Our Account Executive, Matt Camilleri, contributes to Restaurant Auctions List‘s article on common mistakes that happen when starting a restaurant. He lists bad lease negotiations, poor development budgeting, and not creating a business plan as the three top mistakes to avoid. See his piece below, or read the full article at www.restaurantauctionslist.com.
1. Bad Lease Negotiations – Get an experienced commercial broker who has dealt with restaurant lease negotiations. More often than not, newbie restaurateurs are blinded by the address and location of a perspective site, and will gloss over important lease details. Many lease agreements are in excess of 200 pages, but there are a few highly critical sections that a good commercial buyer’s brokers won’t miss. Making sure that leased space has sufficient amperage, gas pressure, and no venting restrictions can save the restaurateur thousands.
2. Poor Development Budgeting – Before we get into the operating pro forma below, it is crucial that you have enough money to build your dream restaurant. This starts with having REALISTIC expectations.
We typically see build-out costs for a “vanilla” space (just walls and mechanicals stubbed in) in the range of $300-$350 per square foot, so plan accordingly and don’t overextend yourself. With smart building, you will set yourself on the path to success.
3. Not Creating a Business Plan – This is an extension of your overall financial planning stage, so this MUST be done early on. With the increasing cost of labor and cost of goods, the best advice is to have a precise operating budget. Make sure the overall net profit line is acceptable. Remember, with pro forma you have to believe in your business plan before anyone else will.