> We had started with $60,000; after six weeks, we were down to $3,000, and there was still so much to do.
I don't think he did nearly enough research into how much it costs to start a restaurant.
I don't think he did nearly enough research into how much it costs to start a restaurant.
I recall stumbling across the franchise agreement for a frozen yogurt place once. They wanted proof that you were able to invest something like $400,000 in the venture, and that's a way simpler setup.
For example Dairy Queen requires:
Investment Range: $779,675 – $1,729,160 Liquid Capital Requirement: $400,000 Net Worth Requirement: $750,000
https://www.dairyqueen.com/us-en/Company/Franchise-With-Us/S...
The idea would be strip as much cost out of the initial part as possible for the start-up (given their odds of early failure are ~97%). Most of them would still fail, the WeKitchen business would get paid their upfront monthly (or quarterly) fees as the restaurants come and go (and there's a perpetual supply of people wanting to try restaurant businesses, this would increase that supply by lowering the cost / risk; it could also accelerate experimentation). It could also enable a lot of other types of food businesses, such as tilt-up bakeries, rather than only restaurant-style.
The overall system would focus on orders to go, aligning with the increasing rise of food delivery services.
With office rents working on fairly regular timelines, it's easier to get a new tenant before an old one has finished up. But if restaurants inconsistently go bust, that may mean that you can't look for new tenants until you're already dealing with a vacancy. Given that restaurants may be cyclical, there's a decent chance that you'll face multiple vacancies in parallel. I know you bring up vacancies, so I just mention this as a possible consideration.
I actually think this is a really cool idea, and would love if someone pulled it off successfully. I've seen it done with clothing stores and would love to see the food equivalent.
I considered that the large unit space / building could have a dining area, where customers could sit down and could then select from numerous kitchens that are local to that space. That pushes it even closer to the mall food court. My reservation on that, is that some percentage of the restaurants will be producing subpar experiences in terms of quality. So a successful restaurant in the space, wants its customers to eat in a successful atmosphere, where customers as a whole are happy; if half the customers in the dining area are unhappy, the enjoyment by the other happier half will suffer as well (people pick up on such things, it rubs off). Then I considered sub-divided dining areas, so each rented kitchen gets its own limited sit-down space, it just might be a stretch though and adds to the overall cost burden in the system with minimum gain (ie, it's probably just easier to focus more narrowly on food delivery).
To deal with the vacancies issue, you'd only build these in higher population urban areas, to maximize the potential number of restaurants etc. that you can rent to (maximize the potential start-ups due to population). You'd also seek to under-build versus demand, preferring to always have a waiting list (recession times might even trash that best effort). I don't know if it would work, but, I'd seek to get a modest upfront payment allocation from the waiting list, that covers the risk on vacancy turn-over. By keeping the demand above the space availability, you can probably get the start-ups to front the first month of rent to get on the list (with some terms of refund). It wouldn't be something you could start with zero capital, the idea would be to get it into the $5k (solo bakery) to $25k range to go from moving into the space to the time it takes to get the first customer.
They're a great service for people who can go in and cook up a batch of, say, baked goods that they then individually wrap and take to coffee shops, or whatever.
The guy in the story did just about everything wrong, though, in kind of an amazingly thorough fashion.
Low end estimate is $150k required up front, and high end of $320k. However, in that low end - $85k estimate for leasehold improvements. $15k for initial subway franchise fee.
Local sandwich shop opened up a few years back and... while I don't know all the numbers, he didn't put in $200k up front. I suspect it may have been more like $40-$50k, between initial lease, equipment, stock, etc. Small town, passing traffic, little competition, he's done well enough that he's expanding - doubling his size and moving a bit up the street. He's also a very pragmatic guy, and the sandwich biz has been in his family for a couple generations, so I have to think they're at least moderately profitable.
http://www.businessinsider.com/what-it-costs-to-open-a-subwa...
>I contacted the banks to apply for a business loan, but I didn’t qualify. I looked into a few angel investor groups, but it turned out that they didn’t “do” restaurants. I even considered Dragons’ Den. As it turns out, no one invests in first-time restaurateurs, no matter how mind-blowing they think their cooking is.
Not without a ton of experience running profitable restaurants.
A year later, he is bankrupt, has lost his house and his marriage.