BUILDING A RESTAURANT
Overview and Checklist
One way to really realize your ideal restaurant vision is to buy a piece of land and construct a new building or renovate an existing structure on the land. That “Location Location” adage is still very important but realize that real estate values are at a premium in high volume traffic areas, if you can find them at all and construction costs are high. Not to say it can’t be done. I know as I did it many years ago.
Here’s are steps you’ll need to take:
LOCATION, LOCATION… I can’t overemphasize the importance of the “Power of Location” (Tourist Attraction, Mall, Downtown, Suburbs, etc..) and Visibility. Valuable location and traffic increase Price of land. It goes without saying… “Buy the best location you can afford” whether you keep the existing structure or tear down and build. NOTE: Traffic study counts are available from the municipal or state Department of Transportation (DOT)
COMPETITOR ANALYSIS: What is the concentration of independent and national chain restaurants nearby (this can be a traffic draw – business brings more business)?
NEIGHBORHOOD: Safe, well-lit, pedestrians or crime, graphiti, odors and blight? Consider residential and commercial neighbor relationships.
ZONING/REGULATIONS: Prior to purchasing land, you must ensure that it is properly zoned commercial and will allow a restaurant use. Also, if municipal sewer and water is not available, you will need adequate land acreage to locate a septic system with a minimum setback of 100 feet from the any open water body and the same distance from your well. Note that you will also need adequate parking (not over the septic system) for the number of seats your propose and do not err on the side of minimal parking.
Before approval, there will be a municipal hearing open to all abuttors to your property to see if they have any objections to your construction and or/business plans.
NOTE: If you plan live entertainment in your establishment, make sure that your building is well insulated for sound. Neighbors can make life miserable if bands can be heard outside your building. At my public hearing, sound was a major concern of abuttors and as a result, the town planners required me to install soundproofing throughout my structure.
NOTE: I’ve mentioned previously that certain municipalities will not grant a liquor license if the establishment is located too close to a school or church.
Sign Ordinances are either loose or restrictive. Obtain a copy of your municipal ordinance and make sure the signs you design for the property and/or building comply with your ordinance.
The first step once land is found is to hire a Land Planning Engineer to survey the property making sure its large enough to meet municipal ordinances for a restaurant, room for parking and can support a stand alone septic system (if there is no city/town sewer) adequate for the maximum number of seats proposed within minimum setbacks from water bodies. The septic evaluation also requires a series of test pits be dug around the property to test soils for proper materials and absorption. The Land Planning Engineer will work on your behalf to obtain necessary municipal permitting and ensure that environmental regulations are met during construction.
SECURE THE LAND:
If the soils tests prove positive and you have adequate acreage for other restrictions, negotiate your best deal and put the property under contract through your realtor with a contingency clause that you “are to be approved by the municipality for your new restaurant”. This way, you will not be required to complete the transaction if approvals are not granted for your business. Remember to have your attorney review your purchase and sale agreement thoroughly.
Is there currently a house, building or structure on the land that can be used for your new restaurant concept (at least a portion). Even if you have to re-model, this will save on building costs and may provide historic or other aesthetic character. Walk the building, imagining your new restaurant in the space. If the structure will not accommodate your vision, can you save any windows, doors, cabinets, other fixtures, etc. that can be used in your new building?
SIZE and SEATS:
Is the size of your building and number of seats you propose inline with your financial projections, expenses and future goals? Is there enough room on the land to expand later?
NOTE: The basic financial equation is: number of seats X average table turns per day X average check per person. Your projections from this formula MUST cover your mortgage and property taxes, payroll/benefits, taxes and related fees, cost of goods, insurances, oil and utilities, marketing, repairs and maintenance, supplies, administrative expenses, etc..
Can your revenue projections cover all the above expenses Plus provide growth and a cushion against weather, economic downturns, sudden loss of business, competition, time to establish a clientele, etc.. Have a backup plan and extra cash available from personal credit cards, family, etc… Things always cost more than you expect and even the most realistic projections MISS something!
Meet with several architects for a preliminary consultation to assess their experience, feel for your project vision and fees. Find an architect that has prior restaurant experience, as interior flow and layout affects your profits. My architect designed a beautiful horseshoe shaped bar in the middle of my new restaurant, but after speaking with experts, I quickly learned that this would limit the maximum number of drinking patrons in “prime real estate”. Had I followed his recommendation, I would have severely limited alcohol service and sales. This architect also tried to sell me an expensive exterior landscape plan, despite the fact that my restaurant would be open in the winter season only. Think through any recommendations and plans carefully trying to imagine the future, as you have the vision for what you want your restaurant to be.
Once you have solicited bids from at least 3 excavation contractors (remember, price is important but so is trust and experience), you must determine the sight placement for your new building. This means that you stake out each corner of the building footprint on your land to take best advantage of traffic visibility, views, etc..
