The Restaurant Manager's Handbook: How to Set Up, Operate, and Manage a Financially Successful Food Service Operation 4th Edition

Chapter 1: Successful Pre-opening Activities For a Restaurant Venture

The purpose of this chapter is to list and describe the activities fundamental to opening a restaurant. Each restaurant offers its own unique, challenging problems. The following chapter will make the prospective restaurateur aware of all the pre-opening procedures that must be completed for any restaurant.

Before engaging in any business activity seek the guidance of a lawyer. You will have many legal questions and will need legal counseling during the opening period. The services of a local accountant or CPA should also be retained. The accountant will be instrumental in setting up the business and can provide financial advice to inform your decision making. The most important task to prepare for is writing the formal business plan, which will be your road map for success. We will discuss Business Plans in full detail in Chapter 3.

TYPES OF BUSINESS ORGANIZATIONS

When organizing a new business, decide on the structure of the business. Factors influencing your business organization decision include:

• Legal restrictions

• Liabilities assumed

• Type of business operation

• Earnings distribution

• Capital needs

• Number of employees

• Tax advantages or disadvantages

• Length of business operation

The advantages and disadvantages of sole proprietorship, partnership, corporation, and the new hybrid Limited Liability Company are listed on the next page.

Sole Proprietorship

Sole Proprietorship is the easiest, least costly way of starting a business. It can be formed by finding a location and opening the door for business. There are fees to obtain a business name registration, a fictitious name certificate, and other necessary licenses. Attorney’s fees for starting the business will be less than those of the other business forms because less preparation of documents is required and the owner has absolute authority over all business decisions.

Partnership

There are several types of partnerships. The two most common types are general and limited. A general partnership can be formed by an oral agreement between two or more persons, but a legal partnership agreement drawn up by an attorney is strongly recommended. Legal fees for drawing up a partnership agreement are higher than those for a sole proprietorship but may be lower than incorporating. A partnership agreement will be helpful in solving any disputes. However, partners are responsible for the other partner’s business actions as well as their own.

A partnership agreement should include the following:

• Type of business

• Amount of equity invested by each partner

• Division of profit or loss

• Partners’ compensation

• Distribution of assets on dissolution

• Duration of partnership

• Provisions for changes or dissolving the partnership

• Dispute settlement clause

• Restrictions of authority and expenditures

• Settlement in case of death or incapacitation

Corporation

A business may incorporate without an attorney, but legal advice is strongly recommended. The corporate structure is the most complex and costly to organize. Control depends on stock ownership. Persons with the largest stock ownership, not the total number of shareholders, control the corporation. With control of 51 percent of stock shares, a person or group is able to make policy decisions. Control is exercised through regular board of directors’ meetings and annual stockholders’ meetings. Records must be kept to document decisions made by the board of directors. Small, closely held corporations can operate more informally, but record keeping cannot be eliminated entirely. Officers of a corporation answer to stockholders for improper actions. Liability is generally limited to stock ownership, except where fraud is involved. You may want to incorporate as a C or S corporation, the most common types of incorporation. The C Corporation is the most complex and must comply with many government regulations on a continual basis. In most states the S Corporation can choose to comply with the same regulations or elect those most suitable to its purpose.

Limited Liability Company (LLC)

LLCs are relatively new and lack standardization among the states. The LLC is not a corporation but offers many of the same advantages. Many small business owners and entrepreneurs prefer LLCs because they combine the limited liability protection of a corporation with the pass through taxation of a sole proprietorship or partnership.

• LLCs have additional advantages over corporations.

• LLCs allow greater flexibility in management and business organization.

• LLCs do not have the ownership restrictions of S Corporations, making them ideal business structures for foreign investors.

• LLCs accomplish these aims without the IRS’s restrictions for an S Corporation.

LLCs are now available in all 50 states and Washington, D.C. If you have other questions regarding LLCs, be sure to speak with a qualified legal and/or financial advisor.

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SELECTING THE RESTAURANT SITE LOCATION

After finding a likely area for the restaurant, obtain as many facts as you can about the area: How many restaurants like yours are there? Can you find out something about their sales volume? As restaurants attract primarily local inhabitants, what is the population of the area? Is the population trend increasing, stationary, or declining? Are the people native-born, mixed, or foreign? What do they do for a living? Are they predominantly laborers, clerks, executives, or retired persons? Are they all ages or principally old, middle-aged, or young? To help you gauge their buying power, find out the average sales price and rental rates for homes in the area, the average real estate taxes for homes, the number of telephones, number of automobiles, and, if the figure is available, the per capita income. Zoning ordinances, parking availability, transportation facilities and natural barriers — such as hills and bridges — are important in considering the location of the restaurant.

Possible sources for this information are the Chamber of Commerce, trade associations, real estate companies, local newspapers, banks, city officials, and personal observations. The United States Census Bureau may have developed census tract information for the area you are considering. A census tract is a small, permanently established geographical area within a large city and its environs. The Census Bureau provides population and housing characteristics for each tract; their website is located at www.census.gov. This information is valuable in measuring your market or service potential. Use the score sheet on the following page to help determine the best location.

NATIONAL RESEARCH

You will need national research if you plan to open a business in a different area of the country than your own. These are some resources to evaluate different areas:

According to Forbes Magazine, the nine best metro areas to start a business in 2005 were:

• Boise, Idaho

• Raleigh-Durham, North Carolina

• Washington, DC

• Albuquerque, New Mexico

• Huntsville, Alabama

• Fayetteville, Arkansas

• Norfolk, Virginia

• Atlanta, Georgia

• Madison, Wisconsin

The ten best small metro areas were:

• Sioux Falls, South Dakota

• Rochester, Minnesota

• State College, Pennsylvania

• Fargo, North Dakota

• Bismarck, North Dakota

• Rapid City, South Dakota

• Lincoln, Nebraska

• Las Cruces, New Mexico

• Iowa City, Iowa

• Bloomington, Indiana

MARKET AREA RESEARCH

Market is one way of referring to a city or a metropolitan statistical area (MSA). MSA is a term used in census research. Decide on a target city for your business. Start looking at various parts of the city. Focus on the parts that would be good for your business.

