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The Recipe To Starting a Food Business

David Zecha

Description

These are the secret steps in choosing the right kind of food busines set up.

Recorded

  • April 14, 2019
    1:45 PM
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So let's get right into it today I'm going to this afternoon I'm going to give you some pointers on the whole construction the whole process of starting your business from beginning to end there's a lot of stuff that I then including here just for the sake of time but we're going to be able to discuss the generalities of it if you have specific questions you're going to be able to come to me and I'll give you my card you can call me anytime you wish so why am I here again than I am as if some of you weren't here this morning I'm a general contractor I do mostly government projects I do commercial I do a lot of commercial projects restaurants I've built over 15 of them in the last few years anywhere from 800 square feet to 8000 square feet and it gets trickier as they go to get bigger obviously but that's what I do and. So here so I'm partners of. Partner Pacific benchmark general contractors I also have my own real estate companies might be here realty on the broker have 40000 Sunder me. One and one other agent there's a lot of commercial property but the rest of them specialize in residential properties and I did have cafe stems which I mentioned I sold earlier last year and. I'm also director of the Senate bill care group so that you know it's it's a young adult group and sending all county with the largest on the bill S.T.A. group and we are extremely active in all parts of the church and as I mentioned last year I saw Kathy stands and but people still ask me for recipes and I'm still willing to give them out. Issues really covered today versus your restaurant concept so it's seems kind of trivial but it's got to be a very good concept and Scott a very could be a very complete concept and getting this down is often the 1st ground work that you have to lay and you have to consult with a lot of people if you don't have all the ideas but if you have the drive and you have the imagination the creativity and some calling area expertise this is a good place to start we're going to go over the financial now assists there's a lot of dynamics when it comes to you know putting the restaurant together financing personal finances being involved also demographic demographics who you want to target what areas to want to target locations and very important and then we have the searching for the property this is a very arduous task that can take months in order to establish So we're going to go over that selection of your broker and contract I won't spend too much time on that but this is a very vital important and important part of the process construction of your restaurant and finally will have other things to consider your restaurant concept so like I say match the concept with the location you're going to have to you know see if you have a vegan vegetarian restaurant will the OR layer concept do all well in a Westfield mall are you going to be able to make that rent or you can be able to pay the employees are going to cover all that over that she have so yet the kind of realized that the demographics supported and you can start studying that area. And make sure you have the profitable model this is your standard business analysis your model of supporting your expenses with your revenues. And then there's another way to test the market I had a good friend I have a good friend he's the owner of ice cream Oh it's a dessert place but he wanted to sell shaved ice so he went to this other restaurant owner like a cafe and she said ma'am you have a little corner like to underscore feet that in their city chairs or anything with over there you mind if I rented out for you for a couple $100.00 a month she was like Go right ahead and so he started his instagram he started his Yelp reviews and a little corner of her restaurant for $200.00 a month and he started cranking out shavings and now he has a brick and mortar store that's been around for about 5 years and he's producing about for about $350000.00 a year. So test the market make sure you can if you're a viable concept sort of financial financial analysis we're going to look at. The typical brick and mortar space we're looking at about 1200 square feet roughly conceit about $23040.00 people here permit an architectural class running about $10000.00 your construction cost plus inspections. With without a hood has about 13250 and then you've got us that have reserved for marketing and stock in the open lease for between 10 to 20000 and these are generate obviously very general numbers in your typical city so to start your own brick and mortar restaurant you have to have capital somewhere between $160.00 to $180000.00 for 12 minutes worth that space and that's a that's quite a commitment and some people are able to. Find the capital and to do it to make their dream come true I'm going to go over other alternatives that are less costly require less capital so this is my Cathy that I sold last year cafe stems is actually a 1050 square feet. It's a fast casual concept no waiters and waitresses there is me working day and night. The Burmese tea the salad one of the everyone's favorite or the only café to sell in all the San Diego this is a restaurant so the restaurant that I built that was about $120000.00 I did a build 3 years ago in downtown sent send eagle that sat about 35 people and this is a 1400000 dollar bill so you can see the disparity and the costs are endless I mean you can go from one end to that this is a very this is a ramen rest and one of them built in San Diego so the cranks out a lot of revenue every month but the build was definitely very complicated and expensive and this one took close to 8 months to build. Demographics you want to target. Generally like I say some areas don't support of the can only option you know you have to have maybe a vegetarian