10 Key Components of a Restaurant Capital Budget

February 28, 2012 by 4 Comments

Once a quarter, I teach “How to Open a Specialty Food Shop” at The Institute of Culinary Education. I love this class! I get to meet with new, aspiring and inspiring hospitality owners. Over the course of the 2 day lecture, I speak a lot about raising money and the little secret behind the capital budget. So, how does a new fast casual restaurant account for the capital budget and what is the capital budget? The capital budget is the money needed today to finance the pre-launch of your business and the secret is… raising enough additional money to cover for working capital. The working capital is the extra money on hand for that rainy day. Yes, new owners will have rainy days when their cash flow is negative. Typically, I like to see enough working capital on hand in the bank to cover 1 year of operational fixed costs. Each concept is different, whether we are working with bakery – cafes to an all american sandwich fast causal restaurant. There are 10 key take aways one must always account for when preparing for the capital budget.

1) Architect, Construction & Equipment. Find a great designer you connect with and believes in your concept. You want an awesome looking space, that is functional too. (Think about whether you will need a hood system or not and where the venting is). This cost differential can be large and make a difference. Of course, if you do not need to install a hood system, this may and most likely will change the production of your products as there will be no open flame. The equipment keeps the engine running. Remember, only buy equipment that makes sense for your operation. Use your menu as a guide to what equipment and display cases you should be purchasing.

2) Professional Services. This includes lawyers, accountants, bookkeepers, chef consultants, brand managers and yes us – management advisors. Depending on the expertise on your team, you may need all or a few of these services. The important thing is that you have the expertise on your team to ensure you are giving your business the best opportunity for success.

3) Marketing / Branding. Marketing encompasses your internal marketing campaign, your external outreach, the advertising you buy and the services of a public relations firm. Some operations want all of these services, others want just a few. My recommendation is to hire a PR company and let them do the hard work for you. Figure out who you are in the marketplace, then move to external and internal marketing.

4) Technology. I love technology and the benefits it provides. This is your point of sale company, security services, recipe management, inventory management, e-commerce and web development.

5) Pre-Paid Rent. Find a place that fits your concept and can maximize sales potential to cover your rent. It is sometimes better to pay more in rent with a higher expectation of guest flow than a smaller dollar amount with very little guests coming through the door.

6) Pre-Opening Inventory. This is the inventory needed to run your business, non-alchoholic beverages, alcoholic beverages, raw ingredients, packaged products, paper and packaging, glassware, service ware and any other items needed to present the product to your guests.

7) Furniture and Fixtures. This is the fun stuff that we all get so excited by, creating the decor of the operation. This includes, Lighting, chairs, tables, fabrics and many more accoutrements to create the space that sets the tone of your culture and ultimately, the guest experience.

8) Opening Staff and Training Costs. Think about your management team and when you need to bring them on board to help shape the concept. Once you have the management in place, hiring and training your staff is essential to your success.

9) Working Capital. After you have tabulated how much you need to open the doors for day 1 opening, this is the additional money to keep you afloat.

10) Flexibility. As an owner, there will be ups and downs during the capital budgeting process. Maintain the awareness of how much money you have to spend and remain flexible to where you may need to alter your budget.

Happy Budgeting… TaraPaige Group

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Unwrap a free gift from TaraPaige Group

January 30, 2012 by 2 Comments

We are underway with a New Year and what a great start. We are hearing the buzz about new and existing retail businesses coming to New York City and we want to help you. Expanding and opening retail enterprises demand a lot of focus, leadership and passion; that x-factor. You already have that; lean on us and let us guide you towards building a sound operational and financial structure.

Unwrap a free gift from TaraPaige Group as our New Year’s Present to you. Whether you are a new concept or an expanding enterprise, we want to hear and learn about your enterprise. We will be selecting one enterprise and offer a free strategy consultation session with our Managing Partner. The strategy session will take place at one of the businesses’ locations and the length of the session will depend on the business operations. Following up to the strategy session, the enterprise will receive a strategic report that will serve as the blueprint to assist your business in 2012. Please share with us the following in 350 words or less:

1) Overview of your business
2) Three Proudest Moments from 2011
3) Three Challenges from 2011
4) Three Short Term Goals for 2012 and how TaraPaige Group could assist you.

