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The Thrill of Losing Money by Investing in a Manhattan Restaurant

168 点作者 PanMan超过 8 年前

25 条评论

feklar超过 8 年前
Friend of mine runs a tiny and successful to-go cafe. His most unexpected problem was competitor restaurants around him constantly phoning city hall to &quot;complain&quot; about his business in hopes they regulate him off the street. The most common complaint at first was cooking smell, so the tiny cafe is forced to install expensive filtration exhaust.Then the complaints turned to signage. A city inspector showed up numerous times to measure his sign, how far his little sandwich board was placed in the sidewalk out front, the brightness of the lights on his sign, that the artwork on the sandwich board was offensive or violated one of the thousands of regulations regarding public advertising. Then the complaints turned to patio, there was too much noise, chairs were too far into the street, garbage was left too long on tables, ect.<p>Anybody with a restaurant&#x2F;cafe startup idea should have some kind of contingency plan to deal with the inevitable use of city hall to try and close you down.
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AJJB10超过 8 年前
Minimal viable product&#x2F;lean startup. This is not that. For a restaurant that means:<p>1. Have good food, that sells. Nothing else matters. No big up front investments. Have a killer product, which you make in your home kitchen if you have to. I thought Americans knew this, with their food trucks and shared kitchens.<p>I see this all the time. People thinking about how to name their company, how the logo looks, or in this case which forks to use. These things matter, but only in the long run, when you&#x27;re able to sell your product successfully already.<p>Access to money and people like the author make this difficult, you aren&#x27;t forced to survive.<p>A restaurant near me has started without a name, no interior decoration and a less than good but not too bad location. After six months they had a line out the door, every night. After a year they had a name. After two years they renovated, but just a little bit. Now it&#x27;s 5 years later, it looks fancy, they have a logo and it&#x27;s nicely renovated. But they started with the product.<p>I think it&#x27;s a good idea to do everything in reverse, especially when we are worried how we are perceived. We see finished, well working things and think we need to emulate everything they are doing, including the expensive business cards, when it&#x27;s really the other way around. Product first, being forced to survive, the details come later. Makes for a much more relaxing atmosphere as well, with much less meetings that go nowhere.
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cool-RR超过 8 年前
The problem with investing in something cool, like owning a restaurant or a bar, is that you&#x27;re competing with a lot of people who are less mature than you. They are less mature than you because they&#x27;re willing to risk their financial future just so they can feel that they are cool guys who own a restaurant.<p>It&#x27;s always dangerous to compete with people who are less mature than you because they are okay with losing the important things in life in order to beat you, so you&#x27;ll be forced to either go down to their level or lose to them. It&#x27;s like playing chicken against someone who has suicidal tendencies.
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jimmywanger超过 8 年前
The fact of the matter is, this article explains why restaurants are money losing.<p>It&#x27;s an intrinsic good to own a restaurant. You get satisfaction from simply owning a restaurant, no matter if you make or lose money.<p>It feels good to treat your friends, and get preferential treatment at your own place. Making money sometimes is secondary.<p>It&#x27;s sort of like programming for the games industry. A lot of people just want to be in the games industry, cause it&#x27;s &quot;cool&quot;. That&#x27;s why they accept long hours and poor pay.<p>The ROI for a scrap metal yard or a sewage plant will always be higher than the ROI for a comparably priced restaurant.
NumberCruncher超过 8 年前
Spot the guy ho knows what he is doing!<p>- Andrew Yang, the principal investor of a successful restaurant [...] who comes from a restaurant family<p>or<p>- Gary Sernovitz is a writer and a managing director of a private-equity firm
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fitzwatermellow超过 8 年前
Counterpoint. The Halal Guys going from a single cart to 300+ restaurants: &quot;How Halal Food Became a $20B Hit in America&quot;<p><a href="http:&#x2F;&#x2F;www.bloomberg.com&#x2F;news&#x2F;articles&#x2F;2016-09-14&#x2F;america-loves-muslim-food-so-much-for-a-clash-of-civilizations" rel="nofollow">http:&#x2F;&#x2F;www.bloomberg.com&#x2F;news&#x2F;articles&#x2F;2016-09-14&#x2F;america-lo...</a><p>In their case, it was certainly <i>because</i> of the overpowering yet enticing smell of fresh grilled spicy lamb kebobs wafting across the block that drew the &quot;I wouldn&#x27;t eat meat off the street in a million years&quot; nabobs ;)
1024core超过 8 年前
The only way you can make money in a restaurant is via booze. I know a couple of restaurant owners, and they admit it: if they just sold food, they&#x27;d be losing money. The profit margins on alcohol are insane. A $1 bottle of beer can easily go for $5 (a 400% markup). And wine? A decent $12 bottle of wine will easily fill 6 glasses, at $7 a pop.<p>So if you&#x27;re planning on opening a restaurant, be sure to get your liquor license. You&#x27;ll depend on it.
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paulsutter超过 8 年前
