So.... You want to open a Restaurant....! (PART III)

Hello my dear readers and welcome once again !!!!

I have been very busy this last couple of days looking for a commercial space for lease for a group of clients that want to open .....you’ve guessed it.... a restaurant in Miami !!! 

I told them about this blog and about this post in particular, so they will be joining us.

Let’s start this PART 3 by talking about square footage, a very complex matter that will expose many issues that you may or may not know. 

            

Someone comes to me and says “I need to rent a space to open a Restaurant and I need 1,500 to 2,000 Sq.Ft.”!!!

First of all... How did this person came up with that number? Well, turns out that these people are not hypothetical, they are real and as a coincidence we crossed paths right at this time that I’m writing this series, so I will use them as a “case study” and they will be very happy about it since they love being in the spotlight, after all....they want to open a Restaurant. 

                                                         Def Leppard at the O2

They were working with another real estate agent that did not know much about the subject and who started throwing numbers about amount of $$$ per Sq.Ft. as in “RENT AMOUNT” and that’s all he cared about... the amount of rent which meant the amount of his juicy commission that now he’s not getting because, my now clients, figured this out before they wasted any more time with him. 

                             "YOU ARE FIRED!!!! "

                                                                                    Donald Trump's photo courtesy of The Apprentice and NBC.com

He stuck by their request of square feet needed without asking them why... See? What happens is that in my field you cannot do it all, you cannot know it all, like I do not know jack about let's say.....marinas for instance, it is just not my thing, so I do not attempt to strike a deal related to something I do not have knowledge of, and that is exactly the beauty of Commercial Real Estate... but let’s stick to the subject of this post shall we?

                                   This Photo Break is brought to you by 

                                    ( ADHD moment )

                       

So, I asked several questions to my new clients and it turns out that 2,000 Sq.Ft. was not going to cut it !!! “What type of food? What’s your business plan like? Is it a high end fine dining concept that you’re thinking about running? What’s your start up capital? Are you going to have delivery service? 

All these questions were answered -luckily and in part- because these particular group of people own one restaurant already (but not here in the US....which is important- and I will be discussing this in the last part of this blog) so they have some knowledge necessary, luckily I met them and they fired their real estate agent, and sure as hell they won’t fire me ! 

As I said, you cannot know it all, or at least you cannot fool yourself that you do (I will blog about this ...”Agent/Rock Star”)

You may be probably asking yourself “What does the type of food has to do with the square footage?” Well, the more complex the menu is, the more efficient the kitchen needs to be.

                                     Venison Mille Feuille w/ mint couscous @ Angie's World Cuisine in Coral Gables, FL

                          Photo Courtesy of MYSELF,  shot with my Nikon and a fixed 50 mm lens that I got from Santa

The menu ultimately determines the size of the kitchen, quality of the food and the amount of “covers” that will be served efficiently with the lowest margin of mistakes, which translates in the quality of service given to the customers. Now....watch this- The Menu dictates the size of your dining room as well, which is the amount of people you are going to fit into your space, according to the concept you will be designing around “The Menu” !!! See how everything is inter related? Do you realize how intricate and complex this thing is? 

           Courtesy of MYSELF, I took this pic when I bought my mew Nikon. Shot with a 18-200mm Nikkor Lens

Do you still want to pursue this illusion of having a restaurant? Let’s continue since my new clients will, and I will tell you how all this turns out-

If you are going to serve fine dining cuisine most likely you will need several people in your kitchen and each one of them will have a station where they are going to perform their duties - Think of the scene of Remy with Chef Gusteau describing from above each one of the positions in the kitchen. 

                                                                              Courtesy of Disney/Pixar

Now let’s move onto the dining room of Chef Gusteau’s restaurant, which is obviously a fine dining experience, and analyze how separated the tables are from one another, see how it all starts to make sense? 

If you think about running a sandwich shop then the mount of space needed everywhere (aside form ADA compliant bathrooms for which you will need aprox. 400 Sq.Ft. standard) is not as in a 5 star high end restaurant- 

Rule of thumb is : 27 to 32 Sq.Ft. per person including kitchen, bathrooms, dining room, and server stations are needed to run any restaurant, then you will need to adjust it around building codes in your city, concept (fine dining, cafeteria, mid range trattoria style etc.) and features such as full bar, a stage, maybe you want to put a nice fountain right in the middle of the dining room, etc. All this data needs to be  on your business plan’s spreadsheet to see if the math adds up; in the case of this new clients of mine it turns out that they will need between 3,600 to 5,000 Sq.Ft. of space so they have to go back to their drawing board and adjust their initial numbers of their original business plan.

