I was rummaging through my archive of interesting food and restaurant articles and came across one called “Start Your Own” featured in a 2006 page of the New York Times. I thought the article would be appropriate for the blog as it describes an ambitious young couple risking to start their own restaurant in New York City where an estimated 60 percent of new businesses fail within two years. Today the restaurant still exists and most recently was featured again in an interview by New York Times food critic Frank Bruni.
How did they do it?
Scott and Heather Fratangelo are the perfect example of first time restaurant owners who have achieved success through a well thought out plan. In 2005, the couple’s Italian eatery opened in the Upper East Side of New York. Within six months, the restaurant was a hit, a favorite dining choice for the affluent and a New York Times two star restaurant. The couple knew what it would take to survive. With Scott’s prior cooking experience from the Gramercy Tavern and Union Square Café, he would take charge of the kitchen. Heather would divide her time between being a pastry chef, wine consultant and hostess. The end result was saving the couple $100,000 in annual salaries.
The Fratangelos were like many new restaurant owners. They had a vision of the restaurant space but little did they know of the various regulations which prevented their vision to come into reality. So, the couple accepted to turn the 1,100 square foot space into a small 32-seat restaurant.
Spigolo is open for dinner seven days a week. A shift consists of two dishwashers, one prep cook, three cooks, one pastry assistant, two servers, one runner, and one bartender and in the winter one coat check-person. Besides tips, each server receives a $20 per shift base pay.
Spigolo goes through $4,000 worth of food per week with the goal of having almost nothing left by the end of Sunday. The restaurant also goes through $1,500 worth of wine and $500 in liquor. Inventory is kept to a minimum to avoid paying a bill all in one shot. State Liquor Authority requires receipts to be paid in full at the end of every 28 day cycle with no exceptions.
Rules of Appearance
Employees purchase their own uniforms as way to take full responsibility for their appearance. Scott has also implemented a $1 fine for every soiled napkin that is not placed in the laundry basket.
The Financial Breakdown
This is how Scott and Heather’s investment breakdown appeared:
Personal Savings of $160,000 were matched by a friend’s father who added another $160,000. This provided a comfortable safety net for the couple.
- Security Deposit = $14,000
- Construction = $260,500
- Liquor License = $4,500 (2 years)
- Lawyers = $9,500
- Sidewalk Café Permit (2 years) = $3,500
- Architect = $3,500
- Tables, Chairs & Dishes = $8,000
- Start-up Food & Liquor = $8,000
- Equipment = $30,000
- Total Start-up Cost = $341,500
- Rent = $14,000 / month
- Staffing = $25,000 / month
- Insurance = $666 / month
- Food & Liquor = $25,800 / month
- Estimated Monthly Expense = $65,466
Calculating a Benchmark
The Fratangelos kept their business plan simple and focused on two main benchmarks: calculating the daily break-even point ($3,000) and the average check required for achieving it ($52).
For example, it required 215 plates of gnocchi all priced at $14 to achieve the daily break even.
Scott and Heather Fratangelo understood what it would take to make a profitable business. They realized operating a restaurant especially in New York could potentially be a disaster. To avoid failure, they broke down what they had to do. Because of the size of the restaurant, they knew that they had to step into multiple roles and manage their time well. By doing this, they could save $100,000 in annual salaries. At the time of when the article was published, the couple estimated they were already earning $8,000 to $9,000 profit per month only after a year. However, this was only possible since Scott and Heather were working in the business. If the couple were to hire chefs and other additional staff, their profit margin would drastically slip.
Scott predicted that when 2007 came around, the couple’s total investment of $480,000 would be fully paid off. That would be two years since the opening. Since the average return on investment is within three years, the Fratangelos are on the right track. There hasn’t been any update on whether Scott and Heather had paid off the investment last year. However, with recent reviews by the New York Times and other restaurant review sites, that is a sign of success.
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