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Small business center launches restaurant startup program

The SBDC brings restaurant advisor to help owners remain in business

Posted: March 31, 2013 2:00 a.m.
Updated: March 31, 2013 2:00 a.m.

The Small Business Development Center, hosted by College of the Canyons, offers a wide array of services, many at no cost to new and existing business owners.

But as of late, it’s been designing innovative programs that go beyond general business consulting. The programs aim to provide in-depth resources targeted to a particular industry in order to ensure a business owner’s success.

In December, the Santa Clarita center announced it had launched the Center for Entrepreneurship in partnership with California Lutheran University, the law firm of Homeier & Law and the Maverick Angels investment network to support economic growth through entrepreneurs.

Together the trio is offering six-week programs that include training and mentoring to early stage, high-growth potential companies that typically seek capital from angel investors.

The latest program offered by the SBDC is the Restaurant Start Smart Assistance Program – a program geared towards helping restaurants make the most informed and best possible decisions as they move to open their restaurant.

The center felt there was need to provide targeted assistance to those entering the world of the restaurant business because so many people open eateries based on a dream without sufficient real world experience or the knowledge of the economic fundamentals that are critical to the success of a restaurant, said Steve Tannehill, executive director with the SBDC.

Restaurants tend to have a higher failure rate than many other businesses, he said.

"We brought someone on board with almost 20 years experience in the restaurant business," Tannehill said. "He has successfully opened a number of restaurants and currently consults with some big name restaurants in Los Angeles, as well as helps run those restaurants."

The program consists of meeting with the restaurant owners once a week for up to three hours a time over the course of six to eight weeks as they’re preparing to open, he said. The SBDC’s restaurant advisor, Kevin McVearry, meets with the owners and helps them with all aspects of opening the restaurant for business.

"It’s all free," Tannehill said. "And it’s like practicing preventive medicine. We help the owner do it the right way from the beginning and avoid mistakes. We can be a lot more effective and helpful if we assist from the start than we can after they’ve been open for a while and are struggling to make their numbers. Our ability to affect positive change is a lot more limited then."

A number of restaurants opened last year and the SBDC was helping the owners launch their restaurants, he said, but Tannehill didn’t believe the SBDC had the expertise they needed.

Tannehill went looking for an additional resource, and after screening a number of applicants, he selected McVearry. Although he lives in downtown Los Angeles, McVearry was willing to come out and help the SBDC implement its new program, Tannehill said.

Everyone likes to cook and eat, McVearry said. But too many people and families open restaurants based on a dream and don’t realize it’s a business – you have to run it like one, he said.

As an example of that, McVearry pointed out that food costs have to be calculated along with the cost of overhead when pricing meals. But too many restaurant owners price their meals incorrectly and get into trouble.

"You have to make a profit," McVearry said.

McVearry has plenty of experience to back up his advice. He spent 17 years opening and operating restaurants, bars and nightclubs around the country, including the Los Angeles Market for the past 11 years.

He has opened and operated a total of seven nightclubs and five restaurants, and he currently consults for similar businesses on operations, management, opening, marketing and profitability controls.

His extensive background in opening new venues lends to his background in counseling on construction, projections, budgets, profit and loss statements, marketing, public relations, promotions, customer retention, hiring and training.

Marketing is key, McVearry said. But there’s more to the business than just marketing.

McVearry advises small operators to work with at least two major food suppliers in order to be able to compare prices.

"If you’re only using one supplier, you’re not really comparing your prices to anyone else," McVearry said. "U.S. Foodservice might be cheaper on paper goods, but higher on produce. So buy your produce from somewhere else."

When a restaurant is a small business, every nickel and dime counts, he said. Margins of 8-12 percent profit are good.

One of the biggest hurdles for new owners is being under-capitalized, McVearry said.

Restaurant owners often think they’ll make up what they spend to launch shortly after they open. But they need to keep 20-30 percent of their capital in the bank – ideally, six months of labor, rent and supply costs to draw on as the business is being built.

Among the most common mistakes restaurant owners make, McVearry said, is in not understanding their costs and their customers.

There a lot of egos in the business, he said. Restaurant owners think they have amazing food, and all it takes is for people to come in and eat the food. But they neglect to pay attention to what the customer wants.

A business owner also has to know the cost of making their recipe, the rent, accounting and workers’ compensation costs. For example, labor costs for certain restaurants should be around 25 percent of revenues.

Keeping an eye on everything can prevent "money from walking out the door without the business owner even realizing it," McVearry said.

The numbers really matter, Tannehill said. If a restaurant owner doesn’t know their costs and how to price, they can get themselves into trouble very quickly.

"Having proper staff is also very important," McVearry said. "When I used to run the Geisha House, I’d tell my staff everyone will come because of the name. But they’ll only return because of the service, from the hosts to the sushi chefs. Positive energy can spread very well."

Restaurant owners often make the mistake of thinking that if they’re busy the first month, they’ll be a success, Tannehill said.

If the culture in town is that everyone flocks to the new restaurant to check it out, they may well have one of the best opening months ever. But diners will only return based on other factors.

"Remember, they’re not adopting you as their new restaurant of choice; they are trying you out," he said.

"Most restaurant operators think they know everything and the last thing they’d ever do is go and ask for help," McVearry said. "But the success rate is much higher for those who learn and listen and are humble."

Taking advice from someone who is as learned as McVearry is worth a restaurant owner’s time, Tannehill said.

"Our program is about helping businesses succeed so that they are contributing to economy," Tannehill said. "Our services are free, but what we are seeking is the economic success of our clients. We want to help drive restaurants to positive economic outcomes – and if we are successful, to share their results with us so we can share that information with those that fund us. In the end, our funding and ability to provide free services depends on our clients being successful and sharing that success with us."



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