On Part IV of this post I will be discussing the lease and landlord issues which is another big piece of the equation to be considered and will definitely impact your bottom line $$$$ .

See you in a few days!!

                             Courtesy of Ratatouille/Disney/Pixar

Cheers!!!

So.... You want to open a Restaurant....! (PART II)

Hello and welcome to “part deux” of this post about restaurants; mind you that I will just be giving you a general overview of this complex subject; I simply cannot tell you everything I know because first of all it is not that much what I know, and second of all it would take roughly 23,456,986 parts or chapters to get in depth addressing every single issue.

To begin with I will start with the obvious, and that is “Location, location, location “ 

                                                 Kemah Boardwalk- Houston, TX
As simple as it may sound and as repetitive or trivial rather, the location of a restaurant is not only important because of the amount of traffic you might or may not get given any specific quadrant or street or corner, but instead it is very important because it is directly related to the food and concept you will be presenting to your potential customers...

...and also you may want to consider demographics before deciding on a certain spot. 

Most likely if you live in the city where you are thinking about opening your restaurant you already figured out what concept would go and in what neighborhood.

                                                          Puglia, Southern Italy


Here in Miami for example there are two different kinds of crowd, tourists and locals, each one of them with its own sub-categories but we are not going to get into that. Will you cater to locals? Will you cater to tourists? Or will you cater to both!

                                                                                       Beacon Hotel -South Beach, FL

Once you are totally ready to commit suicide find a good real estate agent that knows about this things (like me for instance)moz@avantiway.com   Commercial Division Director at Avanti Way Realty in Miami, FL

Then you have to find and architect, a contractor which will recommend a person that “walks the plans” thru the different departments to obtain approval for building permits, then you need to establish your business plan (very important) and design (also very important) - 

The main reason why restaurants fail in the first two years of operation is 
                      “UNDERCAPITALIZATION” 

which is a direct consequence of a poorly prepared business plan because of lack of knowledge. 
Think about it, you put on your excel spreadsheet your expected dining room rotation per day  times 12 months times your projected average ticket of X amount of dollar amount, and turns out that after your Grand Opening you were off by 67% and you are already riding that wave..... Plus you did not include things like insurance premium, security deposits for the landlord, pre paid rent, beer and wine license, coffee machine, etc. Turns out that there is an extra $50,000.00 that you overlooked and were not included in your business plan!!!!
Bottom line is that even If you think that you know what you’re doing, your business plan must be accurate or hire someone to do it for you- A feasibility study for any given area is in order; you cannot just go by the way you think or see that restaurants are doing in a certain neighborhood, like this one in this photo.... 

....that would be the dumbest financial move to make!!! 

Second item relates to another big issue and that is construction costs, I can only tell you what is more or less standard for my area, being Miami one of the largest metropolitan areas in the US, construction cost for a restaurant will start at around $80 per Sq.Ft. with low end finishes that is, once you start getting into high end touches like polished concrete floors, specialty lighting, sound system, etc. you will be in the $200 to $300 per Sq.Ft. range..... easily !! 

                                             Stephan Pyles Restaurant- Dallas, TX

I personally think that the best deal is to find a pre-existing restaurant already built out that closed down so you don’t really have to deal with construction from the ground up but rather some remodeling to fit in your concept and everything else related to a change of name and ownership, plus lots of advertising to make people notice that it is someone else with a different concept in that same spot, I assure you it will be a lot cheaper than building one from scratch. The good thing about this scenario is that you will most likely find all the most expensive and biggest headaches already in place, such as kitchen hood, grease trap, sprinklers, chairs, bathrooms that are ADA compliant and the BAR- Plus you will not have to deal with permits, construction, building inspections, new plans, etc, etc, etc.

These are the most expensive items that I could think of in a restaurant. 

If you still need a brand new space and wish to build it from the ground up then I invite you to read PART III of this series. For now ...... 

Cheers !!!

So.... You want to open a Restaurant....! (PART I)

Are you sure!!!? 

