Open a restaurant in Singapore

[FoodLover]

Hi guys,

Would you think it's possible to open a Vietnamese restaurant in Spore with minimal 100K startup, of course a bit far from the central area?

Also I would like to know if Sporeans and expats would like to try VNmese food in Spore, about S$20/person?

Although most of my friends have good impression with Vnmese food but I would like to hear from majority.

I would highly appreciate your reply!!!

[ksl]

Hi guys,

Would you think it's possible to open a Vietnamese restaurant in Spore with minimal 100K startup, of course a bit far from the central area?

Also I would like to know if Sporeans and expats would like to try VNmese food in Spore, about S$20/person?

Although most of my friends have good impression with Vnmese food but I would like to hear from majority.

I would highly appreciate your reply!!!

I occassionally eat Vietnamese food if i see it, I think yes it would sell but your pricing would have to be carefully done, outside the city.

I would think 100k is also enough, my advice would be to start very small, and build out, start with a little cafe, in one of the shopping malls, with small dishes, priced accordingly.

A restaurant outside the city, all depends on who is your target audience, choose very carefully. Most of all, you need to have exceptionally tasty dishes to stand out in the crowd, and that isn't difficult if you know what you are doing.

Seriously think about testing the food at one of the food exhibitions at the expo centre, before splashing out 100k on a resaurant. I do all the food exhibitions at Expo, and that's when you can really get a feel of what is going on in the F&B industry.

I can also tell you now is not the time to open up a new restaurant, because spending is down 50% year on year in the food & beverage industry and 30% down from May to November.

So i would be very cautious on your forecasting for the future.

[FoodLover]

Thanks, ksl!

Thank you for your instructive reply!

I asked as above because we are now in progress of interview for a restaurant located in a school Alumni club, hopefully with a very reasonable lease.

The construction and view are perfect, got built-in small swimming pool, gym for members (S$100+/year). From the restaurant we can see gardens down hill, really nice view...

But the problem is it is not in the city. Even though with good food, good service but reasonable price, would you think we can win?

And I want to learn how to cooperate with companies, offices, tourism companies to get constant flow of customers...

Thanks!

[ksl]

Thanks, ksl!

Thank you for your instructive reply!

I asked as above because we are now in progress of interview for a restaurant located in a school Alumni club, hopefully with a very reasonable lease.

The construction and view are perfect, got built-in small swimming pool, gym for members (S$100+/year). From the restaurant we can see gardens down hill, really nice view...

But the problem is it is not in the city. Even though with good food, good service but reasonable price, would you think we can win?

And I want to learn how to cooperate with companies, offices, tourism companies to get constant flow of customers...

Thanks!

I would have to see the location to get a feel of the place, check out the busiest times of the day and night, then look at your breakeven point, before giving you a list of "What If's" Most startup businesses are so enthusiastic, they have a tendancy to set their goals a little high, only to fall flat on their backsides.

An example was bubble tea in a high traffic area, the rent was around 3k a month, which meant he was having to sell 350 drinks a day to break even.... I spent 5 minutes looking at the place, which he had opened 4 months previous having spent 30k on renovation. 350 cups a day, wasn't possible so he closed on the 4th month with a loss, and he tried renting to me for 4k

First the rental was not worth 4k, but only around 2.5 max even in high traffic area, it's no good in a bad economy, people are very conservative just now, more than before, because there jobs are not safe!

So you must look at all aspects of the macro and micro problems together before looking at your beautiful location, beautifull location is no good without targeted spending power, so the food price must be suitable for your target market!

school Alumni club

Unless you are catering for rich kids, your meals need to be priced accordingly.

I go to a community cafe, with my family and spend around 20$ per adult and child on food, though their is also music.

It's all about what you are selling, after all food is not always enough! If it's a vietnamese romantic setting by candle light, then its an experience, which is added value.

Take everything into consideration, why these kids should spend 20$ on your food, and do they have the money to do it every other day, or once a week and roughly how many kids are we talking about in the club?

Have you worked out your breakeven point? How many meals a day must you sell? Be very careful of the lease price and deposit

[FoodLover]

Hi ksl,

Sorry, it was not clear. This is not for kids, for university actually. Then we would want to see staffs coming in with discount rate on daily basis for set meal. At the same time we want to run a cafe cum restaurant at night. It has a quite big indoor louge and large outdoor shelter, plus 3 VIP rooms.

