Chef/Owner, or Academic

You are 45, married, with the most precious little kid known to man. If you could do either equally well, would you:

-Open a small bistro, as chef/owner; Your previous restaurant, critically acclaimed (a Chicago Sneed nod to a U.P. outpost; many positive reviews and accolades, articles on the "first of its kind" in the Northern Michigan outpost, etc.), but woefully overleveraged, and in the wrong place at the wrong time, died. You'd move your clan somewhere else and try again - at a town's invite. You've got the heart and chops to do it.

-go back to grad school to finish a PhD started 20 years ago. Teach, but spend 6 years to get there - until you are in your early to middle 50's. You've got the brains and focus to do it. Decent salary, summers off, nights at home, for the most part.

Not at all from life, just a rhetorical query.

Oh, and (pan-seared red grouper with caramelized baby bok choy, winter root vegetables and blood orange butter sauce):

 

Mmm, that looks pretty good. Chef definitely if I could cook like that!

 

Meant to post this thread in general chat. Sorry...

OK, one more...pear napoleon: roasted anjou-crème pâtissière, Poire William chiffon, pear feuilleté. (Hands are those of my former garde manger - my staff was family, and I miss them as much as the other things. Greatest crew a chef could ask for).

 

I'd do the chef gig in a heartbeat, though I would think acadamia would be more secure. I love to cook for family/friends. Tough choice, but with the kind of skills in your photos, you should be out there doing what you love the most! Great presentations, btw.

 

Thanks guys. My cousin is a California winemaker, and tonight he got my mind filled with the crazy notion it's doable again, despite what we went through over the last several months. Just not "braised lamb shoulder" with timbale of provencale vegetables, chevre risotto" in the land of the Great Northern Pasty...(nothing like the pasty and a Leinie's, however, when it's 30' of snow outside).

 

north... the real question here is what kind of COG are you running? What kind of labor? Can you keep them both below 50% combined. You've got location expense to consider... can you net 25% or there about?

Where's your niche? If it's just in great food, heck, Caligula had some great food, but I believe that little bit about him fishing all the titmices tongues out of their throats for that exquisite "titmouse pie" might have pushed his COGS a tad north too.

And he wound up the way of most restaurants who do not consider such consequences in the end.

Dead.

Let me know, I am very interested.

IN Christ

 

Thank you, Dead Corn, for the comment.

It wasn't a COG issue. To be honest, I'd be surprised if it usually was, in my market segment. Most high end restaurants run higher food costs, but given that you don't take percentages but rather $ to the bank, a higher COGS may not be the issue: I'd rather take $100 to the bank, with only 5% net profit per plate, than $80, with 10% profit - I achieve this because 5% on a higher-ticket item can easily garner more money to the bank than 10% on a lower ticket item; a few butts in the seat, and you have your nut.

It was quite simply too debt-loaded - we didn't have a ton of coming in, leveraged the entire startup, and we blew it on the due diligence - with our erstwhile partner, with the loaning entities...word of earned advice for potential restaurauteurs...when your bank says that your pro-formas are "wildly conservative, you're going to blow those numbers out of the water," ....run for the hills.

The other issue was seasonality. We predicted a dip during the mid-winter into early spring slump, but nothing on the order of what we experienced. Apparently, our area goes to nothing around February-March, and does not pick up until solid summer. Our only surprise here is that given this is commonly known, no one among our bankers and partner, who know the market, mentioned just how bad the dip hits. We should have known it, of course, by more exhaustive research, and this was part of our poor due diligence. Money was so easily thrown at us - our proposal was a slam dunk, and getting the loans was a zero issue - that we didn't blink. A tragic mistake. Coupled with a lousy couple of summer tourist seasons (most blamed gas prices - many businesses died over the last couple of years - ours is an extremely elastic economy and when the nation burps, we barf)...well, it wasn't pretty.

We were reservation only, sold out for several months ahead - you couldn't get in. We thought we had passed the bumpy months of all new places. But it was not to be. Wrong place, wrong time. Or in other words, location, location, location. I do believe that in 10 years or so, a place close to what we did might be able to make a go of it up here, but then, I'm not sure. We banked on an over 500-physician hospital system and a plethora of professionals for our bread and butter, as we were the only game in town, regionally, for this type of dining experience. We were wrong. Though there is a high degree of disposable income, "dining" is just not a part of the culture here. It may never be. Folks up here are salt of the earth, good, sincere people, but they have a good deal of distrust for anything new, and not just in food. I suppose that even though my wife is from here, and she has family all over the place, we came across as "city" and by the time that message was corrected, it was simply too late. Who knows.

