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.

I like that your planning this a few years out. At this point you don't need a gm or a chef. I would recommend that you visit & take notes on as many similar concepts as possible, browse their websites, note what you like & what you don't like. Develop what your vision is by informing it with the operations of a couple dozen other operators. You will eventually be presenting what you don't like to your gm (all in the pre-planning stage) and asking him/her why, why, why.

I would also start familiarizing myself with the local zoning laws of municipalities in which you may want to build your place. I recall reading years ago of a place Puck opened called Eureka that was crushed with all kinds of legal issues. I googled it, here's a link:

http://findarticles.com/p/articles/m...6/ai_12378925/

Don't worry so much about the instincts, you can hire or buy good instincts with a consultant. Focus on becoming an expert on the brewery side,start subscribing to all the trades, set up an online reader to follow the appropriate blogs & news feeds about your specific business & the general business climate in the areas you might set up in.

If you wanted to buy a place like this what steps would you take to make sure it was a sound investment and you got a good deal? Assume the restaurant had a great reputation.

http://costarica.en.craigslist.org/for/2179995919.html

I don't know much about conducting business in Costa Rica or if this place is presently heavily dependent on tourist trade--but if I was buying it, I would want it to be. I would first learn about property rights laws & get some sense of how much business is generally conducted in the grey or black market. I'm not against operating in one, but I would like a good set of facts before proceeding. Many countries only allow nationals to own businesses & property. I see that this is a rental, but I would still discuss this with an attorney, preferably an expat american who has intimate knowledge of the trade area. Your not looking to buy this at ~20K, your looking to steal it (like most business on craigslist) for half that or, if it is under-performing, just take it over in exchange for assuming the lease. I start by asking for some operating details, gross sales at least & if I am really serious, minimum of 2 site inspections as an unknown--just go there and eat & take it from there. Is this owned by a Costa Rican or foreigner?

The key question to ask of a business listed on craigslist or elsewhere is why? Why is it really for sale? Is the owner or business underwater, is it burnout--or is the excuse "pursuing other business interests". I would estimate that 90% of businesses listed on craigslist are dogs, this might be ok, but the odds are against it.

this question is to all Business owners:

are there any websites that talk about ways to avoid theft in ur business by employees.. this is def a big issue especially when management makes all the decisions.

the industry im in is car transportation

apocalypse_fives,

thank you for the great thread. i have a series of questions, if you will:

-how do you evaluate purchasing an existing franchisee, such as yogurtland? it's a fad here in SoCal and they're making a ton of money. upon inspecting financials, what kind of metrics would you expect to pay? do you evaluate it in terms of earnings multiples? note: i neither own nor do i intend to own: i am just asking out of curiosity. ive heard one store selling for a million bucks couple years back

-i have an interesting idea that i think could do well in my area and maybe one or two locations throughout the US (orange county, being one, and others san jose and manhattan). im thinking of a chinese breakfast where dishes such as soybean soup, fried breakstick, and buns are served. after lunch im thinking maybe serving boba / shaved ice for the cheap. i have limited (but basic) knowledge of how to make the dishes and possibly dont even need a big shop given most people will possibly buy it to go or have them delivered to the office. what are some problems with this concept? how many people realistically would i need to get this up & running?

thanks for your time!

In the example of purchasing an operating franchise, my first three thoughts are: (1.) Why is this place for sale? You should assume it is not performing until he proves otherwise. (2.) What is he doing wrong or what problem can I correct to improve the store's performance. (3.) Is this a location issue.

The answer to the first question will inform my offer more than the financials. Almost every restaurant listing you come across has some element of a distressed sale & some are better for you as a buyer than others. Is the owner legitimately stressed out & about to implode due to other commitments involving family & perhaps a career--good for you as a buyer. Some people simply cannot endure the hardships required to build & operate a business. Was the owner under-capitalized to begin with & perhaps was planning to draw down his opening investment to pay off loans--also good for you as a buyer. Is the owner trying to dump this dog, hang the lease around your neck & GTFO?--not so good. It can ultimately be a multiple of sales or he can be convinced to carry the note for the whole place at a discounted price. Every situation is different. Spend some serious effort trying to get the real answer to question 1 before trying to answer #2 & if it's #3, bad location, just walk away. Get the financials & tell us more.

Your concept is not fully formed, so I can't comment on what's right or wrong about it yet. I do like concepts that attempt to main-stream ethnic dishes. PF Changs did a nice job with Chinese (or their version of it) in some parts of this country. They made it very accessible & also made quite a bit of money in the process.