Serving staffs is requirement from the owners to add value to the alumni club. We have to work out a lot of things as you suggested. We go for the interview because we find the rental is extremely good compare to the state of art construction...v...v... Rental here is equal to 1/4 to one in the city. We now only have good recipes and enthusiasm. Everything else we are starting to work on.

Thanks a lot for your reply!

[ksl]

Hi ksl,

Sorry, it was not clear. This is not for kids, for university actually. Then we would want to see staffs coming in with discount rate on daily basis for set meal. At the same time we want to run a cafe cum restaurant at night. It has a quite big indoor louge and large outdoor shelter, plus 3 VIP rooms.

Serving staffs is requirement from the owners to add value to the alumni club. We have to work out a lot of things as you suggested. We go for the interview because we find the rental is extremely good compare to the state of art construction...v...v... Rental here is equal to 1/4 to one in the city. We now only have good recipes and enthusiasm. Everything else we are starting to work on.

Thanks a lot for your reply!

It sounds very promising, if you have the numbers going through and staff, with no competition, I would say you are half way there. can you get alcohol licence or play music, if so utilise your skills to creating an experience not just a resaturant, create ambiance and maybe allow musicians to have practise nights at weekends.

Most important is your breakeven point! Do not spend 50k on renovation, use your creativity and the students in the school to create the atmosphere, that is suitable for the school, something that will last, like fashion, it changes, so try not to spend money on contractors doing the work, get the students to make something they like and the staff may like.

My belief is the less you spend, the more likely you will succeed in bad times if your cash is in the bank, if you spend on renovation, which most Singaporeans do, because they are not DIY savvy it's a huge waste if you cannot afford it.

A 100k is more than enough! Though contractors for renovation are the ones to look out for, just like going to Sim Lim They will take all your money if they can, I know the business because I have been in the industry I was also a bricklayer from the age of 15 to 18, and was self employed in steel erecting and roofing too in my 30's, so I am aware of most tricks in the trade.

Trust me it's the same in the car industry, when you take a car to be serviced. happens the world over, they do half a job and charge double price, so get second/third opinions before saying yes to any work that needs doing.

It's all about keeping costs to a minimum, you can send me your Breakeven point, by PM if you like, But anything over 2 years is ouch for me. In food you should be able to show profit rather quickly, if you keep your costs to a minimum. Good Luck!

Though what are the terms of the lease how many years? Anyway I'm sure you know what you are doing, but be more grounded on the forecasting and renovation, minimise your risks, with all the what if's!

[FoodLover]

I don't know about these terms. I can understand like this, if we can sell S$400/day, then we can cover all the daily expenses, not mention about the startup investment, and start to earn a profit from S$0 onward. Is that breakeven point? Then we will need to start from 20 customers/day. It sounds good but for a "newbie" restaurant, I know we need to do a lot of things to reach the BEP.

It's a smart idea to start with minimal renovation. We have construction department in the school. We will try to make use of it.

[FoodLover]

Oh yes, we will get alcohol license. Music is also in our plan. If you ever tried Vnmese coffee, I hope you like it. We will make a playground for not only professional players but also musical students. For cost cutting in the starting time, we will go with students first.

We are interested in serving family gathering, then we will ultilize the 2 VIP rooms for food cum karaoke. The other VIP room is for kid house. This restaurant also have an outdoor play ground. Again, we will spend minimal on karaoke system. And all the furnishtures, dishes and cooking and decoration stuffs will be shifted from VN. We found a good deal back home, cost about 1/3 or 1/2 of the expense if we shift from Malay.

ToL is 3 + 2 years. We are still negotiating. Which term do u think the best for us?

[ksl]

Your breakeven point will be your total cost = total revenue.

You say 400$ a day = 20 people, though i would not be so optimistic, lower your expectations to each person averaging 10$, then you need 40 people a day.

Do Singaporeans spend 10$ on a meal every day? Maybe not are my thoughts, maybe one person will spend 10 or 20$ once a week in the restaurant, and eat at the hawker centre most of the week? These are the questions you should include in a survey at the school.

From my experience in the shopping malls Monday to Thursday would be slow Friday to Sunday would be good, these trends of spending, need to be identified. Maybe the school club is very quite at weekend, i don't know. Though i can tell you that spending power is down by 50% year on year in nearly all sectors. You must take that into account in todays economic climate which will push your breakeven point further away, hence to be conservative just now.

You need to include all your costs before you can make a projection for the break even point, don't forget marketing costs.

For the lease, why not make a clause to protect yourself and minimise your lease costs, with the offer of % of profits to the university, and no penalty if you close the business early, most landlords will want your $, what you want is a win win situation, with minimal financial risk, protect yourself in case the venture fails in the first year.

