Archive for February, 2018

Combating Food Waste in Your Restaurant

The last thing you want as a restaurant owner is to watch your money get thrown out in the garbage. Unfortunately, when you waste food, this is exactly what’s happening. It’s seemingly easy to do, some milk here, apples there, and right before your eyes, thousands of dollars have gone to waste. Because it’s so easy, it’s estimated that there are 60 million tons of food wasted annually throughout the United States, and it’s likely that your restaurant is contributing. So how can your restaurant put anti-food waste steps into effect? Here are some actionable steps your restaurant can take to help cut down on food waste.

Create a committee. Either find individuals motivated to take a stand against food waste or incentivize the position, but make sure you have people from different areas in your restaurant as part of the committee. You don’t want to involve your whole kitchen staff, only to leave out the wait staff. You also need your purchaser on board (whether that’s you or an employee).

Practice FIFO. If you don’t know what FIFO is, listen up! A ‘first in, first out’ system allows your food preparation to run more smoothly, while keeping in mind the issue of food waste. When a new food order comes in, put the new food on the right and shift the previously-purchased food to the left. Cooks then grab food in a reverse order (left to right) to make sure they are using the items that will expire more quickly than the food on the right hand side.

*Pro Tip: When organizing your storage area, beware of cross-contaminating foods. Raw chicken does not belong next to fresh produce so don’t let all your rules go out the window to focus on FIFO. Shelf-labeling is handy while keeping in mind newer versus previously-purchase food and the types of food that can be stored together.

Control portion size in the kitchen. This requires due-diligence from your staff. As kitchens get busy, eyeballing ingredients (aka not paying attention to the pre-priced amounts from your menu plan) becomes more common but this is one way that customers end up with more food than they need and often more than they paid for. American restaurants are notorious for unnecessarily large portion sizes. You want to satisfy your guests, but not at the cost of your bottom line. A great way to cut down on food wasted by customers is to allow them to choose their portion size by offering lunch and dinner sizes on the menu. The less food that’s left on your guests’ plates, the better.

Repurpose ingredients. Have a lot of leftover shredded chicken from yesterday’s fajita special? Make chicken tortilla soup! If you’re flexible with your specials, soup can turn leftover nightmares into the next day’s featured dinner.

Make over your menu. Speaking of flexibility, you’ll want to check in on how each of your menu items are doing. If you must buy highly-specialized ingredients for a few items, make sure they’re worth it. If they are sub-par performers on your menu, change it up! It’s easier to broaden your menu with dishes that have more universal ingredients. A lot of restaurants turn to a focused menu to use up any surplus and still offer a variety of options without sacrificing storage space while cutting unnecessary costs.

Compost. Chances are your restaurant probably builds up (and throws away) a lot of produce scraps. Whether it’s from leftover salads or unused portions, these scraps can easily be composted. If your restaurant has its own little garden that grows herbs, use these as fertilizer. Or build community relations and reach out to farmers who could use the compost to help supplement their crops.

Donate what you can. If your restaurant has exhausted the options to using leftover food, consider donating. There are many organizations around the country that help excess food get to those who are in need. If you’re concerned about liability and the legality of your donation, review the Bill Emerson Good Samaritan Act of 1996 to understand your rights as the donating party.

Full dumpster

Keeping food waste in the forefront your mind when running your restaurant and making operational decisions is crucial in combating the problem. Taking the steps above are just a few ways your restaurant can have an impact on this destructive global trend. Integrating these better choices into your business model can cut down on food waste and save you money at the end of the day.

Do you have plan for food waste in your restaurant? What steps do you take to combat it? Tell us below in the comments.

Guest Blog: Negotiating the Best Lease for Your Restaurant or Bar

Full room shot of an empty bar.

Do you want to save money and improve the value of your restaurant?

If you’re leasing or renewing a lease, or at the beginning stages of opening a restaurant, bar, brewpub or other retail establishment, this article can help you.