Off topic, have you been to 8oz Burger Bar & if so, what did you think?

apocalypse_fives,

writing this on behalf of someone I know. They are a great chef living in central New Hampshire (not alot of upscale restraunt opportunities around). They did personal chefing in vegas last summer, and has been head chef at a bunch of pretty mediocre restruants in NH. All of them have loved him and said they dont expect him to stay long because his ability is wayyyy above their menu.

Anyways, he (obv, as im sure every other chef has the same aspiration), would like to move on to opening his on place. He doesn't have a ton of money, whats the best way for him going about achieving his goal?

(I know this chef talk may be a bit off topic but I figured you had some experience with it).

Anyways, options would be I guess:

1) Opening up his own place ($$$ required that he probably doesnt have enough for)

2) Partnering with someone to finance it and doing a joint venture (whats the best way of finding investors?)

3) moving away to a big city and getitng more upscale restraunt experience as head chef there, and then try to make it work from there?



So yea, just wondering how tough it is for someone with his skillset but no capital to go about opening his own place, and what his best steps to achieving that are

anyways, thanks a ton for the thread, and taking the time to read this

re: primordial

isn't the answer to figure out how to meet people with money? that's what i'd focus on if i were him. do whatever it takes to meet people with money, even if it means catering their bar mitzvah/wedding/etc at breakeven.

+1, i will post more tomorrow.

Awesome. Thanks! I have a close friend that is trying to sell his store just because it hasnt done as well as it had in the first couple of years. He may be thinking of selling it and re-investing it for other investment purposes. I'm not looking to buy but just wanted to better understand the process. caveat emptor, basically

My current concept is a Chinese delicacy restaurant with a focus on breakfast. There is a Chinese delicacy "chain" already: http://www.phoenixfoodboutique.com/Phoenix/Phoenix.html but they are also restaurants by night. The thing with PF Chang is that they're not even real Chinese and I dont know if authenticity is scalable at all. (I doubt what I'd be making would be authentic to begin with, but I digress). It's just something that I have seen one or two shops do but not very well.

I have not but have heard decent (not great) things about it. If you're looking at gourmet concept I think something like The Counter is also interesting (build-your-own) http://www.thecounterburger.com/ (just checked and they have more locations than I thought they did...hmm). I will go try it out this weekend if I have time and report back

Well, "buying yourself a job" isn't exactly a horrible thing. Most people have jobs. The difference is that they get paid a lot less than what they produce for their employer. When you own your own place, all the profit goes into your pocket, you can sell the business if you want to exit, and you run your own show. The more you work, the more you get paid. (instead of your employer just making more money.)

It's completely reasonable to buy yourself a job. Investing time & money in your education to attain a particular degree or acquire a skill is not much different than investing in a business--they both result in a job. The trick is to invest the appropriate amount of time & effort to ensure your business pursuit has a high likelihood of success & that your expectations are reasonable. Inexperienced restaurant investors, and that includes those who purchase franchises or indy operated units to replace another job, do not invest enough in the DD required to make a good decision or do not have the industry knowledge necessary to ask the right questions. That's unfortunate. It often puts otherwise smart, ambitious & committed individuals into very bad $ spots, upsets families, upsets relationships & will simply tear you apart.

awsome, thanks a ton guys, looking forward to it (the elaboration).

He's a hard worker so looking forward to at least giving him something to motivate himself with

Thanks for the great, detailed reply.

It's funny all the attention the theft issue seems to be getting, this is only a small issue among what I consider to be many details that must be addressed.

I am also a CPA and setting up good controls is simply good accounting procedure. Setting up controls to deal with theft should be done in any business, it's just good business and I would think that would be obvious to all.

If I got to the point of having a physical location, there would definitely be brand identification across the board, from packaging to cool T-shirts that would be custom designed with great graphics and funny brand phrases. I have a great Graphic Artist who has already presented some really creative ideas I think will be well received (you can see his work on my construction business website, if you want the link, just PM me and I'll send it, I don't want to post it here because I don't want that to be interpreted as me spamming)

I'm with you when you say "don't put zippers on your customers pockets" and that's why I'm reticent to do it and why I asked the question. Deep down in my gut, it doesn't feel 100% right at this time. I may be ahead of the technology and the average persons spending habits but I can't help but be intrigued by the possibility of a no cash system.

All of your systems are great and things I would expect to incorporate into any restaurant I start.

