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How do you turn your business into a company?
June 13, 2012 8:55 AM   Subscribe

Do you have to know how to cook to own a restaurant?

Basically, I ask this because I heard about Les Wexner (a billionare living in my hometown) the CEO of Limited Brands. He started off with only $5,000 and opened up The Limited which was a sportswear clothing store for women. He didn’t design anything but he just owned the store and ran it. After seeing some success he opened other stores and some how made Victoria Secret very successful. I envy him and admire Les wexner!

My family owns a small mall strip with an Asian grocery that has been in business for almost 30 years. It also caters to African, Jamican, and other products. MANY of the Carribean and Asian stores buy products from us for their restaurant. My dad gave the restaurant business to his brother which makes far more profit than us and makes me a bit jealous…plus he doesn’t pay much rent for it. Oh yeah, people drive 2 hours just to shop here and eat here.

I was just thinking how can I do what Les Wexner did and open up more shops? I feel like the restaurant would be far more easier to open because it’s profitable and everyone likes to eat. Sadly, I don’t own the business…my uncle does and maybe my cousins would want it. With the grocery, I feel like it’d be more of a challenge because I’d have to know WHERE the minorities are at. I know a store like this wouldn’t do well in California or NY with PLENTY of ethnic shops =\ Don’t you agree? Also, our shop isn’t super nice like Wal-mart and high tech but a Mom and Pop shop with a decent sized building.

So, what did Les Wexner do? Just buy out companies? It’s so sad that I’m in Small Business management but my university didn’t teach me about this >_< Also, my dad doesn’t agree with opening another location cuz he believes employees would steal from him. He’s very untrusting lol

Again, I feel restaurants are far more profitable than Grocery but I don't know how to cook that great LOL

If you want to read about him here it is
http://www.limitedbrands.com/our_company/about_us/our_founder.aspx
posted by azn_hunnie to Work & Money (26 answers total) 1 user marked this as a favorite
 
Lots of questions here. Les Wexner founded a company and grew it over time because he made connections with people who were knowledgeable about a particular skill set that he needed to grow his business.

So, to apply his circumstance to your question, a person can own a restaurant and hire a chef and waitstaff. In fact, I would wager that most successful restaurateurs do precisely that.

Part of successful management is knowing the limits of your strengths and weaknesses and shoring up your weaknesses with good hires.
posted by dfriedman at 9:01 AM on June 13, 2012


My dad gave the restaurant business to his brother which makes far more profit than us and makes me a bit jealous…plus he doesn’t pay much rent for it. Oh yeah, people drive 2 hours just to shop here and eat here.

So is the restaurant in the mall that your family owns? Because I'm pretty sure that would be a big part of its success. To duplicate that, you would pretty much to have other locations where you would have that kind of an advantage. ("Pretty much," because it wouldn't be impossible to create the same restaurant elsewhere, but having a low-rent location you can depend on is huge.)
posted by BibiRose at 9:02 AM on June 13, 2012


As an example, my favorite local restaurant, a mom-and-pop Italian place, has grown wildly successful in its current location. They thought about expanding to another location but I think they just didn't get a good enough deal on the place, plus the demographics were a little different and they didn't do it. At least one of them has a business degree and I think they are very very smart in matters of scale.
posted by BibiRose at 9:07 AM on June 13, 2012


To start a successful restaurant, you need to know how to run a restaurant successfully. Obviously part of that is good food, but you personally don't have to cook it - that's what chefs are for. You can cook yourself if you want, but there's a lot more to running a restaurant than cooking.
posted by EndsOfInvention at 9:08 AM on June 13, 2012


It’s so sad that I’m in Small Business management but my university didn’t teach me about this

I'm confused; you're looking to grow a small busines into a big one, but you've only studied small business management. I'm not sure why you'd think they would be related.

Also, I'm not sure what your question actually is - you start out asking about restaurants, then ask how to turn a business into a company. Then you talk about a clothes retailer. I'm getting the sense that maybe you aren't quite sure what it is you want to do yourself, other than "make a small company into a big one."

If that's the case - your best bet would be to figure out what kind of business you are most passionate about. Right now you're thinking "maybe a restaurant" because well, I guess people like to eat, so I guess that'd be profitable." You'd probably have to be more interested in the restaurant industry overall to ensure a greater shot of success -- not that you'd necessarily have to know how to cook, but the idea of food and feeding people should be appealing in some way. if you're not all that interested in food, but you're really into music, maybe something involving music would be more interesting to you. Or clothes if you're more of a fashion-oriented person. You get the idea.