A business venture would be looking at 3 years of accounts to get a feel of things, unless you incure heavy losses within the first few months.

[Strong Eagle]

I think you are very optimistic that you can break even at $400 per day. On a 30 day month that is $12,000 per month. Given your restaurant description with multiple rooms and outdoor area, you could easily spend $6,000 in rent. Food should never be more than 1/3 of costs... say 25 percent and that is another $3,000 per month, leaving you only with $3,000 for everything else.

I don't know much about the restaurant business and I would guess your monthly turnover would need to be at least 5 times rent and close to 8 to 10 times to be profitable.

Try doing a google search on 'turnover to rent'. Interesting numbers out there.

And while I am at it, how much reserve will you have for loss making, that is, what do your pro forma P&L's look like for estimated break even date? Can you support your loss until breakeven (assuming your projections are reasonably accurate)? If not, you are doomed from the beginning.

I also think that $100K will fly out the door for the kind of place you are describing, even if you do import stuff. And lastly, getting the permits out of the gahmen will be a major pain in the ass... you must plan for significant delays while inspectors of every type crawl over your plans, then your construction. I know one fellow whose restaurant was nearly 6 months late opening because it was slightly non standard.

[FoodLover]

oh...oh... thanks a lot for your warnings! As I told, we just rapidly grab the interview. Only now we start to plan everything. Your calculation is quite close to my case. The reantal is 4.8K + 8% total sale. I will modify this proposed rental.

[Strong Eagle]

From what I have read, if your rental exceeds 10 percent of gross revenues you will not have a winning proposition.

Your landlord wants $4,800 plus 8 percent. To stay at or under 10 percent you will need a monthly turnover of $240,000 (.08 * $240K = $19,200 + $4,800 = $24,000). This equates to $2.88 million per year, which is a long way from $400 per day.

Let's say you do $60,000 per month. Now your rent is (.08 * $60K = $4,800 + $4,800 = $9,600 which is 16 percent of your gross revenues.

Again, I don't know squat about the restaurant business but having looked into it in the past, the 10 percent for rent seems to be a reasonable number.

http://www.hvs.com/StaticContent/Librar ... urantRent/

And a quote from another site:

I had a good example of this when I worked with a restaurant at Circular Quay in Sydney. The site was eye wateringly expensive at first glance, but when I did the feasibility study for the business, I discovered that three million pedestrians walk past the door each year, mainly tourists. This is what we call a ‘golden location’. To put it crudely you could put crap on a plate and still be wildly successful in a location like this and not have to spend a bean on marketing. This justifies an unusually high rent. In this case it turned out to be 14% of turnover, which in most other cases would be totally unsustainable.

[ksl]

SE is correct, if the rental exceeds 10% of gross revenue it will not be in your favour.

Negociate better terms, get it below the 10% mark to be feasible, like i said November to November spending is down 50% in most areas of F&B.

100k is not a lot of money for this venture, though if you can pull the students together for renovations to HCCP standards you will save a great deal of cash. Our renovation of 4000 sq ft to HCCP standard is costing 100k though this is a new empty building, being done by contractors, and partitions and floor levels have to be changed for drainage for the kitchen preparation area. It amazes me that they build a Food hub building with only one drain, and floors that fall away from the drain. costs we are not prepared to take on, though i spotted the faults before purchasing the new building

So we negociated our renovations into the purchase price, with the cost of a delivery wagon thrown in, becuase they wouldn't discount the building purchase price, so you need to look closely at what needs to be done to get yourself in a win win situation with your landlord.

[Strong Eagle]

One more quote:

Ideally, rent should not exceed 6.0% of gross sales unless there is a special benefit received by the restaurant operator by virtue of the superior location of the real estate or the quality of the improvements that result in increased revenue potential over what is typical for an average location.

For fun, let's use the $4,800 rent with no percentage. At 6% max rent, you will need gross revenues of $80,000 per month. For a $30 day month, you will need to have daily sales of $2,666, and at a $20 meal, this is 134 meals per day.

The P&L in my link above is most informative. It shows me that the way to make a small fortune in the restaurant business is start with a large fortune and whittle it down.

[FoodLover]

Before I compared my case with the other near Spore river (at the Art House). The chef is my friend. He said that his restaurant pay a bit lower than before which was 30K/month for rental and get about 100K, meaning ~20-30% is on rental.

Now after reading your comments, I need to open my eyes even bigger...


Thanks a lot for the info!!! I will do research on it!