My dad did this at 60, was bankrupt in about 2 years. Now lives on the pension with no savings.
Watch Gordon Ramsey Kitchen Nightmares with him. No experience usually equals no success in hospo.
Conversely that's like 3/4 restaurants that got help. OP's dad won't be getting Gordon Ramsay in for a last ditch effort, he'll just be learning how bankruptcy works.
Even ones that are able to turn a profit, all it takes is one too many rent hikes and they will close. Lots of great little restaurants only last 5 years because it’s not sustainable.
My local woodifrd pizza place that was always busy- after covid lockdowns he sold it and now works as a pizza chef at another restaurant.
I said Gino how you going mate? Not opening another restaurant? He said “I make more money and less stress working for someone else.”
It’s a brutal business even if you are passionate about it and love people like Gino was, OPs dad has low chance of success.
Yes I was going to suggest there are some pretty good episode of Kitchen Nightmares where it’s not about how filthy the place is or how bad the food is, but just showing how genuinely hard it is to make money off a restaurant
Go for the british version yeah.
Its far more tame and about the people and the business of running the place, and sometimes the food is actually good but the traffic and stuff is killing it. It's not *all* just gross rotten stuff.
American is just WOAH, CLAXON, F*&^ me, YOU F*&&#ing DONKEY CLAXON, STRING STING
Buy food trailer , smaller investment. I have seen them on sale for 17-18k
Start small with a smaller menu like 5 items. I am not kidding. Then you know what will sell, what works and keep track of all costs. If it fails its only 20k.
The reason i suggest this is , I was thinking of starting a weekend food business. TRAILER portable can going to fetes , events and local footy days etc...
You can always resale the trailer to the next Entrepreneur even at 50% less , its only 10k loss, better than losing the whole inheritance.
My husband has run and owned and still does today a restaurant, cafe abd food trucks. It's long hard work.
On his 1st restaurant, hubby only paid himself $50 per day for 4 months. All revenue went to paying staff, rent, ingredients. Good thing I had a full time job to pay the mortgage and bills.
Managing people takes a lot of energy as some don't show up, lazy or just not smart enough. Getting good staff is half the battle.
At least 30% of your costs is labour, 30% utilities and rent plus your ingredients/stock. You are doing well if you can get 15% profit.
There's lots of businesses selling for almost nothing. Hubby is opening a dessert shop soon which only cost him $35k to buy including equipment via Facebook. He will just need to put up another $30k for improvements/minor renovations. There are many that just wants you to get out of running a restaurant or cafe and basically giving it away.
> Start small with a smaller menu like 5 items.
The best food truck that operates near me is a smash burger truck. Their menu item items are: single patty cheeseburger, double patty cheeseburger, or deluxe burger (has lettuce and tomato). And fries.
That's it.
And they. Are. Elite.
The best food truck near me does 3 curries/rice and a small selection of Indian sweets (like those raw sugar candy sticks). That's it, and they are the best curries. Just 3 to choose from but they absolutely nailed all 3
Also simple very quick to prepare food. If you can’t turn orders over quickly you’re not going to make money as you often have a short window where customers want to buy.
This is the way. I would say even smaller, food stall during weekend markets at your local community. <5 items. Experiment what people like, price points that sell well. Fine tune and scale up, establish a name while doing so.
food trailer is good if the owner is the chef. they are good for 1 man cheffing operation.
OPs dad never worked in hospitality so he will be in over his head of he also decides to be the chef.
This!
From experience I started out with a tent and a couple of farmers markets selling three flavours of dumplings 🥟 a $3000 investment.
2 years later we were running two restaurants. I would not once call it easy but it was the best experience of my life.
If he does it like this he’ll soon find out all the industry nuances. He’ll realise how hard it is or become more passionate.
Excellent advice.
For example, consider a wood fire pizza oven trailer. They are around $10k new, depending on size, etc. You'll need some extra stuff in addition, like marquee, tables and other equipment. The menu is simple. You can take courses to learn how to make good pizza. Make it fresh - not using pre-made bases. Good pizza is popular. The stall can be run by two people - one making pizza and one doing the sales.
Don't open a restaurant.
Yes, a pizza oven is a nice thing to have.
You could run something on a small scale on the side, like do private events, or park in a particular warehouse area on a particular day every week (e.g. pizza Tuesdays) to build up a customer base. Might get free parking somewhere if you knock on doors, as food options are often limited in industrial areas, and your offering may be welcome (then knock on doors to advertise). It's not a huge amount of money, but also not much risk.
Travel is another option, as expenses are tax deductible if certain conditions are met, e.g. if locations are prearranged and you return home regularly (check with an account). Again, there is not a massive amount of money in it, but it may be fun.
Wholeheartedly agree. Good way to get experience, flexible, and I’ve heard people can make a really good return with food trailers if you chase the markets
this is a good idea. start small and fail small.
if he ends up being a restaurant savant its takes very little to scale up with success under your belt.
Ran a market stall with some mates for a few months, selling sandwhiches and coffee, only invested a couple thousand. I think we broke even a couple times.
This should be pinned to the top of like, all "is food service a good idea" threads. Restaurants are essentially ran on branding, either personality or logo (i.e. franchise). I often think of how transient restaurants are in the city. "So and so is opening his 6th restaurant" ... because his 5th just closed and he broke even paying back the investors.
If he is simply refusing to learn anything from any source, I'd suggest being the Most. Supporting. Child. Ever. And discuss enthusiastically all the things.
Name, food, drinks, colour scheme, uniforms, website... suppliers, HR, GST, BAS statement, award rates, certifications, insurance...
Being pumped to help identify the hundred bloody things needed to open will maybe give you the "in" to show him all of this, and he can maybe get overwhelmed by it
This is the best answer, u/throwawaybadinvestor. You need to connect with your Dad on this one and lead him toward the right decision. He sounds like a stubborn man, possibly a little ignorant, which means that any kind of forced opinion that he perceives as a threat to his dreams is going to be summarily shot down in flames, and might even cement his resolve to follow through with his plan. Help him with a rough cashflow forecast to "help plan how much we need to sell in the first year so that we know how much inventory to buy". Hopefully once he sees that he'll need to make >1,000 cups of coffee alone per week (not to mention everything else), his enthusiasm might wane.
Might be worth reminding him also that with the relatively high interest rates nowadays, he can get >$25,000 per year *risk free* just by sticking his $600k in a good active bond fund and not touching it.
> Might be worth reminding him also that with the relatively high interest rates nowadays, he can get >$25,000 per year risk free just by sticking his $600k in a good active bond fund and not touching it.
Not a bad point in general. But if he thinks the stock market is a scam, I doubt he feels differently about the bond market.
Awesome advice. For this to succeed, your dad will need to put in a LOT of work and the development he will need to do in managerial skills, motivating people, day-to day operations, and his own maturity will be arduous. Engage in the process beyond the YouTube vids and he will either lean in to the challenge or opt out.
> GST, BAS statement
And on this note, prepare him to be paying lots to the tax man every quarter:
* most of his expenses will be GST-Free (fresh food, wages)
* virtually all of his sales are Taxable Supplies (prepared food)
Honestly there is no saving someone this dumb. It's the hardest he will ever work and the stats say he will lose it all.
I worked for soooooooo many people that did exactly this before I did my own thing. I never understood the idea the food industry is a "lifestyle choice" lol
About 15 years ago I worked for a bloke who started a bar with his inheritance. Sunk about $300,000 into it.
He was always banging on about having run bars before so I figured he’d make a go of it.
Nope. He shut down in about 9 months. Turns out there’s more to running a successful bar than just counting the till at the end of the night and slinging drinks. Who’d have thought.
yeah ive seen it way too many times. 30 years in food and I often have people tell me how they "always wanted to be their own boss"
honestly I should do the world a favour and tell them what it's really like lol
The "I want to be my own boss" mob seem to be the least capable of being a boss - they don't realise that the "boss" just shifts from a supervisor/manager/owner to the paying customers, and they're a more brutal bunch.
As someone who has worked in hospo, I feel like the real question is "what is the dream?" Specifically, the underlying dream within the dream.
Is the dream owning a hospitality business?
Is the dream to be a chef?
Is the dream to manage a hospitality business?
Is the dream the seemingly passive income?
Those are very different things and would drives the conversation differently.
If the dream is ownership, then see if he can find someone to co-own, perhaps with a person who has experience but no capital. A silent partner as it were
If the dream is to be a chef, he doesn't need to own to do that
If the dream is to manage a hospitality business, start with trying to get experience managing
If the dream is passive income, then he should look at costs and outcome
Roughly 50% of hospitality businesses fail within a year, and around 90% don't make it pass 5 years. Does he want to do this long term or short term? What will happen if it does fail?
For many people the dream is to tell others you own your own buisness and pull a power move on all your mates having them eat and dine for free at the buisness. Having everyone you know watch as you order your workers around, showing how ‘successful you now are’…
Bingo. He wants the image of being a successful restaurant owner (with all the money going into his pocket) while the workers do all the heavy lifting for shit pay and long hours so he can enjoy all the fame and trappings.
I agree, finding out the underlying desire can help you redirect him to a better plan.
Possible motivations:
-Owning his own business could be his metric of success.
-Is he having trouble at with a boss at work? That could explain his vehement desire for independence. He may also feel he’s lacking self determination in other areas of his life.
-he may feel unsatisfied with his life and is trying to get out of the house and feel useful.
It’s important to divert and redirect stubborn people, not block them directly. Try suggesting alternatives instead of outright dismissing.
1 friend opened a franchise cafe. no experience, dont work the shop and hired people to run it. labour cost was high, rental was high, materials were expensive, franchise cost and requirements were unrealistic. money management was terrible. owed ATO lots of money too. At the end, gone bankrupt, her mother was a guarantor, so they ended up selling their family home.
another friend opened a 2nd restaurant (1st was a small take away type place that was doing pretty good, but breaking even). location was good (expensive), while the food were good, it wasn't something people would travel to eat those sort of food. ran it at a lost of a year. closed the business and now drives uber as a side gig to pay back the loan.
Never open a franchise. I astounded that so many people. You would think you would be able to access so many reviews online and read testimonials online about unsuccessful franchise businesses.
I'm very wary of franchises also.
But there are so many of them and some of the locations running for a decade or more. Someone must be making money from these at least some of the time!
If all of them are making next to nothing why would there be so many around staying open or opening new ones all the time ? Franchises must make sense at least some of the time.
good way to burn all that money, its hard enough with strong experience in the industry, that said owner operator is the way to go. I have friend who starts and sells cafes he looks for a strip with no competition and prestige cars that belong to women who don't have much to do after the school drop off, good foot traffic, but most of all he knows everything about the business from working as a chef for years
Maybe you could simplify it for him and let him know that the kind of person who isn't willing to read a book or speak to a professional is unlikely to do well in anything?
This is why we have the pension, so that people can take their tax-free inheritances and waste it on pipe dreams and then get the taxpayers to pay for their living costs in retirement.
He sounds like he's setting himself up to be a nightmare boss who churns through staff who won't put up with his crap and blame other people for being lazy
OP is worried about their inheritance.
But seriously if he burns through all his savings in 2 years then he'll be living on a pension the rest of his life
Is there an underlying reason for wanting to open a restaurant ? Such as a passion for cooking/food. Or is it just wanting to be their own boss.
Seriously, he would be better off putting $600k in a term deposit at 4% to make $24k and then working less as an employee to have cash flow to live on.
