Restaurant industry proves challenging
Date posted: June 24, 2014
SHERIDAN — Sheridan is a community that presents a tough market for restaurants. Over the past few years, multiple restaurants have opened and subsequently gone out of business for various reasons.
The National Restaurant association estimates that nationwide, roughly 60 percent of restaurants fail within the first three years of operation, and that number jumps to 75 percent at five years.
While statistics for Sheridan aren’t readily available, a fair share of local restaurants have opened and closed here in the past few years. There was Oliver’s, LuLu’s Cafe, Terrazza Bakery and Italian Bistro, The Living Room and Warehouse 201, to name a few. While each business had its own reason for closing its doors, they all weigh in as evidence that the food industry is just as dicey here as anywhere.
Chad Franklin, owner and general manager of P.O. News and the Flagstaff Cafe, counts himself among the few restaurant operators who had a feel for what he was getting into when he purchased the business in 2005.
“There’s a lot of misconceptions where people like the idea of having a restaurant,” Franklin said. “They like the idea of making their signature dish or having a bakery and maybe some people go out and get an education in the field, but I think a lot of people just do it and think they can run the business. They don’t really grasp the wholeness of the operation.”
Lab Instructor for the Food Service and Hospitality Management program at the Wyoming Culinary Institute Ross Lynn said one of the points of the Sheridan College program is to emphasize to students that the food industry is unique.
“I tell them it’s an industry that’s not for the faint of heart,” Lynn said. “Most of our students that graduate, graduate at an entry-level line cook or manager. By doing that, you really start from the bottom and have to work your way into an executive chef or manager on duty position. It takes a combination of education and practical knowledge and experience. It works hand in hand.”
While WCI is a renowned school for the food trade, Lynn said even real-world catering events staged by the school don’t substitute for the years of experience it takes most people to be ready to fly solo as a food business owner.
“That’s what has really gotten Sheridan into trouble,” Lynn said. “There are a lot of people here who own restaurants that have never worked in a restaurant. It’s a very different type of thing to cook for people at home or cook for a crowd. It’s a different mindset you have to have when running a restaurant.”
Aside from the mandatory time commitment it takes to get a restaurant or bakery off the ground, the ability to wrangle business finances is a tripping point for many entrepreneurs.
“When you’re building your menu, you really have to know the cost of your product,” Franklin advised. “It’s an ever-changing product because you’re buying groceries in a market that fluctuates price.
“One of the keys in the restaurant business is it’s absolutely critical to know what your food costs are. You have to break down your menu to the ounce of mayonnaise,” he said, offering the example that a thimbleful of coffee creamer is roughly 7 cents. “If you’re not factoring that into your operation, that adds up really fast,” he said.
Franklin added his rule of operational funding is that he works with the last 5 percent of income.
“That’s where you’re going to make your living if 35 percent goes to food, 35 percent goes to labor and 20 percent is overhead,” he said. “It dwindles so quickly.”
Lynn said the financial world is tipped in favor of large franchise operations instead of personalized, “mom and pop” operations.
“It’s all about consistency,” he said. “That’s the reason chain restaurants are so successful. For example, you can go to any McDonald’s in America and know there are between 174 and 185 sesame seeds on a bun.”
While some customers might balk at the concept of every dish being shipped from a corporate headquarters in vacuum packed plastic, that method is the safest financial option for upstart restaurants.
“If you’re going to get a loan from a bank, they’re more willing to give you a loan if you want to open a branch of a chain, like Applebee’s,” Lynn said.
However, starting a hometown eatery that’s not a spin off an existing restaurant is still doable.
“When someone opens, they should have the mindset that they’re not going to make any money for the first five years,” Lynn said.
“After you invest in equipment and silverware and all of that, it will take you that long to pay it off. If you have the capital to make it past the five-year point, then most likely, your restaurant will survive.”
What’s there to work with?
The other catch about running a restaurant is it’s not just about being a whiz in the kitchen and at least a novice bookkeeper. In the food business, the skill of managing people is critical.
Franklin said that both customers and employees tend to cycle through local restaurants rather quickly.
“It’s an industry where people enter at a relatively young age and they’re looking for a job and then they want to move on,” Franklin explained. “It’s constant training. By the time you get them trained, they’re seeking greener pastures.”
While Franklin indicated he has employees that have been at his business longer than he has, the norm is that food service employees generally stay for brief periods of time.
“The labor pool here isn’t the best in the industry,” he said. “There’s some definite talent and some great people that work in our food and beverage industry, but when you live in an area that doesn’t have a lot of seasonal fluctuation, it doesn’t really attract a lot of skilled labor in some senses because you don’t have the opportunities for it.”
Franklin clarified that while Sheridan has a respectable influx of tourists passing through on their way to other regional attractions, it’s not a destination on the scale of Yellowstone National Park or the Black Hills.
That said, Franklin accepts that training his staff is an added hat he has to wear to run a successful business.
“If you can manage those people to grasp the concept of service and quality and hospitality and consistency, that’s a big phase of it,” Franklin said.
While the story of individual restaurants are as unique as their respective menus, there are a few common themes that accelerate the likelihood of success for a food business here.
“Without a doubt, this is a steak and potatoes town,” Franklin said, indicating sticking to staple menu items will create reliability in the perception of the customer.
Lynn agreed, but said there’s also a hopeful niche for broader horizons in Sheridan’s dining market.
“There is enough young money in Sheridan to warrant a cultural change in a restaurant,” he said, indicating something more off the beaten path, like a sushi restaurant, might flourish here with a strong business plan.
Lynn said the original and locally owned restaurants that survive here usually do so by targeting a niche market. He said with perseverance, a well-prepared restart owner has a decent crack at success here.
“It’s kind of an anomaly that we do have a lot of visitors in the summer and we have a lot of people with disposable income,” Lynn said. “You still have to have a fairly solid business plan in Sheridan to be successful here. You have to know the market.
“Sheridan is a small enough town that they’ll give you a second chance,” Lynn said. “But, if you don’t fix a problem the second time, they’ll tell all their friends.”