Why Kickstarter, part 2 (It costs more than you think!)
Despite what you still see on TV, it takes more than guts and glory to run a restaurant. The word more implies something dazzling, I think. In this case I mean it more like the opposite. Fame and fortune may be a common restaurateurs dream, but neither one is likely to come around without a whole lot of drudgery. That drudgery can eventually open itself up to a successful business over time, with or without the fame and fortune attached; and the commencement of that drudgery happens to be quite expensive.
Do they still award the winner of Top Chef $100,000 to “pursue their wildest dreams [paraphrased]”?
Admittedly, it has been probably 10 years since I’ve seen the show, maybe they’ve upped the ante, but I did start my career while tuned to the first decade of its run. Quick fire challenges, celebrity run-ins, slow motion flaming torches, full page magazine spreads, top speed cooking non-stop, AND the ultimate prize of $100,000 to make the impossible, possible were the foundation of my worldview about how to break out as a restaurant success. There’s a good chance they are yours, too.
First thing: it costs a lot more than $100,000 to open a restaurant. That may be a surprise to you, or you may be surprised to hear that I ever thought it was enough myself. We all know what we know, and don’t what we don’t. When we opened our first restaurant, it cost roughly $350,000. That restaurant was, and still is, a third of the size of a typical restaurant of our style.
This year, we are packing up the whole operation and moving it next door, to a space twice the size plus a smidge more. It’ll cost $780,000 to build, outfit, and open (allowing for a budget of working capital through the ramp up period — during which the business scales up toward sustainable revenue levels — said restaurant. The extra $30,000 is for the installation of a hood vent system in the kitchen which we naively struck from the budget the first time around.
Speaking of naively, the other side of this is how a restaurateur spends their time. Back to the example of Top Chef, the budding entrepreneur wins the competition by being the baddest and boldest cook in the kitchen. Establishing themselves as such they are awarded a six figure windfall and sent packing off on a journey of implied success. We’ve established that the money in the bank is not nearly enough (not even a third of enough to open a restaurant without a walkin, separate kitchen, office, staff room, or hood vent — that’s ours). The qualifications, though, are also severely lacking; if taken singularly.
The myth of the restaurateur — the most common example in contemporary mythology of course is the chef/owner — is one of hard work, deeply committed to craft and artistry, and a constant pushing toward culinary excellence and technical innovation. Those things exist in many operations, but far from exclusively. At least not in the ones that will last.
A better reality TV example for what it really takes to run a successful restaurant business might actually come from the fashion genre. Making the Cut, a reboot of sorts of Project Runway — the original being a show run by the same producers as Top Chef — puts the reality of business front and center, asking the contestants to constantly evaluate and compromise their “genius” in order to serve their brand, the marketplace, and their team (all of which is code for bringing in enough money to keep the lights on and the payroll funded). To boot…the winner comes away with a million dollars, and an already established product line on the market.
Now, we managed to launch our business and keep it afloat without a million dollars, technically (Also, technically, we did have an established product line). And we’ll do it again. But there sure was a lot of compromise. Katrina and I did the long hours. Those long hours included a lot of the artistic ones…and admittedly, those were the ones we were most knowingly signing ourselves up for.
They also included incalculable hours of learning, failing, regulatory compliance, bureaucratic annoyance, calculations down to the pennies for making good on our commitments to vendors and staff, a few paychecks of our own stuffed into drawers uncashed for later use, basic plumbing, mid level electrical (Katrina installed the dimmers in the dining room that we forgot to ask for and our contractor forgot to suggest), and of course…lots and lots and lots of management finance (aka: where is the money and what can we use it for?).
That was just phase one. There were less than 10 of us. Katrina and I worked just about every hour. We had a core of a handful of individuals from past operations and events (our timeline to restaurant ownership is filled with a lot of non traditional activity, which is a story for another day), and a few new faces. Eventually a team was cultivated and assembled, Katrina and I continued to work just about every hour, and then eventually we didn’t.
By that time we were coming slowly to terms with what the job of the restaurateur really was. It is different every day. It is filled with essential activities that have little to do with the food on your plates. The role is also a modular one, if we pay the right attention to training, delegation, and iteration. In our company those attentions became the core of our forward thinking activity, while we continue (very) long hours in all of the things you don’t see on TV. And when we are lucky, a few of the ones that you do.
This is the phase that we find ourselves in, while raising the funds to transform our early dream from a successful project into a sustainable flagship. That project skated by on a shoestring — a much grander shoestring than we originally realized would be necessary — tied tight with an immense amount of effort and daily compromise. The path to flagship will be paved with support — from the public, and our incredibly impactful team — and mapped by us, with a much greater understanding of the roles we must be responsible for, and the financial stewardship that is required…especially from the start.
As part of our answer to why Kickstarter is such an important part of our early fundraising: we believe (and this is largely true whether we believe it or not) that anyone who supports our venture should receive something for that. If we chose not to believe this, we probably wouldn’t receive much support…so there’s that. The mix of funding will involve some crowdfunding, some equity type investments, and some debt (this mostly means a bank). I’ll get into a term called non dilutive financing, maybe next time. But here is the very short version:
We will use all types of financing required, and then it will become our job (one of our many jobs, actually) to operate a business plan with our team to generate a positive profit and loss statement (also, to come) based on whatever that mix of financing is. Debt financing places a fixed burden on the operation, which can be incredibly challenging during the ramp up phase mentioned above. Equity style financing takes resources out of the successful business once it is operating profitably, reducing our ability to invest in our team, and our future.
Neither debt or shareholder financing options are automatically bad. We fully intend to wield both. But Kickstarter supporters represent a type of liability — obligations (bank debt is another form of this, as is short term debt we owe to vendors between delivery date and writing the check) — to the business that requires us to provide services, not money. It is like when someone puts a Starbucks gift card in your holiday card, and then you refill it again instead of throwing it away. You’ve done that before, right? In return for your willingness to plan ahead for something you were certain to purchase in the future, you got a discount, and Starbucks paid their vendors and staff quickly, and didn’t have to pay any interest or sell off any further piece of their little company to do it.
We love to provide services. That is like that part you see on TV: chefs in the kitchen, service staff putting on a show, guests in the seats with full glasses and plates. That is the part we are really good at. Every dollar we raise this way, while it does come with a short term requirement to spend and provide, represents long term freedom to be sustainable and to have continued and greater impact.
Of course, our ability to do those things is not your responsibility! Which is why we prepare to, and are excited to, provide services and experiences for your Kickstart, and your trust.
At Juliet, we strive to deliver a great product: cuisine, beverage, and the service to go with it, but we take a multi stakeholder approach to defining success. People are absolutely essential to our work; we create great jobs, and we mentor people into careers. The restaurant industry needs this, our communities need this, our country needs this.
We reached our initial Kickstarter goal in 4 days! But as you’ve seen above, it’s going to take a lot more than that.