a bit of history
I’m 28, and have been since April. In my 28 years I’ve managed to start-up and sell and website marketing business, opened two small sandwich bars, settle down and marry a beautiful woman and father a shiny new baby. Not bad, but there’s much more to come!OK, let take it right back. I’m at University in Northampton studying Psychology (yes, it IS a science – my degree says BSc), but I don’t know what I want to do. I get this vague idea that I’d like to open a fast food restaurant – because I’m a vegetarian and no fast food places at the time were very welcoming to my kind!
So I graduate, it’s 1999, and the first thing I think my planned restaurant will need is a website (because the internet was BIG news back in 1999!). So I register a domain name, and then set about learning how to make a website.
Over the next few months I developed my restaurant business plan, and developed my free webspace alongside it. In fact, I got pretty good at html coding, but more importantly at how to get visitors for my new site. For about a year my website was at the top of the search engine result pages for a ton of keywords, and soon I began receiving requests from businesses on how to optimise positions for them.
So my first business was born, and the restaurants hit the back burner. Traffikka only ever employed two people from the back room of a rented house, but was a cracking business. I learned many fundamental business skills back in those days, such as the importance of cashflow, but despite having some household names for clients, my heart wasn’t in it. I strung out the sale of the business for over a year, selling off chunks of clients at a time. This was a mistake, and for my efforts I only walked away with about £15,000, but by then I had raised enough money and won sufficient support from the bank manager to open my first restaurant in the glorious midlands city of Leicester. It was September 2003, I was 26, and life was great!
So there I was. We had hired our manager and our staff and were ready to open. We started on day one with a zero bank balance – just waiting to receive those millions.
Shock! Within one month we were £6,000 overdrawn. The shop was loosing over £1,000 per week, and something had to be done. Our immediate reaction was to go on a sales drive – which worked! Sales soared, but over the next year the restaurant continued to loose money. After a year or so we had all worked our fingers to the bone – and yet we had nothing to show for it. Something wasn’t quite right, and I set about uncovering the problem.
Our customers loved us – of course they did, we were selling our products too cheaply. The fact was that out of every £1 we earned in that first year, 60p was going directly to our suppliers. A restaurant should make a gross profit of at least 60% (that is profit after food and packaging is taken away). We were making 40% - leaving too little money to pay the staff, rent, rates, electricity etc…
What a culture shock. With Traffikka I never had to worry about maintaining margins, but now margins became my life. Every cost had to be reduced, every item of food, drink or packaging had to be at the lowest price possible, and every sale price had to be calculated correctly. I will be going into more detail on the points in the coming months, because these things occupy many of my working days, but for now let’s just say it was one steep learning curve.
It began to dawn on me that even when the margins were correct, we weren’t going to be making much money. After the wages were removed our profit would be (at best) around £4,000 per year. I needed a way to reduce our costs further, while at the same time increase sales.
Answer = shop 2. In the summer of 2004 we found the perfect shop for sale. It was much bigger than the first premises, had a small bakery attached, a flat above that could be rented, and plenty of space to base our newly formed corporate catering business from. Perfect! So in October 2004 I embarked on a second fund raising episode that would finance our expansion and create the beginnings of our restaurant chain!
posted by Paul Fisher @ 11:04 am
1 Comments:
Hmmm... The Restaurant thing is a tricky one. I've got one myself and can't quite work out why we're taking lots of cash, the customers are happy, but we are aren't making loads of money!
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