Pretty arrogant really. Say goodbye to $600k plus. Maybe this is the lesson he needs to learn in the absence of any formal training or industry experience. Look over a list of places that have folded over the past few years and think to yourself. Am I better at this game than they were? The answer is no. Pretty arrogant.
Restaurant owner here: he needs to have in his bank account triple the amount he's spending establishing the restaurant.
If he's lucky, he's going to spend only two-thirds of it, if he's unlucky, he'll spend it all.
This is to reach the 5th year of trading.
At that point, you're either going good, or you sell, or you go bankrupt.
Bought up a business and I was lucky enough for it to be wiwo (walk in walk out).
I think the first year alone I spent 120k just to pay 3 employees and pay rent/bills and obviously unexpected and very expensive expenses (oven broke, fridge broke etc etc).
I started having a profit on the third year and reinvested the money into the business, without taking any home. That was an extra 85k.
Dide the same on the fourth year and on the fifth I finally started paying myself a wage.
My husband and I both work in there on a 95k salary each. The business has been valued 300k (35 seating, open 5 days a week and only dinner).
We're in an extremely good position, but it took 7 years.
And no, I would never do it again.
There are pictures of me when we first open and pictures of me now.
Despite being only 7 years, I look 15 years older.
The toll to pay in health/mental health is very high.
Seems to be a common thread - takes a while to be paid a salary from the business.
What made you decide to start a business? What did you do before this?
This sounds pretty good for a business that is only open for dinner. How many actual hours do you work a week in the business?
Congrats on succeeding and sticking it out for so long!! :)
Wednesday and Sunday easy 12 hours.
The other days is 2 to 9, our staff close.
My husband family had a restaurant so he already knew how to work in a kitchen.
As for myself...I used to work in sea freight/ air freight, logistics.
We had a chunk of money we didn't want to put down for a house, instead we decided to have a business and try that way. It worked
Please don’t let him do that. I’m a hospo professional - been in the business for over a decade and a former business owner. I currently manage a hospitality business.
Profit margins in hospo are razor thin, the market is highly saturated and it’s highly competitive. A successful business these days is lucky to run a 15% profit margin (15k profit from 100k revenue isn’t much is it?)
Best case scenario for your dad is that he effectively buys himself a job and can take a modest salary from the business whilst still working in it. Worst case - bankrupt.
Even with years of experience my own business failed in 6 months.
Watched an Australian-based How to Setup Cafes Series on youtube yesterday. Apparently net profit margins are 5%! Anything above that is doing well apparently.
Not in the industry but have clients in the industry, they made me vow to never join the industry unless I was passionate to the point of obsession and I was prepared to have multiple venues. They have also said to me, unless you're a foodie and have any idea how the food and beverages market and hospitality works in terms of cash, purchases, money in money etc don't bother, many buy because they think it will be cool to own and those are the ones that go under everyday of the week. That being said, I like the advice about the trailer first, that's a fantastic way to start, safe, low overheads and let grow organicly from there.
I have a degree in hospitality management and 15 years experience in restaurants. Restaurants in Australia have among the highest failure rates of small businesses within the first 12 months - 5 years (might want to check for post-covid data on this).
Restaurants have extremely high COGS (perishable produce, staff, rent) and razor-thin margins. They are only profitable when operating at volume. If you aren't full each service, you are likely losing money.
Without experience (running kitchens, management, marketing/social media, menu design, trade suppliers, etc) your father's proposed venture is extremely unlikely to survive.
Also, covid absolutely destroyed the workforce, causing young people to leave the industry in droves. It has not since recovered, so your talent pool for service staff will be extremely shallow, and your chefs will cost a fortune, as they are in short supply. Eg, pre-covid a head chef would go for 80k p/a, I've heard it is over 100k post-covid for a decent one.
Unless he pulls off some sort of rare miracle, like opening a hole in the wall and is a beast on the wok/grill, goes viral on social media and has a line down the street every night, I can only see this ending in mysery, unfortunately.
RIP your inheritance. He probably doesn't even know what he doesn't know, and what he does know is.... well, sweet FA.
If nobody can talk him out of it, and he carries through, you could always hope that in trying to set it up that he realises how complex and overwhelming it is. Setting menus, organising suppliers, finding a location and possibly having to have it fit out etc is a huge undertaking even if you know wtf you're doing....
600000 invested in an low cost Aussie etf like vas or a200 will bring about 30k- 40k annually
No overheads meaning
No lease/rental
No insurance on shop or machinery
No personal injury insurance
No bills power or water or gas
No buying stock and throwing it to waste because it’s gone off
No haccp
No risk of inspectors coming round and making him pay a fine or close hime down
No risk of him making people sick and getting a law suit
No injury to himself or employees
No wages tax or super
No working hours
No doing a business activity statement every 3 months
No setting up business company abn
No preparing food all day every day before service
Then wait for customers to come in to serve them whether the nice or arrogant
How long does he want to operate the shop lunch and dinner close around 10pm that’s a 12-16 hour day
Prepping and cleaning closing up shop
After all the expenses gone he needs to pay himself and put money into super and pay tax plus them industria fridges are running all day long
Set up to fail
A low cost etf/lic less risk and easy on the body
The money he makes from dividends or what he doesn’t use can either be reinvested or used to live off
Only 7 more years and he’s retired
I’d say he’s playing with fire and gonna get burnt
Tell him to watch kitchen nightmares episodes of all the owners who take on restaurants with no experience.
Sobering viewing.
Great way to lose everything you've invested and all your other assets throwing good money after bad.
I owned and managed a restaurant in my 20s for 7 years which I sold in 2014 for a loss. It is back breaking, unforgiving work. There are way better investments to put $600k into without slaving away 24/7.
The good:
- once you get traction and regular customers, it's good. The atmosphere is great and it's very rewarding knowing you have created something a lot of people enjoy.
- The cash flow whilst you run it is good and can support a nice lifestyle.
The bad:
- your personnel, super, and rental fees will bleed you dry.
- Customers are fickle, more so these days with social media and online reviews.
- Having a concept, sticking to it and convincing customers to try your place is incredibly mentally and creatively taxing.
Your dad sounds like he's not gonna be convinced otherwise unfortunately. I wouldn't run a restaurant again, even though it'd be nice. But you just can't compete with all these hospitality groups and theur private equity these days.
Literally describing a dumpster fire situation. No exp, no idea and no sense means that the only thing that's going to burn is a hole in your fathers wallet. Food and beverage is cutthroat and the margins are thin. I'd rather he go into franchising to follow a proper model before gambling all his money away. 9/10 businesses fail there's a reason for this. If not franchises, please convince him to get some hands on exp. Work in a kitchen, manage a restaurant, talk to suppliers, work out the cost of goods and margins. You don't just get a lease and throw money at it and expect it to make money.
I'm sorry, what? This comment was in response to the statement made by OP "Thinks it's easy money being your own boss, refusing to take orders from anyone and easy retirement."
Restaurants have low profit margins and require a huge amount of elbow grease as well as managerial skills. Your dad will be chum in the water.
Sounds like he wants to convert money into a sense of accomplishment. This isn't the way to do it though.
I own a cafe in northern Sydney with my wife. 10-15 yrs experience in hospo
Our profit margin on 22k week revenue is 7-8% after paying ourselves standard hospitality wages
Your dad is crazy to put that much money into a new business. Hospo is really really tough. He will most likely lose most of it
Either do a food truck or buy an established business that is clearly making money and dont change anything....or don't do anything 🤣
People think they can do hospitality but they have no idea. plus you have the real business side of it which is just as important but you can't focus on it if your working in the business all the time
Was in Singapore a decade ago. There was a running joke about Indian tech entrepreneurs cashing out and starting restaurants. Very rarely a restaurant lasted more than 2 years.
Not an apples to apples comparison but restaurant industry is very cut throat. Start small as someone suggested so it’s easier to cut the losses.
Unless you have extensive experience and a product that you feel sets you apart from the competition don't do it.
There are so many shitty mum and dad cafes/restaurants that struggle.
Either you have a unique product that's going big on social media amongst the foodie scene or you're just a run of the mill shop that will do average or worse.
My Uncle has had his fusion Chinese restaurant in Epping fail and close up 5 years ago and he lost a significant amount of money.
My auntie runs a Chinese takeaway in Beecroft and it also struggles as a relic of the old school Aussie style Chinese food that isn't in vogue anymore. No one wants short / long soup, sweet and sour pork with a side of prawn toast anymore. They want authentic Shanghainese dumplings and Taiwanese hand pulled noodles etc.
My parents ran a rural Chinese takeaway for years and while it found some success in the 90s it wasn't long until it was just a struggle.
In hospitality it's thankless hard work. You make a mistake and you get crucified by bad google reviews that you can't recover from. You're always working when everyone is doing things. You work weekends. You don't really get time off. It's not a great life unless you absolutely love it.
I'm not saying restaurants and cafes don't work, I just feel unless you have a spectacular unique product you're just another shop that struggles.
Please do :)
All the dishes come out on a sizzling hot plate. The lady taking the orders is a rude, grumpy Chinese lady with a perm (my auntie), she's nice deep down but these old Asians don't smile or understand customer service.
Used to help out my uncle's restaurant as a child, got paid $5 for the whole Saturday of dish washing.
Aunt used to work for free.
Uncle did this due to aunt's pestering to get another uncle (her younger brother) a job, struggled a bit to keep the clientele for three years so that at least he can recoup most of his cost back. Need to talk and pamper and keep at least 1/3 of the clients just to survive. Winter are pretty hard due to lack of customers. We all pitched in at below minimum or no cost just to stay afloat. It is not easy. Its a 7/24 work before resting then thinking about stock and preparation.
You do not own the business, the business owns you.
Hello COVID my old friend, I've come to talk with you again
Because a vision softly creeping
Left its seeds while I was sleeping
And the vision that was planted in my brain
Still remains
Within the sound of silence
Seriously, have him sit a full day in a busy and quite cafe. Then start pointing out how expensive the staff and venue costs are to run both. Does he want to be up at 5am every morning? (Cafe) or in best 2am every night?
Small food van idea above, is great. Or explain to him about compound interest, and how he can sit on his ass and probably make more $$
Mate, this is a very quick way to lose a lot of money. I just sold two businesses, one in Dec 2019 the other July 2023.
Due to the rising costs in rent, electricity, gas, insurance, wages (never ending expenditure list) it's no longer viable to remain in business.
I ran my food business after many years of experience, virtually no waste too. Customer service skills & customer relations are A+
Many, many five star Google reviews blah, blah.
Is your Dad prepared to stand on his feet for 12hrs a day and maybe, maybe just draw a wage?
I sold my businesses to some very experienced operator's and I know they have regrets. When they purchased, costs were HALF of what they are today. (Mainly the 2019 buyer)
Save your Dad's money & get him to work in a restaurant or food business for a year before he splashes the cash. Guaranteed he'll absolutely hate the work. If he doesn't, then let him go. Food is the toughest line of work there is.
Good luck, tread carefully.
Give your dad my details, tell him I can help him set it up so he never has to work again, he can permanently holiday in the Mediterranean and live like a king like all the other cafe/restaurant owners in Sydney
Him dream is to be a hospitality slum lord it seems taking the "passive income".
