Lol, he's back.....

internal theft is a problem in almost all business.

x 100 in retail businesses

x 1,000 in restaurant business

I'm always amazed that such a large % of people want to open restaurants given the ridiculously high statistical failure rate of restaurants. I'm guessing a major motivator (besides the fact that they mistakenly think they'll make a ton of $$) it that people think it would be "fun" to own & operate a restaurant.

That said, I occasionally daydream about owning a bar/club on a beach somewhere in Mexico, so guess I'm as starry-eyed as everyone else.

But I'd love to open a Chipotle Grill in a mall food court (don't think they currently operate in food courts) if only they'd start franchising . . .

It's not by coincidence that Chipotle (and starbucks) for example do not operate a franchise system.

it's commonly referred to as Loss.

this is a great Topic/Thread.

I looked breifly into operating small franchise markets(7 eleven) but after reviewing the financials I found out I would need to own at the very least two to three individual units to make enough where it MIGHT be worth while. the average 7/11 will bring in about 40k-75k net after all fees and costs... some MIGHT bring in more but you need a location that is absolutely pumping volume. One additional item that killed it for me is that this is a 24/7/365 business... no down time what so ever. you can loose your rights as a franchise owner if they find out you are not open for business. on a side note the good thing about the franchise is that they do all payroll accounting and paper work all you have to do daily orders and make your scheduled deposits.

It depends on a few things, but mostly volume. You will have the most leverage when you commit all of your purchases to one main line purveyor (Sysco, GFS, USFoods etc..) & then might have an opportunity to to sign a prime vendor agreement with one of them that will set your prices at x% over their costs. The larger purveyors are also better connected into the network of brokers & manufacturers. So sometimes you can negotiate the pricing directly with them or at the very least get sampled quickly & have access to good info. Brokers are a very valuable resource so don't hesitate to call on them.

Keeping them honest with pricing starts with your first meeting with the sales reps & I will be posting some guidelines on dealing with purveyors later tonight. FYI these guideline will not apply very well to franchise operations where you will be generally required to purchase directly from their commissary or preferred purveyor & follow their established recipes. If you are in a franchise model, know that your franchisor is getting a kick back on every dollar of sales from the purveyor & likely has agreements with manufacturers that commission them in exchange for using their products. There is very good reason, usually financial, why your franchise uses Pepsi vs Coke & Kraft vs Ken's.

Sorry for the delayed response. Glad to have read you are confronting internal theft in front of your opening. You should know that it's pretty common for operators to use employee theft as an excuse for cash shortages they are responsible for. I know of no serious operators who are concerned about the type of theft you are asking about, but most all have implemented some version of the guidelines I have listed below.

1. I am not overly concerned with being robbed & I have been robbed several times over the years. Use cash drops throughout the day,secure your backdoor, install some cameras, get an alarm system (NOT ADT) & leave your POS cash drawers open and empty when you close. The biggest expense of my being robbed was replacing bent cash drawers or POS systems damaged in the process of trying to open the cash drawer.

2. I recommended you not use ADT because they will not instantly report an alarm condition at your store to the police. They will first call the store & then call you or whomever the emergency contact is & if that person does not answer, they will call the next person on the list & so on. Even after that they will still jump through some additional hoops before dispatching the police. ADT gets charged for false alarms & there is some kind of expense involved to be patched right into the police dept. Talk to some independent contractors & ask them to explain the process of how & when the police will be dispatched. If you are really concerned about theft, pay to have additional alarm horns installed outside your exits or, depending on your local codes, very near to them. Also, many false alarm conditions are a result of doors or windows that don't close properly. Ensure your physical plant is in order & then take a gamble on allowing every alarm being routed directly to the police after just one call to the store. It's a difficult to hear the phone ringing over the alarm, so instruct your employees to move near the phone asap after a false alarm has been triggered.

3. Give every manager or keyholder a unique keypad code & make sure your alarm company will allow you to easily audit which keycodes were used at which time of day.

4. Keep your keypad clean, LOL. When there is only one code in use, it's usually made up of the dirtiest four numbers on the keypad.

5. Re-key all your locks with high quality MEDECO or better cylinders with keys that cannot be duplicated without your permission.

6. Take control of all the keys to your cash drawers so that your employees can only open the drawer with a recordable transaction....an order, a void, a no sale. These transactions will generally appear on your daily sales reports so you can question each of them & make a habit of doing so. "What's this void for, what happened, why?"

7. You will have the ability to assign cash drawer privileges. Those privileges will require that your employees first identify themselves by swiping a card or entering a code. Don't rely on that. Invest in a POS that has integrated fingerprint readers.

8. Know that overages are worse than shortages. A clever thief will keep the cash from an unreported sale in the drawer until he/she can find a good time to pocket it. If your suspicious of someone, you can decide if it's ok to load the drawer with an extra $20 & see how they react.