In all honesty, I was purely speculating that the cost of a credit card transaction could be offset by the efficiency gained, potential increase in sales and the reduction in theft. I saw an interview with a guy who had a food truck and he switched to a POS system that worked off his mobile device and it said it increased the number of people he could serve in "X" amount of time from 3 to 5 people (can't remember what "X" was). I don't personally have experience using such a system and have no way to know if this would apply in mine or any others case. I also can't recall if he went to 100% digital transactions.

As far as being robbed, I don't have a great concern either, but I would like to do what I can to mitigate that risk as much as possible. In particular, I feel there would be a greater risk to a food truck that would be driving around with two women running the show (more on that later, I'm not a women but could be partnering with two). If it progresses to a permanent location, who's to say the thief would even know or believe the business doesn't deal in cash and therefore decide not to rob the place?

I'm taking the slow train to China on this endeavor and I'm not sure I'll ever even bother to disembark. It's been a while since I've worked in the food industry but from what I have experienced, I know its a ton of work and that perception will just be compounded by what I have yet to learn.

When I was in High School I wanted to be a Chef and planned to go to France and attend the Cordon Bleu. While in high school, I attended a seminar given by a chef at our career fair and in a rare moment, I actually listened to what an adult had to say. He said he suspected that many of us wanting to be a chef really wanted to ultimately open a restaurant, which was true in my case. He said that restaurants fail because they have good food and bad business or bad food and good business, so he suggested that we get our undergrad degree in accounting and then go to chef school. I agreed so that's what I did.

However, while attending college and working at various restaurants and bars, I decided I didn't want to work nights, weekends and holidays at low pay while everyone else I knew would be having fun or enjoying the holidays, so I found myself working for Deloitte & Touche after I graduated. I did this for a couple of years and then decided to start a construction company where I did speculative remodels and home building for the last 20 years.

I sold my last house in November of 2010 and decided to take a sabbatical until I figured out what I wanted to do next. I got to thinking about being a chef and decided, what the heck, I'm going to culinary school, so I enrolled in January and am currently taking classes.

My goal in going to culinary school is to have fun, meet some young, talented and ambitious folks and ponder the possibilities of starting some type of restaurant by investing in their talents, energy and youthful ambition while also bringing my financial, construction and soon to be culinary know how to the equation (as well as my dollars).

I don't want to be a full time, married to the business owner like I've been the last 20 years. I'm willing to dive in for a year or so to fully understand my business and be able to step back in if needed, but ultimately I hope to partner with good people and create something everyone can benefit from. I also have many contacts from my old D&T days that have the experience and know how to create a nationwide chain if that ever became a possibility. It's a long shot, but if it got to that point I'd gladly turn it over to these guys and retain a smaller percentage if it meant they turned a small operation into a multi million dollar operation.

These discussions just help me evaluate what I may be getting myself into as well as helping me properly consider as many aspects of the business as possible for the business plan I will develop prior to investing any significant amount of money.

I've already met a few gals and we have talked about something that I think could be potentially successful and could expand across the country if the public reacted favorably (presently there is no national chain doing this concept). If we attempt to go forward with this idea, I plan to take baby steps by renting a food truck and selling the food at various locations throughout the city. If the response is good enough from this, then we are looking into renting a space at the state fair and if that is successful, invest these returns toward a physical location (I already own the land for the site and can build the building thus reducing my risks and overall costs). The building would be small (400-800 SF) and could be easily reproduced and placed in the parking lots of strip centers or small odd lots across the country with a small staff.

I've got a long way to go, hell just reading about the food service risks and systems needed to mitigate them is enough to make me question my sanity.

Thanks again for your response as well as starting this thread.

Yimyammer,

That's good to hear. Please pm your site. You neglected to mention that you are in the construction business & that is indeed a huge benefit that you can exploit in this business. Knowledge of accounting & construction are significant assets. I think you may I have misunderstood my reply a bit. My point was every action you take should have some benefit to your top or bottom line. Going cashless will ultimately provide neither. In fact, it will hurt both.
I am presently working on two concepts that are extensible & have similar footprint requirements. I like concepts <1000sq ft, I like them a whole lot.

I think you are headed in the right direction. I really do. The accounting & construction background solidified that for me. The operation of a food business won't be particularly difficult for you. Keep being skeptical & asking questions. You have sharp pencil instincts & seem to know how to model risk well. Trust them. I want to recommend two books: The E-Myth & Restaurants that Work. The second one is out of print, but you would be smart to dig one up & pay particularly close attention to the case studies on Lettuce Entertain You properties & Smith & Wollensky. You will have to read between the lines a bit, but I think it will provide a good framework on this industry.