• Trade area research. Trade area refers to the area from which most of your customers will come.

• Site research. After you have narrowed down your choices, it is time to look at the sites. Take pictures, make notes, and evaluate the various sites to determine which is best for your restaurant.

POPULATION AND DEMOGRAPHICS

Population and demographics are factors to consider in choosing your location. Places to obtain the details you need include: the United States Census Bureau (www.census.gov) which can supply important information and statistics about the restaurant industry.

Demographics to evaluate include:

• Population density

• Personal income

• Age groups

• Ethnic populations

• Employment statistics

A favorite source for information is the local Chamber of Commerce. To contact a Chamber in another area, go to www.chamberofcommerce.com. You can get in touch with the state restaurant association and peers will assist you with economic and lifestyle patterns for your business research.

Your library and online sources can provide valuable information. There are research librarians who can help you. Some books you should check are:

• Demographics USA (ZIP edition). Find out the market statistics in different areas of the United States.

• Lifestyle Market Analyst. Standard Rate & Data Service—look under gourmet cooking/fine foods and cross-reference market, lifestyle, and consumer.

STANDARD & POOR’S INDUSTRY SURVEYS

For additional data and statistics, visit the following sites online:

• http://quickfacts.census.gov/qfd/index.html

• http://www.searchbug.com/sitemap.aspx

• www.melissadata.com/Lookups/index.htm

• The American Community Survey – provides additional information from the supplemental census survey. This information includes demographics by county and metropolitan statistical areas (MSAs). An MSA is an area with at least one major city and includes the county or counties located within the MSA. This survey is replacing the Census Bureau’s long survey. It provides full demographic information for communities each year, not every 10 years.

• Censtats – http://censtats.census.gov provides economic and demographic information that you can compare by county. Information is updated every two years.

• County Business Patterns – Economic information is reported by industry, and the statistics are updated each year. Statistics include the number of establishments, employment, and payroll for more than 40,000 zip codes across the country. Metro Business Patterns provides the same data for MSAs.

• American FactFinder – http://factfinder.census.gov lets you evaluate all sorts of U.S. census data.

SITE RESEARCH

You can use the following list to evaluate a potential business site:

• Downtown area

• Historical district

• Business district

• Government offices

• Colleges/universities

• Technical schools

• Religious schools

• Military bases

• Hospitals

• Major highway

• Beaches/Ocean

• Lakes

• State parks

• Sports arenas

• Rivers

• Mountains

• Nature preserves

• Zoos

• Hotels

• Shopping

Evaluate these specifics about any location you are considering:

• How many similar restaurants are located in the area?

• Find sales volume. (Check business licenses for previous year.)

• Are there colleges or student housing in the area?

• Is there a high number of working mothers in the area?

• What is the population of the immediate area?

• Is the population increasing, stationary, or declining?

• Are the residents of all ages or old, middle-aged, or young?

• What is the average sales price and rental rates for area homes?

• What is the per capita income?

• Find the average family size.

• Is the building/location suitable for a food service establishment?

COMPETITION

Never underestimate the value of knowing your competition. Make a list of the other restaurants in your market. Which ones target the same population that you will? Find out what they are selling and their prices.

Take a detailed look at your competition when you narrow down your choices. The information you want can be hard to find. The best way to find information about your competition may be a visit to their establishments. Be creative. Other sources of information on competition include the following ideas:

• Telephone book. Will give you the number and location of your competitors.

• Chambers of Commerce. They have lists of local businesses. Verify whether it is a complete list, not just Chamber members.

• Local newspapers. Study the local advertisements and help wanted ads. There could also be a weekly entertainment section with information about local restaurants, their prices, and menus.

• National Restaurant Association. They provide by state the number of establishments, projected sales, and the number of employees. This can be found at www.restaurant.org/research/state/index.cfm.

SCOUTING THE COMPETITION

Mark the proposed location on a street map. You can determine how far to research, depending on how far you believe people will travel for your products.

Once you determine your target area, visit every business that serves items that are similar to the menu you plan to feature. Sample items from those businesses that have similar menus or serve your target customer. If they have menus you can take, grab one. Be critical and answer the following questions:

• What did and did not work for you in their restaurant?

• Do they serve your target customer?

• If not, who do they serve?

• Do their customers seem to like the surroundings?

• How busy are they at peak times?

• What kind of presentation do they have for their menu items?

• How is the food?

• What does the plate presentation look like?

• Do they offer anything unique?

• What is their seating capacity?

• What is the atmosphere?

• When are their busy periods?

GOVERNMENT LAWS, REGULATIONS, AND LICENSES

STATE REGISTRATION

Contact the Secretary of State’s Office as early as possible and discuss your plans for opening a new business. All states have different regulations. This office will be able to describe all of the state’s legal requirements and direct you to local and county offices for further registration. There is generally a fee required for registering a new business; most often it is less than $100. The city, county, or state agency will run a check to make certain no other businesses are currently using your business name. You may be required to file and publish a fictitious name statement in a newspaper of general circulation in the area. You must renew this fictitious name periodically to protect it legally.

Should your state have an income tax on wages, request from the State Department of Labor or Taxation all pertinent information, such as required forms, tax tables, and tax guides. Also contact the State Department of Employee Compensation for their regulations and filing procedures.