                                                                                       Photo Courtesy of Pari Dukovic

That is my first question to any prospective buyer that comes to me looking for restaurant space, followed immediately by my next one question without even letting them answer the first: Have you ever been in the Restaurant business? Do you know anything about it? Have you had restaurants in the past?  That’s rather 3 or 4 questions but they are all necessary; what happens is that I have encountered many people in the past that have come to me because of my experience and track record in both the real estate field and the restaurant business and I have found many times a common denominator, and that is lack of experience or lack of knowledge together with a strong desire for being in the spotlight; after all owning a restaurant looks very glamorous, elegant, gives you the illusion of belonging to the jet-set, of being part of a high class/VIP crowd, it’s a self esteem booster; all these ingredients together are a strong cocktail which will lead an investor to financial disaster- SO....!! Do you really want to open a Restaurant and do you really know what you’re doing? If so I will be happy to help you find the right spot or even build one from scratch...

                                                                               Apotheke in NYC - Photo Courtesy of Noah Kalina

...but if you have not been in the business, and regardless of all the warnings you are so hard headed that still want to venture in dangerous waters, then there are a few things you need to know which I will be discussing in the following PARTS of this short series. I am dividing it in “PARTS” because there are many topics that need to be discussed and if for you this is something new, and still want to do it, then it is better going slow so the digestion of information will be more effective. 

I will be discussing on PART II and PART III of this post things such as permitting, construction, design and concept, on PART IV we’ll be getting into leasing and landlord issues which are a key factor needed to be taken care of BEFORE getting into a commitment and on PART V we will be discussing what I have been seeing a lot lately and that is foreigners with experience in restaurants....in their country. 

Cheers!

Great Music Never Dies

In between posts I will be “posting” stuff to relax, to chill.... as I mentioned when I wrote my very first one, I will be writing about things that make ME feel good and I hope that they will make their way thru you somehow- Life is not only about money and work and business, although I pursue happiness in a lot of ways, and one of them is actually attempting to make an insane amount of MONEY, I truly believe that happiness is achieved by following and pursuing what makes you feel complete, what makes you realize that this journey is temporary and we better make the best out of it because we actually don’t know shit of what’s coming next in the so called “afterlife”.

This evening I had the luxury of watching and excellent documentary about the band U2 and the making of their album “The Joshua Tree”; released in 1987 and Grammy award winning work from the Irish band. 

The film goes about the members of the band speaking together with the manager (Paul McGuinness) and the producers of the album,  in the studio, with the original recording tracks of it and just going over the state of mind, the political environment at the time, the protest, the sorrow, the anguish, the laughs and cries of a time that didn’t know better..... 

Catch it if you have a chance, it is only shy of one hour long and it is all worth watching it. 

I’ve never been a big fan of U2, I have to admit it, I love their music but I come from a different school of Rock’n’Roll, nevertheless I have to say that they are certainly a pivotal band in Rock Music’s history; they explored sounds, they were innovative and way ahead of their time wether in writing or in the studio, sort of like one of my favorite bands of all times, which Bono actually quotes during a segment of the clip when he states that the thundering drum beat and the guitar of “Where the streets have no name” kinda resembled Bonham and Page.... 

Don’t miss it and since you’re there browsing, try to also find “It Might Get Loud”, if you like true Rock’n’Roll you will love both films !

Cheers !!!

In Times of Turmoil....(PART IV)

                                          AWESOME PHOTO COURTESY OF Timothy A. Clary/AFP/Getty Images

Welcome back to PART IV of this series of posts dedicated to investing during uncertain times, and as I promised on PART III, I will discuss a little bit about what I think is a safe investment in Real Estate, examining the positive and also the very few negative aspects of them. 

As I mentioned, nowadays I really like NNN investments such as Walgreens, CVS, Dollar General, any Telecom/Cell Phone company.... you get the idea, strong and stable tenants. What I like abut them first of all is that their NNN status allows a worry free ownership, the tenant is responsible for all the expenses such as property taxes, property hazard insurance, general maintenance of roof and structure and also cleaning , landscaping, exterior paint, parking lot.....EVERYTHING!! 

