Opening a Cafe or Restaurant

[[ALIMEISTER]]

I'm thinking of opening up either a small restaurant or cafe. I've got about 10K saved up and will be getting a loan from the bank to cover most of the expenses. I just wanted to know what type of costs are involved. Would it be difficult to find a place for about less than 2k a month? Is it difficult to get a business loan? Downtown would be expensive so i'm thinking maybe opening it in the Markham or Richmond Hill area. Any other information provided would be greatly appreciated.

[papasmerf]

you need a business plan that make sense to someone who has never owned a business.

You also need suppliers who will endure the startup.

As for cash consider this 24 months of total support of the business.

[Drunken Master]

I've also been toying with the idea of opening a small business. But I'm broke. Feel free to disabused me of any illusions I might have about getting small business loan from a bank or the government.

[papasmerf]

I've also been toying with the idea of opening a small business. But I'm broke. Feel free to disabused me of any illusions I might have about getting small business loan from a bank or the government.

Imigrants to the US get money to start businesses.

Citizens get the ability to support their asses.

[MuffinMuncher]

Ali, do yourself a favor and write a comprehensive business plan. Any investor or lender will require one, and it will force you to take a long hard look at reality. Most restaurants fail within the first year, doomed by a poor location or insufficient capital. Unless you have some deep pockets to get you through the first year, you really have better odds of putting your money on a spin of the roulette wheel.

Trust me on this one, I have about 10 years of experience in the industry.

[papasmerf]

Ali, do yourself a favor and write a comprehensive business plan. Any investor or lender will require one, and it will force you to take a long hard look at reality. Most restaurants fail within the first year, doomed by a poor location or insufficient capital. Unless you have some deep pockets to get you through the first year, you really have better odds of putting your money on a spin of the roulette wheel.

Trust me on this one, I have about 10 years of experience in the industry.



Ummmmm yea
what I said

[poorboy]

The bank will only match 1 to 1 on restaurant loans because of the high failure rate. So if all you have is $10,000, they'll only give you a business loan for $10,000. 1 out of 10 chance an independent food service business will succeed.

[[ALIMEISTER]]

Thanks for your input everyone. It seems as though it would be quite risky. I've always wanted to own a small business on the side. I know location is extremely important, and the demand has to be high for my product or service. A business plan is something that I have started working on.

[n_v]

']I've always wanted to own a small business on the side.
If its in the food service, the small business will hardly be on the side. It will consume every moment you have.

[Asterix]

Try starting up another, smaller business first, on the side as you said, to see if you like it. I was in a partnership for 10 years, and have now had my own business for nearly as long, and the one thing I can tell you is that it demands your attention far more than you might expect. I don't have any business experience in restaurants, but from my friends who do I know it can be especially brutal. In my city over half of new restaurants don't make it past the first year.

[ham2004]

First off - follow the dream. You might want to look at either investing in or taking a small business. 10,000.00 is good seed money

Contact the Business Development Bank ( check in the yellow pages ) they fund and support small business ventures just like yours.

If I had listened to the nay sayers 11 years ago, I would still be working for paycheque every week. Today I am making a six figure income and have time to golf every friday and wednesday during the summer and take golf weekends to the west coast and florida several times a year.

Follow the dream...

[buckminster]

Follow the dream, but don't let it become a nightmare.

If you are not extremely familiar with this type of businees, i.e., foodservice and all it entails, forget it. Unless you have a partner who knows the ropes and will put in the long hours, forget it. Unless you can lose the original 10K, then another 10K, and then get sued for another 10K, forget it.

Go work at a place like you want to open first and make sure you can handle it.

[n_v]

First off - follow the dream. You might want to look at either investing in or taking a small business. 10,000.00 is good seed money

Contact the Business Development Bank ( check in the yellow pages ) they fund and support small business ventures just like yours.

If I had listened to the nay sayers 11 years ago, I would still be working for paycheque every week. Today I am making a six figure income and have time to golf every friday and wednesday during the summer and take golf weekends to the west coast and florida several times a year.