I have had eight page leases and two hundred page leases in my career. It is imperative that you negotiate the best deal you can. When you decide to sell, what you decide today will play a part in what you sell for in the future. I have had underperforming restaurants and bars to sell over the years and because they had  below market rent  or a favorable lease we were able to leverage the value in the lease. Also, I’ve seen wonderful restaurants that are reasonably priced and profitable to sell, but have a lease that has unfavorable terms, rent is too high, not enough term on the lease, landlords reputation is difficult, the building is in disrepair… get the idea?

Restaurant Leases can be very lengthy and confusing, making them hard to fully comprehend and negotiate favorable terms for. Leases can be short and vague, or extensive and complex. You need to be aware of what you are agreeing to. The best way to do that is to review the terms carefully. Have the right people in your corner. Make sure they are licensed, understand commercial transactions and reputable. Your Broker can help you navigate the road blocks in your lease, and their knowledge of the market will help you get the best possible deal. Always have a seasoned real estate lawyer that focuses on commercial leases to review the lease prior to signing.

There is so much information to understand and be aware of that I picked a few main topics to discuss.

The LOI

Prior to a formal lease being signed, the Landlord or Real Estate Broker will draft a non-binding Letter of Intent (or LOI) stating the basic terms of the lease.

  • WHAT: The Letter of Intent is a non-binding document, that sets the ground rules for the lease negotiation. The LOI simply creates a term sheet for the lease, so all parties involved are on the same page.
  • WHY: The LOI creates the framework for negotiation before a binding contract is signed. When the Tenant, Broker, Landlord, and Lawyers involved review the LOI, all parties are on the same page prior to drafting the lease. It saves time for all parties by setting up the ground work.

 

How long should you commit to the lease?

The length of your lease term can vary, and you should be aware of the renewal options, as well as when to exercise them.

  • Base lease terms generally last 5 to 10 years.
  • Typically, the lease should have renewal options (5 to 10 years, matching the original lease term).
  • The lease dictates when you need to give notice to the Landlord to properly exercise your options. This could be anywhere from 6 months to 2 years before the expiration of the lease. Make sure you pay attention to when this time period is in your lease.

 

Personal Guarantee Strategies

“I’m not signing a guarantee, why should I?” This puts you personally on the hook, financially, and defines obligation, risk, and liability. Some landlords make this a deal breaker but it doesn’t have to be. If you do not want to sign one consider some of the following strategies to eliminate or reduce liability.

  • In lieu of a Personal Guarantee, sometimes you can negotiate a higher security deposit, a letter of credit, or a co-signer.
  • Try to limit the Personal Guarantee to a specific time frame (2 years), or ask for Liquidated Damages.
  • Negotiate to limit the Guarantee to the amount of rent, brokerage fees, and build-out costs.

 

How much rent can I afford to pay? What’s the secret sauce here.

The economics of the lease are critical for your success.

  • To figure out, roughly, how much rent you should pay for a space, take your projected sales for the location and multiply it by the percentage of industry norms. This will give you your Occupancy Cost.
  • 5% to 8% are average rental costs, 9% and above are high costs.

 

What is Percentage Rent?

Is additional money that is paid to the landlord only if you hit certain benchmarks. In Percentage Rent, the base rent can be lower. If you exceed the Break Point in sales, the Landlord will receive additional rent based on that percentage.

  • It is calculated as an annual percentage based on gross sales that exceed a certain threshold. This is called the Break Point.
  • Once you hit the Break Point in sales, you pay the difference between your Actual Sales and the Break Point, multiplied by the percentage agreed upon in your lease.

If you cannot negotiate the percentage rent out try the following:

  • Make sure what the Landlord considers Gross Sales is defined in your lease.
  • When your rent goes up, the Break Point should increase.

 

Common Area Maintenance (CAM)

If your space is in a Shopping Center, Strip Mall, Retail development there is a good chance you will be obligated for Common Area Maintenance (or CAM).