option they have to have a corporate ethnic foods so they say you have to test your market in order to get that information and once you can refine you may have to refine the process as you go along to you may open you know I'm vegetarian but you may bill to narrow down to the gyn options on or vegan food only so searching for the properties so you have several options as to where do you get your information from there's so much information on the Web You can Google Maps to find out traffic times the Chamber of Commerce has information and also what I tell people now. There's 2 websites you might want to write down if you ever interested in purchasing the space business end dot com and buy a business buy sell dot com I use businessmen quite a bit as a real estate broker we post our listings on there so if I have I have many clients who sell restaurants I post it up there and who my clients want to buy a restaurant I search for property on biz Ben dot com I'll show you example of the listing here so you know. So this is one of my listings that I just sold last week close escrow. It's a cafe 1683 square feet actually I did the construction on this 5 years ago and it turned him over a couple times and this was listed at $145000.00 I end up selling it and the double in the deal and him sell it for 120000 so as you can see in this it like in that it's different than residential when you're looking for a house you know there's not a lot of play if you're in a popular area you're going to pay $500000.00 for that house maybe in the GO she had a little bit you know one percent or something like that where sometimes you have multiple offers at the pay more than $1.00 pay more than the asking price when it comes to commercial property it's a very soft market even though the property might be in the very popular area like I say this one was listed originally for 100 but I said 140 I said I sold it for 10120 and even then the owner the seller was able to take payments we had $80000.00 down and the balance of $40000.00 I had the buyers pay over a month period of $4.00 months so kind of help them along with the capital this is another list and I just put up on the market last week it's a bakery. I built the baker 2 so it's a it's it's 2 and a half years old has an 8 foot Hood system and has approximately 1400 square feet and next door happens to be a vacant space so the as landlord is allowing this and the new buyers of this bakery to take both spaces still have almost 2100 square feet of space. And then that's can price as $179.00 so I pay the buyers of the cat I'm sorry the bakery originally spent over $300000.00 on construction that's why we build them to build this bakery that was 2 and a half years ago I listen this property right now for $179000.00 so I just think that kind of you know then they were not profitable and they they're going to lose quite a bit and we may not even get 179 the last offer I had was 168 so if he can sell you those bargains on the internet when I say when you're looking for a piece of property and you're wanting the build out a piece of property or a unit the best thing to do that I was recommend all my clients to do is look for an existing restaurant we know what the turnover rate is right for a restaurant so it's always good to find that existing restroom that you can turn over in a short period of time sometimes you can do a change of ownership and get that running off the ground instead of having to build it up from scratch because you'll do it you'll save yourself from a ton of headaches. So on biz Ben dot com and just look for in the search engine look for a bakery or restaurant cafe. And then there's the purchase price. The other thing too that it doesn't show here is sometimes you'll have the the net profits that the owner will make so say for instance you'll be a business like this will gross you know 200000 a year but it says net to the owner $75000.00 so that's how much you know if you buy that business you'll make about $75090.00 come to you per year that's after nobs all the expenses. So. Last year I didn't cover any options here brick and mortar because not everyone has the capital in the alley to to do a brick and mortar restaurant so the 1st alternative I'm giving you as the farmer's markets I'd suggest this to a lot of people because it's the great idea it's a great option to have when you're just starting out from almost nothing farmers markets for an average 10 by 10 booth typically cost you between 5 $100.00 to $700.00 a month you know that's $125.00 a week. And if you think about a brick and mortar store you're spending $13125.00 a day on the lease space so how much more can you can you get out of a farmer's market booth. So again let's compare this some of the compare each one of these options to the brick and mortar store. So in a brick and mortar store the lease rate is going to cost you $3000.00 a month proceed to so you got $4200.00 a month versus $5.00 to $700.00 a month that's quite expensive a stark contrast. In a 2nd option the food truck. How many of you ever considered a food truck. So the food truck. It's a great alternative and I like this one a lot because you're you can get a used food truck in a very good in very good condition that has all the equipment already built into it for about 50000 of course you need to update the health permits get a transfer to your name insurance maintenance and gas are running the other $700.00 a month but this option gives you so much more liberty to do what you want because you can apply for permits in different parts of the city that are very successful or very populated that's where you can actually sell your products you don't have to be stationary in a brick and mortar store. So think about it again $50000.00 initial outlay $700.00 a month of course when you calculate some of the you know the food costs and all the all the other overhead but I'm thinking I'm talking about just initial cash outlay in the in the monthly expenses. And the other alternative is the community kitchen 2 years ago