As others have said, you don't necessarily have to know how to do the thing itself to grow a business. But it would help to at least know enough to be able to recognize talented workers when you see them (you don't need to cook yourself, but you at least should know enough to know how to judge "oh, yes, this guy's a better cook than that one, so that's who I'm going to hire").

And regardless what kind of business you want to open up, there are other university courses that will help you manage it. Restaurant management is different from retail management is different from fashion is different from...you get the idea. See if your university has more specialized classes that will teach you how to manage the specific business you want to start.

That's assuming you first figure out what business you're interested in starting, though. Right now you're only thinking about "what would be profitable," but you also need to think about "what am I personally interested in enough to make it the focus of my every day". Because you're gonna need to, and no matter how good your location is, or how good the chef is, you're going to be miserable if in a couple years you realize, "wait, I actually don't care all that much about fancy food after all."

Good luck.
posted by EmpressCallipygos at 9:09 AM on June 13, 2012


Again, I feel restaurants are far more profitable than Grocery

Before you open a restaurant, read Anthony Bourdain's Kitchen Confidential. The profit margins for restaurants are razor-thin, and many first-time restaurant owners fail catastrophically. As a bonus, it's a really fun book. That said, it sounds like you should talk to your uncle about opening another location. With his support and (critically) his experience, you may be able to do it.
posted by qxntpqbbbqxl at 9:15 AM on June 13, 2012 [8 favorites]


To answer your question "do you have to know how to cook in order to run a restaurant?" The answer is yes altlhough you don't have to be a chef.

As a restaurant manager, you need to be knowledgeable about all of the ins and outs in your business which range from cooking, dining, safety and hygiene, and management. If you lack knowledge in one area then you can lose money because of this.

For instance, bed menu planning that's all over the place, hiring 'chefs' that can't cook but not being able to recognize their lack of talents, not being able to help cook a few of the restaurant's well known dishes during busy times, etc... can lead to lost profit.

Most restaurants tend to fail in their first year of opening. Running a restaurant is by no means an easy thing to do and can lead to several thousands of dollars in debt if you open up a restaurant and you're unprepared or lack knowledge about a certain aspect of the business.

If you are truly interested in this sort of thing then perhaps you can get a restaurant management certificate and work at your family restaurant so that you can develop a better understanding of what happens in the kitchen.
posted by livinglearning at 9:15 AM on June 13, 2012 [1 favorite]


I feel restaurants are far more profitable than Grocery

Sounds like you have an ideal opportunity to find out first hand about the restaurant business by working in your uncle's restaurant.

You could get a clearer idea of whether you could run a restaurant yourself, as well as learning what's involved, what the costs are and whether restaurants are indeed more profitable than grocery stores.

Plus perhaps you could find out more about the finances, and whether it's financially feasible for you to open another store or restaurant.

How do you turn your business into a company?

Well, you don't have a business yet. I suggest walking before you run, and concentrating on starting a business before you think about expanding it.
posted by emilyw at 9:23 AM on June 13, 2012 [6 favorites]


Restaurant startup is a notoriously difficult arena. There are a million horror stories about people going in with a love of cooking but no other knowledge of the business, and failing expensively and spectacularly. Working in your family's successful restaurant, and taking on some managerial responsibility when you can, sounds like the perfect way to learn the ins and outs of what it really takes to run a successful restaurant and deciding whether it's right for you. You're very lucky!
posted by fingersandtoes at 9:42 AM on June 13, 2012


One thing you might do to expand your current business is sell the ethnic foodstuffs you carry on Amazon. Since you already have the supplier relationships, it wouldn't be that hard and you could either handle fulfillment yourself or have Amazon do it. Think about high value, low weight, long storage items--spices, obviously, but there are others--and check out what's available now and whether the pricepoints would allow you a profit. Name the Amazon enterprise after the grocery store.

If you buy spices in bulk now, consider packaging them under your store brand.
posted by carmicha at 9:44 AM on June 13, 2012 [6 favorites]


While full of bragadocio, I think you should read the just-released Restaurant Man by Joseph Bastianich. It tracks his rise as a restaurateur and the establishment of his of a restaurant/food/wine empire.
posted by donovan at 9:55 AM on June 13, 2012


plus he doesn’t pay much rent for it

I suspect this is why the restaurant is more profitable than your grocery store.