CITY BUSINESS LICENSE

Contact the city business department. Almost all cities and counties require a permit to operate a business. Your application will be checked by the zoning board to ensure the business conforms to all local regulations. Purchasing an existing restaurant will eliminate most of these clearances.

SALES TAX

Contact the state revenue or taxation agency concerning registry and collection procedures. Each state has its own methods of taxation on the sale of food products. States that require collection on food and beverage sales also require an advance deposit or bond to be posted against future collectable taxes. The state revenue agency may waive the deposit and accept instead a surety bond from your insurance company. Sales tax is collected only on the retail price paid by the end user. Thus purchasing raw food products to produce menu items will not require sales tax on the wholesale amount. However, you must present the wholesaler with your sales tax permit or number when placing orders and sign a tax release card for their files. A thorough investigation into your state’s requirements is a must.

Certain counties or cities may also assess a sales tax in addition to the state sales tax. This issue needs to be thoroughly researched, as a future audit could present you with a considerable tax liability.

HEALTH DEPARTMENT LICENSE

The health department should be contacted as early as possible. A personal visit to discuss your plans and their needs is in order. Show cooperation and compliance from the very beginning. The health department can close your facility until you comply with its regulations. A restaurant shut down by the health department can be ruined if the closure becomes public knowledge. Prior to opening day, the health department will inspect the restaurant. If the facilities pass inspection, they will issue the license allowing the restaurant to open. The cost of the license is usually less than $50. Should they find faults in your facility, you must have them corrected before they will issue a license.

Every year, the health department will make unannounced inspections of the restaurant. An examination form will be completed outlining their findings. You must have all violations rectified before their next inspection.

Many health inspections are brought about by customer complaints. The health department will investigate every call they receive. Depending upon the number of calls and the similarity of the complaints, a pattern may develop. They will then trace the health problem to its source. Usually the problem is a result of mishandling food by a member of the staff, or the problem can sometimes be traced to your supplier.

Although the health department can seem like a terrific nuisance, they really are on your side. Cooperation between both sides will resolve all the restaurant’s health problems and make it a safe environment. Many states have laws requiring that the manager and in some states the entire staff attend and pass an approved health and sanitation program.

Check with your state restaurant association. A list of all associations is located in the back of this book. The most common approved program is the ServSafe program developed by the NRA Educational Foundation. Materials may be purchased at www.atlantic-pub.com or by calling 800-814-1132. The ServSafe products, including instructor guides, answer sheets, instructor slides, manager training, food safety CD-ROMs, and instructor tool kits are available in English and Spanish.

FIRE DEPARTMENT PERMIT

An occupational permit from the fire department will be required before opening. Contact the fire department as early as possible, preferably in person, for their regulations and rules. Fire inspectors will check exhaust hoods, fire exits, extinguisher placements, and the hood and sprinkler systems. Many city fire departments do not permit the use of open-flame candles, flaming foods, or flaming liquor in the building. It is best to ask in advance. Based on the size of the building, the local and national fire codes, and the number of exits, the fire inspectors will establish a capacity number of people permitted in the building at one time. Follow their guidelines strictly, even if this means turning away customers because you have reached capacity.

BUILDING AND CONSTRUCTION PERMIT

If you plan on renovating the restaurant, you may need a local building permit, Permits are generally issued from the local building and zoning board. The fee is around $100, or it may be based on a percentage of the total cost of the project. You need to show the building inspector your blueprints or plans to determine if a permit is required. If so, he will inspect your plans ensuring that they meet all the local and federal ordinances and codes. After the plans are approved a building permit will be issued. The building inspector will make periodic inspections of your work at various stages to ensure that construction conforms to the approved plans.

SIGN PERMITS

Many city governments are instituting sign ordinances and restrictions. These ordinances restrict the sign’s size, type, location, lighting, and proximity of the sign to the business. Owners or managers of a shopping mall or shopping center may also restrict the use and placement of signs.

STATE LIQUOR LICENSE

A state liquor license requires extensive investigation because of its complexity. Many states do not allow the sale of liquor in restaurants; others allow only beer and wine. Certain states vary the restrictions on sales of alcoholic beverages by county. A license to sell liquor in some states may cost a few hundred dollars; in others a license can cost upwards of $100,000. Several states are on quota systems and licenses are not even available. Sometimes the decision to allow liquor sales is up to the county. Conduct a thorough investigation concerning your particular state, possibly with your lawyer. After you obtain a license, it is imperative that you adhere to its laws and regulations. Most states have so many laws regarding the sale of liquor that they fill an entire book.

Make certain all employees are thoroughly familiar with the liquor laws. Carefully train new employees; test them if necessary. Constantly reiterate the laws. Employees will become lax if they are not reminded often of this big responsibility.

FEDERAL IDENTIFICATION NUMBER

All employers, partnerships, and corporations must have a Federal Identification Number. This number will be used to identify the business on all tax forms and other licenses. To obtain a federal identification number, fill out Form 55-4, obtainable from the IRS. There is no charge. Also request the following publications, or download them via the Internet at www.irs.gov:

1. Publication #15, circular "Employer’s Tax Guide."

2. Several copies of Form W-4, "Employer Withholding Allowance Certificate." Each new employee must fill out one of these forms.

3. Publication 334, "Tax Guide for Small Businesses."

4. Request free copies of "All about O.S.H.A. and O.S.H.A. Handbook for Small Businesses." Depending on the number of employees you have, you will be subject to certain regulations from this agency. Their address is: O.S.H.A., U.S. Department of Labor, Washington, D.C. 20210, http://osha.gov.

5. Request a free copy of "Handy Reference Guide to the Fair Labor Act." Contact: Department of Labor, Washington, D.C. 20210, www.dol.gov.

