Hotel Online Special Report
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Secrets and Success Strategies in the Restaurant Business
Profiled in 'The Upstart Guide to Owning and Managing a Restaurant'
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CHICAGO, July 24, 1998 -  Just because people have to eat doesn't mean they will choose to eat in your restaurant! According to hospitality professor, bartender trainer and restaurateur, Roy Alonzo, "A common misperception about restaurants is that they can endure the worst of economic times and even survive poor management. Restaurants follow the general business model of roughly 80% failing within the first five years of their existence. Others do extremely well."

Alonzo acknowledges that no one has come up with a formula that works in every case. "The best you can hope for is that with training, experience, good planning and a lot of hard work, you stand a chance of succeeding." To increase your chance of succeeding, Alonzo recommends learning from the experiences of others. In "The Upstart Guide to Owning and Managing a Restaurant" ($15.95, Upstart Publishing Company) Alonzo shares some of the secrets and success strategies he has developed over many years in and around the restaurant business.

Here are a few of his tips for starting smart and maintaining an attitude of watchfulness to spot potential problems before they blossom into business failure:
 

Get guidance from an accountant and attorney who are familiar with the restaurant business.
Develop a financial plan (Cash-flow budget) for your first year in business.
Compare your actual performance against your plan at frequent intervals throughout the year, and make adjustments as necessary.
Set up and maintain control over the different restaurant profit centers right from the start: Purchasing; Receiving; Storing; Issuing; Inventory; Standard recipes; Portion control; Cashiering.
Know your customers and make them feel welcome.

"You needn't be a genius to have a profitable restaurant start-up. You do need common sense, and should be willing to face and accept your own limitations," say consultants and coauthors Peter Rainsford and David H. Bangs, Jr. 

Success in the restaurant business comes from detailed planning before the first meal is served, according to Rainsford and Bangs. "Since the process of starting a restaurant is long and complex, be aware of the benefits of allowing yourself the full amount of time recommended -- a year or longer -- before making one of the biggest investments you'll ever make (both financially and personally). Using this time wisely allows you to modify your initial idea, acquire skills, discover what will set your restaurant apart from the ordinary and avoid the most common pitfalls."

Here's some of what you need to do when, based on The Restaurant Start-Up Guide's proven timetable:
 

One year to nine months: Refine your ideas, decide on the type of restaurant, begin research
Nine to six months: Define your restaurant concept, target markets and unique hook, start writing your business plan
Six to four months: Decide on menu, location, name, check with local health department, set up group of outside advisors, create detailed financial projections
Four to two months: Prepare marketing plan, open bank accounts, use cash flow forecasts and balance sheets, secure financing
Two months: Secure insurance coverage, contact food and beverage vendors, determine image, advertising, promotion and publicity strategies, start hiring process
One month: Hire staff, make sure everything works, fine tune cash flow budget, do final professional check
Start-Up and after: Budget your time, continuously improve menu and service level, maintain good communication with bankers and vendors, update your plan as needed

By writing your restaurant business plan in detail first, according to the authors, you will need to make only minor alterations to turn it into a first-rate financing proposal. "The difference between a business plan and a financing proposal is one of emphasis rather than design. The main focus of your business plan is to enable you to understand and master the complexities of your business, whereas the function of the financing proposal is to show your prospective backers that you not only know what you are doing but will also make their investment as risk-free as possible."

Here are some of the ways a banker might be able to help out cash-strapped entrepreneurs:
 

Short term financing can help with short term liquidity shortfalls, short term construction, seasonal inventory loans. These can be repaid from returns on specific short term transactions. You don't want to be paying for something after you've already taken the benefit of it!
Intermediate financing can be repaid anywhere from one to five years out of operating profits. Generally these are repaid in fixed monthly installments. The most common items financed via intermediate term debt are equipment loans and working capital loans for businesses undergoing rapid growth.
Lines of credit are a short term tool, similar to a credit card, that you arrange before a specific need arises.
Long term financing is considered for long term needs and fixed assets, where the repayment period is more than five years. The most common example of long term financing is real estate financing.
 

Roy Alonzo is a professor of food service management at the University of New Hampshire, and a food and beverage consultant. He has also served as partner and general manager of a full service restaurant, managed a faculty club and campus restaurant. He is the author of "The Upstart Guide to Owning and Managing a Bar or Tavern."
 

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Contact:
Upstart Publicity Department, 312-836-4400, ext 4777
 
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Also See:
Cornell Hotel School will be holding the Restaurant Executives Program / May 1998 
Foodservice: Counting on Food Courts / Frank H. Andorka Jr. / April 1998 

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