advice to open new restaurant

pranal

Hi,

Me and other half are planning to open up a restaurant next year, . I have ten years experience as a restaurant manager and my wife works in the same place as finincial administrator

Currently we are looking at place which is in a good location.
We met the Landlord of the property,he offered us to put us some investment into building works.
There is building with walls and with full planning permission, where everythin g has to be done from scratch(roof work, plumbing,sanitry,electricity,heating,sewage,stair rails,floors,etc).

Initially when we met the landlord, he was hoping us to go 50-50% for the entire works until the restaurant opens and start with low rent i.e, 5%of the turnover for the 1st yeat and 8 % for 2nd and 3rd year and 9%for the 4th year. Rent would be reviewed from year 5 , depending on the market rent.
we think there is lot of basic work, that needs to go into the building.

What we could'nt figure out is the build up costs for the restaurant. we tried to google, but there is not much information available. We assume it would cost upto €100,000.

We are not sure how to approach him with a counter offer

All wew can think of is,
1. If we get the building with all the basic work done we can go from there with 50-50 option.

2. If we have to put money into the building from the scratch, we think 30-70% would be ideal

Kindly suggest if there are any other options available

We have €50,000 in saving, will that be enough for a project like this? how much it would cost to set up a restaurant from scratch?

Any suggestions welcomed

Regards
Praveen

yutta

I don't know much about the restaurant business, but surely you should be focusing on getting customers rather than the technical details of setting up the business? Sounds like a good deal if the landlord wants to go 50/50 on the renovation works.

THEIRISHMOB

Do you mind me askin:
1. what part of the country? city or county
2. what style of restaurant and food?
3. do you have a chef?

I have a lot of experence is this business and you would want to be very confident of your location/food/price/customers, etc as it is probably one of the hardest businesses to crack at the moment.
People just don't have the money they used to have for meals out.

Good luck but please think this out very carefully first.
Get someone not connected to you or your business to look over your plans for an honest view.

I'd do this for you for free as I would hate to see anyone waste money that took them years to earn.

pranal

THEIRISHMOB wrote: »

Do you mind me askin:
1. what part of the country? city or county
2. what style of restaurant and food?
3. do you have a chef?

I have a lot of experence is this business and you would want to be very confident of your location/food/price/customers, etc as it is probably one of the hardest businesses to crack at the moment.
People just don't have the money they used to have for meals out.

Good luck but please think this out very carefully first.
Get someone not connected to you or your business to look over your plans for an honest view.

I'd do this for you for free as I would hate to see anyone waste money that took them years to earn.

Hi Irish mob,

Thank you for the concern, The place we are looking is north Co.dublin.
we have researched the area and there is a big gap in the market for our kind of restaurant, with limited competition and good demand

I have couple of chefs in mind, who are interested in the project, but can only approach once the deal is done.

just could,nt figure out what is the best way to approach

bit confused.

the landlord has lot of kitchen equipment which he bought in auctions over the years for cheap, just dont how useful they are

irishmob if you PM me your number I can contact you and discuss in detail


Regards
praveen

pranal

I felt Boards was very useful, looking at other posts responses

Looking for some more advice!! Can anyone please help

Praveen

Bandara

The landlord sounds like a bit of a wide boy to me.

Why are you not looking for another pre-fitted out unit ? there are loads around.

what realistic weekly turnover are you predicting? What type of restaurant is it? what % of t/o will wages cost? Am I right in presuming your currently managing a hotel restaurant?

pranal

Hammertime wrote: »

The landlord sounds like a bit of a wide boy to me.

Why are you not looking for another pre-fitted out unit ? there are loads around.

what realistic weekly turnover are you predicting? What type of restaurant is it? what % of t/o will wages cost? Am I right in presuming your currently managing a hotel restaurant?

We are predicting the turn over to be 15,000-20,000 PW, it would be an indian restaurant. we will try to keep the wages below 30% turn over

I am interested in the place as it is in a good location, and as i said in the earlier post, there is not much competition in the area.

there is loads of pre-fitted restaurants in dublin but not in the area i am looking.

finally i am working in a busy seafood restaurant with seats 90 covers, which does upto 50000 turnover PW in busy summer month.

I am indian national, though never worked in indian restaurant, am keen in opening one, as there is a good demand for an indian in the area. i also know a good chef who is interested to work with me

The estate agent came back to me today morning, saying the landlord would do all the basic works which need to be done, and would like to know what kind of work(estimates) we are going to put in

not 100% what the estimate would be for the kitchen set up and the dining room, said will do the projections and get back to him

markymark21

pranal wrote: »

Hi Irish mob,

Thank you for the concern, The place we are looking is north Co.dublin.
we have researched the area and there is a big gap in the market for our kind of restaurant, with limited competition and good demand

I have couple of chefs in mind, who are interested in the project, but can only approach once the deal is done.

just could,nt figure out what is the best way to approach

bit confused.

the landlord has lot of kitchen equipment which he bought in auctions over the years for cheap, just dont how useful they are

irishmob if you PM me your number I can contact you and discuss in detail


Regards
praveen

Firstly I believe your landlord is giving you an excellent deal in so far as he is willing to burden some of the costs in regards to setting up the restaurant. Very un-landlord like if you ask me!

In regards to start up costs you said he has bought equipment.. what kind of equipment? Commercial fridge, freezers, ovens, fans etc or just knives and chopping boards?