Follow the dream...
It's not nay saying. Just the fact of the nature of the business, the industry and the obstacles that will present themselves. The Business Development Bank does support small businesses. However less so fo teh nature he wants to opne. Almost next to impossible to get. They are are more interested in high rate of return and quick and add to the fact that resaurants opne and close a dime a dozen a month. This doesn't make BDC chomping at the bit to loan out money. You'll need alot more then $10,000 cash to get this going. In the end, most likely even if it doesn't fail, you will just be buying yourself a job.

[Daddio]

Consider a franchise. Some turnkey operations come with all the bells and whistles, including financiers just waiting for your call. Especially if you are sincere enough to invest 10K of your own.

[The Brus]

As a person who knows the restaurant and bar industry intimately, please be warned. Firstly, the bank will not lend you any money at all. The big banks are very greedy and see no margin in an industry with a 95% failure rate within five years. Secondly, ten thousand dollars will barely buy the silverware. Check out the prices for commercial grade kitchen and dining room furniture. The prices are outrageous. For a new operation, suppliers will demand cash on delivery. Thirdly, for any feasible food service franchise, the upfront fees would be in the neighbourhood of $175000 to $250000.

I know that the food service industry seems sexy and exciting, but it is fraught with problems and pitfalls beyond your imagination.

If you have to open a restaurant of your own, check out "Opening Soon" on the Food Channel on television to get an idea of the trials and tribulations that prospective entrepreneurs run into, and, these people, as experienced chefs and managers, know what they are doing. Therefore, if you are not experienced in this area, you probably don't stand a chance.

[CityOfJoy]

This is a very interesting thread. I am sure a lot of fellow terbites own business either full fledged or on the side. Ofcourse, it's been my dream to start some kind of business on the side and see if I can liberate myself from the 9-5 regime.

10 K seems a small amount to me and I'd be really surprised (pleasantly) to find out if that can help start anything. Let me know if yes..

Me and my friend have been investigating a lot of business opps but have consciously stayed away from restaurants. We feel any retail or customer facing biz would require a lot in terms of time, commitment etc. It cannot be 'on the side'. We are going for trading related. Like importing stuff for sale here or vice versa. Again, if there are experts here, Won't mind learning tips.

This is a great board and I love it more when people share ideas and offer help.

[Coach]

I have had clients in the restaurant business; there are labour costs, taxes, food that spoils (which can be a lot), plus you need trustworthy staff. It is easy for a dishonest employee to pocket cash. It is an industry with an incredbly high failure rate. To be honest, $10k isn't nearly enough to support the business, and keep in mind you have to support yourself too.

[n_v]

Consider a franchise. Some turnkey operations come with all the bells and whistles, including financiers just waiting for your call. Especially if you are sincere enough to invest 10K of your own.
Where are they waiting for your call in the food service industry?

Oh stop sir. $10,000 is too much for you to invest. Let us bear the biggest brunt of the financial risk. :rolleyes:

[n_v]

As a person who knows the restaurant and bar industry intimately, please be warned. Firstly, the bank will not lend you any money at all. The big banks are very greedy and see no margin in an industry with a 95% failure rate within five years. Secondly, ten thousand dollars will barely buy the silverware. Check out the prices for commercial grade kitchen and dining room furniture. The prices are outrageous. For a new operation, suppliers will demand cash on delivery. Thirdly, for any feasible food service franchise, the upfront fees would be in the neighbourhood of $175000 to $250000.

I know that the food service industry seems sexy and exciting, but it is fraught with problems and pitfalls beyond your imagination.

If you have to open a restaurant of your own, check out "Opening Soon" on the Food Channel on television to get an idea of the trials and tribulations that prospective entrepreneurs run into, and, these people, as experienced chefs and managers, know what they are doing. Therefore, if you are not experienced in this area, you probably don't stand a chance.

This is a great post. It paints the true reality of this business. While not to discount your initial investment (as any money to save up is tough) but in this industry $10,000 is pitence. Unless you have a friend or relative who is willing to burn a quarter million, look elsewhere to invest.