Next, determine if you wish to have a full or partial basement or just a concrete slab. Storage is important but a basement will cost much more than a slab as the excavator must dig your cellar hole and the mason contractor must build substantial foundation walls using more concrete and rebar for strength. Your architect must also engineer load bearing beams or trusses to carry weight of the flooring and walls overhead. When I first built my building, cash was extremely tight and I chose to forego the basement in favor of a slab. For the next seventeen years, I had far less storage than needed without the basement and I needed to rent storage facilities.
The excavator will also build your road and parking areas and install your septic system. If a system is required, the excavator will build a leach field for liquids (usually a series of plastic chambers installed just below the land surface) and install a concrete tank(s) for solids and a grease trap. Your Land Engineer will provide the design of your system based on number of seats, day-parts you are open and number of plumbing fixtures.
Make sure your system design is large enough to accommodate more seats should you someday plan to expand. To get a building permit from your municipality, you will need to present a copy of your septic design. To obtain approval for expansion, you will need to prove the number of seats your system was designed for and demonstrate water usage for a number of busy months. Make sure you have your plumber install a water meter where your water supply enters your building and take daily readings several months prior to approval.
NOTE: The leach field chambers are extremely fragile and cannot be driven on by any vehicles, unless the surface over them is paved with asphalt. The septic tanks must be pumped every year based on volume of usage. My excavator cut some corners on the septic system install and it failed within a month of opening the restaurant. Yes, the work was fixed under warranty, but you don’t want to know what happened next to my building in full view downwind of my customers.
The road way and parking areas also must be constructed for proper drainage and to minimize erosion. If the road surface and parking is crowned properly, water runs off to each side. If not, you will get potholes, cracks and caverns. An uneven parking surface will collect large puddles of water and be a nuisance to your customer stepping out of their car.
NOTE: Excavators must also pay close attention to environmental impact and laws. Silt fencing is used to keep contaminants and other runoff out of streams, rivers and waterbodies.
It is best practice to solicit bids from at least 3 – 4 reputable building contractors and check their references. Are the owners satisfied with their building? What issues arose and how were those resolved? Were the sub-contractors reliable and did they perform quality work? Was the building completed on budget and on time? Would you hire the builder again? Although its human nature to be tempted to go with the lowest bid, try to anticipate the future and don’t be short-sighted to save a buck.
When I built my 6,000 square foot building years ago, three of four builders suggested a Truss-Roof structure which is the cheapest way to go. The builder I ultimately selected had the foresight to suggest a Post and Beam structure to allow future expansion by building a second floor. Although, this was not the cheapest option, it was the most aesthetically beautiful and we did ultimately build the second floor which doubled our sales.
NOTE: SAVE YOURSELF SOME SERIOUS $$$: Building contractors make money two ways – on the labor to build and then the markup on materials needed for your building. You have the option of buying your own materials. You have the most leverage with contractors and lumberyards before you select the final bidder and materials source.
Bid contractors against each other and start a relationship with your local lumberyard and set up a commercial contractor account. This means you will get contractor discounts of 10% or more off retail price on all materials you purchase for your new building.
Tell the lumberyard you’re constructing a new restaurant and will be spending lots of money with them now and in the future. You may attempt to negotiate with your contractor that you will be handling the purchasing of materials. This is a bit unconventional and some may refuse, but I learned long ago “Don’t Ask, You Don’t Get” and I did this.
Had I not negotiated, I would not have gotten the discount and I would have paid above and beyond the retail lumberyard price if the contractor had purchased the materials. This being said. Only attempt to handle the purchasing yourself if you feel comfortable being in this role.
Fixed Price Contracts should be explored as you can better plan for financing knowing exactly how much the structure will cost.
Remember, there are thousands of details to building a building and that “Change Orders” are costly to your budget and delay your completion date, which costs you money for every day your restaurant is not open.
Make sure to have a really good idea of what you want your building to be prior to signing the contract.
Have your attorney review any building contract prior to signing.
Builders generally act as the General Contractor (GC) framing and roofing the building only. They then sub-out excavation, road and site work, foundation, septic design and construction, plumbing, electrical, heating and cooling systems, sheetrock, paint, etc.. The GC monitors the sub contractors work and timeline, pays them and holds them accountable for the end result.
You may find with a busy contractor that you put the “GC Hat” on often, making critical decisions on-site almost daily, noticing problems and just getting the job done.
NOTE: To keep the project on schedule, you should have a solid idea of everything you want in advance, have fixtures and lighting picked out and ordered in due time and do all you can to be ready when the subs are.
Now that you have a building…
What equipment and small-wares, furniture and fixtures will you need to source and purchase to fit out your concept?
I can’t emphasize enough the importance of hooks or those aesthetics or unique characteristics of your concept and offering that have “Wow” factor and crowd appeal.
In two of my concepts, I built large wood-burning brick pizza ovens that I placed right in the middle of the dining room. The ovens and my pizza cooks were the “SHOW” and it created huge “buzz” and customer loyalty. What are your hooks?