How to Make a Small Fortune

This Green and Surprisingly Pleasant Land ventures into restaurants

Anxious to avoid originality, let me deploy a well-known maxim about how to make a small fortune - start with a large one and see it dwindle at speed by opening a restaurant.

This thought is sparked by a spate of reports showing that last year was the worst for UK restaurant startups. Yet the pace of new restaurants openings in London is steadily rising.

Assuming little changes, 60% of new restaurants can expect to go bust in their first year of operation and 80% will close within five years. Any establishment making a five per cent profit will be doing very well. Most struggle with much slimmer profit margins.

So, why do so many people get into this risky and largely unprofitable business? Moreover why does it attract such a large number of people who have no experience in the field?

The attraction starts with the fact that people like going to restaurants and dream about owning them because it seems to be such fun. What a way to show off, eh? Friends can be invited and impressed and there’s something about ordering what you like from the menu without having to pay (although this is basically Horlicks because the real price of ownership makes ordering caviar piled high on the dish look like a bargain).

Clueless punters are not dissuaded by a lack of knowledge and experience. You often hear of decent home cooks convincing themselves that this ability can be seamlessly applied to a commercial kitchen. Others spend a lot of time in restaurants and reckon they understand what makes them tick. And then there are the endless TV restaurant and food shows which appear to reveal the tricks of the trade.

Aside from the clueless many chefs try their hand at restaurant ownership. Some are brilliant in the kitchen but quite hopeless when it comes to the mundane tasks of management. They know how to make the food but, as anyone who has been in the business will tell you, making and selling food is hardly the same thing. Mastery of the kitchen is rarely a qualification for the grunt work of cost control, dealing with regulations and, crucially, dealing with staff because this is an unrelenting labour intensive business. 

I was in the business for some three decades in Hong Kong and have the scars, metaphorical, of course. That said, I don’t regret doing it but wish I knew what I now know.

Lesson number one, two and possibly three, is to be very wary over employing chefs. Yes, I do realise that it is rather challenging to operate a restaurant without chefs, particularly those towards the higher end of the food chain.

However I finally discovered that the chef problem can be minimised by focusing on the fast food business where you don’t need expensive and often temperamental chefs because food production is more a question of systems rather than individual flair or flare ups you get from chefs.

Obviously fast food is less glamourous than owning restaurants with white starched table cloths and, if you are really unlucky, a chap with a dangerously exposed flame flambéing away at the table. But fast food does not need to be bad food and producing it in volume can be a really satisfying experience.

Even assuming that the chefs are not driving you mad, quite an assumption, the remorseless task of cost control is not for the fainthearted. Given that profit margins are on the knife edge and that most full service restaurants heavily rely on alcohol sales to push them into the black, rigid cost control is crucial.

Food is the quintessentially perishable item, unlike grocers who can flog off ailing food stocks at discount prices, restaurants cannot risk serving food beyond its consume-by date. This means that the battle against food waste is endless.

It requires a lot of skill to manage the people working in this intense and demanding environment,  achieving the right balance between having too many and too few staff on the payroll adds considerably to this challenge.

Getting it right is intensely satisfying. The people who succeed tend to be very hard working, very focused and, by and large, not chefs. What, however, can be a winning formula is restaurant ownership that combines chefs and managers who are sufficiently tough to take no shit from chefs.

And yet there seems to be an inexhaustible supply of people lacking experience with stacks of cash to burn and a firm belief that failure is what other’s do as they ‘just know’ how to start a restaurant.

Let me do them the great service of mitigating their losses by volunteering to take their money before it drains away. I am willing to take the folding notes right now and put them to better use. This may sound like a dubious proposition but it’s an offer many putative restaurateurs would be foolish to refuse.