I built a community kitchen in doubt and near City Heights and send a go and while we did us we just renovate in the existing kitchens so they spent about 100000 on construction now what they do it there it's partly government funded but they lease this kitchen so you can have a space in their refrigeration space you can have the times allotted to you or your organization for $25.00 an hour. And if your can prove low income or you're struggling whatever they'll even rent to down to $20.00 an hour and that's a phenomenal savings compared to any other other alternative that you might have. They'll give you access to the entire range so you have a range you have deep fryers you have a walk station so you can use all that equipment and you don't have to pay overhead they pay everything for you. And then the refrigeration cost these you charge about $5.00 a day to store your goods into the refrigerator they put a padlock on there so the community kitchen is becoming more and more and more prevalent in more popular even Jr Jr and they are talking about building the food community kitchen so that those who are aspiring to become chefs or who are chefs and want to get the product out to market can do so so when you talk about when you start to finance your restaurant the reason why I don't suggest you do a brick and mortar restaurant there's a lot of cost that you haven't in that foreseen and unforeseen 1st of all people say Can I just get a loan the answer in so many words is no unless you have a private investor or you have a family member is just when the dole out some money which most of us don't have it's awfully difficult and you don't want to dump your life savings in this thing either trust me it's too risky. An S.B.A. loan is often issued by like Wells Fargo Bank of America the bigger institutions. If you will have one at least one successful restaurant that has been in existence for 2 years at that point the reevaluate your reevaluate your financials and the issue of S.B.A. loan to finance your 2nd location but like I say the 1st location is the most difficult to get off the ground and you've got to be successful in that to be get to get your 2nd one yet and I often emphasize 2 I mention this morning about having business partner and if you could go it alone that's that's more power to you but if you have a business partner always work out an exit strategy you know in any business actually it applies to that you want to have a successful you want to have a business that exit strategy worked out before you get into the. Business the business line of credit is another thing you can get if you have your 1st store you can get. Business line of credit but if you're very limited it's like taking a home equity line against your house you're only limited by a certain amount generally if you're if you're building a small you know 1000 square foot brick and mortar store you can get a line of credit of about $1520000.00 from Wells Fargo to stay the treat like a credit card. So knowing your broker and your contractor I'm not going to develop heavily on this part but as I mentioned 1st of all your brokers got to scout out the right properties and this is one of the reason why when the reasons why I became a broker is because I'll tell you a quick story one of my Because struction customers were building the 3rd restaurant. And they found their broker found this building and the building that was in the great location the lease rate was fairly low $6.00 a square foot but I went to go visit the property and it was a disaster the plumbing was old cast iron pipes the ceiling was too low for a hood the parking was miserable and the broker kept pushing the pine and the buyers said you can't take this property it's an excellent. You're not going to find this deal so I told him Do not take this location Well guess what 3 weeks later the broker convince him to take it he took it and I got stuck with the problems sure enough we got stuck with the building department we were held up for 6 months they were paying $6000.00 a month for the lease so they waste It's $36000.00 during this time and that was a painful lesson for them and they wish that they had listened to me but it happens all the time the brokers will push a property upon this the the buyer not knowing the intricacies of the building. So. Get to know your bro brokers reputation are they looking out for you. And then And then also work with the contractor that you're planning to use have this all lined up before you start searching. Know the building so that you don't run into trouble later on. And you should find a contractor that builds restaurants I mean that I built the 1st couple restaurants I just continually get phone calls for people and they want me to build more restaurants I have to reject at least 3 projects a year because I'm just flooded with work I mean it just rolls in the. Day after day. And then you got a deal you do diligence regarding the contractors qualifications so once you get to the construction of your restaurant you get to that phase selecting the architect select in the designer so oftentimes you don't have the requisite knowledge of the construction phase so that's why you need a a kitchen designer kitchen designer lays out the kitchen for you give them the menu you give them your concept and they can lay out the kitchen how you're supposed to how you should have it and to make it as economically feasible is possible so always you know him in my cost a little more money but you'll save more money and time in the long run is to get the proper designers in line. And what you're going to do is you come up with their concept you come up with their menu because when you start the Permian process the Health Department wants to know what your menu is because based on your menu is how you can have your equipment your grease trap and everything else that goes along with that so your concept and your menu is very important you just can't be too vague about it you have to be pretty specific about it. And then once you get that