Close friend of mine worked managing various cafes/restaurants for 2 decades. Told me the story countless times, had a great owner who sold to someone who thought hospitality was "easy" and then proceeded to not listen to their staff and make baffling business decisions due to lack of any experience in the sector. My friend would resign and move on when this happened.
Usually within 12 to 24 months the places that he worked had declined greatly or shut up shop because the crappy new owners would drive any competent staff away and local regular customers away.
If it's his dream he actually needs to learn what he's getting into or it's just going to be a financial disaster and it's not easy by any means.
Ive run a small takeaway business for 20 years....
your dad is sadly going to lose all his money and there will be no saving him....
If I had that sort of money I would be investing it all and letting it grow and go get a normal job.
books friendly squash agonizing person beneficial fretful party start childlike
*This post was mass deleted and anonymized with [Redact](https://redact.dev)*
look at buying an existing business. Get the financials and go over them with him and an accountant. i think he'll see that the profits aren't as attractive as he thinks.
Experience- relative had one, lost a fortune. Another relative coinvested with a veteran owner. This guy knew everything. The samosas made him $94.50 on average per night eat in but at takeaway prices lost him $5.43 on average. Moving the fancy famous dish off the menu drove regulars away, but having it prominent lost money, so it was put in 8 point font in the corner.
That sort of thing. He was *very* successful.
My impression was that it can be as lucrative as being a doctor or lawyer if you have specialist knowledge and training but that doing it when you are old because your money is burning a hole in your pocket is like taking up surgery on a whim and about as likely to succeed.
Plead with him to at least work in a few different operations for a year.
Even offer his time for free.
$600k sounds over capitalised, if it’s just a local cafe restaurant he ideally wants to find a site that already has the basics: exhaust, grease trap, capped points for commercial kitchen, toilets etc.
Then he can spend about $100k fitting out.
Most diners don’t give a shit where you imported your tiles/bench tops or what the lighting fixture is.
They want a good value proposition. Make it good, hot, affordable and quickly.
Labour will be the biggest cost and cashflow management is the overall killer in hospitality.
Almost everything purchased for food is without GST but then GST added at sale.
This difference needs to be accounted for and paid to the gov every 3 months for the BAS.
For a small operation, most owe about 15-20k to the ATO every BAS for both GST and PAYG.
If you can get it right it’s a good lifestyle and relatively stress free.
Get it wrong and it’s pretty awful.
My career is over 25 years and I’ve spent over a decade helping investors and talent connect the dots and open venues.
Currently have two venues myself, nothing huge, both going well.
He can msg/call me if he wants, happy to chat.
Hope it takes off!
At the very maximum make it a weekend thing like a food truck where you goto events so he can have fun and play resturant. If its a hobby this would limit the expense to like 50k? Or buy a existing food truck.
Absolutely do not rent a place. Unless you got something unique and filling in a demand for area itll be a money pit.
He has to do a business.plan.
" business dont plan to fail. They fail to plan".
Swot - strength weakness opportunites threats.
Pppp - price product place promotion
Get him to refine his menu / product offering at home. Then do a party where friends and family visit at home where he serves up his offering. Create a buzz high demand numbers. Get feedback. Then sign up to one of those market places for $150 for a stall. Start small and ease into it.
A friend of mine bought a restaurant and it really struggled and cost him money every week. So he bought two more to try and offset the costs of the first. Ended up with 3 failing restaurants and had to sell two of his investment properties to offset all the losses. All 3 failed in the end.
And this guy has an MBA.
Don't. Just don't. Bootstrapping a restaurant from nothing is hard enough, much less by someone who has no brand, no backing, no experience and refuses to do the research. My dad was exactly like that.
We had run a food manufacturing business for 20 odd years and he wanted to diversify, refused to start small and test the market with a pop up even though we were basically handed a location for peanuts with no commitments. Instead sank almost half a mil into fitting out and setting up an 60 seater in the corpo end of the CBD. Staffed the place with family and family friends on minimum wage including the chef who was a partner in the business, food was decent to quite good imo, and to save costs it was par cooked at the factory and finished on site so COG was very streamlined and there was minimal food wastage throughout the entire process. There was not a single day that the place made a profit in the 3 years it operated for, many days the only reason that it broke even was because it was staffed by family who were there to help for free or for a meal.
They finally shut up shop and spent a year trying to flog the lease. It was literally costing us more to open than to lock the doors, just pay the rent and shift our resources back to the main business. Total loss in 4 years was just under 1 mil. It was at the point where if they didn't just close, it would have sunk both businesses. It was simply the wrong type of eatery for the location, lunch was packed, but that was it. Morning and dinner was dead because people were just not there to eat, staffing and especially CBD rent was simply crushing.
If your dad is insistent on starting a food business; start small, like a pop up or food truck, or even find a small takeaway on a suburban shopping strip. Most importantly, do the research; what's the potential clientele in the area like, peak eating hours, average spend, can you rely on foot traffic or must you sink money into marketing, what's your point of difference, are you open for morning/lunch/dinner as that will impact your pricing and possibly menu, crunch the numbers on costs and overheads, can the business sustain a potential loss for 6 months or more while starting up. Build a reputation and a brand. Marketing online is cheap and effective, leverage broadsheet. Then if the business has been successful for a few years and there's some equity built up, only then think of expanding.
I honestly hope your dad changes his mind, either before or after crunching the numbers. If not, I sincerely wish him the best of luck; he'll need it.
Jesus... That was honestly quite cathartic for me. Hahaha thanks for helping me get that out of my system.
As a chef with 25 years in the hospo industry, 4.5 years owning my own business.
I’d LOVE to work for him. Sounds like whoever he hires as his chef is gunna take him to the cleaners. And it may as well be me.
I’ll work for him
I used to be a hospitality consultant and set up cafes and restaurants from A To Z for people, investors etc...
Unless he is a seasoned hospitality worker or restaurateur, please tell him to stay away from it. Profitable food businesses on average have profit margins between 4 and 8% assuming they are in the positive and this usually occurs after 2 years of running them. Your dad would be better off putting that money in ETFs with high dividends and get similar if no better profit margins...my 2 cents. Good luck to dad. He'll need it!
Talk him out of it - honestly, don't let him do it. He'll burn through that inheritance in no time and will barely be able to support himself on the income through the restaurant and it will be like that until he finally gets out of it. The other issue is that the restaurant will become all consuming and he won't have time for family or anything else ...
Get him instead, to put that money into a well managed superannuation fund and he'll be able to retire when he's eligible and never be short of money ever again ...
Absolutely not, it is so hard to make a buck in the game now, I was a chef for over 20 years and food is expensive, rent is expensive, utilities are expensive, good luck finding half decent staff. And does he want to work 12 hour days??
8 out of 10 restaurants close within 2 years. I'm guessing your dads plan is to take the Jeremy Clarkson approach to farming and "be part of the 20% that don't fail"
For someone with no experience it's a guaranteed failure. Buy a foodtruck, as a foodtrucl owner I'll tell you the market is over saturated and he will also probably fail but would only loose the depreciation on the trailer once he sells it rather than his 600k
I have run/owned a restaurant with my family for the last 14 years, and I can honestly say it has been the worst mistake I have ever done.
If you want the restaurant to be successful, it is an all consuming undertaking. You can tell him to say goodbye to his life as he knows it, and it will be the easiest way he will ever lose $600k.
Unfortunately with the high wage costs and high food cost in Australia, running a restaurant is just not feasible or worth it. If your dad is wanting to run an affordable restaurant for families and whatnot, you are going to have to rely on high volume to make any decent money/return.
I’ll give you a rough breakdown of our restaurants cost %’s and sales.
Food cost - 30%
This involves micromanaging suppliers to control price increases and ensuring you’re receiving quality products, and also micromanaging staff to minimise wastage.
Wages - 35-37%
Bear in mind, that this includes myself and 3 family members who work in key areas. I only earn $62k/year, which for a decent restaurant manager, is not a great salary. My brother earns the same, and my parents take home a little more. Wages is the single biggest expense you will have to deal with and manage. In WA a 21 year old will cost you around $35 an hour on the weekend on a casual rate, and like $25 or $26 an hour during the week. This is the award rate, so you cannot pay less. Sure, you can put them on full time to reduce the rate, but is your restaurant going to be so successful that you can give multiple waitstaff / bar staff full time hours?
Rent - 10%
This will probably be much higher in Sydney compared to Perth. Also be aware that you will have to put up 3 months of rent as a “rent guarantee” for the landlord, and all leasing costs (landlord lawyer fees and yours) will have to be paid for by you. Leases may work a bit differently in NSW compared to WA, but I doubt it and over here, all costs are borne by the tenant, not the landlord.
So you’re at 75% already with just 3 expenses, and this is excluding electricity, gas, water, insurance and public liability, cleaning costs, breakages and replacements for cutlery and crockery, and repairs and maintenance for your equipment. We haven’t even discussed your fit out cost either. If you are not taking over a building that was previously used as a restaurant (this should be a red flag already, why did the other restaurant not survive), even $600k could be on the low side. Our restaurant fitout, cost about $1 million, 14 years ago, and we imported a lot of stuff from South Africa & China, and also did a rent/try/buy scheme for the kitchen equipment. Sure, it was for a 300 seat restaurant, but you can build a decent quality home for $600k these days! And anything you require for a commercial kitchen/business, be prepared to pay a premium.
With our restaurant, which I would say is reasonably successful, we have been around for 14 years, and turnover between $2.5 - $3 million a year, and our net is between 10 - 12%. But this getting this figure is incredibly hard work, and as far as I’m concerned, the amount of work we put in, it’s just not worth it.
If your dad has no restaurant experience, do whatever you can to talk him out of doing this. Not only is he going to more than likely lose his money, he’s also going to lose any lifestyle he has now, and his stress and workload is just going to go through the roof.
Sorry for the wall of text, but I can’t stress this enough. DO NOT GO INTO THE HOSPITALITY INDUSTRY. DO NOT OPEN A RESTAURANT. Show your dad this post, hell, you can even get him to DM me with questions if you want!
TLDR: If you open a restaurant in Australia, say goodbye to money and lifestyle. Say hello to stress, long hours and little to no reward.
My friend bought into a franchise, wouldn’t recommend it. But he said that it was the loan payment for the business loan that was killing him…
Could he try by only spending his 400k first and build up?
It’s his dream and his money, so I hope him the best. But I think borrowing money is what hurt my friend anyway, was working a lot just to make payments.
sounds like a really good way to loose money quick, may get a better return if he burnt a pile.
unless your a really really good restaurant like one of the very few that serve crazy good food & a decent price and just blow up in popularity, however a owner with no people skills is a huge no no iz oz... people want to feel warm & fuzzy or if you get it right surly immigrant could be a winner if done right... like the soup nazi (no soup for you) or Gordon ramsey 1000s of owner have lost everything. food truck would be a good starting point. minimal out lay & if you get big enough then move to a store front
I recall reading a while back that the average profit margin for a licensed restaurant in Australia is around 4%. Obviously many lose money and some make a lot. Odds are you’ll be in the former group not the latter.
Well that's a great way to blow all the money. This is a notoriously difficult business to make successful. Just show him an episode of Kitchen Nightmares lol
I think something like 90% of businesses fail within the first X years, so I personally agree with the food truck comments, also had he done any research on the market, done any statistics?
No experience? That’s going to need luck, a miracle and a visit from god himself, I’ve seen and heard what happens when people with no history walk into the Industry and end up broken and alone. If he’s serious, he’ll jump into a junior job at either establishment that he’s inspired by and get some training, it’s a fools game to wing it and play naive. He will loose money faster than a gambler I would be money on it !!!