INTERNAL REVENUE REGISTRATION

In conjunction with the liquor license, you need to obtain tax stamps from the IRS. Call the local IRS office and have them send you application Form 11 or check the website atwww.irs.gov. Based on the restaurant information you supply on the form, the IRS will assess a fee. This application makes the IRS aware that you are engaging in the retail sale of liquor.

OPENING THE RESTAURANT BANK ACCOUNT

If you received your financing through a local commercial bank, it is suggested you also use this bank for your business account if it fills all your needs.

Choose a bank that will provide you with these services:

• Night deposits.

• All credit card services (if you will be accepting credit cards).

• Change service (coins, small bills).

• A line of credit to certain suppliers.

• Nearby location for daily transactions.

It is very important that you get to know all the bank personnel on a first-name basis, particularly the manager. You will be in the bank every day. Make an effort to meet them and introduce yourself. Their assistance in obtaining future loans and gaining credit references will be valuable. We suggest using a smaller bank. Your account will mean more to it than to a larger bank.

Take time to shop around for the bank that will serve you best. When you go into a prospective bank, ask to see the bank manager; tell him of your plans and needs. All banks specialize in certain services. Look at transaction charges and all other service charges. Compare handling charges on charge card deposits. A small percent of thousands of dollars over a couple of years adds up to a great deal of money. Look at the whole picture very carefully. After you have selected a bank, you should order:

• Checks

• Deposit slips

• Deposit book

• Night deposit bags and keys

• Coin wrappers for all change

• Small bank envelopes

INSURANCE

Liability protection is of the utmost concern. Product liability is also desirable, as the consumption of food and beverages always presents a hazard. Described in this section are all the different types of insurance coverage applicable to all types of restaurants. By no means is it recommended that you obtain all this insurance. You would probably be over insured if you did. Determine with your agent which insurance coverage should be in place. Any policy should contain a basic business plan of fire/theft/liability/Workers’ Compensation.

FIRE INSURANCE

Covers the buildings and all permanent fixtures belonging to and constituting a part of the structures. Coverage usually includes machinery used in building services such as air-conditioning systems, boilers, and elevators. Personal property may also be covered.

REPLACEMENT COST ENDORSEMENT

Provides for full reimbursement for the actual cost of repair or replacement of an insured building.

EXTENDED COVERAGE ENDORSEMENT

Covers property for the same amount as the fire policy against damage caused by wind, hail, explosion, riot, aircraft, vehicles, and smoke.

GLASS INSURANCE

Covers replacement of show windows, glass counters, mirrors, and structural interior glass broken accidentally or maliciously.

SPRINKLER DAMAGE

Insures against all direct loss to buildings or contents as a result of leakage, freezing, or breaking of sprinkler installations.

VANDALISM

Covers loss or damage caused by vandalism or malicious mischief.

FLOOD INSURANCE

Flood insurance is written in areas declared eligible by the Federal Insurance Administration. Federally subsidized flood insurance is available under the National Flood Insurance Program.

EARTHQUAKE INSURANCE

Covers losses caused by earthquakes.

CONTENTS AND PERSONAL PROPERTY DAMAGE

• General property form

• Replacement cost endorsement

• Boiler and machinery insurance

• Improvements and betterments insurance

• Extended coverage endorsement

• Direct damage insurance

• Vandalism

• Consequential damage endorsement

• Business interruption (use and occupancy)

BUSINESS OPERATIONS INSURANCE

• Valuable papers

• Electrical signs

• Transportation policy

• Motor truck cargo owners

• Time element

• Business interruption

• General liability

• Earnings insurance

• Product liability

• Extra expense

• Contractual liability

• Rental value insurance

• Owner’s protective liability

• Lease hold interest

• Personal injury vehicle

• Umbrella liability

• Fidelity bonds

• Crime

• License bonds

• Liquor liability

• Business legal expense

• Fiduciary liability

• Life insurance

• Group life insurance

• Partnership

• Travel/Accident

• Key man insurance

• Health insurance

• Comprehensive general liability

• Dishonesty, destruction and disappearance

• Major medical

• Endorsement extending period of indemnity

WORKERS’ COMPENSATION INSURANCE

Workers’ Compensation Insurance covers loss due to statutory liability as a result of personal injury or death suffered by an employee in the course of employment. This insurance coverage pays all medical treatment and costs plus a percentage of the employee’s salary due to missed time resulting from the injury. Workers’ Compensation Insurance is highly regulated by both state and federal agencies, particularly O.S.H.A. Be certain to obtain all the information that pertains to your particular state. Workers’ Compensation Insurance is mandatory in most states.

ORGANIZING THE PRE-OPENING ACTIVITIES

Opening a restaurant or any business is a great test of anyone’s organizational and managerial abilities. It is imperative that you communicate well with your key personnel. The best way to do this is to use the form at the end of this chapter. Keep track of the assignments that need to be completed, who is handling the assignment, and when they must be completed. Allow plenty of time for assignments and projects to be accomplished. Even the simplest task may uncover a web of tangles and delays. Delegate responsibilities whenever possible, but above all stay organized. Maintain a collected composure and deal with people and problems on a level and consistent basis, and you will be off to a great start.

FIRST PRIORITY ITEMS

Suggested items that must be completed well ahead of opening date are:

1. List the restaurant’s name and number in the phone book and yellow pages.

2. Order and install an employee time clock or appropriate software.

3. Allow shipping and lead time for:

• China, tables, chairs, settings

• Silverware

• Equipment

• Drop safe for office

• Printing: menus, stationery, business cards, matches, and napkins

4 Develop a list of all construction projects to include who is completing them, when they will be completed, and a list of materials needed.

