impossible to do so otherwise.
You can't get the sort of service they're trying to provide for the middle-class without having a lot of poor people. This is where neoliberalism free-movement-of-labor is needed, where we can import a class of low-paid labor because Americans don't want to do that job for a low a price. (Obviously raising prices means no more business, so that's not happening.)
But first, Americans have to decide if they want to spend all their money on food or not. And then they have to decide if they want to eat commodity factory food or not.
And the people that say labor costs should remain high are basically saying "Poor people should never eat at restaurants" and that "Poor people should always eat factory food".
A) labor costs in the US is very low (compared to other industrialized countries)
B) the real question is whether you want servant class of citizens who are essentially exploited?
Personally, I prefer only going out to eat on special occasions, paying well, and knowing that the people serving me makes a living.
Note: in some utopian world restaurants would automate the kitchen and reduce labor requirements, without having said automation impair quality. Maybe one day :)
Unrelated to original discussion, is the phrase "industrialized country" even relevant anymore? China is an industrialized country but very different from other developed countries.
> B) the real question is whether you want servant class of citizens who are essentially exploited?
It's absolutely necessary. We are being harmed economically because we don't have enough of an unskilled servant class.
Right now, women can't effectively work a job if they have a baby. You can see a situation where every household could have one servant, just to allow a woman to work - never mind all the other segments of the economy that could use low-skilled servant class. This may total to about 30-40% of the population.
Meanwhile, only about 10% of the US population doesn't graduate high school. So, where are we expected to gather the rest of our unskilled labor force?
We need to import this class of labor because America can't provide it, and we need to provide basic human services for this class of labor as well - health care, retirement, etc..
Inequality serves a useful function in any economy. When everybody is a high-skill worker, economies breaks.
If everybody is a PhD computer scientist, who raises babies while they are at work?
> If everybody is a PhD computer scientist, who raises babies while they are at work?
In Nordic Countries that would be the daycare/kindergarten (that usually accept 1+ years old kids) teachers, who have an MSc in Education or a community college or vocational school degree. This way also both parents can go to work.
If everyone is a PhD computer scientist - then the wages of babysitting will rise to the true value of that service, and a babysitter will earn as much as a computer scientist. Currently due to abundance of availability of low skill resources - their wages don't depend on the value of the service and instead on their willingness to work for whatever amount to get the job, but once the resource scarcity becomes inverted their wages will be tied to the value.
Great. Since everything costs as much as a high-skilled computer scientist, no one can afford anything.
We're now back to limiting the economy because we don't have enough low-skilled workers. People are now forced to work suboptimal jobs for their skillset, and our economy stagnates because we're now fixing broken windows we broke.
Child care at least has an intrinsic value that will create wage equilibrium because it directly frees up someone else's time for high value labor. It should track closely to the income of the people you are serving, and it mostly does even in the US. This is ignoring the educational and social benefits that good childcare services can create which act as a future labor multiplier.
And I lived right next door to Renard.
It's hard to imagine that during the planning, budgeting, and all the upfront work that someone didn't caution him against the unscrupulous landlord. The landlord was a guy that wrapped a chain around our neighboring building to pull his building back onto its foundation. This is a guy that had public, outstanding violations and complaints on his building and unpermitted work.
And they moved in to a microscopic kitchen to do white-tablecloth dining in a local neighborhood. Yes, they moved in right after a hot restaurant, St Jack, moved out, but St Jack had a marketing/advertising/buzz machine behind it. They systematically created success, not the other-way around.
I guess the moral of the story is take this to heart:
>I told myself what I'm sure every single novice restauranteur tells themselves: I'll be in the 1 percent that make it, by sheer will.
Take the leap, but you've got to do your diligence. Listen to the feedback and concerns people voice about your endeavor.