9. Be more concerned with theft of time, theft of product, over portioning & waste. One person per cash drawer will allow you to isolate who is coming up over or short. How long will you keep someone running a drawer when they are habitually over or short?

10. Position a camera so that you have full view of the drawer, the customer & your employee. That alone will eliminate most problems.

11. Have procedures in place to close & balance the drawers twice per day

12. Invest in a auto coin dispenser that is integrated with your POS. Most cash shortages out of drawers are due to bad math skills so ensure that your POS is programmed to display the correct change for every transaction.

13. Most POS systems allow you to spot balance them throughout the day. Come in unannounced from time to time & count down the drawer. You are looking for overages here obviously & not shortages.


I read in another of your posts that you felt you could make up the increased transaction costs associated with 100% plastic sales by other accounting efficiencies. I would be curious to hear what they are. Are you suggesting that because your are 100% plastic your can save x% elsewhere or is it that you have some other efficiencies up your sleeve that will lower operating costs by 2-3% regardless of if you accept cash or not?

Last thing, if you told me you were going to take on increased packaging costs by branding all of your take-out containers with your logo & color palette (FYI the % are quite similar in this example)& that this was a worthwhile expense due to the brand awareness you are building, I would be in agreement. It will indeed drive your top line. Accepting 100% plastic will not drive up your top line, in fact it will only serve to reduce it & the 2-3% efficiency you believe will balance the transaction costs is not worth even a 1% reduction in your top line & that's being optimistic--I think it would be much, much higher.

Cliffs:Don't put zippers on your customers pockets.

I have an idea for opening a bar/restaurant/brewpub (still in its extreme infancy). I bring money, vision, and time to the project. However, I need 3 quality people to really bring the project off the ground. A brewer, a chef, and a front manager. I am confident in my networking capability in the brewing capacity to find good people(and it's the area I'm most comfortable working). Where would you suggest finding key kitchen and managerial people?

+1, these are brutal businesses & the best locations are not where I would want to be defending my inventory of liquor, cigarettes & cash.

perfectly stated... high risk areas.

what do you know about the proprietary pizza parlor business?(non franchise)

With no operating experience, my first hire is a gm & I am inclined to recommend a gm coming out of a strong corporate system (Cheesecake, Hard Rock, etc..etc...) I would be looking for someone who has significant experience operating within a system even if it is not of their own design. That eliminates most gm's with small scale indy experience.

Your going to have to rely on that gm and your own instincts to shape a successful operation. The problem is you don't have the experience to differentiate between a good gm & a bad one. Your instincts won't serve you well with that as many of requirements of a successful restaurant are very much counter intuitive & bad gms are very agreeable people. Before we get into that, can you give me some idea of the area you plan on putting this operation, what size, will you own or rent & what you believe your capital requirements will be?

I know it pretty well. Ask away.

It's interesting to note that many of the posters who are pursuing an investment in a franchise operation are unwilling or very hesitant to reveal (even through a pm) which concepts they are looking at. That's fine & I respect your right to privacy, but since I don't want to mislead anyone or provide inaccurate or incomplete information, I won't be answering any franchise ops questions without knowing who the franchisor is.

My general thoughts on franchise operators is pretty pessimistic. ~75% of franchises refuse to reveal overall financials or unit performance numbers. That is a choice they make, their is no law precluding them to do so. They commonly inflate their unit inventory with stores that may open as a marketing ploy to induce you to jump aboard & back fill markets with stores that render other operating units less profitable (or unprofitable).
I was once passed a reliable document revealing that >70% of all Quiznos franchises are operating at break-even or worse.To be blunt, most franchise systems are built to collect the dead money.

I had 7eleven disclosures... it was somewhat shocking. I had to sign a confidentiality agreement, i have since toss it in the trash otherwise I wouldn't have minded sharing.

how much for a nice pizza oven, refrigerator and tap set up :-)

can I get in for under say 100-150k?

franchise disclosure post was not directed to you Mschu, but appreciate that you see the value in sharing. I have built these types of places out before & could probably do something with those numbers, but question is could you do it? Tell more about your concept, seating & size.

Again, this is all in the extreme infancy. All my research comes from the head brewer/chef at a small brewpub I worked at in highschool, books, and some information online. I think you nailed the part about instincts. I don't have any, which is why it is imperative to choose the right people. But, as you point out, I don't even have the tools to do that!

Area would be somewhere in southern California, no idea on own/rent (although I always assumed the restaurant spaces were rented in high profile areas), capital requirements would probably be 1-1.5million, although these are ballpark numbers. Almost any existing space would need significant construction to install brewing equipment (300Kish for the equipment itself), in addition to just needing a large square footage to accommodate the equipment.

In a few years, I'd like to bring a decent chunk of equity to the table, then raise the rest through a combination of individual investors, angel investors, and more traditional small business loans. But, what I don't know vastly outweighs what I do know at this point.