5 ms·

I don't know much about running a restaurant, but I figured he'd be in big trouble as soon as I read that number after reading the condition of the place. I've

by ufmace 9y ago

I don't know much about running a restaurant, but I figured he'd be in big trouble as soon as I read that number after reading the condition of the place. I've done remodelings, and I'm pretty sure that just remodeling that place alone would eat up the entire $60k. I have to figure that bootstrapping a new restaurant would run at least that much on its own, between laying in food, kitchen equipment, hiring staff, doing marketing, permits and taxes, etc.

mikeash 9y ago
I know almost nothing about the restaurant business and I haven't even read the article, and my first reaction was still that this number must be missing a zero. I recall stumbling across the franchise agreement for a frozen yogurt place once. They wanted proof that you were able to invest something like $400,000 in the venture, and that's a way simpler setup.
- Fezzik 9y ago
  I had the same reaction. I was looking at investing in franchises and they range from initial cash investments if $400k to $600k for one restaurant. And, like you hint at, these are behemoths that have networks of fine-tuned resources. Also, this information is astonishingly easy to find, so getting the gist of what opening a restaurant costs is stupidly simple. For example Dairy Queen requires: Investment Range: $779,675 – $1,729,160 Liquid Capital Requirement: $400,000 Net Worth Requirement: $750,000 https://www.dairyqueen.com/us-en/Company/Franchise-With-Us/Store-Types-Markets/ https://www.dairyqueen.com/us-en/Company/Franchise-With-Us/S...
  - mikeash 9y ago
    Thanks for putting some concrete numbers behind my vague recollection!
adventured 9y ago
I'm surprised there isn't a big WeWork for restaurant start-ups. A large space converted into numerous kitchens, that can be rented for relatively inexpensively (no large upfront cost to buy equipment or the building, no large initial lease, etc). The WeKitchen owner would have its own inventory of kitchen equipment that could be rented and moved as needed, to facilitate a lot of various types of kitchen arrangements. The idea would be strip as much cost out of the initial part as possible for the start-up (given their odds of early failure are ~97%). Most of them would still fail, the WeKitchen business would get paid their upfront monthly (or quarterly) fees as the restaurants come and go (and there's a perpetual supply of people wanting to try restaurant businesses, this would increase that supply by lowering the cost / risk; it could also accelerate experimentation). It could also enable a lot of other types of food businesses, such as tilt-up bakeries, rather than only restaurant-style. The overall system would focus on orders to go, aligning with the increasing rise of food delivery services.
- jamestimmins 9y ago
  You're almost describing a high end twist on a mall food court. It's an interesting idea. I suspect this doesn't exist because the high startup costs (multiple full kitchen build outs would like push costs into the 7-8 figure range) would be too high given the inconsistency of restaurant rents. With office rents working on fairly regular timelines, it's easier to get a new tenant before an old one has finished up. But if restaurants inconsistently go bust, that may mean that you can't look for new tenants until you're already dealing with a vacancy. Given that restaurants may be cyclical, there's a decent chance that you'll face multiple vacancies in parallel. I know you bring up vacancies, so I just mention this as a possible consideration. I actually think this is a really cool idea, and would love if someone pulled it off successfully. I've seen it done with clothing stores and would love to see the food equivalent.
  - smelendez 9y ago
    Is this not the food halls popping up in a lot of cities?
    - jamestimmins 9y ago
      Do you mean like the Ferry Building in SF? If so, then I guess so! Although that may not be specifically what OP was picturing. May have been picturing something where each restaurant had their own dining area.
  - adventured 9y ago
    My assumption was it would take a very sizable amount of venture capital to do it properly, with a lot of red ink early on. There are an immense number of restaurants, bakeries, etc founded in the US every year, so I suspect there's potentially some kind of big market for this - especially as the order-to-go business gets drastically bigger over the next decade. I considered that the large unit space / building could have a dining area, where customers could sit down and could then select from numerous kitchens that are local to that space. That pushes it even closer to the mall food court. My reservation on that, is that some percentage of the restaurants will be producing subpar experiences in terms of quality. So a successful restaurant in the space, wants its customers to eat in a successful atmosphere, where customers as a whole are happy; if half the customers in the dining area are unhappy, the enjoyment by the other happier half will suffer as well (people pick up on such things, it rubs off). Then I considered sub-divided dining areas, so each rented kitchen gets its own limited sit-down space, it just might be a stretch though and adds to the overall cost burden in the system with minimum gain (ie, it's probably just easier to focus more narrowly on food delivery). To deal with the vacancies issue, you'd only build these in higher population urban areas, to maximize the potential number of restaurants etc. that you can rent to (maximize the potential start-ups due to population). You'd also seek to under-build versus demand, preferring to always have a waiting list (recession times might even trash that best effort). I don't know if it would work, but, I'd seek to get a modest upfront payment allocation from the waiting list, that covers the risk on vacancy turn-over. By keeping the demand above the space availability, you can probably get the start-ups to front the first month of rent to get on the list (with some terms of refund). It wouldn't be something you could start with zero capital, the idea would be to get it into the $5k (solo bakery) to $25k range to go from moving into the space to the time it takes to get the first customer.

by ufmace 9y ago

mikeash 9y ago

I know almost nothing about the restaurant business and I haven't even read the article, and my first reaction was still that this number must be missing a zero. I recall stumbling across the franchise agreement for a frozen yogurt place once. They wanted proof that you were able to invest something like $400,000 in the venture, and that's a way simpler setup.