Anyway, we pioneered something and went the way of many first timers. Lessons learned and onto other ventures. The dilemma of this thread is at the forefront of my mind, I can do either, and must now weigh out what makes the better choice for the years ahead.

 

That goes against every economic principle concerned with running a succesful business. Profit margin isn't just important, it is crucial. If there is a question between 5% and 10% you should go for the 10% every time (as long as quality doesn't have to suffer to achieve it). An increase in margin signifies a greater effeciency and if you are able to do $80 at 10% you are freeing up resources which will either save you more money or free you up to increase your gross revenue.

Money in the bank is a false economy and unfortunately it dooms business's all the time. You can have turnovers in the millions but if your margins aren't right you can actually put yourself out of business.

 

YFS1, I think this might be a problem of semantics. I am almost positive we are talking about the same thing - what I am calling "money in the bank" is margin. I am talking about a higher margin as well, though COGS is typically higher in the haute cuisine segment.

I was responding to Dead Corn's attention on COGS. If for some reason, you are talking COGS, I agree, it does go against what is usually laid out in textbooks - the party line being "contain COGS." But I cannot agree with you on your conclusion. From my own experience, I can tell you that every higher end restaurant I have worked for, or known, is maintaining a higher COGS than your average burger joint, but likely taking more to the bank at the end of the day.

It goes without saying that no business can survive going in the red - and if you have the option, going for 10% over COGS plate over 5% is always desirable so long as quality does not suffer - but there's the rub. Too often, people seek to contain COGS by slashing labor, or buying cheaper raw materials. The problem is, guests are not stupid, and in my game, they know the difference between live Maine lobster or PEI mussels flown in, slaughtered on demand, v. frozen coldwater tails or New Zealand mussels. Listening to generic "experts," a restaurauteur will shoot him or herself in the foot trying to reach some established "efficiency" line item. And unfortunately, this mentality is the first thing bankers and accountants, not knowing the first thing about the food business, tend to leap to. And that is often what will kill an otherwise successful restaurant venture. People sniff despair. I can't tell you the number of times I've seen a restaurant fold along this path.

Let me give you a concrete example (actually, pretty decent real world model).

Restaurant A: 35% food cost, average guest check, $8. 100 people a day. Money to bank: $520.

Restaurant B: Food cost, 45%. Average guest check, $25. 40 people a day.
Money to Bank: $550.

Relative income, B-A: net $30.

In restaurant B, more of my income is eaten in COGS, yet I walk to the bank with more money. Again, which would you rather have? Moreover, each additional butt in the seat will garner higher relative income. If 1 more person came to A, 1 to B:

Relative Income, B-A: $38.55. (A, with 101 customers, makes $525.20, B, with 41, makes $563.75).

In other words, it takes precious few additional butts in Restaurant B for the net income to start climbing. Again, of course, every business should seek the highest possible efficiency - so long as they keep in mind it is net profit they need, and not low COGS per se.

The biggest thing with restaurants, of whatever stripe: You make precious little, even under the best of circumstances, unless you build a business, build value, and sell it, or you own several. Nature of the beast. You do it because you love food, and you love serving people. For better or worse, since I was a child, I've been cooking French food, it hits me in the core to do it, and this is one thing I know.

 

From what I understand (having never owned a restaurant, but done accounting for one), a good COGS for a restaurant is 39%. Beverage is about 21%.

I'd much rather own a bar than a restaurant, plus drunk people always buy more beer . Given that restaurants go under all the time (I think its the worst business to be in), I'd not even touch it.

 

Those figures are reasonable. Agreed - if you are not insanely passionate about food and service, restaurants are not your game. Among the hardest ways to make a buck.

 

Guys, I currently run fourteen fast food restaurants though my background is in fine dining. I just couldn't turn my back on the money. I can tell you categorically anyone who runs a 39% COG will not survive. That is number one. Average COG should NEVER and I mean NEVER exceed 30% as a target.

Number Two, though broken out on the in-store P & L, Beverages ARE part of the overall COG, therefore if food is at 39% (a recipe for disaster albeit) and COGs were at 21 (assuming they were equal parts of the top line) would mean COGS were actually at 30% (where they NEED to be to survive).

