Finance

Restaurants Are Businesses: If You Want to Cook Tomorrow, Make Money Today!

While some may have found the demise of The Restaurant, the TV reality show, amusing, I personally find it to be a valuable lesson that successful restaurants can rarely be built on just the personality and even panache of talented chefs. Chef Rocco is hardly the first chef to see a dream turn into a nightmare either by not personally understanding the financial end of the restaurant business or not being as involved as truly necessary. The current story of a so-called celebrity chef here is Houston is just one more example that fame can be fleeting or perhaps merely be an illusion.

The big hit of the 2004 Taste of NFL Super Bowl Party here in Houston was Ruggles, which served a wonderful beef tenderloin with Chimichurri sauce. The lines at Chef Bruce Molzan’s station were long the entire evening, and attendees were chatting up the marvelous food being served. He was the talk of the event and undoubtedly basked in deserved success. From a culinary viewpoint, he connected with guests. Who could blame Bruce for enjoying such accolades?

Yet, when Bruce’s name surfaced in the Houston Chronicle recently, the euphoria of the Taste of the NFL gave way to public knowledge that Ruggles’ finances were in serious trouble. Rarely when a vendor like Sysco takes legal action against a restaurateur does it make the business section of the newspaper. Usually a private settlement is reached, but in this case it went on the public record that Sysco was owed $406,000.

Among local restaurateurs was a curious response of both shock and joy. Some felt that Sysco had perhaps stepped over some line by putting this situation out front of the Public. But others, who seemingly felt that too often egotistical chefs believe the rules of business don’t apply to celebrities, were pleased. No doubt this was a wake up call that had the restaurant community abuzz.

Now it seems a settlement has been reached, but perhaps the damage is done. How the public reacts remains to be seen, but after nineteen years of success, Ruggles faces obstacles that no businessman would call small. Can you imagine the revenue that will be required to pay down just the Sysco debt, much less continue on in business? Who knows, but perhaps Sysco now has a significant ownership position in Ruggles? It wouldn’t be the first time a chef got into financial trouble and had to cede ownership to a vendor.

I applaud Sysco for sending a message to both the general public and to young people aspiring to be chef-owners of restaurants that they should be taking that ownership issue as seriously as their creativity. Too often students stare in disbelief when I tell them if you want to cook tomorrow, you need to make money today!

Are you ready for Prime Time from a financial perspective? You can use our free E-Tools section or our Capstone Capers to get a basic look at key financial reports and costing tools. For an overview on a Business Plan and Finance for independent restaurants, read Chris Tripoli’s and Jim Laube’s features here on RestaurantU.com and visit their web sites. You’ll also find a treasure trove of financial information on The National Restaurant Assn.’s web site, www.restaurant.org, including features such as The Restaurant Industry Forecast; an Executive version of that report; Restaurant TrendMapper; Restaurant Spending; Compensation Survey; and, numerous articles on Financial Management and Management of Small Businesses.