Author Archives: admin

Food Borne Illness

Market fruits and vegetablesYou buy only the top quality produce, proteins, and dairy from the best suppliers. Your restaurant has had rave reviews from your local press and even Zagat’s is saying very good things about you, your chef, and level of service. Everything is going beautifully and then the worst case scenario happens. You get a call from three customers who dined at your restaurant 14 to 25 days ago. All were hospitalized after eating at your establishment and the doctors tell them they have ingested a dairy product that contained a strain of listeria monocytogenes. They believe it came from the lasagna they ate at your restaurant during their last visit. Their doctors said the CDC (Center for Disease Control) has reported that there has been a recall of ricotta salata cheese from a specific manufacture that is known to supply your restaurant. What do you do now?

Does your business have procedures set in place to manage this PR nightmare? Do your employees understand what they should and shouldn’t say to the press and customers if there should be more calls with additional reports? And furthermore, financially what should you do? How should you communicate with your local and state health departments?

Typically Commercial Property and Casualty insurance policies do not offer business interruption coverage for food borne illness outbreaks. These policies are designed to respond to events involving physical damage and claims for medical injury and lawsuits associated with physical and emotional injuries. They may offer some coverage in the event a customer is hospitalized, however they are not designed to cover expenses that are going to continue regardless of whether the restaurant is open or closed.

The impact can be devastating to your revenue while you work through the press and government inquiries and requirements. Do you have the capital in reserves to enable your business to keep key employees and cover ongoing expensed. Below is an example of a typical financial impact of the effects of an outbreak:

Chart of Financial Impact of a Food Borne Illness Outbreak

Chart of Expenses When Revenues Drop

If you want to know whether or not you are prepared for a worst case scenario situation, please contact our office. We will be happy to audit your Business Interruption and General Liability policies to give you piece of mind should a food borne illness Outbreak should hit your business.

Please contact us at 214-216-0225 or email Mona Carpenter at mcarpenter@innovativenationalrisk.com if you have any questions.

DON’T GIVE UP EQUITY!

In these crazy, unpredictable times—when playing the stock market is like riding a roller coaster blindfolded – the lending market is tough, especially for restaurants and hospitality.  This in mind, how can businesses find short-term money without giving up equity?  CapRock Services’ Growth Capital program allows growth without giving up equity or putting up collateral.  By factoring future credit card sales, CapRock operates much faster than banks can, and doesn’t have a lengthy or bureaucratic approval process.   With funding as quickly as three to five days, we are the fastest in the industry.   Whether the economy is up or down, we are in the business of creating jobs, helping companies thrive and maintaining the entrepreneurial spirit.

Planning a New Restaurant?

They say success is 90% planning and 10% execution – opening a new restaurant is no exception. As you begin planning for your next restaurant try this approach:

Demand:
Discovering whether or not there is a demand for your concept in your market is the first step in deciding if the concept will survive. Do your market research to determine if your idea has merit. Ask yourself if there is already a successful brand delivering your idea? If not, what neighborhood in your market has the demand for your offering?

Outlook:
Once you’ve determined there is a demand in the market for your concept, develop a 5-year financial proforma to determine if your concept can financially succeed through the first 5 years. It’s known that the mark of a successful restaurant is one that survives beyond 5-years, so plan intelligently. Use total covers, turns per meal period and per person averages to calculate projected daily, weekly and monthly sales. Use these figures to reach your projected annual sales.

Location:
It’s now time to scout potential restaurant locations. Find neighborhood or mixed use developments in your market that will foster the traffic you need to hit the financial projections outlined for your business. The ability to draw your desired covers per meal period is a key financial indicator (KPI) to your success. Don’t pick a location that can’t produce the needed traffic.

Lease:
Once you’ve selected your location you will have to negotiate your lease. Don’t settle. Never settle! That’s a non-negotiable. Your monthly rent is a “make it or break it” financial fact. When negotiating, regardless of the tenant assistance or rent abatement offered, don’t fall into the trap of a base rent that exceeds 8% of your total sales. 6% is the target, but 8% is survivable. The triple-net rates will push it closer to 10% of total sales. 10% is the maximum. Don’t exceed that amount.

Accountability:
Next you must define your company’s ownership structure. Seek the aid of a professional tax attorney to help you structure your restaurant’s entity in the way that best fits the desires and needs of the investors and members of the company. It’s important in the operational agreement to outline roles and responsibilities, so that no one is confused as to who will be performing which role in the business, and what they will be held accountable for.

Reaction:
You’ve now thought through just about all the preparations for your next restaurant opening. Now it’s time to take a step back. Share the concept, the financials & the location with your inner circle(s) or confidants. See what their thoughts and opinions are, and where you may have consumed too much of your own Kool-Aid. Let the advice of those you trust help you determine if this is truly a concept and location worth pursuing.

Start-up:
If you’ve passed the sniff test with your closest advisors, then it’s time to talk start-up costs. How much will it truly cost you to get the restaurant off the ground? That’s the $100,000 (or more) question. For construction costs on a 1st generation location, try not to exceed $100/sqft. For a 2nd generation location, try not to exceed $60/sqft. For Furniture, Fixtures & Equipment (FF&E), it’s important to identify what new items you will actually need and what you can get used. These dollars will be your “make it or break it” dollars.

Once you’ve completed this exercise, and if all of the D.O.L.L.A.R.S. makes sense, then go ahead and generate a business plan. Break a leg!

If you would like more information on Restaurant Consulting Services provided by Caprock, please feel free to email Zach Hopkins at zhopkins@caprockservices.com.