In setting up any restaurant its important to understand that the first two years will make or break you. Don't expect to make any profit, if you break even I think you will be doing well. Setting up an Indian take away would be easier to make a profit in but as you said you are opening a restaurant = far higher operating costs.

I think €100,000 could be about right, depending on your rent agreement and what equipment you have. I'd advice you to ring the council as well to find out exactly what kind of commercial rates (water etc) they would stick on you..

Why not get in contact which other Indian restaurateurs and ask them what sort of start up costs they incurred? Although seeing as you will be there competitor they may not be so forthcoming with their information - but its worth a try right? Maybe get in contact with someone from another county?

I'd advise you to try and have a second source of income while operating the restaurant to ensure that if things become tight you have a back up plan. If you are going to quit your job to focus on this new project I think your wife should stay where she is.. that means along with her wages and your savings ( which I think you should keep rather than plowing into the business) you aren't putting all your eggs in one basket.

To fund the business I advise going to the small enterprise boards for a grant, the bank or the credit union (although you will be lucky to get money of them). You could also set up as a PLC and try and get some willing shareholders!

Good luck!

pranal

Hi all, thank you for all the information i received here on boards.

Just giving an update of whats been happening. After several meetings with the landlord and the agent, we agreed on following terms

LEASE:
4 years and 9 months

RENT:
The rent for the first 3 years will be determined by the turnover figures of the business as follows:
Year 1 - 5%
Years 2 & 3 - 8%.
year 4 - Rent review


USER:
Indian restaurant as well as collection & delivery of hot food.


We were clear on the terms above, but were not sure about

1. VAT: Will the tenant be liable for any VAT payable on the rent in accordance with VAT regulations?

2. the turn over of % , we understood must be on the net turnover but we received a drft heads of agreement stating that, it would be on the gross sales

What would be normal practice gross or net?

The landlord as agreed to put in 90% of kitchen equipment and will undertake to finish construction of the property to include, inter alia, walls, ceiling, mechanical & electrical, sanitary, lighting and most kitchen fittings.
and will arrange to meet with his architect to allow our input into the final layout and specification.

just before doing any negotiation, would like to get some advice here on boards

thanks in advance

pranal

antoinolachtnai

The problem with this is that you are investing money and time in developing the site, and the landlord can throw you out at the end of four years and nine months. A lease of this length gives you no real tenure and you cannot sell the lease on to someone else. This is fine if you think you can make your money within five years. This is not really a long-term investment though.

By gross, you mean including VAT? I don't think there is any norm. There is really nothing normal about a rent based solely on turnover.

I wonder how your landlord proposes to monitor or audit your turnover? This seems like something likely to result in a dispute. Make sure there is a means to resolve this dispute when it arises.

VAT on rent - you can offset this, i.e., if you pay 1000 euros VAT on the rent, you can discount this VAT from the amount you remit to the revenue.

At the end of the day, whether this is a good deal depends on how good the location is. If the location really is good, it's a good deal. Make sure the planning permission is adequate too.

Since the lease is so short, I would be pushing the landlord to provide you with almost everything you need.

Make sure to have an experienced solicitor on your side.

pranal

antoinolachtnai wrote: »

The problem with this is that you are investing money and time in developing the site, and the landlord can throw you out at the end of four years and nine months. A lease of this length gives you no real tenure and you cannot sell the lease on to someone else. This is fine if you think you can make your money within five years. This is not really a long-term investment though.

By gross, you mean including VAT? I don't think there is any norm. There is really nothing normal about a rent based solely on turnover.

I wonder how your landlord proposes to monitor or audit your turnover? This seems like something likely to result in a dispute. Make sure there is a means to resolve this dispute when it arises.

VAT on rent - you can offset this, i.e., if you pay 1000 euros VAT on the rent, you can discount this VAT from the amount you remit to the revenue.

At the end of the day, whether this is a good deal depends on how good the location is. If the location really is good, it's a good deal. Make sure the planning permission is adequate too.

Since the lease is so short, I would be pushing the landlord to provide you with almost everything you need.

Make sure to have an experienced solicitor on your side.

Hi Antoinolachtnai,

Thank you for replying, We are taking your advise on board.

Landlord is looking for sales report from POS system as a proof of sale. Yes by gross we meant sales including VAT.

Kind Regards
Pranal

Bandara

Pranal,

Just keep an eye on the contract and get it professional reviewed

Watch out for a minimum rent payment clause per annum, and e aware that it's quite possible that if you miss/are late with one payment then you may void the contract and risk the landlord being able to immediately remove you from the site if he wishes.

Also have nailed down who covers what in the event of equipment failure, general wear and tear and upkeep is probably your responsibility but in the event of something needing to be replaced I'd be pushing for that to be covered by the landlord. For example he may fit the kitchen out with a oven not fit for purpose, it breaks down after a year and your faced with a 6k bill to buy the correct equipment

Duke Leonal Felmet

I have no experience in food other than ordering and eating. Imo, a good example of an Indian restaurant with nice food and reasonable prices is Diwali, on Georges St. The decor is very basic, but that doesn't matter to me if you can feed me and not charge me the world for it.

My thoughts as a diner.

kk7

LEASE:
4 years and 9 months

I would not put any money in with this length of lease. The only one to benefit from this arrangement is the landlord. Get a solicitors advice.

dh0661

After a quick read @ all posts - has there been any mention of insurance & rates built into costs?