To be considered, your business must reside in the tri-state area (New York, Connecticut, New Jersey) and the following must be included.

•Story Teller’s Name, Role, Email Address
•Company Name
•Company Address
•Web address
•Company Phone
•Year the business was started.

The enterprise story we find most compelling will receive our New Year’s Gift. Responses are due by Thursday, March 1st. The recipient of the New Year’s Gift will be announced on Wednesday, March 15th. Please send your enterprise story in an enclosed document (pdf or word) to vision@tarapaige.com.

Happy Unwrapping… TaraPaige Group

Filed Under: Enterprise Insight
December 28, 2011 by Leave a Comment

Enterprise Insight: Goodbye 2011 Hello 2012

As the year comes to a close and we say goodbye to 2011, it’s a great time to think about those business resolutions for the coming year. We have spoken with many enterprises and a few resolutions we want to share with you.

* Clearly align your guests perception of your business with your vision. Take a moment and look at your 4 products: service, menu, design and flair. Check to make sure they are all clearly singing the same tune, remember the flair is what guests connect with emotionally.
* Take time to step “outside of the business” while looking in. This will allow you to look at the big picture and the strategic steps you want to take for the coming year.
* Spend more time with staff: getting to know them and how they personally can make an impact on your business
* Spend at least 10 minutes a day reviewing your financial numbers. Start with the top selling products, lowest selling products, check average, number of transactions / day and overall trends. Reviewing the management reports will give you the edge you need to move your business in the direction you seek.
* Listen more to your guests feedback, while not changing your concept. Connect with guests and build that relationship. They are the end user and when asked (or not), they will be very candid with you.
* Recipe cost all menu items and re-check all products for portion sizes. More often than not, the portion sizes are causing menu items to carry too high of a food cost. * Dedicate one day for a management retreat. A day in the park would allow everyone to interact in a new way and discover new things about one another and the business.
* Deep-clean your enterprise at least once a week. What does that mean? Choose one day of the week, typically the slowest and clean out all of the refrigerators, dry storage areas and check those hard to get to corners… Oh yes, remember the dust that builds on top of all shelves, cabinets and refrigerators.
* Take moments throughout the coming year and celebrate the goodness that comes your way.

We wish you a wonderful, joyous New Year and look forward to continued sharing.

Happy 2011… TaraPaige Group

https://paigepapers.com/2011/12/28/goodbye-2011-hello-2012/

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November 30, 2011 by Leave a Comment

Enterprise Insight:
FINANCIAL ANALYSIS Part III: Labor Control and Costing

In the hospitality business, we say it is all about the staff. What does this mean? You need to source, hire, train and manage your staff for longevity. That is the key, you cannot be complacent about these 4 key roles to managing your business, your staff and ultimately managing your costs.
 The other big number to the prime costs is the labor costs. Labor cost percentages including benefits can run enterprises 25-35% of sales. Having said that some enterprises achieve a lower labor cost percentage but may have a higher food cost percentage. The important piece here is that together these costs do not exceed 65% of sales, and then you have already put your business in a good place to be financially viable.

For all enterprises, a budget for all operating costs should be prepared. To really understand your labor costs, you must first present a staff schedule for each revenue center. Creating a schedule allow you to have a greater understanding of what positions you will need for that business, what you will pay for each position and ultimately is the labor cost percent in line with industry standards above. Let us say, hen calculating these numbers your labor cost comes to 40% of sales for your budget. What can you do to achieve a lower labor cost percent? 1) Produce more sales to pay for the existing staff you have on budget. 2) Streamline processes to reduce the number of staff needed on any given shift. 3) Make changes in the wages of employees and the number of hours worked in order to reduce your overall labor budget. Awareness of the budget and percentages needed to keep in line, you will be more empowered to understanding how best to manage your staff and labor costs. Sourcing, Hiring, Training and Managing your staff will invariably create a positive culture around your business and reduce employee turnover.