5. Set up a large calendar on the wall with deadlines, when deliveries will be expected, construction projects finished, equipment installed, meetings, and the opening date.

6. Contact the art galleries or artists’ groups in your area. They may be able to supply you with artwork to be displayed in the restaurant on a consignment basis.

PRE-OPENING PROMOTION

Described below are some pre-opening promotional ideas. There is a definite distinction between promotion and advertising. Promotion involves creating an interest in a new project usually at little or no cost. As soon as possible, put up the new restaurant sign or a temporary sign explaining the name of the new restaurant, type of restaurant, hours of operation, and the opening date. People are interested in what is occurring in their neighborhood; give them something to talk about.

1. Meet with the advertising representatives of the local papers. Determine advertising costs and look into getting a news story published describing the restaurant.

2. Have plenty of the restaurant’s matches and business cards on hand: they are a great source of publicity.

3. Join the Better Business Bureau and the local Chamber of Commerce. Besides lending credibility to your organization, they can supply you with good free publicity.

4. When you place your employment ad in the classified section always list the type of restaurant and location. This inexpensive classified advertising will help spread the word. Many people in the restaurant industry also love to find new restaurants to try out.

INITIALLY CONTACTING PURVEYOR AND SUPPLIERS

Six to eight weeks before the scheduled opening date, contact all the local suppliers and meet with their sales representatives. Have the kitchen and bar managers present if possible. These companies will be supplying the restaurant with its raw materials. Make certain each sales representative understands that quality products are your top consideration. Competition is fierce among sales representatives and suppliers. Let each know you are considering all companies equally. Never become locked into using one purveyor only. Shop around and always be willing to talk with new sales representatives. Consider these points when choosing a purveyor:

1. Quality of products. Accept nothing but A-1.

2. Reliability.

3. Delivery days. All deliveries should arrive at a designated time.

4. Is the salesperson really interested in your business?

5. Does he seem to believe in what he sells?

6. Terms in billing (interest, credit).

7. Is the company local for emergencies?

8. From the first meeting with the sales representative you should obtain:

• Credit applications to be filled out and returned.

• Product lists or catalogs describing all the products.

• References of the restaurants they are currently servicing in the area. Check them out!

You should supply them with a list of the products you will be purchasing with estimates of the amount of each item you will be using every week.

Emphasize to the sales representative that price is certainly an important consideration, but not your only one when selecting a supplier. Point out to the sales representative the other concerns you have about using their company. Indicate that you intend to compare prices among the various companies but would not switch suppliers due to a one-time price undercutting. Loyalty is important to sales representatives; they need to expect that order from you each week, but at the same time let them know they must be on their toes and earn your business.

Most companies offer a discount to restaurants once they purchase a certain number of cases. Keep this in mind when comparing prices and suppliers. Choosing a supplier is often a difficult task with so many variable factors to consider. Begin to analyze these problems in terms of the overall picture, and your purchasing decisions will become consistently more accurate.

PAYROLL

Before the opening date, you will need personnel to assemble chairs, do odd painting, hang pictures, and do anything required. Many of these temporary employees may be used for various jobs in the restaurant after opening. The time clock should certainly be used during this period for better control. Overtime must be carefully monitored, and if possible, avoided. Managing employees and payroll will require a great deal of organization between assignments and scheduling.

Many of these jobs will be boring and tedious. Compensate these employees well for their efforts. Giving them a free lunch or dinner will be appreciated. These small tokens on your behalf will be returned in gratitude many times over the small cost incurred.

In most restaurants the internal bookkeeper calculates and prepares the payroll. I recommend the use of Quickbooks or Peachtree computer software for payroll processing. Quickbooks will be very useful in other parts of your business. The website is www.quickbooks.com, Peachtree is www.peachtree.com.

You may prefer to use a computerized payroll service or your accountant. All computerized payroll service companies operate in a similar manner. The bookkeeper totals the number of hours each employee worked for the pay period from the time cards. This information is transmitted to the computer company via telephone. or as part of your service, it may be picked up from your office.

Using the rate and number of hours worked, the computer calculates the gross pay, overtime, social security, federal and state taxes, other miscellaneous deductions, and the net check amount. Based upon this information, each check will be printed along with a corresponding stub. The checks are verified and returned, often within 24 hours.

Payroll checks are issued from a special checking account that will be set up with your bank. This account enables you to transfer only the exact funds needed for the payroll as a safety measure. The service will also provide a report detailing the amounts withheld from each check, allowing you to prepare the IRS Form 941, "Employers Federal Quarterly Tax Return." Use the information on Form 941 to compute your quarterly state unemployment compensation form. Annually the service will also prepare a W-2 form for each employee who received wages during the year.

PUBLIC UTILITIES

Notify public utility companies of your opening date. Allow plenty of lead time for completion. Do not lose valuable time because the utilities are not hooked up yet. Some of these companies may require a deposit before they will issue service. Every company and city has different policies, so be sure to investigate yours.

PHONE COMPANY

You will need a minimum of two phone lines for the restaurant for taking reservations. Remember a fax line. Do not lose customers because they cannot get through. You should have two phones in the offices, one or two extensions at the entrance area, one or two extensions in the bar, and a public pay phone. The phones in the entrance and bar areas should not have long distance to prevent misuse by customers and employees. Place local emergency numbers at all phones.

You will need an intercom, handheld radio or paging system throughout the restaurant to speak from your position to key areas. Discuss with your local phone company business office your needs and their options. A music intercom/paging system is also available; see the discussion in the section on music.

GAS AND ELECTRIC COMPANIES

All major equipment requires hookups that can only be completed by trained technicians of the gas or utility company or authorized representatives. These technicians should be contacted as early as possible to evaluate the work required. In many cases they will need to schedule the work several weeks ahead of time.