Fezzik 9y ago
I had the same reaction. I was looking at investing in franchises and they range from initial cash investments if $400k to $600k for one restaurant. And, like you hint at, these are behemoths that have networks of fine-tuned resources. Also, this information is astonishingly easy to find, so getting the gist of what opening a restaurant costs is stupidly simple. For example Dairy Queen requires: Investment Range: $779,675 – $1,729,160 Liquid Capital Requirement: $400,000 Net Worth Requirement: $750,000 https://www.dairyqueen.com/us-en/Company/Franchise-With-Us/Store-Types-Markets/ https://www.dairyqueen.com/us-en/Company/Franchise-With-Us/S...
- mikeash 9y ago
  Thanks for putting some concrete numbers behind my vague recollection!

adventured 9y ago

I'm surprised there isn't a big WeWork for restaurant start-ups. A large space converted into numerous kitchens, that can be rented for relatively inexpensively (no large upfront cost to buy equipment or the building, no large initial lease, etc). The WeKitchen owner would have its own inventory of kitchen equipment that could be rented and moved as needed, to facilitate a lot of various types of kitchen arrangements. The idea would be strip as much cost out of the initial part as possible for the start-up (given their odds of early failure are ~97%). Most of them would still fail, the WeKitchen business would get paid their upfront monthly (or quarterly) fees as the restaurants come and go (and there's a perpetual supply of people wanting to try restaurant businesses, this would increase that supply by lowering the cost / risk; it could also accelerate experimentation). It could also enable a lot of other types of food businesses, such as tilt-up bakeries, rather than only restaurant-style. The overall system would focus on orders to go, aligning with the increasing rise of food delivery services.

jamestimmins 9y ago
You're almost describing a high end twist on a mall food court. It's an interesting idea. I suspect this doesn't exist because the high startup costs (multiple full kitchen build outs would like push costs into the 7-8 figure range) would be too high given the inconsistency of restaurant rents. With office rents working on fairly regular timelines, it's easier to get a new tenant before an old one has finished up. But if restaurants inconsistently go bust, that may mean that you can't look for new tenants until you're already dealing with a vacancy. Given that restaurants may be cyclical, there's a decent chance that you'll face multiple vacancies in parallel. I know you bring up vacancies, so I just mention this as a possible consideration. I actually think this is a really cool idea, and would love if someone pulled it off successfully. I've seen it done with clothing stores and would love to see the food equivalent.
- smelendez 9y ago
  Is this not the food halls popping up in a lot of cities?
  - jamestimmins 9y ago
    Do you mean like the Ferry Building in SF? If so, then I guess so! Although that may not be specifically what OP was picturing. May have been picturing something where each restaurant had their own dining area.
- adventured 9y ago
  My assumption was it would take a very sizable amount of venture capital to do it properly, with a lot of red ink early on. There are an immense number of restaurants, bakeries, etc founded in the US every year, so I suspect there's potentially some kind of big market for this - especially as the order-to-go business gets drastically bigger over the next decade. I considered that the large unit space / building could have a dining area, where customers could sit down and could then select from numerous kitchens that are local to that space. That pushes it even closer to the mall food court. My reservation on that, is that some percentage of the restaurants will be producing subpar experiences in terms of quality. So a successful restaurant in the space, wants its customers to eat in a successful atmosphere, where customers as a whole are happy; if half the customers in the dining area are unhappy, the enjoyment by the other happier half will suffer as well (people pick up on such things, it rubs off). Then I considered sub-divided dining areas, so each rented kitchen gets its own limited sit-down space, it just might be a stretch though and adds to the overall cost burden in the system with minimum gain (ie, it's probably just easier to focus more narrowly on food delivery). To deal with the vacancies issue, you'd only build these in higher population urban areas, to maximize the potential number of restaurants etc. that you can rent to (maximize the potential start-ups due to population). You'd also seek to under-build versus demand, preferring to always have a waiting list (recession times might even trash that best effort). I don't know if it would work, but, I'd seek to get a modest upfront payment allocation from the waiting list, that covers the risk on vacancy turn-over. By keeping the demand above the space availability, you can probably get the start-ups to front the first month of rent to get on the list (with some terms of refund). It wouldn't be something you could start with zero capital, the idea would be to get it into the $5k (solo bakery) to $25k range to go from moving into the space to the time it takes to get the first customer.