Amazon is a good suggestion as it doesn't require much of an investment, another option would be to talk to your customers who are driving a long way to come to your store and find out where they're coming from then either look at getting premises there or as a lower risk option, find grocery stores in the area and ask if they would be interested in stocking some of your products.
posted by missmagenta at 9:56 AM on June 13, 2012 [1 favorite]


plus he doesn’t pay much rent for it

I suspect this is why the restaurant is more profitable than your grocery store.


One recurring theme in the Bastianich story is that every one of his successful restaurants started as a sweetheart real estate deal.
posted by donovan at 10:09 AM on June 13, 2012 [4 favorites]


You're looking at a restaurant as a business first and foremost. This puts you so far ahead of the game, it's not even funny...

The overwhelming majority of restaurants go out of business within their first year of operation. This is because their owners love restaurants, but have no idea how to run one... they love to cook, but can't manage cashflow. You're a businessperson, you understand how to write a business plan, how to research competition in the area for opportunities, how to work with suppliers, how to identify and hire key talent (the chef), and how to make changes when the business demands it.

If you're not comfortable with doing all of that, you may want to bring on a partner or consultant who can guide you into it. Your uncle who runs the successful grocery may be a good resource.
posted by Slap*Happy at 10:13 AM on June 13, 2012


Fastest way to lose money is to open a restaurant.

My (step) father was a decent to good cook, he tried at least three times to open restaurants, and they all failed because of factors not related to the quality of food.

I am, within certain specialties, a very good cook. Whenever I even start to think, "hey, I should open a restaurant" I always make sure to mentally slap myself silly. I've seen the amount of work needed for such poor ROI, and even if you survive for years and years all it takes in a new flashy opening and bam you're toast.
posted by edgeways at 10:26 AM on June 13, 2012 [1 favorite]


One recurring theme in the Bastianich story is that every one of his successful restaurants started as a sweetheart real estate deal.

Yep. The most successful restaurateurs I know own their own buildings.

That said, if you look at a restaurant as a business, you realize that the more work you do, the less you have to pay someone else to do, and the more you get to keep. And that is going to include doing some of the cooking when necessary.

I think the best answer for you here is not to ask us but to go work for your uncle for a while and see how everything works.
posted by deanc at 10:31 AM on June 13, 2012


azn_hunnie: "I feel like the restaurant would be far more easier to open because it’s profitable and everyone likes to eat."

There's a ton more to running a restaurant than cooking individual plates. Watch Kitchen Nightmares. Netflix has all the past seasons. A running theme is owners (chefs or otherwise) who fail to grasp the business side of the business.
posted by mkultra at 11:02 AM on June 13, 2012


Watch Kitchen Nightmares. Netflix has all the past seasons. A running theme is owners (chefs or otherwise) who fail to grasp the business side of the business.

And if you can watch the UK version, which is significantly less sensationalised and templated, even better. (Ramsay himself has lost a fuckload of money on restaurants.)

Scaling in both groceries and restaurants is tricky: I know of a few local restaurants that expanded beyond their comfort zone and flamed out (at least one of them led to the owners divorcing). On the grocery side, there's only so much you can do before you butt into the economies of scale found at big ethnic markets like H-Mart/Assi. It's also an odd subsector to be in, because it's not pure retail grocery, but a little bit wholesale/trade supply.

If you're renting property, you're beholden to your landlord; if you're buying and have a mortgage, you're beholden to the bank.
posted by holgate at 11:42 AM on June 13, 2012 [1 favorite]


You have to know a lot about the restaurant business, or you will get ripped off by the people who work for you. The grocery business and the restaurant business are not the same.

Also, the clothing business and the restaurant business are not the same. Clothing doesn't spoil. Your customers don't wind up in the hospital because the clothing was sourced from a shoddy manufacturer. This is why people who are familiar with business but not the specifics of clothing manufacture and design can do well in the clothing business, but people who are not familiar with the specifics of the restaurant business almost never succeed in the restaurant business.

Finally, you're looking at the story the wrong way. Les Wexner made a bazillion dollars starting from one small store, and hooray for him. On the other hand, hundreds of thousands of people who owned one small store went bankrupt. Guess what? The odds of going bankrupt are even higher in the restaurant business than they are in the clothing business--even for very experienced restaurateurs (folks have mentioned Gordon Ramsey as an example!)

Agree with everyone who says "Go work for your uncle for a year or two and learn about the restaurant industry."
posted by Sidhedevil at 12:08 PM on June 13, 2012 [2 favorites]


Haha, honestly my parents would probably kill me working for them. I work for the grocery whereas the restaurant has enough help. It's a difficult story to explain why they would feel betrayed if I worked for them instead. I've been with the grocery for several years.

