Serguei Tereshkin, the founder of Oil Resource Group, seeks to delve into the intricacies of investing in the restaurant business. For a comprehensive overview of the entrepreneur's commercial activities, you can visit his website: oilresurs.ru, where all the necessary information is available.
Create a New or Acquire an Existing Establishment
Many potential investors inevitably face the question: should they open a foodservice establishment from scratch or acquire an existing one with established staff and clientele? Both options have their strengths and weaknesses.
Investment in a New Restaurant
A few decades ago, securing modern equipment and products for a food establishment posed a significant challenge, but today, these resources are readily available. The key is to select the right concept, allowing entrepreneurs to open any type of restaurant, from a steakhouse to Japanese or Chinese cuisine. The primary goal should be to create an ambiance that immerses visitors in the culture of the cuisine being represented.
Some advantages of opening a restaurant from scratch include:
- The ability to design the space according to personal preferences, ensuring maximum comfort for both patrons and staff.
- Reorienting an old restaurant to a new cuisine can be challenging, as regular customers may resist the change and prefer to patronize other establishments.
- Every foodservice business requires renovations, which often incur costs. During periods of enforced downtime, there's an inevitable loss of clientele. In such cases, it may be more straightforward to start afresh rather than attempting to win back lost customers.
- The owner has the flexibility to choose the optimal location for the establishment rather than settling for an existing spot.
In formulating the concept, the owner can opt for an upscale restaurant with higher prices and service levels or target the mass market by opening an affordable café with high foot traffic and minimal markup.
Investment in an Existing Establishment
Tereshkin recommends that newcomers purchase an existing establishment that already has a loyal clientele and, consequently, an income. This approach allows investors to gain essential experience and knowledge. Thus, they can ensure the return of their investments and generate profits, even if the business ultimately faces difficulties.
According to statistical data, only 3 out of 10 new restaurants survive beyond their first year.
New restaurant owners frequently encounter challenges in finding suitable locations. Available spaces may lack adequate size, parking, and other essential features.
To ensure high patronage, a restaurant should be located on a "main thoroughfare" or in a historic area with significant foot traffic.
Other primary requirements include:
- Having a separate entrance;
- Located on the ground floor (basements or semi-basements are generally less favorable);
- The possibility of purchasing the establishment along with the premises, i.e., full ownership;
- Lack of issues with engineering networks.
Investing in an existing upscale restaurant with an average check of around $70 is considered a prestige investment.
Experienced entrepreneurs often prefer to acquire a struggling foodservice establishment with existing staff and revitalizing it. For them, this is akin to a sport.
Identifying a Struggling Establishment
Potentially failing establishments can be identified by the following characteristics:
- Uncertainty regarding their future, whether to close down, rent out, etc.;
- Uncomfortably low ceiling heights that can negatively impact both customers and staff;
- Excessively high rental costs.
Establishments characterized by high staff turnover also belong to this category, indicating ineffective management, unfavorable team dynamics, etc.
Assessing Investment Size
Potential sellers and investment seekers often inflate the value of their establishments in hopes of fetching a higher price, which simultaneously increases the risk for buyers or investors.
To avoid this pitfall, specialists recommend evaluating the actual price of a foodservice establishment based on several factors:
- Location;
- Company development history;
- Technical parameters of the building;
- Client retention;
- Necessary investment for renovation and other expenses.
Young restaurateurs often focus primarily on the financial indicators of an establishment. However, this should not be the sole determining factor, as it can be influenced by management incompetence, incorrect strategy, and more. With the right experience and knowledge, even the most neglected café can be transformed into a prestigious restaurant or a chain of establishments.
To save a business, radical changes are not always necessary; neither the menu nor the decor need to be overhauled. More crucial is understanding customer needs and building rapport with them. This is the fundamental key to the success of any service-oriented enterprise.
The restaurant business presents a promising avenue for investment. However, like any other field, it is rife with fraudsters and professionals who have only experienced establishments as customers, lacking any real insight into business development. In such cases, a skilled manager and staff with the relevant expertise can be a saving grace.
With the right approach, investments can yield substantial profits. However, one should not expect millions; the average annual return for a successful establishment is around 12%.