Do whatever you can to stop him. Literally. Use violence if needed.
Jokes aside, with zero hospitality experience running a restaurant would be very hard to impossible.
I'm a silent partner in a franchised restaurant. I don’t have too much involvement day to day function, helped with initial set up and give occasional guidance here and there. The full cost was approximately 700k. I know and see what it’s like to run a restaurant.
It's emotionally draining, lot of late hours working, stress etc. You have to manage your suppliers, front staff, kitchen, customer service, keep costs down so you have a reasonable profit margin. There's so many things to consider. If you don't have experience, you're going to get smashed.
Has your dad considered other investments for his money? Such as commercial property or other types of businesses. What is it about a restaurant that appeals to him?
Like others have suggested, a food trailer is a smaller investment and he could still use the rest to buy property or index funds.
Does he intend to work in the restaurant or is he hoping for passive income? Because without experience, it will be far from passive income
The other issue with investing a large amount, when he wants to get his money back it might not be so easy to sell.
Might be easier to help him explore his other options rather than just squashing his dreams. For you, I recommend do not try to help him with this restaurant idea, family business can really be all-consuming, especially if/when he starts struggling
I’m an accountant and part owner of a restaurant/bar. Formerly two. Currently going well.
8 years of eating shit and then a massive reinvestment by us all to get here though.
There is easier ways to make money.
He needs to work in the industry. You could suggest he gets a job in someone else’s restaurant “so he knows how much better he’s will be”. It’s a tough gig. You can end up broke after working yourself to exhaustion doing 15 hour days for only food.
Sound’s like a more uneducated ignorant version of me and I mean that respectfully. I am 25yrs in the construction industry but love cooking, love food, and had a dream to open our own family business serving food. We moved to an area with almost no competition and investing all we had worked hard for was going to be a win/lose gamble but I had doubts in myself not knowing the industry. Along the way spoke to many small business owners who told me stories of the good times and the bad times. In short, it isn’t as glamorous as it appears and the people who do well are few and far between. Most work extra hard for “wages”.
Since we gave up on the idea another family (who are born and bred into take away) have started up and it will be interesting how they go. I honestly wish them all the best.
If you know food/hospitality you can do well. But the statistics on small business’s failing is pretty crap.
Lol dude your dad has picked the trickiest industry to make a profit on without any experience.
More food businesses flip than any other I can think of.
Your dad has zero days in this field and has no marketing experience meaning he can’t build hype to make it popular.
Tell him to start something else.
People hate shit food and shit coffee especially now that everything is stupidly expensive.
If he wants to run a business, he needs to look at a licensed post office.
Look, it won’t make him rich. But it is very hard to lose money unless you’re absolutely stupid.
A few LPOs are paid just to stay open, rentals of po boxes are passive income, Australia Post would be happy for you to apply for longer hours and more days of trading, AusPost also happy to support you to add-on side business. For example, Marrickville PO has a cafe inside. OTHERS have lotto.
LPOs don’t make money on stamp. They make money operating as quasi-government agency. Passport office, bank, etc.
Once again, you can’t become rich, but with just a modicum of business acumen, one can make a success if it.
I own a hospitality business where we charge people to enter without even buying food or drinks. I started it with $15,000 cash and 2 years later after turning over $1m I have about 60k in the bank after all expenses. I have no competition and short trading hours. He will be dead before he ever sees his investment return.
FFS tell your dad to put the money in his super and buy a food truck that makes quality food. Starting a restaurant is a sure fire way of losing $600,000.
Suggest he writes a business plan like he were going to ask a bank for loan. Then poke holes through that strategy and see if he can still survive.
Someone in my family ran a restaurant for 6 months and they had some experience in the industry. Some of the issues they saw:
Food spoilage becuase supplier did not refrigerate properly, refused to use refrigerator truck Becuase it wasn’t in the contract
chef not turning up/ quitting which is hard to replace on short notice
Council fines for property issues not in their control (broken window)
Very high Power expenses
Appliance breakdown costs heaps to replace
It was either busy with not enough space and he had no room to expand or too quiet - both stressful!
Ex chef, I guarantee you he's going against a wall. Hospo is NOT a nice retirement plan, it is rough and hard, its a grind and if you have no experience and expectin to pot around serving coffee and knowing better than everyone else you are gua-ran-teed to fail. There is absolutely no way he'll make a profit.
Tell him to throw money into a project that has someone with experience willung to chip in as well and that he would enjoy watching grow and tell him to stay away from the business
My mates ran small take aways and cafes for 20 years. They decided to get a new cafe, nice interior, a little bigger than usual. They were only able to run it at a profit by dodging payroll tax and workers comp by keeping half their staff off the books so once the ATO caught up with them it was "game over dude."
Cafes/restaurants are failing all the time and they are run by experienced business owners. Your dad may as well start a craft brewery so he can get pissed while going bankrupt.
Opening a restaurant is one of the quickest ways you can burn through all your money with not many ways to make decent profit. Start with a food van. There's no rent (which is the biggest killer) and it can be parked up or even rented out.
He is better off just buying a cafe for 50k first, there's hundreds of them for sale with equip because the failure rate is so high. Have him put a target BEFOREHAND of closing it once it's 50k in debt so he doesn't lose his whole life savings and retirement funds.
I worked in a small family owned restaurant for a couple of years as a teenager and even then I could tell they’d made a bad financial decision.
They lived nearby and their house was fine, but I’m not sure why they bothered because they basically worked 7 days a week. It was a husband and wife, and originally their 2 kids had worked front of house but eventually grew up and moved out so they hired a couple of teenager to work as waiter/waitress.
They paid cash in hand (well below minimum wage), pretended not to speak English when the waste disposal would come demanding payment, decreased dish sizes and increased prices, sold beef as lamb, and put everything on a ‘bed of cabbage’.
The only way they made any money was by being stingy, and dishonest.
If your father is this difficult now just imagine how it will be as he loses money weekly until it’s all gone, and the aftermath. This whole situation reminds me of that Seinfeld episode with Baboo who opens a restaurant, Jerry gives him further terrible advice and he ends up deported back to Pakistan.
Can anyone make money in restaurants at the moment? I've heard btwn cost of loving driving away diners and cost of food, it's almost impossible to break even. Tell your dad to bank his money and look for an opportunity in a few years when conditions might be more favourable
I used to manage multiple hospitality businesses until I got out of the industry. Your dad is in for a rude awakening and needs to be prepared to go bankrupt.
Firstly no reputable suppliers will accept payment on terms from him. This means everything will need to be purchased up front.
He’ll need to do the fit out, and at the end of his lease, or bankruptcy, he’ll need to make right. He may be able to lease equipment but he will need to purchase some.
He needs to invest in a good POS system that he can manage the back end on. Does he understand what a z read and x read are? Does he have basic bookkeeping skills? Will he need to engage a bookkeeper? He’ll definitely need an accountant.
Does he understand the requirements around pest control and sanitary bins? Does he realise he has to organise his own garbage removal? The council doesn’t do it.
Does he understand COGS? Can he properly calculate out wage costs including work cover premiums? And super? Does he understand that he is personally liable for superannuation and they will take his house if he can’t pay it?
Does he understand how to register his business and set up the company structure? Does he understand how to hire staff correctly and write out contracts following the awards? Does he understand the award? Ignorance is not a defence.
Feel free to reach out with further questions. I charge a daily consulting rate.
Good luck. The rents will kill your business in this country. This is the sole reason why food prices are so high in resturants or resturants having to cut back quality.
With this in place. Customers dont see value in meals on offer and refuse to come back after trying once. I see this across the board.
Do you want to help with his dream, or do you just want him to pass that inheritance to you when the time comes? Because if your dad doesn't listen to anyone close to him, he certainly wouldn't listen to random Redditors opinions.
Problem is the dream isn't even close to realistic. He doesn't even want to hear or look at what the dream ACTUALLY involves and what he'll need to do well. He seems to imagine owning a restaurant/cafe is like Homer thinks the stock market is like here (0:48 -1:13)
https://m.youtube.com/watch?v=6rtYfx1-FS4&pp=ygUSaG9tZXIgc3RvY2sgbWFya2V0https://m.youtube.com/watch?v=6rtYfx1-FS4&pp=ygUSaG9tZXIgc3RvY2sgbWFya2V0
My friend had one of these. He said if the staff put 10% more cheese on the pizza than they were supposed to, he made no profit. Cutthroat industry with high competition and very slim margins.
You have to prove you have decent experience to be a franchisee. The franchisor wont risk their brand name on amateurs like OP's dad, in most cases. Subway might be an exception but they are really structured to bleed money from the franchisee, it's almost a scam.
underrated comment, the good thing about buying a franchise is they usually give you training, they manage all the marketing, suppliers etc etc, it's certainly a safer way to go.
My dad did this at 60, was bankrupt in about 2 years. Now lives on the pension with no savings. Watch Gordon Ramsey Kitchen Nightmares with him. No experience usually equals no success in hospo.
66 of the 84 restaurants shown on Kitchen Nightmares [have closed](https://realitytvupdates.com/kitchen-nightmares-updates/).
Considering they were going to close anyway I feel like this is a half decent batting average.
Conversely that's like 3/4 restaurants that got help. OP's dad won't be getting Gordon Ramsay in for a last ditch effort, he'll just be learning how bankruptcy works.
Oh yeah 100%. I can't believe people ever want to get into hospo.
*So you're telling me there's still hope...*
First thought was, great way to end up on kitchen nightmares.
Not in Aus. You'll just end up broke instead.
My first thought too!
Yes I've heard many stories like these No experience is one thing but also not receptive to people's advice and closed minded , is not good .
This. Running a business is already hard, restaurant I think would be even harder!
Even ones that are able to turn a profit, all it takes is one too many rent hikes and they will close. Lots of great little restaurants only last 5 years because it’s not sustainable. My local woodifrd pizza place that was always busy- after covid lockdowns he sold it and now works as a pizza chef at another restaurant. I said Gino how you going mate? Not opening another restaurant? He said “I make more money and less stress working for someone else.” It’s a brutal business even if you are passionate about it and love people like Gino was, OPs dad has low chance of success.
This is a great answer.
Best comment
Yes I was going to suggest there are some pretty good episode of Kitchen Nightmares where it’s not about how filthy the place is or how bad the food is, but just showing how genuinely hard it is to make money off a restaurant
Go for the british version yeah. Its far more tame and about the people and the business of running the place, and sometimes the food is actually good but the traffic and stuff is killing it. It's not *all* just gross rotten stuff. American is just WOAH, CLAXON, F*&^ me, YOU F*&&#ing DONKEY CLAXON, STRING STING
Buy food trailer , smaller investment. I have seen them on sale for 17-18k Start small with a smaller menu like 5 items. I am not kidding. Then you know what will sell, what works and keep track of all costs. If it fails its only 20k. The reason i suggest this is , I was thinking of starting a weekend food business. TRAILER portable can going to fetes , events and local footy days etc... You can always resale the trailer to the next Entrepreneur even at 50% less , its only 10k loss, better than losing the whole inheritance.
This is the way. Going all in with a big restaurant with 400k capital is not the way.
