KEY POINTS:
To want to own a restaurant can be a strange and terrible affliction. What causes such a destructive urge in so many otherwise sensible people?
So asks celebrity chef and author Anthony Bourdain in his book Kitchen Confidential.
"Why venture into an industry with enormous fixed expenses (rent,
electricity, gas, water, linen, maintenance, insurance, licence fees, trash removal etc), with a notoriously transient, unstable workforce and highly perishable inventory of assets?"
Only a minority of cafes and restaurants survive long-term. Many owners struggle along making a pittance.
But not everyone loses money in the business, says Celia Hay, author of How to Grow Your Hospitality Business and owner of the New Zealand School of Food and Wine.
"Eating and drinking is something we do every day and therefore it makes everyone an expert," says Hay.
To be a success you'll need to be much more than a great host. The key skills, she says, are being:
* A good host.
* Good at detail.
* Able to provide a quality experience.
* A hard worker.
* A business person.
It's not just about being able to cook a mean muffin or decorate a cafe tastefully. Hay says you need to ask yourself what skills you can bring to the business, are your interpersonal skills good enough to manage a team, can you remain calm in the face of disgruntled customers, can you live on a shoestring in the start-up phase, do you have the energy commitment and patience to make this work, and will your family support you.
A successful cafe or restaurant needs a well thought out business plan, including financial projections. Invariably these businesses cost more and bring in less than expected in the early days.
So Colleen Hurd found out. She and a business partner set up Vanilla cafe in Belmont on the North Shore. As far as cafes go Vanilla was a resounding success - packed to the gunnels with customers much of the time and its owners could afford to shut up shop for four weeks from Christmas.
Nonetheless, the owners blew the budget setting it up. There had been a failing cafe in the same spot, but Hurd and her partner more or less gutted the building and started from scratch.
"All told, we spent about $115,000," she says. "We could have spent double that, but we did things on the cheap. For example, they had four fridges instead of a chiller and we had to put up with very poor acoustics, because fixing the problem would have cost too much."
Hurd had no experience in the hospitality industry, but the business partner she approached to join her had a background in catering. The pair spent from Anzac Day until the middle of June 2002 researching the market and setting up the cafe - opening just one day late.
They had to do market research, locate suppliers, employ staff, get building works finished, buy machinery and other equipment such as tables and chairs, learn how to use Eftpos and make coffee, negotiate with banks and do some marketing all before the launch.
Inevitably costs arose that hadn't been budgeted for. They had to employ more staff than expected, buy an alarm system, they paid more for expensive incidentals such as rubbish removal and commercial cleaning, and their prices had to be tweaked to make the place more profitable.
Vanilla's owners were determined that their food would be fresh. Ironically, although the customers recognised this, it cut profits.
"For us fresh and tasty food was part of the dream," Hurd says.
Even at the high point Hurd was taking only $600 a week from the business. It was only when the partners sold the business last year that they recouped a lump sum, which in part made up for the salary they forfeited while they were working in the business.
All along they'd had a four-year exit plan. As it transpired they were approached regularly by potential buyers and eventually agreed to sell in October last year for just under $200,000 plus stock - over and above the fixed costs. But the figure is somewhat academic, because Hurd says they weren't really adequately recompensed for the amount of effort that had been put in. Nonetheless she says: "I was really pleased I had done it."
Hurd's tips for anyone starting out:
* Research your cafe idea thoroughly.
* Remember that if you're successful, the operation will be bigger than you think.
* Expect to spend more than you budget for.
* Believe in yourself.
* Don't let things get you down.
Single cafes or restaurants can be profitable, but economies of scale once they've opened more than one branch can make the business much more profitable if they get their systems right.
Andrew van der Peet of Mecca Cafe, a Mediterranean/Turkish chain with eight restaurants in Auckland, says the cafe started with humble beginnings.
"As its popularity grew, it became clear that growth opportunities existed, and it responded by taking a slow path to expansion.
"To be successful as a multi-outlet operation requires quality people and systems to maintain the standards of the business, and protect your name and reputation, as each outlet's performance can affect the others."
Van der Peet says cost savings are to be gained through centralised administration and higher volume purchase.
The next step from setting up a number of branches can be franchising the concept. Dunedin-based Reload Juice & Salad Bars started as one small outlet three years ago and is now an international franchise with agreements in place for franchised branches to open in Singapore and China.
Burger Fuel owner Chris Mason started in Ponsonby Rd in Auckland, intending to flick the operation on after a year. He soon realised there was more money to be made in expanding the concept and opened four more stores himself then set up a franchise.
"Our tipping point was about 12 stores," says Mason. "It would be three times as good at 25 stores."
Eating out is a growing trend. Figures produced by Statistics New Zealand for the Restaurant Association of New Zealand show sales are growing by about 10 per cent per year.
The survey's authors also concluded:
* Workers are in acute short supply.
* The "coffee culture" is still very much alive.
* There is a demand for simple food.
* The industry still produces an unacceptable profit - many operators are locked into a cycle that generates a poor return on their investment, often resulting in an outlet's short lifespan.
* Customers are prepared to pay for ambience/service.
* An emerging trend is entertaining with a plate of tapas and a glass of wine.
Finally, if you've ever toyed with the idea of opening your own cafe or restaurant - based on the fact that your friends rave about your dinner parties, then read Kitchen Confidential - it's a wake-up call.
And if you're still determined to do it, the Restaurant Association of New Zealand holds regular networking events for members.
It also offers seminars for potential owners covering topics ranging from legal issues to food hygiene regulations and getting resource management consent.