Many gas and electric companies have service contracts to purchase. If available, it is highly recommended that you purchase them. Equipment that is maintained to the manufacturer’s specifications will last longer and operate more efficiently. Calibration of kitchen ovens is a must in any service contract. It is critical that all ovens register true temperatures for consistent cooking results. Most ovens need to be calibrated monthly.

Set up a loose-leaf binder containing all the information and maintenance schedules for your equipment. Include all warranties, brochures, equipment schematics, operating instructions, maintenance schedules, part lists, order forms, past service records, manufacturers’ phone numbers, and a chart showing which circuit breaker operates each piece of equipment. Ensure that this manual is kept up to date. Become aware of your equipment’s needs and act accordingly. Train your employees in the proper use of all equipment, and it will serve the restaurant for many years.

WATER

Water composition is different throughout the country. Water that has been subjected to chemical treatment may contain a high level of chlorine. Water taken directly from the water table will contain any number of minerals depending upon the geological makeup of the soil it came from. Different types of water give different results when used in cooking.

Chemical particles in the water can have a bad effect on fresh-brewed coffee, food, recipes, and cocktails. Several companies market filtering devices that attach directly to the water lines. Filters need only be connected to the water lines that are used for drinking and cooking. Filtering devices are usually tube shaped canisters containing charcoal or special filtering paper. Discuss your particular situation with the state Department of Natural Resources and the sales representative for your coffee supplier.

SERVICE PERSONNEL NEEDED

LOCKSMITH

A registered or certified locksmith must be contacted to change the locks when you occupy the building. Keys should be issued on a need to have basis. Only employees who need access to a locked area to perform their jobs should have keys to that lock. The locksmith can set door locks so that certain keys may open some doors but not others. Only the owner and manager should have a master key to open every door. Each key will have its own identification number and Do Not Duplicate stamped on it. Should there be a security breach, you can easily see who had access to that particular area. The restaurant should be entirely re-keyed when key-holding personnel leave or someone loses keys. Safe combinations should be changed periodically by the locksmith.

On the next page is an example of a key system chart. In the example, the key code corresponds to a particular key that only opens doors with a similar letter. By determining who should have access to an area, you will be able to develop a good, security system. It is important that only the manager has a key to the liquor, wine, or china storage areas.

FIRE AND INTRUSION ALARMS

Every restaurant should have two separate alarm systems: a system for fire, smoke, and heat detection and one for intrusion and holdup.

The fire detection system consists of smoke monitors and heat sensors, strategically placed throughout the building. This system must be audible for evacuations and directly connected to either the fire department or a private company with 24-hour monitoring service. In newer buildings the sensors also activate the sprinkler system. Most cities and states also require restaurants to install a hood system in the kitchen areas. This consists of a sprinkler-type system situated above equipment with an exposed cooking surface or flame. The system may be operated automatically or manually. When released, a chemical foam is immediately sprayed over the area. This foam is particularly effective in stopping grease fires. Once activated, the system will automatically shut off the gas or electric service to the equipment. To regain service the company that installed the system must reset it. Ask the local fire department for their recommendations for a reputable fire and safety service company.

An intrusion alarm system is recommended for any restaurant. Begin this search by contacting the police department. They will recommend companies. Ask them for a survey and proposal for the building and your needs.

The security system should contain magnetic contact switches on the main doors, windows, internal doors, and other places of entry such as trapdoors and roof hatches. Do not overlook the air conditioner vents. The interior of the building should be monitored by strategically placed motion detectors that are zoned so that if one fails, the entire system will continue to function. The safe area must be monitored. The locking-type holdup buttons, which may only be released with a key, are an excellent option and should be placed in the cashier, bar, and office areas. Alarm companies can also provide video monitors.

Another recommended option is temperature monitoring for the freezers and walk-ins. Have temperature-sensitive devices installed in these areas. If the temperature rises to a certain level, an alarm is triggered at the monitoring station. The operator may then call the restaurant manager or dispatch the refrigeration repairman. Some of these security service companies also provide guard service in the lounge area and escort service to the bank. These companies must be bonded, licensed, and insured.

The installation of an alarm system in the restaurant is a necessity. It will increase property value. A 24-hour monitored system may save 5 to 10 percent on insurance premiums.

DISHWARE CHEMICAL COMPANY

Contact all the dishwasher chemical suppliers in the area and meet with their representatives. Several of these companies maintain large research staffs that are developing innovative chemicals and devices that conserve the machine’s energy and chemical usage, reducing your overall operational cost. Their field service people will monitor the entire system ensuring the machine and staff are working together for maximum efficiency. A local company supplying the chemicals and service as a sideline cannot possibly maintain the service offered by these national companies. Clean dishes and silverware are an absolute necessity for a restaurant.

KNIFE SHARPENER

A knife sharpening service is a must for any restaurant. Sharp knives are essential. A service contract guarantees that all knives and blades of cutting and slicing machines will be sharpened on a regular basis. In between servicing, the staff may keep the blades honed on a sharpening oil stone or ceramic sharpening sword.

SANITATION SERVICE

In most counties, a private business must provide its own garbage pickup. A restaurant of any size has a great deal of waste. A sanitation service company is required to maintain a proper health environment. Receive quotes from all the sanitation companies in the area. Prices may vary considerably depending on who purchases the dumpsters. You may wish to get the advice from your health department for the selection. Any service contract should contain provisions for the following:

• Dumpsters with locking tops

• Periodic steam cleaning of the dumpsters

• Fly pesticide sprayed on the inside of the dumpster

• Number of days for pickup

• Extra pickups for holidays and weekends

Some restaurant waste may be used by manufacturers in the area. Soap manufacturers will be interested in purchasing all the meat and fat scraps for a few cents a pound. Pig farmers may buy all the food scraps. Buyers will provide special containers to store the products. Scrap glass from empty liquor bottles may also be sold or donated to the local recycling or ecology project.

