Is it wise to open small business in recession?

[tharkad1]

With North America's current economic situation, is it wise to open a new small business?

I currently have a secure job in a unionized environment that pays well for what it is. However, an opportunity to open my own shop has come up, and the offer is really good.

I'm in the Restaurant industry, and I am considering opening a small cafe (serving breakfast and lunch) in a an office building with approximately 80 employees, but other businesses in the vicinity. Start up costs are minimal (all equipment is already on site and is included), and rent is cheap.

With such small overhead, I feel the risk is relatively small (as its the fixed costs that ultimately cause most restaurants to fail). But in hard times, eating out is often what most people cut out.

I'm asking if anyone has experience opening a new restaurant, or if in general you think this is a good idea to execute now, with our current/impending hard times.

[slavka012]

I don't know much about restaurant business, but I do see them go out of business left and right. From my observations, it is a tough business in any economy, very competitive and low margins. Do your market research very carefully. 80 employees is not nearly enough to sustain your business. At times I ate out five days a week, but I would not go to the the same place twice a week.

[cdnNick]

I would try to find out why this business became available. Is it losing money? 80 people is not much, let's say half of them will have coffee every day and maybe 1/4 of them eat there everyday. Can you survive on that?

Can outsiders coming and eat there? Are there other office buildings that would come eat there? Some places can make a killing on drinks and snacks but I don't know if 80 people would be enough.

[rongsokan]

It doesn't matter about the economy. The most important is yourself. It just meant that you need to work harder. I think with the right marketing plan your restaurant business can differ itself from your competitor. make sure you know what your competitors doing and give what the customers want. Constant feedback from the customers are important, track where all your customers coming from. and make sure secure their business by geographic location and move expanding your customers to new territory. Selling inexpensive and delicious foods and drinks are the key in this tight budget customer economy. Keep that in mind, but most importantly give what the customer want and exceed the expectation. Make sure you secure all 80 employees in your building by start building inressitable maketing plan,make sure they want to go to your restaurant 24/7 by providing entertainment,etc. A scenario you want to make is that the supervisor will need to go down all the way and remind the employees that their break hour are ended. When this happen, you will know that you got what the customers want and maintain that geographic customer and move to the next. By the way, give me a detail situation about the business, are you alone will manage the business? and who will cook? will you focus on breakfast,lunch and dinner only? what is the surrounding are look like? Any offices or other entertainment industry?

[BornRuff]

Why is this place so cheap?

[Bincent]

What everyone else has said above... plus...

1) The restaurant business is tough... my parents were in it for a number of years and spent countless hours prepping for the next day. Either you do it yourself or you have to hire someone to do it (hence takes away from your profits).

2) As you've already mentioned, as the economy gets worse, more and more people will start to brown bag it more. So your basically getting into a business where there is a dwindling potential customer base (which 80 is low already).

3) Since you're in an office building, the likelihood of you being able to open for dinner is probably not worth the time/effort/expense. So if you're looking for alternative ways of generating money, then you can pretty much count out serving dinner.

I'd say, stick with your job until a better opportunity arises.

[UncleSteve]

Another factor to look at when examining a business in an office building is not just the number of people that work there, but how many tenants they represent. For example, if 40 of those people work for just 1 tenant, and if that 1 goes out of business or moves, 50% of your traffic just vanished.

[Rx-87]

:arrowu:

Exactly. Location and having a good feel of that areas daily traffic as well as how accessible this place is will play a major factor in how well a cafe does.

Cafes that do well are really dependent on the quality and selection of choices that it intends to sell, while competing with other mainstream choices.

Since you're looking at the "Breakfast & lunch route"... you're cafe is practically competing with every single other restaurant out there that offers "donuts, sandwiches, burgers etc... so think... "tim hortons, wendy's, McDonalds, food courts in malls etc etc etc.."

Have to consider, what are you offering that is better then those options?? What makes your cafe stand out as a better choice for people in the area?? Is it the price of the food? Quality? Or a mixture of both.

As well, what kind of patrons are you looking to attract?

All of the above is dependent HEAVILY on the location and how well you market, advertise and sell your product.

I can go on but I'm sure you know all of this already in detail.

[Just Confused]

There are two questions in your OP.

1/ Opening a food service business. I don't have any experience (except the eating part) to make an insightful comment. The other posters seem to agree that is a tough sector to choose, but you do have some offsetting advantages, including low capital costs. It isn't a sector I would choose personally but it could be just right for you.

2/ Opening a business in a recession. That is probably as good a time as any. It can actually work in your favour in certain circumstances. Your revenue may be lower but some of your input costs will be lower too. Your customer base can depend on a lot of other things than the general economy. If you have a vision that you can do it... then go for it. As Gretzky said "You're 100% guaranteed to miss every shot you don't take."

[tharkad1]

Thanks all for your input,
much appreciated

[bigshotceo]

If the existing building has a daytime security guard or receptionist, go talk to them about the old restaurant. We often hear a lot of off-hands comments about the restaurants in the buildings we work in, and we see the traffic patterns, so we have a pretty good idea about its reputation and how many people actually go in there.

[van]

If there is a Tim Hortons nearby, I wouldn't bother. But if you are the only cafe in the area, within walking distance from many busniess', then it would certainly be worth considering.

Also, if you are taking over an existing business, it would be a good idea to checkout the books on the place and find out how much profit it is/was making.

[Rx-87]

:arrowu: hahah:lol:

Gotta love Tim Hortons... for doing what it does...

I haven't seen their statistical data concerning their sales and stuff.. but just from seeing the crazy lines of patronage at all odd times of the day..

Why is Timmies so attractive??

It really can't just be the donuts and their mild coffee... could it??

:lol:

[UncleSteve]

Gotta love Tim Hortons... for doing what it does...

I haven't seen their statistical data concerning their sales and stuff.. but just from seeing the crazy lines of patronage at all odd times of the day..


If you get a chance, dig up their IPO from a couple of years back. Lots of interesting data in there concerning their sales. Some facts that stuck in my mind:

Number 1 restaurant chain for sales of soups.
Number 2 restaurant chain for lunch, after McDonald's.
In the 10-year period leading up to their IPO, the introduction of lunch took average annual sales per location from 800K to 1.7 million.

[loxx]

I've been asking myself why Tim's is so successful, and why I was going there. I had noticed that the donuts are WAYYYYY better at Country Style, and that country style coffee is a little better too (still too weak on flavor).

Then I realized that I've been going there a lot because that was what I was used to; they had a lot of locations. I'm on the road a lot and I tend to pull in to someplace that I'm familiar with. Tim's was everywhere, and I was simply going to Tim Horton's due to market saturation - I don't even like their coffee or donuts.