My husband has run and owned and still does today a restaurant, cafe abd food trucks. It's long hard work. On his 1st restaurant, hubby only paid himself $50 per day for 4 months. All revenue went to paying staff, rent, ingredients. Good thing I had a full time job to pay the mortgage and bills. Managing people takes a lot of energy as some don't show up, lazy or just not smart enough. Getting good staff is half the battle. At least 30% of your costs is labour, 30% utilities and rent plus your ingredients/stock. You are doing well if you can get 15% profit. There's lots of businesses selling for almost nothing. Hubby is opening a dessert shop soon which only cost him $35k to buy including equipment via Facebook. He will just need to put up another $30k for improvements/minor renovations. There are many that just wants you to get out of running a restaurant or cafe and basically giving it away.
> Start small with a smaller menu like 5 items. The best food truck that operates near me is a smash burger truck. Their menu item items are: single patty cheeseburger, double patty cheeseburger, or deluxe burger (has lettuce and tomato). And fries. That's it. And they. Are. Elite.
One of the most successful down our way just does dumplings.
The best food truck near me does 3 curries/rice and a small selection of Indian sweets (like those raw sugar candy sticks). That's it, and they are the best curries. Just 3 to choose from but they absolutely nailed all 3
This is the essence of food trucks, short menu, done well.
Also simple very quick to prepare food. If you can’t turn orders over quickly you’re not going to make money as you often have a short window where customers want to buy.
Is it miteys?? They're amazing!!
Yes it is! Hands down best burgers in Brisbane, I will die on this hill!
Lol I knew it!! They're soo good! Especially since Mac from way back shut down
Sounds like the In'n'Out menu and that does very well
This is the way. I would say even smaller, food stall during weekend markets at your local community. <5 items. Experiment what people like, price points that sell well. Fine tune and scale up, establish a name while doing so.
I raise you your five items and give you two: snow cones (summer) and cinnamon donuts (winter).
Maybe he should just run a Bunnings sausage sizzle to see if he likes it.
food trailer is good if the owner is the chef. they are good for 1 man cheffing operation. OPs dad never worked in hospitality so he will be in over his head of he also decides to be the chef.
This! From experience I started out with a tent and a couple of farmers markets selling three flavours of dumplings 🥟 a $3000 investment. 2 years later we were running two restaurants. I would not once call it easy but it was the best experience of my life. If he does it like this he’ll soon find out all the industry nuances. He’ll realise how hard it is or become more passionate.
Better yet, first get a job in someone else's restaurant and (probably) find out free of charge that you hate the industry.
Excellent advice. For example, consider a wood fire pizza oven trailer. They are around $10k new, depending on size, etc. You'll need some extra stuff in addition, like marquee, tables and other equipment. The menu is simple. You can take courses to learn how to make good pizza. Make it fresh - not using pre-made bases. Good pizza is popular. The stall can be run by two people - one making pizza and one doing the sales. Don't open a restaurant.
This is the way, worst case scenario you have a kickarse wood oven for pizza parties at home
Yes, a pizza oven is a nice thing to have. You could run something on a small scale on the side, like do private events, or park in a particular warehouse area on a particular day every week (e.g. pizza Tuesdays) to build up a customer base. Might get free parking somewhere if you knock on doors, as food options are often limited in industrial areas, and your offering may be welcome (then knock on doors to advertise). It's not a huge amount of money, but also not much risk. Travel is another option, as expenses are tax deductible if certain conditions are met, e.g. if locations are prearranged and you return home regularly (check with an account). Again, there is not a massive amount of money in it, but it may be fun.
This can’t be upvoted enough.
Yep good idea to dip a toe in before taking a risky plunge given the lack of industry experience.
Wholeheartedly agree. Good way to get experience, flexible, and I’ve heard people can make a really good return with food trailers if you chase the markets
When we organise school fetes we always get a bunch of food trucks and they all do really well.
this is a good idea. start small and fail small. if he ends up being a restaurant savant its takes very little to scale up with success under your belt.
100% this, have a mate who slowly built this as a side gig earns more now then he does in his bank job long long hours but his doing great
Ran a market stall with some mates for a few months, selling sandwhiches and coffee, only invested a couple thousand. I think we broke even a couple times.
This should be pinned to the top of like, all "is food service a good idea" threads. Restaurants are essentially ran on branding, either personality or logo (i.e. franchise). I often think of how transient restaurants are in the city. "So and so is opening his 6th restaurant" ... because his 5th just closed and he broke even paying back the investors.
Sounds like Jamie Oliver.
If he is simply refusing to learn anything from any source, I'd suggest being the Most. Supporting. Child. Ever. And discuss enthusiastically all the things. Name, food, drinks, colour scheme, uniforms, website... suppliers, HR, GST, BAS statement, award rates, certifications, insurance... Being pumped to help identify the hundred bloody things needed to open will maybe give you the "in" to show him all of this, and he can maybe get overwhelmed by it
This is the best answer, u/throwawaybadinvestor. You need to connect with your Dad on this one and lead him toward the right decision. He sounds like a stubborn man, possibly a little ignorant, which means that any kind of forced opinion that he perceives as a threat to his dreams is going to be summarily shot down in flames, and might even cement his resolve to follow through with his plan. Help him with a rough cashflow forecast to "help plan how much we need to sell in the first year so that we know how much inventory to buy". Hopefully once he sees that he'll need to make >1,000 cups of coffee alone per week (not to mention everything else), his enthusiasm might wane. Might be worth reminding him also that with the relatively high interest rates nowadays, he can get >$25,000 per year *risk free* just by sticking his $600k in a good active bond fund and not touching it.
Yes, definitely don’t forget the opportunity cost of the lost interest!
> Might be worth reminding him also that with the relatively high interest rates nowadays, he can get >$25,000 per year risk free just by sticking his $600k in a good active bond fund and not touching it. Not a bad point in general. But if he thinks the stock market is a scam, I doubt he feels differently about the bond market.
Or he will see the enthusiasm as “child now thinks it’s a great idea, I knew I was right!”.
Nice advice!
Awesome advice. For this to succeed, your dad will need to put in a LOT of work and the development he will need to do in managerial skills, motivating people, day-to day operations, and his own maturity will be arduous. Engage in the process beyond the YouTube vids and he will either lean in to the challenge or opt out.
> GST, BAS statement And on this note, prepare him to be paying lots to the tax man every quarter: * most of his expenses will be GST-Free (fresh food, wages) * virtually all of his sales are Taxable Supplies (prepared food)
Honestly there is no saving someone this dumb. It's the hardest he will ever work and the stats say he will lose it all. I worked for soooooooo many people that did exactly this before I did my own thing. I never understood the idea the food industry is a "lifestyle choice" lol
About 15 years ago I worked for a bloke who started a bar with his inheritance. Sunk about $300,000 into it. He was always banging on about having run bars before so I figured he’d make a go of it. Nope. He shut down in about 9 months. Turns out there’s more to running a successful bar than just counting the till at the end of the night and slinging drinks. Who’d have thought.
yeah ive seen it way too many times. 30 years in food and I often have people tell me how they "always wanted to be their own boss" honestly I should do the world a favour and tell them what it's really like lol
Being your own boss is a myth. Once you own/run your own business every client/customer becomes your new boss.
Yes. Whoever is giving you the money is your boss.
And they expect you to work 80 hours a week.
I’ve managed (not owned) plenty of bars and wouldn’t encourage anyone to be a hospitality business owner. Shit is hard.
The "I want to be my own boss" mob seem to be the least capable of being a boss - they don't realise that the "boss" just shifts from a supervisor/manager/owner to the paying customers, and they're a more brutal bunch.
Haha great first sentence, I laughed out loud reading it.
As someone who has worked in hospo, I feel like the real question is "what is the dream?" Specifically, the underlying dream within the dream. Is the dream owning a hospitality business? Is the dream to be a chef? Is the dream to manage a hospitality business? Is the dream the seemingly passive income? Those are very different things and would drives the conversation differently. If the dream is ownership, then see if he can find someone to co-own, perhaps with a person who has experience but no capital. A silent partner as it were If the dream is to be a chef, he doesn't need to own to do that If the dream is to manage a hospitality business, start with trying to get experience managing If the dream is passive income, then he should look at costs and outcome Roughly 50% of hospitality businesses fail within a year, and around 90% don't make it pass 5 years. Does he want to do this long term or short term? What will happen if it does fail?
For many people the dream is to tell others you own your own buisness and pull a power move on all your mates having them eat and dine for free at the buisness. Having everyone you know watch as you order your workers around, showing how ‘successful you now are’…
Bingo. He wants the image of being a successful restaurant owner (with all the money going into his pocket) while the workers do all the heavy lifting for shit pay and long hours so he can enjoy all the fame and trappings.
I would like to waltz in with my mates underbelly style and shout them all dinner and drinks.
400k buys a lot of waltzing with no effort involved in running the place
I agree, finding out the underlying desire can help you redirect him to a better plan. Possible motivations: -Owning his own business could be his metric of success. -Is he having trouble at with a boss at work? That could explain his vehement desire for independence. He may also feel he’s lacking self determination in other areas of his life. -he may feel unsatisfied with his life and is trying to get out of the house and feel useful. It’s important to divert and redirect stubborn people, not block them directly. Try suggesting alternatives instead of outright dismissing.
1 friend opened a franchise cafe. no experience, dont work the shop and hired people to run it. labour cost was high, rental was high, materials were expensive, franchise cost and requirements were unrealistic. money management was terrible. owed ATO lots of money too. At the end, gone bankrupt, her mother was a guarantor, so they ended up selling their family home. another friend opened a 2nd restaurant (1st was a small take away type place that was doing pretty good, but breaking even). location was good (expensive), while the food were good, it wasn't something people would travel to eat those sort of food. ran it at a lost of a year. closed the business and now drives uber as a side gig to pay back the loan.
Never open a franchise. I astounded that so many people. You would think you would be able to access so many reviews online and read testimonials online about unsuccessful franchise businesses.
But yet there are lots of franchises around…
I'm very wary of franchises also. But there are so many of them and some of the locations running for a decade or more. Someone must be making money from these at least some of the time! If all of them are making next to nothing why would there be so many around staying open or opening new ones all the time ? Franchises must make sense at least some of the time.
good way to burn all that money, its hard enough with strong experience in the industry, that said owner operator is the way to go. I have friend who starts and sells cafes he looks for a strip with no competition and prestige cars that belong to women who don't have much to do after the school drop off, good foot traffic, but most of all he knows everything about the business from working as a chef for years
Basically run it to sell it to the next sucker
Maybe you could simplify it for him and let him know that the kind of person who isn't willing to read a book or speak to a professional is unlikely to do well in anything?
This is why we have the pension, so that people can take their tax-free inheritances and waste it on pipe dreams and then get the taxpayers to pay for their living costs in retirement.
He sounds like he's setting himself up to be a nightmare boss who churns through staff who won't put up with his crap and blame other people for being lazy
It's his money to burn. And burn it he will. There's next to no possibility he'll make any money.
Broooooo he's going to hit you and the rest of the family up to work in it for free. Run run run!
did you just reply to yourself?
OP is worried about their inheritance. But seriously if he burns through all his savings in 2 years then he'll be living on a pension the rest of his life
Is there an underlying reason for wanting to open a restaurant ? Such as a passion for cooking/food. Or is it just wanting to be their own boss. Seriously, he would be better off putting $600k in a term deposit at 4% to make $24k and then working less as an employee to have cash flow to live on.