This is the perfect investment for those foreign national investors by the way,  those that simply cannot or do not want to deal with the property management aspect of the asset since they are not in the US. 
The CAP is generally lower in this type of investment and also is directly related to the area where the building is located, but the NET revenue is nevertheless good, not to mention safe, since it is considered a very conservative lower risk type of investment. 

Across the board nationwide, any of these chain drugstores generates a NOI of roughly 7.25%, (the lowest I have seen is right here in Miami-DADE County where it is very hard to get anything above 6%, but then again premium location comes with a premium price tag). 
Is location at all important for this type of investment?  Well, since the leases are corporate guaranteed, Yes and No, and let me elaborate a little on that; either company will usually sign a very long lease, I have seen 20 years initial term with 10 options of renewal for 5 years each; every lease is structured differently but more or less they have a similarity among them and that is their length, if the Tenant decides to close that location they will pay the rent for the reminder of the initial term or the term they are currently on, risky? Maybe, but if you consider the stability of these type of tenants the risk is very much mitigated. 
Aside from Real Estate I am a day trader and I have performed the due diligence of analyzing these companies from a trader stand point, and they look solid as a rock, plus remember that the Owner/Landlord is getting a check every month without any effort on his part, as I would call it “Non Energetic Income”, the other factor that may stop the average investor is the price tag on one of these which can easily run up the double digits territory (as in the $10million +range depending on the area where is located). 

Other good ones and solid as well are the AT&T’s and the Verizon Wireless’ which can bring an even higher CAP but with shorter term leases though, nevertheless the top Telecom companies are nowadays very solid.

Mobile phone traffic in the US is at an all time high and in crescendo. 
Dollar General stores are also in my list of “good” mainly because their CAP rate usually is above 8% and sometimes over 9% depending on the area. 

They are mainly located in lower income rural areas and prices generally are a little over $1million, very good for those investors with a decent amount of capital but not high enough to get into a chain drug store deal; of course the rule of thumb here is “the higher the CAP the higher the risk” like everything else in life, but once you have evaluated the status of that corporation which eventually would be your tenant, and once you have established that indeed is a corporate guaranteed lease the risk is greatly diminished and the investment therefore is a lot safer than buying a strip mall or apartment building. I will get into the GSA properties on my next final PART V of this series. For now....

Cheers!

In Times of Turmoil.... (PART I)

                                            Picture Courtesy of: McClatchy Newspapers

In times of turmoil is when poor decisions are made, is exactly when out of desperation a person, without the right tools or knowledge ends up getting into all different kind of messy situations that are hard to get out of, and I’m talking about economic decisions, commercial moves that need to be taken and done with a cool head. That is what I’m seeing a lot in our current environment and I try to advise people about the risks involved by investing into something for them unknown or something that from my trader and commercial investment realtor point of view does not make sense; take “Stanford” for example, I have personal friends and customers that invested heavily with his firm just because they were offered a steady 15% return and we all know how it ended up. 

   Picture Courtesy of Scott Olson/Getty Images

Obviously the amount of capital and disposable cash that any given person might have available for any given investment is a determining factor directly related to the amount of courage he or she might display at the moment of making a financial decision, and I’m talking here about those people that even though they have a large amount of cash not necessarily means that they have financial education and if they get it right, out of pure sheer luck, they look good and get the admiration of others, they are then called all sort of names such as “ballsy”, “risk taker”, “financial wiz” and so on, and if they don’t get it right then they really don’t get affected much since most likely, that loss will be written off their taxes at the end of the year.

But for the majority of folks out there, that are the average “Joe” with limited supply of cash but enough to get themselves into a mess, there is not room for error, no mercy if they mess up, so getting financial education is crucial, and I am not suggesting that everyone should become a trader or read a ton of books about trading the markets, but do a little research about safe heaven investments where money can be “parked” for a while until we get to see clear skies one more time. Here in Miami, from where I am blogging and where I have lived for the past two decades, the economical climate is somehow different thanks to foreign investments pouring into our city, but the rest of the Nation is still suffering and seems that recovery is far from being achieved. I don’t want my blogs to be lengthy so I will divide this topic into several parts where I will share with you what I have learned by trading currencies, reading and studying the markets, getting coached by whom I consider the best in the business of trading commodities, my financial coach at AMR University, and of course real estate investments that I have analyzed and look safe. Hopefully many of you will benefit from my attempt and I really hope you’ll enjoy it.

Cheers!