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Tuesday, February 14, 2012

Start That Restaurant!

Old Numbers Never Die Dept.: Re-reading the review I wrote about the short-lived restaurant D'Lites got me admiring the shortsightedness of an owner who sinks a tremendous amount of money into a place and then fails to staff and run it properly. How much money? I investigated that 25 years ago. I suspect the numbers now are different.


Jim Rua, 1987  |  Photo by Joseph Schuyler
SO YOU WANT TO start a restaurant? There are dreams much more unusual and ambitious – but you'd be hard put to find a dream that's more expensive, unless you're into things like funding a Federal space research program.

As a cook at a snazzy place in Fairfield County, Connecticut, I was astonished to  hear reasonable people confess to a desire to get into the business. To me it was a kind of madness, a dream world peopled with crazy chefs and crazier waiters.

Nevertheless, my wife (another who has done time in various kitchens) and I have caught ourselves thinking about that oh-so-wonderful little bistro we'd like to open and run.

So what does it really take before you broil that first steak? You find a building, let’s say, with a dining area for 50 or so and a perfect little room for a kitchen – then what?

You have to get it inspected. That’s a local matter. In Schenectady it might be Andrew Suflita, a senior public health sanitarian, who visits you. “The health department fee is $50,” he explained, “and you’ll be inspected two or three times a year. We’re placing a major emphasis on food handling now – temperatures, storage and so forth.”

John D’Amigo looked pained at the thought. “They came in on New Year’s Eve,” he howled. He is co-owner of the Bijou Cafe1 in Schenectady, a place exactly the size of our hypothetical restaurant. “And they watched us prepare food. That’s a new one. But we did very well.”

John had no problem naming a figure for initial capitalization. “Don’t try it with less than $50,000,” he said. “And then don’t expect to see any profit for three to five years.” He and partner Allan Yerdon started with an existing restaurant but still had extensive work to do. “We had to put in a stainless steel kitchen, for one thing. That was $6,000,” he said. “Schenectady requires stainless. In Albany you can use galvanized, but that’s going to change soon.”

In Albany, restaurateur Jim Rua was even blunter. “Unless you have enormous resources, you can’t do a restaurant like I do or like John does. And you certainly can’t do it to make a living.” Rua operates Cafe Capriccio on Grand Street, another modestly sized establishment. He draws on a large cigar and exhales a cloud of smoke the color of his beard as he reminisces.

“I took this building four years ago, before there was any civic center speculation, before any rehab was going on in the area. And this place was in grievous disrepair. It was cheap to get into, but I spent about $50,000 to turn it into a restaurant. There was nothing, no equipment, nothing. And we got everything used, except the espresso machine. Got a bar from a guy in Utica, got the walk-in box from the Elks Club in Schenectady.

“A couple of years ago, I realized that I’d have to buy this place if I’m going to afford to stay here, so I went to a banker and got the property appraised. They charged me $350 for that. They appraised it for about $55K. I thought that was way too low, so I offered the owner $80,000. You know what he wanted?” Another puff. “A hundred and eighty-seven! And it would cost over $200,000 for the complete rehab the building needs – now you’re talking a half-million dollar project!”

So your starting capital had better allow you to own your building – or get a generous lease. We’ll get to banks in a moment.

Ken Linden and Linda Leyden-Bernal bought the property they turned into Yates Street,2 an Albany restaurant. “But we were very naive,” said Linda. “We came here from New York City and thought people would love a cute, out-of-the-way place. New Yorkers love to discover this kind of restaurant, but up here they want it visible and they want comfortable parking.”

Yates Street has been open just over three years, “and we hope to be making money someday,” Leyden-Bernal lamented. “But it’s important to keep your spirit up. If you’re thinking of opening a restaurant, don’t be undercapitalized. If you have enough money you can make all the mistakes in the world.

“To so many, this business appears to be the simplest in the world – but if you have only 50 seats, you can’t afford to hire a bookkeeper full time, for example.”

And you have to think about more than a bookkeeper. First there’s the liquor license – that’s $3,600 up front for the first three years.

“And you need your insurance policies,” D’Amigo observed. “A thousand a year just for the Dram Shop Law [which requires establishments to carry liability insurance specifically covering the actions of drunken customers], and several thousand on top of that for a regular policy. Everyone pays in plastic, so get ready to lose five percent on credit-card sales. You pay for advertising. You pay just to turn the radio on in your place.”

It cost Selma Nemer four times what she thought it would to start Eartha’s Kitchen3 in Saratoga Springs. As she approaches the dining room from the kitchen she seems just right in the apron and whites, thin, dark-haired, studious-looking – but she confesses to having had a hand in much of the construction.

“This was a deli when we got it,” she said. “We thought it would be fine. But it had what amounted to a home kitchen, and we needed commercial-quality equipment. The kitchen alone cost about $20,000. We bought about half of the equipment used, and out of three coolers, two blew their compressors right away. That’s $400 each. And we’ve gone through three ventilator motors in the year and a half we’ve been open.”

Twenty grand for a kitchen? “It’s hard to say exactly,” said Mark Jackson at G&G Restaurant Equipment in Schenectady,4 “but 20 sounds good. For a place with 50 covers, expect to spend another $15,000 on tables and chairs.” How much can you save buying it all used? “Thirty percent – maybe,” he said.

Then there is the money that keeps you going those first lean months. “You’ve got a constant budget,” Leyden observed. “Even when you’re not making money, you’ve got to pay your staff.”
“And you won’t get employees to work the same crazy hours you do,” Rua added.

D’Amigo has another idea to help: “Get into catering too. Keep yourself and your restaurant visible. That’ll help on those lean nights.” He looks around at the tables, now readied for dinner. “You have to love this business.”

“There are magic nights,” said Rua. “New Year’s Eve was a magic night for us. You get that instead of money. It’s axiomatic that the best places are those where the owner is in the kitchen. Even better is when he has a member of the family on the floor. Look at Lombardo’s [in Albany]. Look at the Viggiani family [Fannies5 in Latham, The Elms6 in Malta]. That’s when you can make some money – when you’ve got a place like Lombardo’s where expenses like the mortgage are behind you. Because no bank in the world is going to put money up for a restaurant.”

He has a story to tell about that, one of the fairy tales so much a part of Albany’s identity. “The city wanted me to develop a restaurant,” Rua said. “The city’s office of community development was behind me, so I found a property at Sheridan and North Pearl, right across from Capital Rep. Three floors, needed a complete gut job.

“The building’s owner, Pat Mahoney, is a visionary. He’s the guy who acquired the Kenmore, owns the Steuben Club. You get the picture. He gives me a contract of sale on the building, and he’s prepared to contribute part of the money realized on the sale back into the project. The community development people approve it, and they have money for me. It’s an $850K project, with apartments on the top two floors.

“I get investors who are pledged for $150K. All right? Now I just need a bank to participate. And I try every one. Not one is willing to go for it. Not one! Three months later. Mahoney gets an Industrial Development Authority grant for $930K to put offices in the building. That says something about the restaurant business.”

Rua sat back and laughed. “This business? It’s Promethean on one hand and complete lunacy on the other. I love it.”

Capital Region Magazine,7 March 1987

1. Gone.
2. Gone.
3. Gone.
4. Gone, but replaced by Schenectady Restaurant Supply
5. Gone.
6. Gone.
7. Gone.

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