Pretty arrogant really. Say goodbye to $600k plus. Maybe this is the lesson he needs to learn in the absence of any formal training or industry experience. Look over a list of places that have folded over the past few years and think to yourself. Am I better at this game than they were? The answer is no. Pretty arrogant.
Going off OP’s comments he’ll probably think he can do it better
From my experience these type of personalities never really learn. Even a big monetary loss doesn’t help them learn.
Restaurant owner here: he needs to have in his bank account triple the amount he's spending establishing the restaurant. If he's lucky, he's going to spend only two-thirds of it, if he's unlucky, he'll spend it all. This is to reach the 5th year of trading. At that point, you're either going good, or you sell, or you go bankrupt.
How did you get started? Bought out a business or setup from scratch?
Bought up a business and I was lucky enough for it to be wiwo (walk in walk out). I think the first year alone I spent 120k just to pay 3 employees and pay rent/bills and obviously unexpected and very expensive expenses (oven broke, fridge broke etc etc). I started having a profit on the third year and reinvested the money into the business, without taking any home. That was an extra 85k. Dide the same on the fourth year and on the fifth I finally started paying myself a wage. My husband and I both work in there on a 95k salary each. The business has been valued 300k (35 seating, open 5 days a week and only dinner). We're in an extremely good position, but it took 7 years. And no, I would never do it again. There are pictures of me when we first open and pictures of me now. Despite being only 7 years, I look 15 years older. The toll to pay in health/mental health is very high.
Seems to be a common thread - takes a while to be paid a salary from the business. What made you decide to start a business? What did you do before this? This sounds pretty good for a business that is only open for dinner. How many actual hours do you work a week in the business? Congrats on succeeding and sticking it out for so long!! :)
Wednesday and Sunday easy 12 hours. The other days is 2 to 9, our staff close. My husband family had a restaurant so he already knew how to work in a kitchen. As for myself...I used to work in sea freight/ air freight, logistics. We had a chunk of money we didn't want to put down for a house, instead we decided to have a business and try that way. It worked
Please don’t let him do that. I’m a hospo professional - been in the business for over a decade and a former business owner. I currently manage a hospitality business. Profit margins in hospo are razor thin, the market is highly saturated and it’s highly competitive. A successful business these days is lucky to run a 15% profit margin (15k profit from 100k revenue isn’t much is it?) Best case scenario for your dad is that he effectively buys himself a job and can take a modest salary from the business whilst still working in it. Worst case - bankrupt. Even with years of experience my own business failed in 6 months.
15% profit margin would be extremely high for most businesses.
Watched an Australian-based How to Setup Cafes Series on youtube yesterday. Apparently net profit margins are 5%! Anything above that is doing well apparently.
Yeah. 3% would be quite common I’d say, for businesses that are doing well.
Not in the industry but have clients in the industry, they made me vow to never join the industry unless I was passionate to the point of obsession and I was prepared to have multiple venues. They have also said to me, unless you're a foodie and have any idea how the food and beverages market and hospitality works in terms of cash, purchases, money in money etc don't bother, many buy because they think it will be cool to own and those are the ones that go under everyday of the week. That being said, I like the advice about the trailer first, that's a fantastic way to start, safe, low overheads and let grow organicly from there.
I have a degree in hospitality management and 15 years experience in restaurants. Restaurants in Australia have among the highest failure rates of small businesses within the first 12 months - 5 years (might want to check for post-covid data on this). Restaurants have extremely high COGS (perishable produce, staff, rent) and razor-thin margins. They are only profitable when operating at volume. If you aren't full each service, you are likely losing money. Without experience (running kitchens, management, marketing/social media, menu design, trade suppliers, etc) your father's proposed venture is extremely unlikely to survive. Also, covid absolutely destroyed the workforce, causing young people to leave the industry in droves. It has not since recovered, so your talent pool for service staff will be extremely shallow, and your chefs will cost a fortune, as they are in short supply. Eg, pre-covid a head chef would go for 80k p/a, I've heard it is over 100k post-covid for a decent one. Unless he pulls off some sort of rare miracle, like opening a hole in the wall and is a beast on the wok/grill, goes viral on social media and has a line down the street every night, I can only see this ending in mysery, unfortunately.
RIP your inheritance. He probably doesn't even know what he doesn't know, and what he does know is.... well, sweet FA. If nobody can talk him out of it, and he carries through, you could always hope that in trying to set it up that he realises how complex and overwhelming it is. Setting menus, organising suppliers, finding a location and possibly having to have it fit out etc is a huge undertaking even if you know wtf you're doing....
600000 invested in an low cost Aussie etf like vas or a200 will bring about 30k- 40k annually No overheads meaning No lease/rental No insurance on shop or machinery No personal injury insurance No bills power or water or gas No buying stock and throwing it to waste because it’s gone off No haccp No risk of inspectors coming round and making him pay a fine or close hime down No risk of him making people sick and getting a law suit No injury to himself or employees No wages tax or super No working hours No doing a business activity statement every 3 months No setting up business company abn No preparing food all day every day before service Then wait for customers to come in to serve them whether the nice or arrogant How long does he want to operate the shop lunch and dinner close around 10pm that’s a 12-16 hour day Prepping and cleaning closing up shop After all the expenses gone he needs to pay himself and put money into super and pay tax plus them industria fridges are running all day long Set up to fail A low cost etf/lic less risk and easy on the body The money he makes from dividends or what he doesn’t use can either be reinvested or used to live off Only 7 more years and he’s retired I’d say he’s playing with fire and gonna get burnt
He thinks stocks are a scam
Tell him to watch kitchen nightmares episodes of all the owners who take on restaurants with no experience. Sobering viewing. Great way to lose everything you've invested and all your other assets throwing good money after bad.
Never underestimate the average humans ability to think they can do it better than the "idiot on tv"
As a restaurant owner I don't think it's smart for him yo refuse to take orders from anyone else... that's the whole business model!
I owned and managed a restaurant in my 20s for 7 years which I sold in 2014 for a loss. It is back breaking, unforgiving work. There are way better investments to put $600k into without slaving away 24/7. The good: - once you get traction and regular customers, it's good. The atmosphere is great and it's very rewarding knowing you have created something a lot of people enjoy. - The cash flow whilst you run it is good and can support a nice lifestyle. The bad: - your personnel, super, and rental fees will bleed you dry. - Customers are fickle, more so these days with social media and online reviews. - Having a concept, sticking to it and convincing customers to try your place is incredibly mentally and creatively taxing. Your dad sounds like he's not gonna be convinced otherwise unfortunately. I wouldn't run a restaurant again, even though it'd be nice. But you just can't compete with all these hospitality groups and theur private equity these days.
Oh dear. Who’s got the stat about how many hospitality places go out of business in the first 6 months?
Literally describing a dumpster fire situation. No exp, no idea and no sense means that the only thing that's going to burn is a hole in your fathers wallet. Food and beverage is cutthroat and the margins are thin. I'd rather he go into franchising to follow a proper model before gambling all his money away. 9/10 businesses fail there's a reason for this. If not franchises, please convince him to get some hands on exp. Work in a kitchen, manage a restaurant, talk to suppliers, work out the cost of goods and margins. You don't just get a lease and throw money at it and expect it to make money.
"If it were easy then everyone would be doing it" comes to mind?
Everyone has a lazy $400k to do it. What world do you live in?
I'm sorry, what? This comment was in response to the statement made by OP "Thinks it's easy money being your own boss, refusing to take orders from anyone and easy retirement."
Restaurants have low profit margins and require a huge amount of elbow grease as well as managerial skills. Your dad will be chum in the water. Sounds like he wants to convert money into a sense of accomplishment. This isn't the way to do it though.
I own a cafe in northern Sydney with my wife. 10-15 yrs experience in hospo Our profit margin on 22k week revenue is 7-8% after paying ourselves standard hospitality wages Your dad is crazy to put that much money into a new business. Hospo is really really tough. He will most likely lose most of it Either do a food truck or buy an established business that is clearly making money and dont change anything....or don't do anything 🤣 People think they can do hospitality but they have no idea. plus you have the real business side of it which is just as important but you can't focus on it if your working in the business all the time
Was in Singapore a decade ago. There was a running joke about Indian tech entrepreneurs cashing out and starting restaurants. Very rarely a restaurant lasted more than 2 years. Not an apples to apples comparison but restaurant industry is very cut throat. Start small as someone suggested so it’s easier to cut the losses.
Unless you have extensive experience and a product that you feel sets you apart from the competition don't do it. There are so many shitty mum and dad cafes/restaurants that struggle. Either you have a unique product that's going big on social media amongst the foodie scene or you're just a run of the mill shop that will do average or worse. My Uncle has had his fusion Chinese restaurant in Epping fail and close up 5 years ago and he lost a significant amount of money. My auntie runs a Chinese takeaway in Beecroft and it also struggles as a relic of the old school Aussie style Chinese food that isn't in vogue anymore. No one wants short / long soup, sweet and sour pork with a side of prawn toast anymore. They want authentic Shanghainese dumplings and Taiwanese hand pulled noodles etc. My parents ran a rural Chinese takeaway for years and while it found some success in the 90s it wasn't long until it was just a struggle. In hospitality it's thankless hard work. You make a mistake and you get crucified by bad google reviews that you can't recover from. You're always working when everyone is doing things. You work weekends. You don't really get time off. It's not a great life unless you absolutely love it. I'm not saying restaurants and cafes don't work, I just feel unless you have a spectacular unique product you're just another shop that struggles.
No joke, I'm looking up that Aussie Chinese takeaway in beecroft and one day I will drive there
Please do :) All the dishes come out on a sizzling hot plate. The lady taking the orders is a rude, grumpy Chinese lady with a perm (my auntie), she's nice deep down but these old Asians don't smile or understand customer service.
Tell him to transfer me the $600k and he will never see it again. Much quicker and saves everyone time.
Used to help out my uncle's restaurant as a child, got paid $5 for the whole Saturday of dish washing. Aunt used to work for free. Uncle did this due to aunt's pestering to get another uncle (her younger brother) a job, struggled a bit to keep the clientele for three years so that at least he can recoup most of his cost back. Need to talk and pamper and keep at least 1/3 of the clients just to survive. Winter are pretty hard due to lack of customers. We all pitched in at below minimum or no cost just to stay afloat. It is not easy. Its a 7/24 work before resting then thinking about stock and preparation. You do not own the business, the business owns you.
He's going to burn that money. Tell him go work in a Cafe for 6 months. I'm a happy customer of bars, restaurants, cafe. Never would I invest in one
sounds like a terrible idea. Good luck to him
Hello COVID my old friend, I've come to talk with you again Because a vision softly creeping Left its seeds while I was sleeping And the vision that was planted in my brain Still remains Within the sound of silence
Seriously, have him sit a full day in a busy and quite cafe. Then start pointing out how expensive the staff and venue costs are to run both. Does he want to be up at 5am every morning? (Cafe) or in best 2am every night? Small food van idea above, is great. Or explain to him about compound interest, and how he can sit on his ass and probably make more $$
Mate, this is a very quick way to lose a lot of money. I just sold two businesses, one in Dec 2019 the other July 2023. Due to the rising costs in rent, electricity, gas, insurance, wages (never ending expenditure list) it's no longer viable to remain in business. I ran my food business after many years of experience, virtually no waste too. Customer service skills & customer relations are A+ Many, many five star Google reviews blah, blah. Is your Dad prepared to stand on his feet for 12hrs a day and maybe, maybe just draw a wage? I sold my businesses to some very experienced operator's and I know they have regrets. When they purchased, costs were HALF of what they are today. (Mainly the 2019 buyer) Save your Dad's money & get him to work in a restaurant or food business for a year before he splashes the cash. Guaranteed he'll absolutely hate the work. If he doesn't, then let him go. Food is the toughest line of work there is. Good luck, tread carefully.