CAM: What Is It, And How To Save Money

The CAM clauses are often the least understood part of a lease, and can be the most expensive part. This is where your Lawyer will come in handy. CAM charges are additional fees tenants pay to offset the common area costs shared by the Tenants. CAM fees cover a variety of net charges, including Fixed & Variable Fees. Be sure to be aware of all the fees included in your lease.

  • Fixed Fees include items such as Real Estate Tax, which may vary somewhat, but are generally similar year to year.
  • Variable Fees are items such as snow removal, pest control, landscaping, and elevator maintenance.

What you need to know:

  • Landlords typically want CAM terms to be broad. Ensure that the CAM terms in your lease specify the details of what you are responsible for and what the Landlord is responsible for.

Make Sure YOU Examine the Landlord’s records to make sure the CAM expenses are properly charged from the Landlord.

  • You want to be able to cap the charges or negotiate a fixed fee for CAM charges. For example, a cumulative 5% cap setting a ceiling on annual increases to CAM fees.

What to watch out for:

Administrative & maintenance fees, lighting, roofing, capital improvements, electrical wiring, HVAC.

 

Look out for Use Clauses and Exclusive Clauses.

  • Use Clauses restrict what you can do and can prescribe specific use. For example, they can restrict menu items. Make sure you’re fully aware of the restrictions put upon your restaurant during the lease terms.
  • Exclusive Clauses prevent the Landlord from leasing to a similar business as yours within a set of terms. For example, another of the Landlord’s Tenants may not be able to have over 20 taps in their bar because you have exclusive rights to 20+ taps in one bar.

 

Should you Sublease or get an Assignment of the lease?

Subleasing is the leasing of part or all of the property held by a Tenant as opposed to the Landlord. The original Tenant still retains partial interest. Assignment means the current Tenant signs over the lease to a new Tenant or the Landlord, and transfers all interest.

  • Before considering either of these options, you should find out if the lease allows subletting/assignment.
  • Know ahead of time what the liabilities are for subleasing/assignment.
  • Have a copy of the Master Lease (the original lease you signed) and all addendums.
  • If you assign your lease the landlord may still want you to stay on the lease

 

Construction Improvements

Have your Contractor & Architect walk through the space prior to signing the LOI and lease. They need to be aware of the terms of the build-out as defined in your lease to best advise you on the build-out costs and timelines. This is a key component in your lease and can greatly impact you.

 

What you don’t know could cost you

  • When leasing a Second-Generation space, the HVAC is a key feature to pay attention to. Make sure you ask the Landlord: How old is the HVAC? What is its expected life? Are you as the tenant responsible for upkeep, replacement, or repair? What is the tonnage?

 

Everyone wants a Patio

The Tenant is generally responsible for the maintenance of a patio. You should not be paying separate rent on a patio space. However, make sure your liquor license covers the additional square footage of your patio.

 

Liquor License tips

  • First item of business is to make sure there is one available that is transferable. Know how much it costs.
  • You need to get a timeline on how long it will take to transfer. Our office averages 6-8 weeks.
  • Will the landlord allow a license? Make sure you pay attention to the Use and Exclusive clauses that exist.
  • Pay careful attention to the Rent Commencement. If you got a too good to be true deal there might be an issue with the transferability of the license.  To save a few thousand dollars and have to open without the license can be  detrimental to the long term success.

 

I can’t begin to cover everything you need to know. There is still Build Out, Rent & Lease Commencement, Signage, Zoning, Permits, Defaults, Tenant Improvement Allowance, Free Rent. I can’t stress enough to make sure you have experienced professionals in your corner.