concept together you're going to put it submitted to the city you submitted to the Veyron mental health which is the health department and then you have to submit to the waste water management which can switch controls the grease down the sewer line so there's 3 entities and there's a 4th entity which I didn't mention is the fire department if you put a hood system in you deal with the 4th governmental entity which is the fire department and I can see why I'm not eager to build restaurants you're just dealing with one governmental entity after another which causes delay after delay after delay so one of the most important parts that of launching a restaurant. Is to market your restaurant I just had a situation 2 weeks ago. There is a franchise dessert girls like a drink desert place like you know Bobo or whatever it's in San Diego and the only store they have in San Diego but they're they're making a fortune in Orange County Ellie San Francisco in the whole day area Seattle but in San Diego they are not able to gain any traction so they asked me to sell their business so I said OK how much are you into this what we paid $75000.00 for the for the franchise fee OK And I said how much you spent on construction they spent 275001 things I'm sorry 200000 I construction I said there's no way I'm going to get you to under 75000 to break even I said the most I can get you is maybe 150000 so the only way just to help them in this situation is I call them some marketing experts we're going to have to just make their business successful you know to recoup their expenses so this is something that they didn't think about initially or they didn't work hard enough initially to do is marketing their their space their restaurant the cap they so I always say set aside capital before your launch in promote your business 2 months at least before you launch. You've got to build a solid social media platform now like myself I still have an A.O.L. account. And most people laugh and scoff at it but that's a whole school I am but you know there are so many millennia isn't passed a B. a B. for anyone younger than that they're so savvy with Instagram with Yelp with Facebook and they're so good at marketing that they don't even have they don't happen they don't have marketing degrees but they're just a natural at their thumbs and so what I would say is you know fine there are so many market companies so many people to do this on the side it doesn't have to be a full out P.R. firm but you should have some. Social media platform before you get started just to spread the word out about your concept you'll be further ahead than you'll ever be if you just try to launch it with a sign in the front the local media outlets. Is kind interesting there are so many news stations have you ever watch the news in the morning Channel 5 or Channel 8 in the morning they always have a segment that kind of features a food product writer so they do a cooking demonstration or something well those people actually come out to your restaurant or to your kitchen or whatever and they'll actually promote you for free and you'll get on how many thousands of eyes are watching this at the office or getting ready for work so it's a great way to utilize free media exposure and that's what we've done before it's a launch many of the restaurants. And the other option if you have more capital available is to use a P.R. firm they charge maybe about $3.00 to $4000.00 a month to launch a project they have they have you know the AAA travel magazine so they have access to the editors over there they'll send articles about your food about your restaurant to those magazines and they will promote it that way and that it costs money you know so there's other ways the can launch your product without having to spend that kind of capital so I want to leave you with a thought for today or a couple thoughts for today collections 323 says and Whatsoever ye do do it heartily as to the Lord and not into men when you launch your idea you know think of who you are impacting your family you or your finances and the community around you and this is something you've got to put your whole heart into I had 3 other businesses it's hard to sustain a 4th one and this is something that 8 didn't quite think of before so when achieving your goal Think of all the ramifications of who you're Thek doing when you're building this business but you when you build something like this and you're successful at it it's a great tool for ministry it's a gathering place and it becomes a testimony you know we've had Bible studies in our café we've had social events for people who are anonymous da's to come to a cafe it's just a great thing to have if you can sustain it you know so what I want you to do that I want to what I want you to think about. Is I've given you some ideas on how to generate or even contemplate having your own your own restaurant business you know some like to say you're free to contact me for details on how to do this and J.R.'s even mention about doing a full workshop on this which you may have to do someday the other thing too if you have the information today and you know someone a relative or friend who wants to do this show the information with them that's what you can to share the information with them they may benefit from it and you're always welcome to contact me I have my information up here I use my G.-Mail account today just to make it look like I'm a little more up with the times. But I don't charge for it I lot of people come to me for consultations for advice and I always freely give it to them because I want everyone to be successful I want everyone to succeed and excel in what they do and. Spread God's message through the same in this thank you this media was brought to you by audio 1st a website dedicated to spreading God's word through free sermon audio and much more if you would like to know more about audio verse or if you would like to listen to more sermons leave a Visit W W W audio verse or.

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