Also, to say that one would rather have 5% than 10% of anything is WHY restaurants go out of business. The model you created is wrong, North, it has way too many holes. For instance the overhead is far more in fine dining than in fast or fast casual dining. Again this creates the absolute neccesity of LOWERING the COG portion of the P & L. 5% bottom line in fine dining will NOT go as far as 10% in Fast Food (incidentally, this is way below the national average) and my guarantee to you is that though the remnants of a 5% Fine Dining bottom line may hit the bank, very little if ANY OF IT will remain there.
You seem to have a passion for food and I love that about you. I cannot wait to see you try it again and SUCCEED. I have tons of info and tools at my fingertips, a virtual flood of resources... Anyway I can help let me know.

IN Christ

 

Its a shame this thread is in Politics as from a business point of view I am finding all of the response interesting.

 

Deadcorn - I appreciate your offer and your thoughts. I've been in this myself, off and on, about 30 years. In my experience, in this trade, "never" simply doesn't apply, as I've seen textbook cases of a restaurant that should go under doing quite well, and textbook cases of a restaurant that should fly, die. In the business as I've known it, there are no hard and fast rules. It's also been my experience that when the rules posed by "The Restaurant Manager's Handbook," "Cheftech," or your local bank become ossified and set in stone, it's time to take a step back and think a bit more deeply to ensure you're not cutting your nose to spite your face. Slashing food quality to achieve a benchmark COGS, stripping staff down to achieve a labor benchmark, moving to a cheaper gin to make a liquor benchmark...all of these may have an impact beyond achieving short term financials; the effect on trend restaurant ops, not just spreadsheets, needs to be taken into account.

Of course - Anyone would want 10% profit over 5% profit, which I define as what you use to pay for your kid's college, or impress your in-laws with your business acumen (in other words, what goes into the bank after everyone else bleeds you dry).

COGS is a different matter. "Industry standard" food cost hovers at 35% (Just doing a search for "average food cost of goods" will frequently show this figure - funny how a culture embraces such figures). with many real-world instances ranging up to 40% (see Massachusetts SBIC, pro-forma financials, for one such instance). Of course, I'm not sure, but I think we are talking nearly the same thing - if food can range from 35% up, liquor will pull the total COGS downwards (my experience just doesn't square with yours that a 39% food cost is a "disaster."). I have never known a strict food cost to food sales to reach 30%, but I have seen F&B cost/F&B sales to approach 30% (I've never worked in fast food, though I have many friends who are in the "fast casual" game).

Typically, in my experience, in haute cuisine, food simply costs more relative to sales. I don't know where you've worked, but this has been my experience, anyway. Lorien's 39% is high, but reasonable, depending on other circumstances. The model I posed above has come from that experience. At the end of the day, if I had my choice, I'd rather take home 4% of $40 than 10% of $10.

 

Yeah, I screwed up by starting it here - anyone care to move it to "general?"

 

I just pulled this off the web - OSI owns Outback, among others:

OSI Financials

 

Yes I should have clarified. Food was 39% normally, Beverage at 21% I can't remember what the overall was though. I know NOTHING about the food business (as I said), but I did do the inventory for the restaurant and I thought they carried way too much food for what they sold. The restaurant manager was always pushing to alter the inventory to "lower" his COGS - which was funny. He had to report to his buddy, the hotel manager if it got too high. So they were in cahoots a little.

A year or so after I left the place, the restaurant changed to something else. So probably either the mismanagement (which was rampant at the hotel/restaurant) or just a change was made in what was offered.

 

What is included in "Beverage" because 21% seems really high. I always heard that the cup McDonalds gives you your soda in costs more then it's contents (Which is why every free offer hinges around buying a drink)

 

It usually depends on the type of place. Places that sell alcoholic beverages most often define "Beverages" as alcoholic beverages, with everything else - milk, soda, etc. - going to "food." 21% is not unreasonable for an alcoholic beverage figure.

 

21% was alcohol only. I am pretty sure (fuzzy memory 10 years or more ago, after all) that soda/milk was included in the food cost. There was a sports bar there, too, so it probably sold a lot of beer.

What gets me, is that restaurants have a great markup compared to actual retail stores. If you are making (assuming a 39%) 61 cents on every dollar; that's not too shabby. For my retail sites, I'm lucky to keystone products (make 50%), and others I make about 37 cents on the dollar, which is terrible, IMHO. I don't understand why restaurants seem to fold a lot quicker than retail stores.