Happy Staffing… TaraPaige Group

https://paigepapers.com/2011/11/30/labor-costs/

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October 24, 2011 by Leave a Comment

Enterprise Insight:
FINANCIAL ANALYSIS Part II: RECIPE COSTING

To run a profitable enterprise, all businesses must control their prime costs. Experience and expertise tells us, all food & beverage and labor costs should be 65% of sales or less in order to achieve profitability. Today, we are going to share with you a few tips on how to start your business with 30% (product) food & beverage costs or less.

First, when embarking on a new enterprise, all businesses must understand how much one portion of each product you sell costs; recipe costing. This includes the raw ingredients to produce that product. Once we get a total recipe cost for each product, the next step is to price your products. Let us say you want to achieve 30% food cost for your business and you are producing and selling sandwiches. After you have done your calculation and have determined one sandwich costs $2.50, there is a simple formula to determine your selling price. $ Food Cost / Food Cost % = $ Selling Price. In our example, to achieve a 30% food cost, we would have to sell our sandwich for $8.33 = ($2.50 / 30% ).
[Read more…]

https://paigepapers.com/2011/10/24/recipe_costing/

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September 27, 2011 by Leave a Comment

Enterprise Insight:
FINANCIAL ANALYSIS Part I: THE MEASURE OF BUSINESS SUCCESS

How do you measure success for your business? This is a question all operators should be asking. Many operators measure business success by how long the line is in the store. Successful operators measure business success by how profitable they are at the end of each month in addition to happy guests. Can lines out the door and financial profitability be mutually inclusive? Yes, they can!

Lines out the door represent you have a following and you are hitting your stride with your core guests. What this does not represent is whether or not you are a financially viable business. For financial viability, many factors must be looked at in order to manage your business effectively. The main factor / cost that affects all hospitality enterprises are prime costs. [Read more…]

https://paigepapers.com/2011/09/27/themeasureofbusinesssuccess/

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August 26, 2011 by Leave a Comment

Enterprise Insight:
GUEST SERVICE

What does delivering great guest service mean? When we walk into an enterprise we are immediately taken by the smells, the sounds, the decor and then… We have our first interaction with a team member of the enterprise. During these initial first few moments, we have already defined whether or not this “feels good”. Delivering great guest service is defined as the empathy of the team members. Do they hear you, are they aware of what you want and better yet, have they enhanced your experience by sharing with you additional information about the company and the products they sell? This feel good experience determines whether or not we will go back to an enterprise.
[Read more…]

https://paigepapers.com/2011/08/26/enterpriseinsightguestservice/

Filed Under: Enterprise Insight
July 28, 2011 by Leave a Comment

Enterprise Insight:
BRAND PROMISE

When we first start to work with a new client who is in expansion mode, we ask this question first: “Who are you?” This question may seem like an easy one to answer; we are a… fast casual bakery, specialty food market, coffee roaster, made to order sandwich shop or perhaps a vegan concept. What we are really looking for is, what makes your enterprise unique, what is your unique selling proposition and how are you differentiating yourself from a very crowded market. What is your brand promise?
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https://paigepapers.com/2011/07/28/enterpriseinsightbrandpromise/

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June 30, 2011 by Leave a Comment

Enterprise Insight:
ENTREPRENEUR: ARE YOU READY?

I attended a cocktail party this weekend in the very hip neighborhood of Williamsburg, Brooklyn now touted as the mecca for food incubation in America. My friends and colleagues were talking about how it seems everyone wants to open their own sandwich shop, noodle bar, gluten free bakery, locally sourced gourmet market or … (fill in your passion).
[Read more…]

https://paigepapers.com/2011/06/30/entrepreneur_areyouready_/

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