Here’s a question: How do you make $1 million in the restaurant business?
Answer: Start with $10 million.
Funny, yes, and rooted in truth. Without an experienced guide, opening a restaurant is an excellent way to lose your … assets.
That’s where Jonathan Eismann comes in. He’s a former celebrity chef and now the founder of Chef Force One in Miami, which consults with developers to help them open tasty eateries that are profitable, too.
Jon and I have started working together to help high net worth families with their culinary aspirations, and he came into the Fried On Business studio recently to tell us more about the restaurant game.
Jon started his restaurant career in New York City and discovered he had a knack for it. He had been a chef at China Grill in Manhattan during the culinary revolution of the early 1980s before eventually relocating to South Florida.
He and his business partners opened the ground-breaking Pacific Time restaurant on Lincoln Road.
“(At the time) There wasn’t a single human being on Lincoln Road, and I had an allergy to Lincoln Road. I’m very blessed that I had three partners who were on South Beach in the late ’80s. I got here around ’90 or ’91.
“They dragged me kind of kicking and screaming to Lincoln Road. I said I had no interest. There’s nobody here. We need to be on Ocean Drive. That’s where we need to be,” he said.
“We walked into this restaurant which was formerly a Chinese restaurant called BC Chong. I had somewhat of an Asian concept (in mind). The place was closed and gloomy and dark and horrendous. We opened a little kitchen door there and, lo and behold, it was set up to cook Asian food.
“I said, ‘This will do.’ They all looked at each other and said, ‘You’ve got to be kidding me.’ A couple of weeks later we signed a lease on Lincoln Road.”
In business, Eismann said, there’s a difference between having an idea and having a plan. His new venture, Chef Force One, was created to implement both, because the restaurant business has notoriously low margins.
“There’s an old adage: ‘If you count the pennies, you’ll make the dollars.’ I really felt that if you watch the dollars, you’ll make the pennies. It takes a lot of skill. Sometimes, profits are single-digit.
“Which can be OK. Listen, if you run a business for five, 10, 15, 20 years, and it’s consistently profitable, there’s nothing wrong with that,” he said.
“There is a big misconception in the real estate world, in the finance world, that every restaurant is an asset to real estate and every restaurant is a gold mine. It’s not always that way.
“There is a great formula where hospitality will add value to real estate, but it’s a very careful formula, and it has to be done in a practiced manner.”
Part of the formula, Jon said, is a high-rise development design that is compatible with the restaurant concept. Bad design of the space will kill a restaurant – or ensure that it never even opens.
“Not every restaurant has to have a celebrity chef. Not every restaurant has to be the best restaurant in the world. Not every restaurant has to be the highest Zagat-rated thing on the planet,” he said.
“There are plenty of service restaurants, but bottom line, you need to focus and you need to prepare properly before you try to open a restaurant. People think it’s easy, and it’s not.”
I asked Jon, if I’m trying to make a splash in an emerging neighborhood, what are the steps to creating a real place-maker of a restaurant?
Too often, he said, well-heeled developers buy their land and allocate millions more toward construction without giving serious thought to the restaurant tenant. They just have visions of rent checks flowing in.
“They get a security deposit, and 36 or 48 months later they’ve collect no rent at all and they still have an empty place,” he said.
“It’s the time where a lot of these real estate investors realize we’re going to spend $100 million bucks on real estate. Let’s throw another $500,000 in the pot. Let’s build the restaurant. Let’s get it to look like what we want it to look like. Let’s get somebody qualified to design it, and let’s start the fire with a great small place.”
Enter the Chef Force One process, which entails:
– A neighborhood survey. Identify prospects for a good concept.
– Determine the square footage for the restaurant.
– Create a concept for the space, if the space is amenable to restaurant development.
– Develop cost estimates.
“What I’ve been able to do is build an incredible war chest of experienced people. The best people in town. We can get things done quickly,” he said.
And it doesn’t take tens of millions of dollars to create a place that’s the talk of the town, Jon said. A solid concept can be developed for a few hundred dollars per square foot.
This was really a fun interview, and we chewed on a lot more, including:
– Popular concepts in South Florida, including fast casual and the “food hall.”
– The business acumen, or lack thereof, for many otherwise outstanding chefs.
Click here to listen to the full interview with Jonathan Eismann of Chef Force One.