[Keebler Elf]

The big banks are very greedy and see no margin in an industry with a 95% failure rate within five years.

That's not being greedy, it's called being prudent...

[[ALIMEISTER]]

Great info guys. I wasn't really thinking of opening up a 5 start restaurant with a chef and waiters. More along the lines of a small cafe, maybe something like Demetries or Flavours, but not as big. Maybe even add in some Sheesha. Big money there.

[holden]

Restaurants are for people who have a passion for food and not for money(it's an act of love) b/c the restaurant biz is so risky, you can be the best chef and average $300 per person and still lose money.

You go into the restaurant biz b/c you love dealing with people and love food

[n_v]

']Great info guys. I wasn't really thinking of opening up a 5 start restaurant with a chef and waiters. More along the lines of a small cafe, maybe something like Demetries or Flavours, but not as big. Maybe even add in some Sheesha. Big money there.
You still need a quarter million. Trust me on that. Been there done that.

[MuffinMuncher]

']Great info guys. I wasn't really thinking of opening up a 5 start restaurant with a chef and waiters. More along the lines of a small cafe, maybe something like Demetries or Flavours, but not as big. Maybe even add in some Sheesha. Big money there.
With all due respect, $10K is petty cash in a start-up business, whether you open it yourself or buy an existing operation or get a franchise. You can have the best idea in the world, but if you are not properly funded, it will die on the vine.

Take your most realistic estimate of sales and cut it in half. Take your anticipated expenses (both capital and operations) and double them. Now, if you still make money (on paper at least), look for an investor who can bankroll your business. No one says you should pass up your dream, but go into it with full knowledge of what you are likely to encounter in your first year.

[[ALIMEISTER]]

Yeah 10K does seem little. Then again, i'm 22 and i've managed to save up this amount during the past 8 months. It's not like i'm going to be jumping into this business overnight, i'm obviously going to explore other options but I was curious as to how it would be like to have your own business.

[papasmerf]

']Yeah 10K does seem little. Then again, i'm 22 and i've managed to save up this amount during the past 8 months. It's not like i'm going to be jumping into this business overnight, i'm obviously going to explore other options but I was curious as to how it would be like to have your own business.


Start by finding out how much the fees for licenses are. Check out the rents for the square footage you figure you need. Check with the Department of Labor and see how much you need to match. Check out Liability, Comp and fire insurence costs. Check with the local sales tax agency and see if you need to pay that in advance. Check with local vendors and find out what the charges are on 15 and 30 days net. Check out the local suppiers and see how much it is to buy fair quality tables, chairs counters, display cases, refridgeration. Also permits for buildout and fees for contractors for it. 10k is seed money. Figure 75 to 100k for startup cash.

[langeweile]

A lot of good things have been said.
The allure of owning a restaurant is quiet tempting. However very few people know and understand the business well enough to make it.

It is definately NOT something you can do "on the side". If you start small there is not enough money to be made to hire a full time manager. Plus the good ones will cost you an arm and a leg.

There are a lot of "wannabe's" in the business. I think one of the main reason why 1 out of 10 restaurants fail is, that the pro's are smart enough not to do it.
people don't realize how much work is involved. 15 qnd 16 hour days 7 days a week are not uncommon. Aside from the opening hours, you need to allow time for cleanup, prep and books as well.

Unless you manage to distinguish yourself from everybody else, it will be very hard for you to make it. You have to be very good or have to offer something nobody else offers.
The old real estate rule "Location, Location,Location" certainly apllies here as well.
If you are really "gung ho" in wanting to be a restaurateur consider a well established franchise. Unfortunately your $10000 will not go very far.

Buy some stocks, bonds or real estate from that money and let it grow. You are much better off in the long run.

