OnSite Consulting | Consulting to Hotels, Casinos & Restaurants Nationwide |

Q. I’m ready to open a bar; I have savings or a cool concept – what should my first step be?

A. As a hospitality operations consultant, I spend a lot of time with first time clients – some have amazing concepts that belong in a metropolitan area; others have a desire just to own a local bar in their hometown or local area; then there are those who are looking to invest or own a restaurant or bar for immigration purposes.

My first question to any of the above is, why?

The glitz and glamour is all smoke and mirrors – it’s very easy to forget that, as an operator, we work around-the-clock and our social and family lives disappear. The second we go on a summer vacation (even if we have competent managers and tried-and-tested procedures and processes in place), something seems to fall apart – we spend our entire vacation wishing we could be back with our venue. If you are a current operator, I can hear your agreement; if you are planning to become an operator I can hear your disagreement!

Lawyers, doctors, investment bankers – countless people (especially professionals) aspire to open a bar or restaurant “one day”.

All of that said, strong planning, economic analysis and an operator able to competently bridge the gap between front and back-of-house operations (and design policies and procedures that managers can understand and implement) have a serious head start.

Q. How do I find the right location for my concept?

A. I have been retained by many new operators, who have a fantastic restaurant or nightclub concept and are searching for a venue.

The reality is, they never really find the venue they want and so they struggle, or settle on a location because it is “the best of a bad bunch”, rather than an optimum site: New operators will often spend months looking for a location, and finally just take a space purely because they are so eager and desperate just to pull the trigger. This will often mean taking a space that will take them over budget either with respect to the rent payable or the cash amount of improvements needed.

These operators, in a race to market, also tend to accept rental terms and/or investment terms that would not normally be acceptable, just to get going – the repercussions, however, can be very problematic.

My general rule of thumb when choosing a restaurant or bar site is: “if you are going to settle, which I would rather you didn’t – at least choose a place with existing plumbing and electrical.” – it might seem obvious, and some people might view this as being unimportant but as a new operator, it is critical to only spend in areas where you can recoup cash outlay, either through depreciation or resale value. Plumbing & electrical in my experience have never really changed the value of a unit on the resale. The other reason I generally go with this theory is that if the infrastructure is not there, it exposes a whole new set of problems. I have lost count of the number of times that a small job has turned into a big job, with a requirement for new permits, more plans, more site inspections and generally more delays.

So, here is a quick tip for finding the right space: Most people that are in the market to sell their venue are out potential buyers’ price ranges – the broker websites or even individual brokers usually list spaces that are over-valued; you will be better off looking for locations you like and to which you wish to entitle yourself (which can be a long process, but cheaper in terms of key money), or a location that you like that is already entitled, but the owner has not really thought of sale.

My personal preference is to find the location first, and then determine the most financially viable concept for the space. There are some venues that I have wanted where I have contacted the owner, enquiring as to the possibility of a sale, every month for an extended period. Don’t be put off by an owner who says “no”, even if they keep doing so. There have been numerous occasions, with projects I have worked on, where the owner eventually has a change of heart – in those situations, if you have stayed in touch, and kept asking, your offer is likely to be the first looked at. We recently experienced this on behalf of a client looking for expansion – the landlord of our ideal location decided to sell after 18 months of our “check ins”.

Q. Everyone talks abouts percentage averages, cost of goods and other key gross sales anlyses that I should be doing. Any quick tips?

A. After we complete a contract we generally leave the owner or general manager with a simple spreadsheet – they can use this to enter key data.

We help them determine the range they should use to find their principal costs. From that point, any fluctuation outside that range should engender an immediate reaction – not necessarily alarm, but at least reaction. If the fluctuation continues over two cycles (we generally measure cycles in units of two weeks, i.e. two weeks to one cycle) and a trend is forming, the operator must find the root of the problem. The spreadsheet helps them to do this.

One service we provide when retained by a client is the “call back”. In our experience, customers will need our services again. It may not be immediate, but it does tend to happen when a new problem springs up and they need advice. The “trend calculator” is a great tool to determine when they should pick up the phone and allows us to go straight to the source of the problem, rather than redo all the data analysis.

How does it work?: We ask our venues to send us their range calculations every cycle, so that we can maintain data analysis on their site or help spot trend lines. Trend lines tend to be the most valuable data a venue can have and the longer the range of data, the easier it is to spot abnormalities or, in a seasonal environment, prepare for busier or slower periods proactively, instead of reactively. There are few things worse than knowing you are about to enter a slow sales period, but not decreasing the payroll or purchasing costs by the same percentage.

Please find a scaled-down example of such a trend calculator for your use – if you have specific trend questions, we’re very happy to share our know-how with you (though we can’t obviously post multiple excel pages containing formulae). Note that, when dealing with trend lines, the swing is completely location-dependant – the numbers placed in the calculator should reflect consistent averages over a period of time, or should be viewed in a turnaround context, as a means to forecast.

If you are interested in any of our services, please don’t hesitate to contact us.