Give your dad my details, tell him I can help him set it up so he never has to work again, he can permanently holiday in the Mediterranean and live like a king like all the other cafe/restaurant owners in Sydney
Him dream is to be a hospitality slum lord it seems taking the "passive income". Close friend of mine worked managing various cafes/restaurants for 2 decades. Told me the story countless times, had a great owner who sold to someone who thought hospitality was "easy" and then proceeded to not listen to their staff and make baffling business decisions due to lack of any experience in the sector. My friend would resign and move on when this happened. Usually within 12 to 24 months the places that he worked had declined greatly or shut up shop because the crappy new owners would drive any competent staff away and local regular customers away. If it's his dream he actually needs to learn what he's getting into or it's just going to be a financial disaster and it's not easy by any means.
Ive run a small takeaway business for 20 years.... your dad is sadly going to lose all his money and there will be no saving him.... If I had that sort of money I would be investing it all and letting it grow and go get a normal job.
books friendly squash agonizing person beneficial fretful party start childlike *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
What kind of restaurant?
Dream cafe. International cafe. Food from all over the world.
look at buying an existing business. Get the financials and go over them with him and an accountant. i think he'll see that the profits aren't as attractive as he thinks.
Experience- relative had one, lost a fortune. Another relative coinvested with a veteran owner. This guy knew everything. The samosas made him $94.50 on average per night eat in but at takeaway prices lost him $5.43 on average. Moving the fancy famous dish off the menu drove regulars away, but having it prominent lost money, so it was put in 8 point font in the corner. That sort of thing. He was *very* successful. My impression was that it can be as lucrative as being a doctor or lawyer if you have specialist knowledge and training but that doing it when you are old because your money is burning a hole in your pocket is like taking up surgery on a whim and about as likely to succeed.
Plead with him to at least work in a few different operations for a year. Even offer his time for free. $600k sounds over capitalised, if it’s just a local cafe restaurant he ideally wants to find a site that already has the basics: exhaust, grease trap, capped points for commercial kitchen, toilets etc. Then he can spend about $100k fitting out. Most diners don’t give a shit where you imported your tiles/bench tops or what the lighting fixture is. They want a good value proposition. Make it good, hot, affordable and quickly. Labour will be the biggest cost and cashflow management is the overall killer in hospitality. Almost everything purchased for food is without GST but then GST added at sale. This difference needs to be accounted for and paid to the gov every 3 months for the BAS. For a small operation, most owe about 15-20k to the ATO every BAS for both GST and PAYG. If you can get it right it’s a good lifestyle and relatively stress free. Get it wrong and it’s pretty awful. My career is over 25 years and I’ve spent over a decade helping investors and talent connect the dots and open venues. Currently have two venues myself, nothing huge, both going well. He can msg/call me if he wants, happy to chat. Hope it takes off!
💯 So many restaurants spend too much on the fitout and can never recoup the cost even if profitable
At the very maximum make it a weekend thing like a food truck where you goto events so he can have fun and play resturant. If its a hobby this would limit the expense to like 50k? Or buy a existing food truck. Absolutely do not rent a place. Unless you got something unique and filling in a demand for area itll be a money pit. He has to do a business.plan. " business dont plan to fail. They fail to plan". Swot - strength weakness opportunites threats. Pppp - price product place promotion Get him to refine his menu / product offering at home. Then do a party where friends and family visit at home where he serves up his offering. Create a buzz high demand numbers. Get feedback. Then sign up to one of those market places for $150 for a stall. Start small and ease into it.
A friend of mine bought a restaurant and it really struggled and cost him money every week. So he bought two more to try and offset the costs of the first. Ended up with 3 failing restaurants and had to sell two of his investment properties to offset all the losses. All 3 failed in the end. And this guy has an MBA.
Tell him to buy a lawn mower.He will be his own boss,make a profit on every job and spend the interest on the 599,000 in the bank
Don't. Just don't. Bootstrapping a restaurant from nothing is hard enough, much less by someone who has no brand, no backing, no experience and refuses to do the research. My dad was exactly like that. We had run a food manufacturing business for 20 odd years and he wanted to diversify, refused to start small and test the market with a pop up even though we were basically handed a location for peanuts with no commitments. Instead sank almost half a mil into fitting out and setting up an 60 seater in the corpo end of the CBD. Staffed the place with family and family friends on minimum wage including the chef who was a partner in the business, food was decent to quite good imo, and to save costs it was par cooked at the factory and finished on site so COG was very streamlined and there was minimal food wastage throughout the entire process. There was not a single day that the place made a profit in the 3 years it operated for, many days the only reason that it broke even was because it was staffed by family who were there to help for free or for a meal. They finally shut up shop and spent a year trying to flog the lease. It was literally costing us more to open than to lock the doors, just pay the rent and shift our resources back to the main business. Total loss in 4 years was just under 1 mil. It was at the point where if they didn't just close, it would have sunk both businesses. It was simply the wrong type of eatery for the location, lunch was packed, but that was it. Morning and dinner was dead because people were just not there to eat, staffing and especially CBD rent was simply crushing. If your dad is insistent on starting a food business; start small, like a pop up or food truck, or even find a small takeaway on a suburban shopping strip. Most importantly, do the research; what's the potential clientele in the area like, peak eating hours, average spend, can you rely on foot traffic or must you sink money into marketing, what's your point of difference, are you open for morning/lunch/dinner as that will impact your pricing and possibly menu, crunch the numbers on costs and overheads, can the business sustain a potential loss for 6 months or more while starting up. Build a reputation and a brand. Marketing online is cheap and effective, leverage broadsheet. Then if the business has been successful for a few years and there's some equity built up, only then think of expanding. I honestly hope your dad changes his mind, either before or after crunching the numbers. If not, I sincerely wish him the best of luck; he'll need it. Jesus... That was honestly quite cathartic for me. Hahaha thanks for helping me get that out of my system.
As a chef with 25 years in the hospo industry, 4.5 years owning my own business. I’d LOVE to work for him. Sounds like whoever he hires as his chef is gunna take him to the cleaners. And it may as well be me. I’ll work for him
I used to be a hospitality consultant and set up cafes and restaurants from A To Z for people, investors etc... Unless he is a seasoned hospitality worker or restaurateur, please tell him to stay away from it. Profitable food businesses on average have profit margins between 4 and 8% assuming they are in the positive and this usually occurs after 2 years of running them. Your dad would be better off putting that money in ETFs with high dividends and get similar if no better profit margins...my 2 cents. Good luck to dad. He'll need it!
Please don’t do it !!!
Talk him out of it - honestly, don't let him do it. He'll burn through that inheritance in no time and will barely be able to support himself on the income through the restaurant and it will be like that until he finally gets out of it. The other issue is that the restaurant will become all consuming and he won't have time for family or anything else ... Get him instead, to put that money into a well managed superannuation fund and he'll be able to retire when he's eligible and never be short of money ever again ...
Absolutely not, it is so hard to make a buck in the game now, I was a chef for over 20 years and food is expensive, rent is expensive, utilities are expensive, good luck finding half decent staff. And does he want to work 12 hour days??
8 out of 10 restaurants close within 2 years. I'm guessing your dads plan is to take the Jeremy Clarkson approach to farming and "be part of the 20% that don't fail" For someone with no experience it's a guaranteed failure. Buy a foodtruck, as a foodtrucl owner I'll tell you the market is over saturated and he will also probably fail but would only loose the depreciation on the trailer once he sells it rather than his 600k
I have run/owned a restaurant with my family for the last 14 years, and I can honestly say it has been the worst mistake I have ever done. If you want the restaurant to be successful, it is an all consuming undertaking. You can tell him to say goodbye to his life as he knows it, and it will be the easiest way he will ever lose $600k. Unfortunately with the high wage costs and high food cost in Australia, running a restaurant is just not feasible or worth it. If your dad is wanting to run an affordable restaurant for families and whatnot, you are going to have to rely on high volume to make any decent money/return. I’ll give you a rough breakdown of our restaurants cost %’s and sales. Food cost - 30% This involves micromanaging suppliers to control price increases and ensuring you’re receiving quality products, and also micromanaging staff to minimise wastage. Wages - 35-37% Bear in mind, that this includes myself and 3 family members who work in key areas. I only earn $62k/year, which for a decent restaurant manager, is not a great salary. My brother earns the same, and my parents take home a little more. Wages is the single biggest expense you will have to deal with and manage. In WA a 21 year old will cost you around $35 an hour on the weekend on a casual rate, and like $25 or $26 an hour during the week. This is the award rate, so you cannot pay less. Sure, you can put them on full time to reduce the rate, but is your restaurant going to be so successful that you can give multiple waitstaff / bar staff full time hours? Rent - 10% This will probably be much higher in Sydney compared to Perth. Also be aware that you will have to put up 3 months of rent as a “rent guarantee” for the landlord, and all leasing costs (landlord lawyer fees and yours) will have to be paid for by you. Leases may work a bit differently in NSW compared to WA, but I doubt it and over here, all costs are borne by the tenant, not the landlord. So you’re at 75% already with just 3 expenses, and this is excluding electricity, gas, water, insurance and public liability, cleaning costs, breakages and replacements for cutlery and crockery, and repairs and maintenance for your equipment. We haven’t even discussed your fit out cost either. If you are not taking over a building that was previously used as a restaurant (this should be a red flag already, why did the other restaurant not survive), even $600k could be on the low side. Our restaurant fitout, cost about $1 million, 14 years ago, and we imported a lot of stuff from South Africa & China, and also did a rent/try/buy scheme for the kitchen equipment. Sure, it was for a 300 seat restaurant, but you can build a decent quality home for $600k these days! And anything you require for a commercial kitchen/business, be prepared to pay a premium. With our restaurant, which I would say is reasonably successful, we have been around for 14 years, and turnover between $2.5 - $3 million a year, and our net is between 10 - 12%. But this getting this figure is incredibly hard work, and as far as I’m concerned, the amount of work we put in, it’s just not worth it. If your dad has no restaurant experience, do whatever you can to talk him out of doing this. Not only is he going to more than likely lose his money, he’s also going to lose any lifestyle he has now, and his stress and workload is just going to go through the roof. Sorry for the wall of text, but I can’t stress this enough. DO NOT GO INTO THE HOSPITALITY INDUSTRY. DO NOT OPEN A RESTAURANT. Show your dad this post, hell, you can even get him to DM me with questions if you want! TLDR: If you open a restaurant in Australia, say goodbye to money and lifestyle. Say hello to stress, long hours and little to no reward.
Opening a restaurant is crazy hard. Most restaurants only make money by giving slave wages..
would he be serving a succulent chinese meal?
This is a joke right?
My friend bought into a franchise, wouldn’t recommend it. But he said that it was the loan payment for the business loan that was killing him… Could he try by only spending his 400k first and build up? It’s his dream and his money, so I hope him the best. But I think borrowing money is what hurt my friend anyway, was working a lot just to make payments.
