1. CHAPTER 1 INTRODUCTION Reasons to Open a Restaurant French Culinary History The Birth of Restaurants in America Challenges of Restaurant Operation Buy, Build, Franchise, or Manage? Starting from Scratch Restaurants as Roads to Riches

2. 2 WHY GO INTO THE RESTAURANT BUSINESS? Money The potential for a buy-out A place to socialize Love of a changing work environment Challenge Habit Too much time on your hands Opportunity to express yourself

3. 3 FRENCH CULINARY HISTORY 1767: –M. Boulanger: The father of the modern restaurant. Sold soups restorantes (restoratives). Boulanger vs. the French Parliament. The opening of Le Champ d Oiseau. 1782: –Grand Tavern de Londres –Aux Trois Freres Provencaux 1794: –The French Revolution Chefs to the former nobility suddenly had no employment. Some chefs stayed & opened restaurants, some went to Europe; many chefs fled to America.

4. 4 THE BIRTH OF RESTAURANTS IN AMERICA 1794: –Paypalt brought the term restaurant to the United States. 1827: –Delmonicos, thought to be the first restaurant in America, opens. Closed during the early years of Prohibition.

5. 5 CHALLENGES OF RESTAURANT OPERATION Long hours Excessive fatigue can lead to health problems Little security for managers who work for others Family life can suffer For owner, possibility of losing investment and investors

6. 6 REASONS FOR RESTAURANT FAILURE Lack of management traits/skills Lack of sufficient capital The expansion & competition from other restaurants Family problems

7. 7 THE RESTAURANT FAILURE RATE Results of Dr. Parsas study: –Highest failure rate during first year- 26% –Second year- 19% –Third year- 14% –Failure rate of 59% for a three year period

8. 8 BUY, BUILD, FRANCHISE, OR MANAGE? There are several career & investment options in the restaurant business: –Manage for someone else. –Purchase & operate a franchise. –Buy an existing restaurant & operate it as is or change its concept. –Build & operate a new restaurant.

9. 9 ADVANTAGES TO BUYING Satisfies an aesthetic personal desire. High rewards if successful. Risks are somewhat reduced with knowledge of why the previous restaurant failed.

10. 10 DISADVANTAGES OF BUYING Difficult to overcome a poor reputation or poor location. High financial losses if restaurant fails: –A fully equipped restaurant that seats 100 people costs anywhere from $6000 to $10,000 + per seat (or $600,000 to $1 million +) in addition to the site being bought or leased. –In contrast, a sandwich shop can usually be opened for less than $30,000.

11. 11 ADVANTAGES OF FRANCHISING Least financial risk (other than managing). Building design, menu, and marketing plans are already created and tested in market.

12. 12 BUY / BUILD / FRANCHISE / MANAGE ADVANTAGES & DISADVANTAGES Original Investment Needed Experience Needed Potential Personal Stress Psychological Cost of Failure Financial Risk Potential Reward Buy MediumHigh Build HighestHigh Highest High Franchise (A) Ex. Subway Low to Medium LowMedium Medium to High Franchise (B) Ex. Applebees High Manage NoneMedium to High Medium NoneMedium

13. 13 BE A COPYCAT! Analyze existing restaurants that are successful. Borrow good points & practices. Modify & improve borrowed points & practices if possible. The successful mix = one that is better than the competition!

14. 14 QUALITY CONTROL Error detection, based on industrial systems, tends to be product oriented rather than service oriented. Critical in the restaurant business. All managers should carry a thermometer in their pocket so they can check that the food is being served at the correct temperature.

15. 15 STARTING FROM SCRATCH Would be restaurant operators come with a mix of different experiences in the business. The industry does not have nearly enough employees & turnover rate is high. The business is highly competitive, requires inordinate energy, the ability to work long hours & the willingness to accept a low salary!

16. 16 RESTAURANTS AS ROADS TO RICHES The most common reason people seek restaurant ownership is the possible financial rewards.

17. 17 THIS BOOK IS DESIGNED TO HELP YOU WITH: –Ownership: Sole proprietorship, partnership, company or franchise. –Development of a business plan: A good business plan may take a while to develop, but youre not going to obtain financing without one. –Marketing/Sales: You need to know who your guests will be and how many there are. –Location: Will your location be free standing, in a mall, city center, suburban, or ? –Whos on your team?: Your Chef, staff, lawyer, accountant, insurance, sales, marketing and PR. –Design/Ambiance: What design/ambiance will you select?

18. 18 THIS BOOK IS DESIGNED TO HELP YOU WITH: –Menu: What will your menu feature, how many appetizers, entrees and desserts will you offer? –Beverages: Who will develop your beverage menu and what will be on it? –Legal: What permits do I need? –Budgets: What will my budget look like? –Control: What kind of control system will I have and how will it work? –Service: What style of service will you select and how will it operate? –Management: How will your restaurant operate?

19. 19 The End Copyright © 2008 John Wiley & Sons, Inc.