You know those tiny lunch places in downtown San Francisco? Closet-sized and to-go only? That&#x27;s what people should try as their first restaurant. Unfortunately, people usually try that second.
lisper超过 8 年前
I don&#x27;t get it. If your gross margin is 3% you can raise your prices by 6% and <i>triple</i> your operating income. Are NYC restaurant-goers really that price-sensitive?
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tptacek超过 8 年前
<i>You can’t own one-forty-second of the next Zadie Smith novel.</i><p>Really? It seems like you kind of can, these days.<p>I wonder also whether restaurants are the kind of investment that only works if you can have a portfolio of them.
bsder超过 8 年前
The standard joke: &quot;How do you make a small fortune in the restaurant business?&quot;<p>&quot;Start with a large fortune&quot;.
mturmon超过 8 年前
OK, but done better by Anthony Bourdain in his famous book:<p>“To want to own a restaurant can be a strange and terrible affliction. What causes such a destructive urge in so many otherwise sensible people? Why would anyone who has worked hard, saved money, often been successful in other fields, want to pump their hard-earned cash down a hole that statistically, at least, will almost surely prove dry? Why venture into an industry with enormous fixed expenses (rent, electricity, gas, water, linen, maintenance, insurance, license fees, trash removal, etc.), with a notoriously transient and unstable workforce, and highly perishable inventory of assets? The chances of ever seeing a return on your investment are about one in five. ...<p>“The easy answer, of course, is ego. The classic example is the retired dentist who was always told he threw a great dinner party. &#x27;You should open a restaurant,&#x27; his friends tell him. And our dentist believes them. He wants to get in the business — not to make money, not really, but to swan about the dining room signing dinner checks like Rick in Casablanca.”
lordnacho超过 8 年前
&gt; Manhattan restaurants seem to be the original example of the business model taken to its extremes by Uber and others in Silicon Valley, of investor capital subsidizing, semi-permanently, the customer experience.<p>That&#x27;s the key take-away (haha). I liken it to poker. If you&#x27;re at a table with an idiot, you&#x27;ll get his money. If you&#x27;re at a table with a bunch of them, they&#x27;ll get yours.
joshu超过 8 年前
It feels like building owners capture basically all of the excess profit of restaurants, which is to the significant detriment of the quality of a neighborhood.
canada_dry超过 8 年前
And for anyone dreaming-the-dream, but thinking a hip new food truck is the way to go... a reasonably well equipped truck will run you upwards of $400K+.
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misiti3780超过 8 年前
I have always wondered why more people in NYC dont start with food trucks. That would be the most &quot;antifragile&quot; approach to starting a restaurant --<p>if the food isnt working, change it, if the location isnt working, drive somewhere else<p>you could approach the restaurant game like you are a&#x2F;b testing a sign up page until you got it right, then nail down a location etc.<p>disclaimer: I have never worked in the food industry
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nxzero超过 8 年前
Only restaurants I&#x27;ve known that did well owned the real estate they were in or were super cheap high margin places that were popular with a good location.<p>Lots of restaurants are just fronts for money laundering.
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rgovind超过 8 年前
What are some good resources to understand costs of setting up a restaurant in bay area? I know the general concepts involved, but its hard to get specific info like labour rates, rents etc
qaq超过 8 年前
Does this hold true for bars as well?
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johansch超过 8 年前
Here&#x27;s the real content, found at the end:<p>&quot;New restaurants, with too-easy access to financing from people like me, invest too much in design, tableware, food, and service, driving up every customer’s expectations of every restaurant in a cyclone of unprofitability.<p>Landlords, with enough dreamers to fill their spaces, can command nightmare rents.&quot;
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oneloop超过 8 年前
&gt; That is, New York City, with all its pastrami-and-pizza-hungry tourists and residents fleeing their pocket-size kitchens and young people too busy taking phone pictures of one another to cook, generates enormous demand for restaurants. There are twenty-four thousand of them in the five boroughs. That demand should (...)<p>24,000 restaurants is not demand, it&#x27;s supply. This is the Mr. Market fallacy.
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oneloop超过 8 年前
The author writes as if he was looking for entertainment, not profit. The journey from investing* to losing half of it over 7 years does sound entertaining, so I guess he got what he wanted.<p>* he says he invested &quot;a car&quot;, so $10-40k?
trendia超过 8 年前
thrill is misspelled<p>(ignore this post)
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theonething超过 8 年前
So you don&#x27;t think obeying the law is a good thing? Don&#x27;t you think regulations exist for a reason? In the case of the medical field for example, I&#x27;m very happy it is heavily regulated and I would expect everyone in that field to follow those regulations.<p>Now if you think think some of your industry&#x27;s regulations are unreasonable, that&#x27;s a whole other discussion. But it seems like what you are complaining about here is that your business has to follow rules&#x2F;law&#x2F;regulations.
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Mendenhall超过 8 年前
Bad math edit :)
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