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 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.
> 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).
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.
“””
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.
> 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. $20,000 later we had a huge pit, filled with the gigantic, state-of-the-art grease trap the city now requires—all of which now benefit not us, but the landlord and his next tenant.
That sounds like they got swindled. They paid for an improvement to the rental property, how come the landlord didn't split that with them. It just seems unfair.
Yeah, I don't know if the photos were stock or pictures of the real premises. But I wouldn't be very keen on 40-50$ entrees in a restaurant serving things in styrofoam cups.
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...
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 :-)
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.
> 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?
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
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.
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...
That's when you get your building inspector to point out the asbestos before you even take possession of the building with a wink and nudge and then you carefully pull them out yourself and no one is the wiser.
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.
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.
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.
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.
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 :)
> 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.
Unrelated to original discussion, is the phrase "industrialized country" even relevant anymore? China is an industrialized country but very different from other developed countries.
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.
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...
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 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."
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":
> 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.
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!
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.
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.
> 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.
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.
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.
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.
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.
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.
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.
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
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.
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.
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...
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).
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
> 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...
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.
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.
"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."
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.
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!)
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).
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.
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)
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 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.
> "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.
> 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.
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.
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...
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.
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.)
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.
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...
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.
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.
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.
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.
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.
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.
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...
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.
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.
- 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.
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.
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.
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.
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?
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.
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.
"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.
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.
"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.
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[ 8.3 ms ] story [ 228 ms ] threadRegulations, zoning laws, and massive subsidies that mutate the consumers concept on how much food should cost.
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.
(1) http://www.nytimes.com/2012/06/17/magazine/so-you-think-you-...
(2) https://www.huffingtonpost.com/women-co/lemonade-stand_b_175...
https://www.newstatesman.com/politics/staggers/2017/07/you-m...
“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)
(1) https://en.wikipedia.org/wiki/Regulatory_capture
That doesn't mean we need bathing licenses, a corps of parasitic "bathing inspectors", and constant live streaming video from every shower stall.
I'm not sure how the idea that everything should be (or even can be) 100% safe at all times gained dominance, but it needs to go away.
Restaurants are hard, not only are you competiting with every other restaurant, you are also competiting with your last service.
There is no way to upload a patch to fix your last service, there certainly isnt a way to delete the stress from your staff.
It's one of the most cutthroat businesses in the world, and there isn't anything that will ever change that.
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.
"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.
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.
If you need your accountant to tell you this, you were doomed from the beginning.
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.
Landlord: I don't care if you do it or not.
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 wouldn't contribute either, frankly.
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.
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?
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.
> 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.
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.
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.
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).
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.
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 :-)
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.
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?
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
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.
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...
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.
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.
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".
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 :)
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?
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.
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.
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.
- 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...
That's why I left, I love cooking, but now I do a bi-monthly cook up for friends and family. I make more money and I actually get to see my wife
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."
If you're wealthy in New York City, you will eventually be asked to fund a restaurant.
Vanity projects, certainly. Some are fronts for money laundering, of course. But charity, not exactly.
The food was not that good.
https://www.newyorker.com/business/currency/the-thrill-of-lo...
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.
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!
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.
I would be surprised if every single novice restauranteur tells themselves that before starting a venue.
Most of them are probably tell themselves something like "If I build it, they will come".
Still, 1% seems to me very low, we are not talking about startups, are there actual statistics on it ?
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.
https://www.carbontrust.com/media/138492/j7895_ctv066_food_p...
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.
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 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'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.
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.
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.
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.
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.
There's always room for cleverness.
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.
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
The reason franchises work is because they vet 99% of the owners.
http://www.slate.com/articles/life/a_fine_whine/2005/12/bitt...
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...
Which makes it all the more puzzling! It's not like it requires any exotic ingredients either...
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
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...
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.
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.
"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."
https://www.bostonglobe.com/magazine/2014/09/17/the-secret-w...
I had a coworker who would frequently visit Vietnam and come back with all sorts of KFC stories. Very popular.
If I'm not mistaken the most recent annual general report from Yum! China who manage KFC and Pizza Hut show a significant slowdown in KFC business.
This may be the end of the novelty binge and the beginnings of health consciousness in the Chinese middle class.
this will make a killing even in the US, anywhere but the south. people just can't seem to do this very well anywhere else, for whatever reason.
"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.
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.
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.
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.
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.
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.
Dudes must be making great money from this.
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.
But I'm sure there is a lot of enterprise apps out there making a dime. Whether through consulting or a spin-off service.
Restaurants aren't niche..
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.
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.
[1] https://www.a1restaurantmarketequipment.com/
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...
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.
Oh ouch. I guess be glad you didn't have to pay them $15 an hour.
[0] - https://www.payscale.com/research/AU/Industry=Restaurant/Hou...
At least that's the case in northern Europe, wages are much higher, but services that relies on humans a super expensive.
With higher prices for restaurant/café meals?
With less competition?
With lower costs for other inputs?
With greater demand for labour across the economy?
By illegally paying employees below award / not paying superannuation payments?
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.
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...
AU median household income in 2014 was $80,704
US median household income in 2014 was $53,719
[1] https://goo.gl/3qQb5u
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.
I want a steak now.
The Napier is still open? God's be damned, I hope it's still there when I get back to Aus!
The Union just round the corner has Melbourne’s best parma and is also doing nicely. It’s a great time to be living in Fitzroy.
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.
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.
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.
https://www.stilldrinking.org/5-reasons-waiting-tables-is-a-...
Ugh this painful to read...
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.
Nobody tell anybody!
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.
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.
But I don't want to be pessimistic. Because there is no excuse for not having tried to build that business.
You worry about Google, Microsoft, etc when you're building a $50M business. Below that, it won't probably even register on their radar.
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.
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.
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.
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.
Some bored person could probably find this building and report the contractor to the authorities.
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.
- 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.
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.
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.
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.
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.
However; I would say this is a hard goods / software thing, but apple somehow does it with iphones.
Our tax and financial system has incredible benefits for landowners, at the expense of everyone who actually does useful work.
Apple is the biggest taxpayer in the USA at $15.8 billion for income taxes on $59 billion in operating income according to https://www.forbes.com/sites/christopherhelman/2017/04/18/wh....
The USA has the highest corporate tax rate in the world and there is an argument to be made in lowering it.
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.
Me, I'd think I was going about it wrong if that turned out to be the case.
Just sayin'...
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.
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.
But yes, if you manage to find a profitable niche, understand the problems in that niche and execute well, you're set for life.
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.
It's an absolute fools game, and I hope that my children don't follow my footsteps in that regard.
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.
Also, for the interested...
Street view of Renard's "Hot Corner" https://goo.gl/1YSjpj
Yelp page https://www.yelp.com/biz/renard-portland
Best inside photo I could find https://i.imgur.com/a5LD2cN.jpg
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