[gypsy121]

Ali if you want to see some sample business plans look here:

http://www.rbcroyalbank.com/sme/bigidea/index.html

There is a lot of information on the RBC site. I am sure this is true of the other bank sites as well.

gypsy

[kat19]

']Yeah 10K does seem little. Then again, i'm 22 and i've managed to save up this amount during the past 8 months. It's not like i'm going to be jumping into this business overnight, i'm obviously going to explore other options but I was curious as to how it would be like to have your own business.


Well you're already ahead of alot of people your age. Most are dealing with school loans, etc. I think it's good to have ambition. You're on the right track with asking questions, just make sure you really research an idea and don't jump into anything. Keep saving your money and keep your options open and I'm sure you'll be ready when the right opportunity comes along. Good luck.

[wrong hole]

put your money in one of those 'Getting Started' savings account....

[Svend]

Forget restaurants.
Just half that amount would be plenty of money to invest with an attractive enterprising young woman who wants to set up an escort or massage business.

[i_am_good]

...keep searching for ideas..talk to restaurnat managers...listen to their stories...

You absolutely will need a business plan - no matter what venture you decide to follow; it lays out your CASH FLOW. This is CRITICAL since you will need to know how much CASH you will have on hand either now or down the road. It also helps you to figure out your BREAKEVEN point.

Ten (or 20) K is not nearly enough to be realistic for even a cafe here in Toronto. Rent, permits, inventory, software, payroll,... Toronto is VERY competitive in this industry.

One of my sports hangouts is a Milestones restaurant and so I've gotten to know the Management. I now know all their startup costs as this location is also used to train Managers. The cost of the alcohol on display at the bar unreal.

Keep looking for something that matches your capital!

[Keebler Elf]

I would also recommend a business plan. To not have one reeks of failure-waiting-to-happen. If someone can't get it together enough to put a plan down on paper, can you be surprised when their venture crashes and burns?

[bishop]

4 years ago me and my friends had the idea of opening up a bubble tea place close to U of T, we did our homework and even started to experiment with flavors and whatnot. Anyways fast forward 4 years later, now there are a number of bubble tea places round U of T but sadly none of them is owned by me or my friends.

Seriously 10K is not enough to open anything with a store front, I mean rent at a place that has a decent location will be atleast 5k a month. If you had an athome business or some consulting/design business then 10k would be decent startup capital.

I too am hoping to find a decent business to diversify my income. Actually one of my ideas is to market a line of handcrafted/custom designed MP3 players, I can do all the hardware design but would need some creative person who can work with various materials to create them.

[xix]

I was watching a coverage of small breweries in Alberta. This team ( brother n sister ) with 10k ( I think wach put 5k) open a beer brewering. A year later they use a warehouse to store/transport the beer they make for their province. I think they want to go national.
I wouldn't go into wine, to risky, and dependent of the weather. I workd for a farmer who was starting that business and I think it took him 6 - 10 years. With the help of the three brothers.

[Hotdog]

If you have the right concept, and of course some luck, anything can happen. Check out this review of Burrito Boyz, a very small, mostly takeout, but successful restaurant in downtown restaurant.

http://www.toronto.com/feature/13095/

[rama putri]

']I'm thinking of opening up either a small restaurant or cafe. I've got about 10K saved up and will be getting a loan from the bank to cover most of the expenses. I just wanted to know what type of costs are involved. Would it be difficult to find a place for about less than 2k a month? Is it difficult to get a business loan? Downtown would be expensive so i'm thinking maybe opening it in the Markham or Richmond Hill area. Any other information provided would be greatly appreciated.I guess I'm the only one reading this thinking, WTF? If you're asking these kinds of questions (in this place of all places), you have no clue about business and I'd suggest you part with your money some other way. No bank would lend you money.

[langeweile]

I guess I'm the only one reading this thinking, WTF? If you're asking these kinds of questions (in this place of all places), you have no clue about business and I'd suggest you part with your money some other way. No bank would lend you money.

Are you saying that people on this board have no business sense? Are we just a bunch of horny old men thinking with their dicks?
I beg to differ.There are quiet a few people on this board that have their own businesses and are very smart.
I don't think it is dumb to ask this question here. Hey you are here!! By your comments i can tell, that you are a smart man. Maybe you could oint him in the right direction.