 

Terri Sokoloff, CBI, CNE, CRB, GRI/Broker

President Specialty Bar & Restaurant Brokers

Terri Ann Sokoloff is the President of Specialty Bar & Restaurant Brokers. She brings a high level of expertise to the clients of Specialty Group, offering more than 25 years of experience in the industry. She is a licensed real estate broker, a certified real estate brokerage manager (CRB) and a certified business intermediary (CBI). In addition to being active in professional organizations such as Commercial Real Estate Women, Urban Land Institute, Women’s Leadership Initiative, PA Restaurant Association, Former Advisory Committee of PA Culinary, Terri has also authored numerous magazine, newspaper, and pricing guide articles and has appeared as an expert on a variety of regional and national media broadcasts. She has been featured as a speaker at the Nightclub & Bar National Convention on the topic of “Selling Night Club & Bars” & for the PA Restaurant Association on the topic of “Confessions of a Restaurant Broker” and “Leases: Negotiation, Clauses, Mistakes, and Tips”.

Pizza Shop Design Trends For 2018

When someone tells you to imagine a pizza place your brain might immediately jump to images of a classic pizzeria.  You know the one. It has black and white checkered floors paired with red walls, a few chairs and tables, usually in a bistro style design, and checkered tablecloths. However, the pizzerias of today, both large and small, are bucking that traditional look and opting for a more updated image.

You might be wondering why that should matter, studies show that ambiance can affect customer perceptions in a big way. Things such as how much and how fast customers eat, how much they spend, how long they stay, and their impressions of your responsiveness and reliability. To make sure you are sending the right message to customers, we’ve gathered together some of the industry’s leading trends.

Back to Roots

In the pizza business, along with many other businesses, we are seeing a shift back to their roots. Many pizzerias are doing this by installing brick ovens into their shops. More and more, customers are wanting not just food but a complete experience. Brick ovens are part of that experience that screams authenticity. Brick ovens also benefit the taste of the pizza: toppings are crisper, and they boost food flavor. They also cook the pizza faster than a conventional oven and are an energy saver.

Open Kitchen Design

Customers are more interested than ever in not only the ingredients going into their food but how it is being made. To accommodate this pizza shops are opting to go with an open kitchen plan. The open layout allows customers to see exactly what is going on during the preparation of their food. Everything from the ingredients being used to the cleanliness of the chefs is available for viewing. Your cooking method is part of your brand.

Besides the practicality, it also adds to the experience of a pizzeria. Seeing dough being tossed into the air has a real feeling of authenticity.

Decorating Using Tools

A lot of pizzerias are using what they already have to decorate their shops. Pizza peels, rollers, and cutters are making an appearance on walls and in other areas of the restaurant. For that something extra, pizzerias are having their names engraved onto wood pizza peels to display at their entrances or on hostess stands.

Tile

Tile is back in a big way. For years the material has been relegated to the bathroom, but no more. Placed behind a bar or as a backsplash in an open-air kitchen. White subway tiles are very in and create a nice clean look. Tile can also be used to create an accent wall with texture.

Murals

Mural walls are a great way to bring color into an otherwise neutral palette full of earth tones and pull focus. Colors help to create an inviting ambiance that has customers staying longer and ordering more. Murals don’t always need to be paint. Some restaurateurs have started combining metal and wood to create focal walls. They will use boards of wood to cover one wall and then hang some form of metal art on the wall. If the budget allows, logos can be cut out of metal to create a cool branding opportunity.

Your branding will help dictate which route you should go. If your brand is more playful or eclectic, a colorful mural might fit right in with your branding. If clean lines and neutral colors are your thing then a wood and metal combination might fit best in your shop.

Reclaimed Wood and Brick

Many pizzerias are favoring the brick and reclaimed wood look. It is a combo of craft/artisan and more modern.  Especially when paired with metal accents. The texture of these materials brings in the artisanal feel while the straight lines they have ended up having a modern aesthetic. “Nothing goes better with pizza than reclaimed wood,” according to Pizza Today. Utilizing brick is also a great way to incorporate street style into your restaurant.

Whether you are considering a complete reimagining of your shop, or simply looking to add a few updated pieces like customized peels, one of these trends is bound to work for you. It will keep your shop looking fresh and your customers coming back for more.

Which one of these trends is your favorite? Let us know in the comments below!