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7 strategies to control opening costs

7 strategies to control opening costs

Careful site selection, space planning and alternative sourcing strategies all pay off when building a new restaurant. • See more Finance articles

Once chef at New York’s legendary 21 Club, Erik Blauberg has made his name in recent years as a hired gun to help open and restructure restaurants. His EB WorldWide Consulting has advised on projects ranging from B.B. King Blues Club & Grill in NYC to the London Ritz Carlton. He recently shared some tips to save on up-front development costs as well as control ongoing operational expenses.

1. Find the right location. By location, Blauberg means GPS coordinates as well as the property itself. Will the neighborhood support the concept? Does the structure suit the concept you have in mind? Can you produce the menu, serve guests efficiently and keep an eye on the dining room with the existing layout? Is the seating capacity adequate to achieve the cover counts projected in your business plan?

2. Bring experts in to evaluate the potential location. “Hire someone who can look at the space and see things you wouldn’t: the gas and electrical service, the provisions for exhaust, whether the structure is sound, whether you need to replace floors or other structural components. If there are issues those are things you need to raise up front,” Blauberg says.

3. Be a shrewd lease negotiator. Look for concessions, such as a rent-free period before your opening date. That’s key, especially if snafus such as permit delays prevent your restaurant from going online in a timely fashion. If having your restaurant on the premises adds prestige or value to the building, use that for leverage. “In New York City, for example, if you have a big building and want to put a restaurant on the ground floor as a showcase to bring in tenants, you can ask the property owner to contribute to the buildout,” Blauberg says. If you’re sinking large sums into renovating a space, improving the electrical supply and other improvements that will add value to the space, negotiate a subsidy for those items.

What about the lease time frame? “You want to know if you can extend your stay there if you want, you want that in writing and you want to know what those terms will be.”

“There are a lot of things you need to think about before you go to the table to negotiate,” he adds.

4. Choose your architect carefully. “I usually recommend looking for more of a nuts-and-bolts architect, someone who knows the building codes and is a problem solver, because that adds a lot of value,” Blauberg says. He says having restaurant-specific expertise is a plus, but not a must, as long as the architect knows local building codes.

Once you’ve settled on an architect and started working out a design, it’s important to review any plans carefully. “I would comb through the plans and make sure I have exactly what I want, because any changes later in the process will result in a change order, and what that amounts to is dollars,” he says.

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5. Go directly to the source. It’s not for the faint of heart nor the inexperienced, but Blauberg is a firm proponent of taking those plans straight to the tradespeople who will build the restaurant. He interviews several plumbers, electricians and HVAC specialists and asks for quotes based on the drawings. Then he circles back and finds a general contractor, who brings in carpenters, deals with permit issues and supervises the project.

He says going directly to subcontractors saves on the markup the contractor normally takes for pulling together the experts.

6. Plan and equip the kitchen to maximize efficiency. “It’s all about economy of motion in the kitchen,” Blauberg says. “The cooks on the line should not have to walk great distances to get ingredients.” Similarly, oven doors situated next to above a range should be hinged correctly to allow access. He advises researching the available equipment and zeroing in on the most innovative products, then shopping around for the best prices. He sometimes calls manufacturers directly and asks them to recommend distributors who are willing to cut him a deal, especially when he plans to buy multiple pieces. And he prefers units like programmable combi ovens for consistency and efficiency.

“When I go into a restaurant and create menus and recipes one of the biggest questions I hear is ‘what happens when you are gone? How do we maintain this quality level?’” Programmable equipment helps ensure consistent results.

7. Make the design work for you. You should begin by deciding whether you need an interior designer or a decorating service. The cost difference might be tenfold, so it’s a question worth asking, Blauberg says. Some spaces simply need an updated color palette or furniture, advice a decorator can offer.

Regardless of who designs the interior, the owner should be involved in choosing the finishes with an eye to the long run. Metal tends to be more durable than other finishes, for instance, and some fabrics are more stain-resistant than others.

“Instead of saying, ‘Here’s $2 million. Build me a restaurant,’ Blauberg advises owners to get their hands dirty in the buildout process. “The more involved you are, the more aware you are of the costs,” he observes. “Restaurant buildouts are expensive.”

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