‘Homework’ Key to Restaurants

Great advice to aspiring restaurant operators from veteran Larry Ross who was there from the founding of Darden Restaurants and has been in the industry in various capacities for decades.

Q. Someone comes to you for advice on starting a restaurant. What do you say?

A. Do your homework, do your homework, do your homework. I’ve done a lot of business plans and I’m very good at putting together a 15-page assignment that’ll look like a home run, but it’s packaging. Don’t do that. It’s your life, it’s your money, it’s your dream … do your homework. What’s it really going to cost?

Worst-case it: How many restaurants are there, and how much business are they really doing? What’s the national trend? My advice has been for years and will continue to be, ‘Why don’t you not open a restaurant?’ It is a brutal business, the odds are against you.  Really, if you want to invest in a restaurant, go buy a meal once a week and invest as you go. If you really want to get it out of your system, go work in somebody else’s restaurant. But if I can’t talk you out of it, then do you homework, in every way.

Another piece of advice: Do not underestimate the importance of the location. And things like size, keep it small. You have to make one hugely successful before you can even talk about two. There are no real success stories of marginally successful single units that become multiunit chains. It doesn’t work like that.

Here are a few other insightful nuggets:

Q. We recently wrote about Sam Seltzer’s Steakhouse, Roadhouse Grill and some other restaurants’ closing in Lakeland and interviewed James Bronkhorst (owner of Reececliff Restaurant in Lakeland and Christy’s Sundown Restaurant in Winter Haven), who said, “I’ve been running restaurants on my own for 18 years now, and this is the worst I’ve ever seen it.” What are your thoughts on that?

A. He’s probably right. That stuff that started in the late 1960s where everybody was trying to buy restaurants and become restaurant chains started slowing down in the 1990s, but it was still growing. Today, the food-service industry is mature, so you don’t have millions of customers coming on line each day. If you’re going to grow, you pretty much have to take it out of somebody else. You can either generate it organically by getting new customers to your current business or you can generate it by buying another restaurant or opening another restaurant.

But what you see is same-store sales, as a better benchmark, start to go down or flatten out, and then your growth is really kind of artificial. That’s what we’ve been seeing the last couple of years. Growth has begun to slow down, so you see a lot of agglomeration, where this chain buys that chain. Same thing we’re seeing in the airline industry right now and we saw in the banking industry years ago. Well, the big news in the airline industry today is they’re canceling flights. Guess what restaurants have to do? They have to start canceling restaurants.

Q. Who’s in the best position to survive?

A. It’s supply and demand, capacity and demand. In Lakeland right now, we probably have too much capacity for the amount of customers and the amount of money those customers have to spend on their food away from home. The lower end of the spectrum, the Bob Evans, Denny’s, the sit-down restaurants that aren’t dinner houses, they’ll probably do fine. Their average ticket is lower, and again, I don’t stop eating out. When my gas goes up, and my credit card bills cost more, I don’t stop eating, I just trade down on the food chain. Someone like a Bob Evans or Denny’s, they get you – $6.95 is dinner. Carrabba’s at $12.95, maybe they’re losing some cover counts (customers), or Bonefish at $18.95, they’re losing some cover counts. The guys in the middle get squeezed.

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