Ask Lorraine — Hard Work, Ample Capital Are Staples for Restaurant


Question: My family is in the processing of opening our first restaurant. We’re proud to have a long line of chefs in our family and tired of working to make our employers rich. We completely understand that restaurants often fail, but we’re still willing to get into the game. Do you have any pointers to help us succeed?

Answer: I don’t want to throw cold water on your idea, but just because you’re a good chef doesn’t qualify you to operate a restaurant. It’s a very complex business.

From what I’ve heard, it’s sometimes the simple stuff that gets overlooked. For example, kitchen design. So if you plan on hiring an architect, make sure you’re paying attention to all the details.

In the restaurant biz there’s very little margin for error, and you’ve got to be prepared for the unbelievable pace. It’s one thing to be in the safety and haven of your own kitchen but totally different being out there dealing face-to-face with customers. They don’t like to be kept waiting; though I must admit it’s easier to get away with that on the West Coast than back East.

Not having enough capital is another major reason many restaurants (and other businesses) fail. I was helping a friend of mine design a restaurant once and had to keep reminding the overzealous designer that you can’t eat the chairs and plates. So watch out that you don’t blow all your dough (no pun intended) in the design and have nothing left to operate and market the business.

Plus, keep a stash for bad days and slow times maybe as much as six months of operating capital.

Another major problem in operating a restaurant is theft. Not by customers, but by employees. It’s a cash business, and it can be hard to monitor especially the bar. I’ve heard stories from restaurant consultants that would curl your hair.

Which brings me to my final suggestion. If you can, hire a restaurant consultant to help you manage expenses, find and train staff, design your kitchen, prepare your menu, etc., etc. It might be the best ingredient for success.

Q: When my partner and I started our manufacturing business 10 years ago, we thought we were kind of cool, daring entrepreneurs. But in today’s marketplace you’re not so cool if you’re not Web-based. We’ve just started investigating the possibilities of e-commerce. Do you have any recommendations for old economy guys like us?

A: I wouldn’t be signing up for Social Security just yet. I think there’s still plenty of risk, but you’re never too old to be entrepreneurial offline or online.

All you have to do is read the financial pages to see all the old world manufacturing companies that are linking up with tech partners and e-commerce specialists. Firms ranging from oil and gas producers to construction and trucking outfits have starting expanding into the wide world of the Web.

I recently read about a business called that plans to help manufacturers go online in addition to monitoring their own performance and comparing their operations to other firms in the same industry.

You might want to check out their site and have them prepare a proposal that will beam you into the new economy.

Q: If a primary business concern of the last decade was security, this decade’s worries must include online privacy. Any thoughts?

A: You might want to check out the Better Business Bureau’s online service, BBBOnline. It’s holding a May 23 summit in Silicon Valley on e-commerce ethics issues that will address these very concerns.

It’s a half-day event, running from 11:30 a.m. to 6:30 p.m., that will feature experts on the subject along with industry leaders, government officials and non-profit organizations.

Along those lines, there’s a new rule that went into effect April 21 called the Children’s Online Privacy Protection Act, or COPPA.

The new law will effect thousands of Web-based companies and sites, especially those that are kid-related. It requires Web sites marketing to children under 13 to get verifiable consent from the parents of young users before collecting or sharing private information.

The Federal Trade Commission is adamant about enforcing the new law and will monitor hundreds of online companies each day for compliance.

Q: My company develops Web sites for Fortune 500 companies. We’re doing great except for the fact that we’re constantly understaffed. I need help now. What can I do?

A: You are in luck. It’s nearly summer, and that means there’s lots of young, qualified people out there looking for work. Many of them might even work for free as interns.

Find them by calling USC, UCLA, Cal State campuses, vocational schools and other local colleges and universities.

Then create summer hours to bring in more people and stagger schedules of existing staff members so they can have a break as well. Maybe some folks will be able to enjoy long weekends without you having to pay a lot of overtime to replacements.

This might help you through the next few months. After that, you may want to consider outsourcing or partnering with another company if you can’t hire qualified full-time employees fast enough.

Lorraine Spurge is a personal finance advisor, author of “Money Clips: 365 Tips That Will Pay One Day at a Time,” and business news commentator. She can be reached at (818) 705-3740 or by e-mail at [email protected].

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