BTW I am horny and old(some might say), but sometimes I use my other head to think too. :D

[booboobear]

']Yeah 10K does seem little. Then again, i'm 22 and i've managed to save up this amount during the past 8 months. It's not like i'm going to be jumping into this business overnight, i'm obviously going to explore other options but I was curious as to how it would be like to have your own business.



I understand fully where you are coming from it's been my ambition also.
However why not consider buying a piece of land or if you don't own a house now buy one in a new development live in it for 8 months and sell for about $ 60k profit

[flyingdgn]

Don't give up. I started my first business for less than 5k and it did very well until the recession hit in the late 80s. Build your assets and credibility over time so that you have more options in the future.

But if you think investing 10k is going to make you rich quickly, don't bother. It's an investment of your time and effort. If you're not going to put 110% into this, you're not going to succeed.

Look around hard and talk to EVERYBODY. If you don't have much money, look for a failing business that has lots of room for improvement. Sometimes you can pick up these business for next to nothing. But you gotta be able to see why things are not going well and have ideas on how to fix things. Bad food, poor customer service, unclean store and unprofessionalism are a few things to look for that you can improve on.

Here is a success story.

Down on Queen Street there was a coffee shop that had very little competition. The service was bad, the shop was grimy from floor to the ceiling and the coffee was really bad. A friend of mine had some info that the owner had trouble paying the rent and still had a few years left on the lease. The owner was very close to walking away from the business despite the penalties that he may have to pay on the remaining lease. My friend made the owner a small offer and he jumped at the chance. He took the time to clean up the store by buffing and waxing the floors, scrubbing the walls and replacing a few tiles on the ceiling as well as cleaning up a few tables and chairs. He changed the way they served coffee by tossing the left over coffee every hour and made a few half decent sandwiches, salads and soups. He went to Duff pastries and added a few more items to the menu. He is a very personable guy and eventually made friends with most of the neighborhood people, many of them were office workers that went to his shop on a daily basis. Sales increase steadily over the year and he did a major renovation to the store at the time of his lease renewal. The renovation brought the store sales through the roof. After only 3 years at the location, he sold the cafe to one of his customers. The original purchase price for the cafe was $7k and he ended up selling for $170k.

I guess what I am trying to say is that it's not impossible. If you look hard enough you will find what you are looking for.

Also, you have to be ready to live like a bum for the next few years. Not everybody makes money from the beginning. Give yourself a few years before any you expect any real revenue. It's usually like this with a new venture and it's a good idea to be mentally ready.

I wish you good luck.

[CityOfJoy]

I guess I'm the only one reading this thinking, WTF? If you're asking these kinds of questions (in this place of all places), you have no clue about business and I'd suggest you part with your money some other way. No bank would lend you money.

As a matter of fact, its quite a good thread and in perfect place. A lot of men on these boards are hobbyists and most of them have spare money for the entertainment and ofcourse time too. They must be doing something right... why not ask? As smart as you might be, you sound too arrogany and obnoxious. just my 2 cents.

[rama putri]

Maybe you could oint him in the right direction.Read my post again. I did.

[drlove]

I understand fully where you are coming from it's been my ambition also.
However why not consider buying a piece of land or if you don't own a house now buy one in a new development live in it for 8 months and sell for about $ 60k profit

Not a bad idea... a friend of mine has his condo on the market right now at almost double what he paid for it.

[peeler_feeler]

Restaurant business is tough - but like with anything with time and 100%effort and you might succeed. I have worked in the finance end of the fast food business for many years and it is so sad to watch people invest their life savings into a business and watch the business fail, due partly to the fact that the franchisor dictates their business direction & you many times have no choice but to comply.

How about a hot dog stand? I heard the hot dog guy in front of the Eaton's centre does amazing business (location, location, location) and has bought himself some prime Harbour Front condo property. Not bad for selling hot dogs. I'm sure he's close to being a millionaire.