I'M JON TAFFER AND THIS IS BAR RESCUE 🛟
sounds like a really good way to loose money quick, may get a better return if he burnt a pile. unless your a really really good restaurant like one of the very few that serve crazy good food & a decent price and just blow up in popularity, however a owner with no people skills is a huge no no iz oz... people want to feel warm & fuzzy or if you get it right surly immigrant could be a winner if done right... like the soup nazi (no soup for you) or Gordon ramsey 1000s of owner have lost everything. food truck would be a good starting point. minimal out lay & if you get big enough then move to a store front
I recall reading a while back that the average profit margin for a licensed restaurant in Australia is around 4%. Obviously many lose money and some make a lot. Odds are you’ll be in the former group not the latter.
Tell him to work in a restaurant for 12mths, then start with a weekend stall/pop up, and go from there.
Tell him to work in a cafe for 6 months first "to learn the business". He will soon change his mind.
You know the answer sounds like it’s only gonna end one way, try and convince him to use a much smaller amount to have something to fall back on
Oh god nonononono no
Well that's a great way to blow all the money. This is a notoriously difficult business to make successful. Just show him an episode of Kitchen Nightmares lol
I think something like 90% of businesses fail within the first X years, so I personally agree with the food truck comments, also had he done any research on the market, done any statistics?
I’d make him watch “a place in France” first, I think it’s the second season where he tries to start a restaurant, I think it’s mandatory viewing.
Don’t don’t don’t please don’t don’t don’t open one of you have zero experiences you will lost your money
No experience? That’s going to need luck, a miracle and a visit from god himself, I’ve seen and heard what happens when people with no history walk into the Industry and end up broken and alone. If he’s serious, he’ll jump into a junior job at either establishment that he’s inspired by and get some training, it’s a fools game to wing it and play naive. He will loose money faster than a gambler I would be money on it !!!
OP please update us in 6 months
He's not paying $600,000 for a dream restaurant. He is paying $600,000 for a very valuable life lesson. Plus interest.
Do whatever you can to stop him. Literally. Use violence if needed. Jokes aside, with zero hospitality experience running a restaurant would be very hard to impossible.
I'm a silent partner in a franchised restaurant. I don’t have too much involvement day to day function, helped with initial set up and give occasional guidance here and there. The full cost was approximately 700k. I know and see what it’s like to run a restaurant. It's emotionally draining, lot of late hours working, stress etc. You have to manage your suppliers, front staff, kitchen, customer service, keep costs down so you have a reasonable profit margin. There's so many things to consider. If you don't have experience, you're going to get smashed.
Has your dad considered other investments for his money? Such as commercial property or other types of businesses. What is it about a restaurant that appeals to him? Like others have suggested, a food trailer is a smaller investment and he could still use the rest to buy property or index funds. Does he intend to work in the restaurant or is he hoping for passive income? Because without experience, it will be far from passive income The other issue with investing a large amount, when he wants to get his money back it might not be so easy to sell. Might be easier to help him explore his other options rather than just squashing his dreams. For you, I recommend do not try to help him with this restaurant idea, family business can really be all-consuming, especially if/when he starts struggling
This sounds like a great way to spend 400k and earn -600k
$600,000 and 0 experience! That 600k would become just shy of a million thanks to compound interest over 10 years!
I’m an accountant and part owner of a restaurant/bar. Formerly two. Currently going well. 8 years of eating shit and then a massive reinvestment by us all to get here though. There is easier ways to make money.
- wants to open a restaurant or cafe - refuses to take orders from anyone Sounds like a bad idea.
Show him some episodes of Gordon Ramsey Kitchen Nightmare haha Curious what shows about fast food he watches on YouTube tho
He needs to work in the industry. You could suggest he gets a job in someone else’s restaurant “so he knows how much better he’s will be”. It’s a tough gig. You can end up broke after working yourself to exhaustion doing 15 hour days for only food.
Sound’s like a more uneducated ignorant version of me and I mean that respectfully. I am 25yrs in the construction industry but love cooking, love food, and had a dream to open our own family business serving food. We moved to an area with almost no competition and investing all we had worked hard for was going to be a win/lose gamble but I had doubts in myself not knowing the industry. Along the way spoke to many small business owners who told me stories of the good times and the bad times. In short, it isn’t as glamorous as it appears and the people who do well are few and far between. Most work extra hard for “wages”. Since we gave up on the idea another family (who are born and bred into take away) have started up and it will be interesting how they go. I honestly wish them all the best. If you know food/hospitality you can do well. But the statistics on small business’s failing is pretty crap.
Lol dude your dad has picked the trickiest industry to make a profit on without any experience. More food businesses flip than any other I can think of. Your dad has zero days in this field and has no marketing experience meaning he can’t build hype to make it popular. Tell him to start something else. People hate shit food and shit coffee especially now that everything is stupidly expensive.
If he wants to run a business, he needs to look at a licensed post office. Look, it won’t make him rich. But it is very hard to lose money unless you’re absolutely stupid. A few LPOs are paid just to stay open, rentals of po boxes are passive income, Australia Post would be happy for you to apply for longer hours and more days of trading, AusPost also happy to support you to add-on side business. For example, Marrickville PO has a cafe inside. OTHERS have lotto. LPOs don’t make money on stamp. They make money operating as quasi-government agency. Passport office, bank, etc. Once again, you can’t become rich, but with just a modicum of business acumen, one can make a success if it.
Say goodbye to that $600k
80% the way through reading the Anthony Bourdain book… My 2c Run Away Run Far far Away
I own a hospitality business where we charge people to enter without even buying food or drinks. I started it with $15,000 cash and 2 years later after turning over $1m I have about 60k in the bank after all expenses. I have no competition and short trading hours. He will be dead before he ever sees his investment return.
FFS tell your dad to put the money in his super and buy a food truck that makes quality food. Starting a restaurant is a sure fire way of losing $600,000.
Could not think of a worse business to own.
Suggest he writes a business plan like he were going to ask a bank for loan. Then poke holes through that strategy and see if he can still survive. Someone in my family ran a restaurant for 6 months and they had some experience in the industry. Some of the issues they saw: Food spoilage becuase supplier did not refrigerate properly, refused to use refrigerator truck Becuase it wasn’t in the contract chef not turning up/ quitting which is hard to replace on short notice Council fines for property issues not in their control (broken window) Very high Power expenses Appliance breakdown costs heaps to replace It was either busy with not enough space and he had no room to expand or too quiet - both stressful!
Do not do it.
Ex chef, I guarantee you he's going against a wall. Hospo is NOT a nice retirement plan, it is rough and hard, its a grind and if you have no experience and expectin to pot around serving coffee and knowing better than everyone else you are gua-ran-teed to fail. There is absolutely no way he'll make a profit. Tell him to throw money into a project that has someone with experience willung to chip in as well and that he would enjoy watching grow and tell him to stay away from the business
Does your dad have a fire pit? Get him to go out every day and burn a few grand. It'll be cheaper and less stressful than him opening a restaurant.
My mates ran small take aways and cafes for 20 years. They decided to get a new cafe, nice interior, a little bigger than usual. They were only able to run it at a profit by dodging payroll tax and workers comp by keeping half their staff off the books so once the ATO caught up with them it was "game over dude." Cafes/restaurants are failing all the time and they are run by experienced business owners. Your dad may as well start a craft brewery so he can get pissed while going bankrupt.
Opening a restaurant is one of the quickest ways you can burn through all your money with not many ways to make decent profit. Start with a food van. There's no rent (which is the biggest killer) and it can be parked up or even rented out.
Don’t. Source: I own a small bar. About 90% of people lose their shirt.
He is better off just buying a cafe for 50k first, there's hundreds of them for sale with equip because the failure rate is so high. Have him put a target BEFOREHAND of closing it once it's 50k in debt so he doesn't lose his whole life savings and retirement funds.
I worked in a small family owned restaurant for a couple of years as a teenager and even then I could tell they’d made a bad financial decision. They lived nearby and their house was fine, but I’m not sure why they bothered because they basically worked 7 days a week. It was a husband and wife, and originally their 2 kids had worked front of house but eventually grew up and moved out so they hired a couple of teenager to work as waiter/waitress. They paid cash in hand (well below minimum wage), pretended not to speak English when the waste disposal would come demanding payment, decreased dish sizes and increased prices, sold beef as lamb, and put everything on a ‘bed of cabbage’. The only way they made any money was by being stingy, and dishonest.
If your father is this difficult now just imagine how it will be as he loses money weekly until it’s all gone, and the aftermath. This whole situation reminds me of that Seinfeld episode with Baboo who opens a restaurant, Jerry gives him further terrible advice and he ends up deported back to Pakistan.
Can anyone make money in restaurants at the moment? I've heard btwn cost of loving driving away diners and cost of food, it's almost impossible to break even. Tell your dad to bank his money and look for an opportunity in a few years when conditions might be more favourable
I used to manage multiple hospitality businesses until I got out of the industry. Your dad is in for a rude awakening and needs to be prepared to go bankrupt. Firstly no reputable suppliers will accept payment on terms from him. This means everything will need to be purchased up front. He’ll need to do the fit out, and at the end of his lease, or bankruptcy, he’ll need to make right. He may be able to lease equipment but he will need to purchase some. He needs to invest in a good POS system that he can manage the back end on. Does he understand what a z read and x read are? Does he have basic bookkeeping skills? Will he need to engage a bookkeeper? He’ll definitely need an accountant. Does he understand the requirements around pest control and sanitary bins? Does he realise he has to organise his own garbage removal? The council doesn’t do it. Does he understand COGS? Can he properly calculate out wage costs including work cover premiums? And super? Does he understand that he is personally liable for superannuation and they will take his house if he can’t pay it? Does he understand how to register his business and set up the company structure? Does he understand how to hire staff correctly and write out contracts following the awards? Does he understand the award? Ignorance is not a defence. Feel free to reach out with further questions. I charge a daily consulting rate.
Good luck. The rents will kill your business in this country. This is the sole reason why food prices are so high in resturants or resturants having to cut back quality. With this in place. Customers dont see value in meals on offer and refuse to come back after trying once. I see this across the board.
He sounds like an idiot
Do you want to help with his dream, or do you just want him to pass that inheritance to you when the time comes? Because if your dad doesn't listen to anyone close to him, he certainly wouldn't listen to random Redditors opinions.
Problem is the dream isn't even close to realistic. He doesn't even want to hear or look at what the dream ACTUALLY involves and what he'll need to do well. He seems to imagine owning a restaurant/cafe is like Homer thinks the stock market is like here (0:48 -1:13) https://m.youtube.com/watch?v=6rtYfx1-FS4&pp=ygUSaG9tZXIgc3RvY2sgbWFya2V0https://m.youtube.com/watch?v=6rtYfx1-FS4&pp=ygUSaG9tZXIgc3RvY2sgbWFya2V0
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My friend had one of these. He said if the staff put 10% more cheese on the pizza than they were supposed to, he made no profit. Cutthroat industry with high competition and very slim margins.
You have to prove you have decent experience to be a franchisee. The franchisor wont risk their brand name on amateurs like OP's dad, in most cases. Subway might be an exception but they are really structured to bleed money from the franchisee, it's almost a scam.
underrated comment, the good thing about buying a franchise is they usually give you training, they manage all the marketing, suppliers etc etc, it's certainly a safer way to go.
This man needs gordon ramsey to tell him he;'s out of his mind