PARKING LOT MAINTENANCE

Parking lots will need periodic maintenance other than the daily duty of light sweeping and trash pickup. Painting new lines for the parking spaces should be done annually. Blacktop surfaces will also require a sealant to stop water from seeping into it. Winter climates will require snow removal, salting, and sanding of the lot. Most of these services may be purchased under contract.

PLUMBER

A local plumber will be needed to handle any miscellaneous work and emergencies that come up. The plumber must have 24-hour emergency service. Make every effort to retain the plumber that did the original work on the building. He will be familiar with the plumbing.

Due to the large amount of grease that goes through the restaurant’s plumbing, clogs and backups will be a major problem. Extra-wide pipes should be fitted to the dishwasher and sink drains. Grease will collect in the elbows and fittings along the plumbing lines. When cold water is put through the drain the grease will solidify, closing the pipe. A plumber will need an electric snake and the necessary acids to remove the clog. For everyday use, a hand snake and plunger should always be on hand in the kitchen.

ELECTRICIAN

Retain the original electrician who worked on the building, if possible. An electrician will be needed when equipment is moved or installed. The electrician should check out and label all the circuits and breakers in the building and should also be on 24-hour emergency service.

REFRIGERATION SERVICE

The most important consideration when choosing a refrigeration company is the response time to emergencies. At any given time the refrigeration systems and freezer could go out, resulting in the loss of thousands of dollars in food. Make certain any prospective company understands this crucial point.

Situations arise where the refrigeration units cannot be brought back to work in time, usually because of a broken part that must be replaced. There are solutions to prevent food loss. Contact your purveyors. They have large refrigeration units you may be able to use to store the food temporarily. Call the tractor trailer companies in the area: they may have an empty refrigeration truck that could be rented for storage.

A fully loaded freezer generally stays cold enough to keep foods frozen for two days if the cabinet is not opened. In a cabinet with less than half a load, food may not stay frozen for more than a day.

If normal operation cannot be resumed before the food starts to thaw, use dry ice. If 125 pounds of dry ice is placed in a half-loaded 10-cubic-foot cabinet soon after power loss, it will maintain a temperature below freezing for two to three days. In a fully loaded cabinet, sub-freezing temperature will be maintained for three to four days.

Place dry ice on cardboard or small boards on top of the packages and do not open the freezer again except to put in more dry ice. Monitor the temperature with an accurate thermometer.

EXTERMINATOR

Exterminators must be licensed professionals with references. Consult the health department for recommendations. Exterminators can eliminate any pest-control problems: rats, cockroaches, ants, termites, and flies. Have several companies come in to appraise the cost. They are experts and can read the telltale signs that might be missed. Take their suggestions. This is not an area to cut corners or try to do yourself. It will not pay in the long run.

PLANT MAINTENANCE

If the restaurant has large expensive botanicals, you may need a maintenance company. A professional plant-care person can provide all the necessary services to protect these investments: watering, pruning, transplanting, and arranging. Contact companies in the area and get their opinions, quotes, and references. Make sure the company you hire is aware that they are working in an environment where toxic sprays may only be used with the approval of the health department.

OUTSIDE LANDSCAPING

You may want the exterior areas of the restaurant professionally designed and landscaped. An appealing exterior is as important as the interior. You may have little room to work with, but a landscaper can put together a design that can be very appealing. Contact local landscapers and get their opinions, designs, quotes, and references.

FLORIST

If you have fresh cut flowers, you need to contact a local florist. Each week the florist will set aside a selection of cut flowers of your choice. Many restaurants use only a single flower or rose in a long-stem vase. Should you decide to do this, make sure there is a large supply of backup flowers. Some customers will take them home when they leave. Adding fresh water with a little dissolved sugar, or a chemical provided by the florist to the vases every day will keep the flowers fresh looking for a week or more.

EXHAUST HOOD CLEANING SERVICE

Contact a company that specializes in exhaust hood and ventilation system cleaning. They should appraise and inspect the whole ventilation system before opening day. Depending upon the amount and type of cooking performed, they will recommend a service that will keep the system free from grease and carbon buildup. Usually twice-a-year cleaning is required. Without this service, the exhaust hoods and vents will become saturated with grease, causing a dangerous fire hazard. All that would be necessary to ignite a fire would be a hot spark landing on the grease-saturated hood. Most of these companies also offer grease and fat (deep fryer oil) removal.

HEATING AND AIR-CONDITIONING

You will need a company that can respond 24 hours a day at a moment’s notice. Losing the heating system in the winter or the air conditioning in the summer will force the restaurant to close. Make certain the company is reliable with many references. Heating and air-conditioning systems need regular service and preventative maintenance to ensure they function at maximum efficiency. Energy and money will be wasted if the system is not operating correctly. A service contract should be developed with these companies to ensure the machines are being serviced to the manufacturer’s schedule. Keep the contract and all additional information in the equipment manual.

JANITORIAL AND MAINTENANCE SERVICE

Depending on the size and operating hours of the restaurant, it is recommended that you use a professional cleaning company. Restaurant cleanliness should not be left to an amateur responsible.

The cleaning service usually arrives after closing time. It will clean and maintain the areas previously agreed on in the service contract. Its work is guaranteed. Never will a customer enter the restaurant and see a dirty fork left on the floor from the night before.