I guess what I really want to do is start up something of my own that I could be proud of. My original choice was to work for Limited Brands because I know many who like it there and say they treat employees well and pay is god.

Right now I know that my family think its a bad idea to have another location. They think it's just a waste of money and they're happy with where they're at.



"So is the restaurant in the mall that your family owns? Because I'm pretty sure that would be a big part of its success. To duplicate that, you would pretty much to have other locations where you would have that kind of an advantage. ("Pretty much," because it wouldn't be impossible to create the same restaurant elsewhere, but having a low-rent location you can depend on is huge.)"
Yes. We own the building but they are in the strip. the grocery and restaurant is connected. My dad doesn't let him pay much for rent.
posted by Asian_Hunnie at 12:26 PM on June 13, 2012


What do you guys think about the grocery idea? I know a lot more about this than restaurant.
posted by Asian_Hunnie at 12:27 PM on June 13, 2012


I've always wanted to own a grocery/market. I have a name picked out, a concept - everything! I'm basically in the restaurant business right now.

I think you are nuts to choose the restaurant over the grocery - but the grass is always greener, right?!
posted by jbenben at 12:33 PM on June 13, 2012


Might I add, my OTHER uncle is a good cook and owns a small restaurant but it's not doing that good. He just makes ends meet. I think he didn't do a good job picking location and customer service. My dad is a good business man and he didn't ask him for help because he was too scared.

Also, the restaurant is connected to the grocery store through a different room. Having us both there helps each other out. When people eat at the restaurant they come shop and vice versa.

If I were to open a grocery in a different location I would have to wonder about demographics, rent, etc. :\ Headache. Maybe I should just finish school and go work at a salary starting at $30,000 which is more realistic...
posted by Asian_Hunnie at 12:44 PM on June 13, 2012


Do you have the capital to open a grocery? Do you have potential locations picked out? Have you done a market survey to make sure you would be drawing a sufficiently large clientele? Are you familiar with the trends in the industry (do you keep up on the industry publications, etc.)? Are you willing to work long long hours filling in for employees who flake out on you?

The thing is that your experience of your parents' grocery isn't going to be 100% transferable, because they have an established business and your grocery would be starting from scratch. So you need to be doing all the standard things of someone opening their first grocery, like the capital assessment and the market survey and the location analysis; the added experience you have from your family business is definitely going to be useful, but you're going to have to do the basic legwork just like everyone else getting into the business for the first time.

If you want to own your own business, go for it. If you want to own your own business because you think it's a good way to get rich, you might as well buy lottery tickets because that's just as realistic. If your goal is to have a thriving business and enjoy your work (on balance, everyone has bad days), you may well be able to achieve that and you might strike it lucky and get rich as well. If your goal is to get rich, it's unlikely you'll make the kind of sound decisions that would put you in a position to take advantage of a lucky break that could lead to riches.
posted by Sidhedevil at 1:00 PM on June 13, 2012


The best rule for opening a restaurant or bar is to work in a restaurant/bar for a long time. It's a very difficult business and you really need to learn the ins and outs of the business or you can lose everything. It may look easy from the outside looking in, but it's not.

Or, if you want to follow in Joe Bastianich's footsteps, make sure your mother is a wildly successful restauranteur and celebrity chef. Then, have her bankroll your first restaurant and hook you up in countless other ways. His story is hardly a bootstraps fairytale.

I think sticking with the business you know and thinking about how to expand (like the Amazon suggestions) is a much better route.
posted by quince at 3:49 PM on June 13, 2012 [3 favorites]


I've been thinking about what you guys said and once I am able to open new discussion I will do that tomorrow.

But yeah, you guys mentioned bulk online. I think a good idea would be wholesale online...not only that but groceries online! Maybe instead of the risk of having another location, concentrate first on my father's business and how to get it better. That means providing things, making it more spaced (it's kind of crowded), better-looking, etc.

Then maybe look to selling things online. Providing those goods for people that live far away. Have them be able to shop for their own groceries. Of course making sure that some goods are able to make it that far and kept fresh.
A few years ago when I was in Interactive Media, I knew a few good web designers and coders who were awesome but didn't graduate yet. Maybe even look to colleges for those who can make good sites for me at a lower cost than a firm.
posted by Asian_Hunnie at 7:56 AM on June 21, 2012


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