Chapter 1

Introduction

Courtesy of the Cohn Restaurant Group

The Restaurant: From Concept to Operation, 7th Edition 1

Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Objectives
• After reading and studying this chapter,
you should be able to:
– Discuss reasons why some people open
restaurants
– List some challenges of restaurant operation
– Outline the history of restaurants
– Compare the advantages and disadvantages
of buying, building, and franchising
restaurants
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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Introduction
• Restaurants play a significant role in our
lifestyles
– Dining out is a social activity
– Successful restaurants offer a reasonable
return on investment
– Restaurant concept determines talents
required
– There is no substitute for experience

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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Introduction (cont’d.)
• Reasons for going into the restaurant
business:
– Money – Fun lifestyle
– Potential for buyout – Too much time on your
– Place to socialize hands
– Changing work – Opportunity to express
environment yourself
– Challenge
– Habit
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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Early History of Eating Out
• Long history
– 1700 B.C.E. taverns
– 512 B.C.E. Ancient Egypt public dining place
– 70 A.D. Herculaneum, Rome
• Eruption of Mt. Vesuvius
– 1200 London cooking houses
– 1550 Constantinople café
– 1650 Oxford coffee house
• Became popular in Colonial America
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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 French Culinary History
• 1767: Boulanger
– Father of the modern restaurant
• Sold soups “restorantes” (restoratives)
• 1782: Grand Tavern de Londres
• 1785: Aux Trois Frères Provençaux
• 1794: French Revolution
• Chefs to the former nobility suddenly had no
employment
• Some stayed and opened restaurants; some went
to Europe; many fled to America
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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Birth of Restaurants in America
• 1634: Coles Ordinary, • 1848–1900: New
Boston York City
Massachusetts – Hierarchy of eating
• 1783: John Adams places
• Sweeney’s “Sixpenny
Tavern Eating House”
• 1826: Union Oyster • Brown’s
House, Boston • Katz’s Deli
Massachusetts

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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 American Style Restaurants
• Delmonico’s
• 1832-1900: New York Delmonico’s
City
• 1919: 42,600
restaurants in
America
– Continued expansion
• Elegance and deluxe
dining
Courtesy of Delmonico’s Restaurant
• WWII made “eating out”
a habit
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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Fast Food Restaurants
• Following WWII:
– Americans took to the road
– Rapid development of hotels and coffee
shops
• Kentucky Fried Chicken, “Colonel” Harland
Sanders
• McDonald’s, Ray Kroc
• 1960s and 1970s:
– Emergence of chains (e.g., Taco Bell)
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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Challenges of Restaurant
Operation
• Include:
– Long hours
• Excessive fatigue can lead to health problems
• Lack of quality time with family
– Little security for managers working for others
• Family life can suffer
– Possibility of losing investments and investors
• Endangers financial security
• Failing economy
• Lack of consumer spending
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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Challenges of Restaurant
Operation (cont’d.)
• Restaurant operators and staff must:
– Enjoy serving people
– Handle frustration easily
– Be tireless
– Have lots of energy and stamina
– Be able to withstand pressure
– Be outgoing
– Have knowledge of food (highly desirable)

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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Challenges of Restaurant
Operation (cont’d.)
• Starting a restaurant involves high risk
– Must be taken to achieve success
• Results of Dr. Parsa’s study:
– Highest failure rate during first year: 26%
– Second year: 19%
– Third year: 14%
– Three year period failure rate: 59%
• Many fail due to family problems
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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Buy, Build, Franchise, or
Manage?
• Several career and investment options:
– Buy an existing restaurant, operate it as is, or
change its concept
– Build a new restaurant and operate it
– Purchase a franchise and operate the
franchise restaurant
– Manage a restaurant for someone else
• Individual or a chain

13
Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Comparing the advantage and
disadvantages

• Include:
– Satisfaction of aesthetic
personal desire
– High rewards if
successful
• Financial loss may be high
Courtesy of the San Diego Convention & Visitors Bureau

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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Comparing the advantage and
disadvantages

• Individuals should assess:

– Temperament
– Ambition
– Ability to cope with frustrations
– Different risks and potential rewards
– Aesthetic personal desire

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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Buy/Build/Franchise/Manage
Advantages and Disadvantages
Original Experience Potential Psychological Financial Potential
Investment Needed Personal Cost of Failure Risk Reward
Needed Stress

Buy Medium High High High High High

Build Highest High High Highest Highest High

Franchise Low to Low Medium Medium Medium Medium

(A) Ex.
Subway
Medium to High

Franchise High High High High High High

(B) Ex.
Applebee’s
Manage None Medium Medium Medium None Medium
to High

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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Be a discriminating copycat!

• Analyze existing restaurants that are

successful
• Borrow good points and practices
– Modify and improve if possible

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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Be a discriminating copycat!
• The Beach Bistro
Sean Murphy’s award-winning restaurant.
• Analyze existing
restaurants that are
successful
• Borrow good points
and practices
• Successful mix
• Quality control is
critical
Courtesy of Sean Murphy

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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Starting from Scratch
• Would-be restaurant operators
– Mix of different experiences in the business
• Industry does not have enough employees
– Turnover rate is high
• Business is highly competitive
– Requires inordinate energy, long hours, and
willingness to accept a low salary
• Culinary training programs
– Costs vary
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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Restaurants as Roads to Riches
• Most common reason people seek
restaurant ownership:
– Possible financial rewards
• Economic troubles:
– Lead to bankruptcy filings (e.g., Bennigan’s
and Starbucks)
• Costs are up
• Sales are down

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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Restaurants as Roads to Riches
(cont’d.)
• This book will help you with:
– Ownership – Menu
– Development of a – Beverages
business plan – Legal
– Marketing/Sales – Budgets
– Location – Control
– Who’s on your team? – Service
– Design/Ambiance – Management
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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.
 Global Issues
• Many of the world’s top restaurants have
similar concerns and overall goals
• Creating a unique menu/supports overall
theme
• Using more focused forms of
promotion/social media
• Technology has shrunk the playing field
• Optimizing investments in remodeling and
capital expenditures is the goal
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Copyright © 2014 by John Wiley & Sons, Inc. All rights reserved.