Cleanliness also has an important effect upon the employees. A spotless restaurant will create the environment for positive employee work habits. They will become more organized and neater in their jobs. The maintenance service company selected must have impeccable references. The company should be insured against liability and employee pilferage. Employees should be bonded. You will need to give the owner of the company her own keys to the entrance, maintenance closets, security system, and possibly the office, for cleaning. It must be made very clear that food and liquor are completely off limits to maintenance employees.

Some important factors to consider when choosing a maintenance company:

• Can they assist with cleaning prior to opening?

• Will they submit a bid as you request?

• What are the hours they will be in the restaurant?

• Who buys the soaps and chemicals?

• Will they consent to a trial period?

• How will you communicate to discuss problems?

• Will they provide references from other restaurants?

• Are they aware that no toxic chemicals are allowed in the kitchen?

• How long have they been in business?

• Will they lock all doors once their employees are inside.

Basic Maintenance Functions

The following are some basic maintenance functions any service contract should contain.

This outline is basic. The actual contract must contain specific items that must be cleaned and when. You and the maintenance company’s supervisor should have a check-off list of everything that must be completed each night. The following morning, walk through the restaurant spot-checking from the check-off sheet that all items have been completed as prescribed. Notify the supervisor immediately of any unsatisfactory work. At first, it may take a great deal of communication to get the desired results. After operating a few months, it will run smoothly.

Items to be cleaned daily:

1. All floors washed and treated.

2. Entire restaurant vacuumed.

3. Windowsills, woodwork, pictures, chairs, tables dusted.

4. Outside area — swept and picked up.

5. Public bathrooms cleaned, sanitized, and deodorized; supplies replaced: toilet paper, soap, napkins, and tampons.

6. Trash containers emptied and sterilized.

7. All sinks and floor drains cleaned.

8. Maintenance room cleaned and organized.

Weekly services:

1. All windows cleaned inside and out.

2. All chairs and woodwork polished.

3. Decorative floors stripped, waxed, and polished.

Annually:

1. All carpets steam cleaned.

Be specific in your instructions about all these areas.

Some manufacturers include detailed instructions for cleaning their product. Special cleaners must be used on some equipment. Improperly cleaning a piece of equipment can ruin it forever. Keep all of this information in a loose-leaf binder in the office. The cleaning supervisor should have access to this manual and must be thoroughly familiar with its contents.

OTHER SERVICES AND SYSTEMS

CIGARETTE MACHINES/CIGARS/ELECTRONIC GAMES

Cigarette, cigars, and electronic games can provide a small additional source of revenue for the restaurant with little or no investment if they are pertinent to the restaurant’s environment. Cigarette and cigars are provided as a service to customers and should always be available; electronic games are not a necessity and should be used only if they are compatible with the restaurant’s atmosphere. Distributors for all of these products may be found online or in the yellow pages of most city directories.

Depending on the type of clientele and the image of the establishment, you might look into the leasing of electronic games. There are numerous types of games available. You may choose from the more traditional games, like the pinball machine, or from an array of computerized video games. Some of these games have become extremely popular and can contribute a good sum of additional revenue. Most companies lease the machines to the restaurant under various terms of agreement. Service to the games should be included in any contract. Many of these companies can also provide TVs, wide-picture screens, and movies with projection equipment.

Before contracting for any of these electronic games or video equipment, carefully consider the pros and cons. Keep in mind that you are primarily in the restaurant business — the last thing you want to do is turn away any of your regular restaurant customers. If the restaurant’s atmosphere is right, these games can bring in substantial additional income.

COFFEE EQUIPMENT

All major coffee distributors offer the same basic plan to restaurants: they will provide all the equipment necessary for coffee service including brewing machines, filters, pots, maintenance, and installation of all equipment. All that is required of you is to sign a contract stating that you will buy their coffee exclusively. The price of all the equipment and maintenance is included in the price of the coffee.

As an alternative, you can buy all your own equipment and pay to have someone install and maintain it, enabling you to purchase coffee from any company at reduced prices. Because doing so is costly, it is recommended that restaurants use the coffee distributor contract method.

There are many different coffee blends available. Coffee is an extremely important part of any dining experience: get the finest and most popular blend available. Have the restaurant employees try the different blends under consideration in a blind tasting.

When negotiating with the coffee salespeople, inform them that you want brand new equipment. They are competing for your business, but once you sign the contract you will be locked in to it. Use this leverage while you have it.

Place the coffee machines in the main and service bars. Various specialty teas, sugar packets, and sugar substitute packages may also be purchased from these distributors, and for an additional charge your restaurant’s name and logo can be imprinted on the outside of each packet.

SODA AND DRAFT BEER SYSTEMS

Soda and draft beer systems may be contracted for in the same manner as coffee. National brand soda and beer distributors will connect all the hoses, valves, taps, and guns needed to operate the bar, usually at no cost. You will be obligated to sign a contract stating you will purchase their products exclusively. The price of the system is passed on to you as you purchase soda canisters and kegs of beer. The distributor will also provide promotional material such as wall plaques, neon lights, and drink coasters.

These systems occasionally break down; maintain at least two cases of each type of soda in bottles or cans and three to four cases of beer in the storeroom. Draught beer and soda lines must be flushed out every week. The cost of this service is usually borne by the restaurant. You may do this yourself, and many people do; however, it is recommended that you use the services of professionals who have the proper equipment to do the job thoroughly. Soda and beer is no better than the lines they flow through. Distributors can recommend a service.

ICE CREAM FREEZERS/MILK DISPENSERS

These companies allow you to use their equipment when you guarantee to purchase their product exclusively. Ice cream freezers, milk dispensers, and other kitchen equipment are available. Their sales representative will have all the information about the equipment.

These arrangements are beneficial for small restaurants with limited capital. Whatever your