Why Closing Your Restaurant Could Be the Best Investment
Closing a restaurant is like going back to school—think of the investment as tuition itself
There comes a point in a restaurant’s life when the owner has to choose between prolonging the pain or pulling the plug. Both bring less than promising outcomes, but the latter, while it might be a harder pill to swallow, can eventually deliver not just relief (financial and otherwise), but also humbling lessons no textbook can provide.
“A lot of people think that opening a restaurant is easy. Some even think that owning a restaurant is like owning a trophy, a status symbol. While it’s one thing to know how to cook, it’s a completely different thing to run a restaurant,” says Stephanie Zubiri-Crespi, whose restaurant Atelier 317 closed its doors after a year of operation. To her, opening shop may have made sense back in 2012. “I was already operating my own catering business and a 16-seater private kitchen so I thought, ‘Why not operate a restaurant?’”
She wanted her restaurant to be in a location that was not conveniently located inside a shopping mall. “At that time, most of the restaurants were mall-based, especially the bigger chains, and I really wanted it to be authentic. A boutique restaurant that serves home-cooked meals with a global twist.” Luckily, after much searching, she found her nest in a small hotel tucked in a community in Poblacion, Makati. “Right now, Poblacion is a hip and happening neighborhood, but back then, I was the only one there except for a couple of places. Originally we were supposed to have a small restaurant on the ground floor, with a gallery with private dining and cooking classes on the second floor.”
No doubt it was a promising project, one that was too good to pass up. And up to the first few months of operations, it still seemed that way. As Zubiri-Crespi admits, it was always fun at the beginning, as with every business enterprise. “The opening nights, where you are really excited to have people coming in and everything goes really well, of course it’s really great.” But all that excitement eventually simmered down to a halt as soon as the problems came pouring in.
As advised by her parents, she opted not to partner with anyone. “My parents had encouraged me to go on my own. They were very old-fashioned that way. They say that I should be able to make my own decisions and all that.” However, not having partners to back her up proved to be disadvantageous and costly on her part. “In hindsight, I would rather have had business partners to help me out and be able to carry that burden whenever something went wrong, especially on the financial side.”
Since she was alone, she had no choice but to spend all of her time at her restaurant. “I came home early one night after a slow service to find that there was absolutely no food at home, not even canned food. And it dawned on me. I was so busy doing the things that I thought I should be doing that I never spent time on the things I loved doing.”
As with many cases, the regret always comes in the end when you see the bigger picture and surrender to the what-ifs. “I wish I considered the business end of it.” She says she would have hired people who had experience in the industry.
“In hindsight, I would rather have had business partners to help me out and be able to carry that burden whenever something went wrong, especially on the financial side.”
OPEN KITCHEN NO MORE
This same problem partly caused the downfall of chef Miguel Pacheco’s restaurant. When he set up Open Kitchen by 48 Concepts in Kapitolyo, Pasig in December 2013, he knew he needed partners to guarantee a good and sustainable run. He signed up two of his closest friends to help him out. However, he regrets not appreciating the value of a good accountant. “Hiring a good and trustworthy accountant is a must in running a successful restaurant or any business for that matter. And make sure he does not double charge you!” Still, he was quick to acknowledge that, despite inviting partners in his business, he lacked management know-how to run a restaurant.
Open Kitchen was inspired by Pacheco’s short-lived stint at an organic restaurant abroad. “In Bermuda, I got to cook all organic dishes. I learned that talking to fishermen and farmers really helps in knowing exactly what ingredients are in season and where they actually come from. Without the proper ingredients, one will not ever get to experience that simplicity is key.” This prompted him to give value to ingredients available locally. Dishes like Anise Pork Belly with Honey Mustard Reduction and Pumpkin Soup with Vanilla Ice Cream were churned out of the kitchen, but in the process of crafting food with his creativity, he forgot the one ingredient that mattered the most in the equation—his customers.
“Open Kitchen was in a residential neighborhood where people cook more at home and prefer comfort food. Yet, we did not want to label our cuisine or be known for a signature dish. For us, that would be a limitation to what our restaurant is capable of. I was really stubborn that way.” Eventually, though, Pacheco had to surrender to the market. “I had to adjust to our customers by creating comfort food with a slight twist. I realized that compromises are challenges that should be embraced.”
As soon as Pacheco struck that balance between what he did and what the customers wanted, Open Kitchen showed progress. More seats were filled and the kitchen saw action like never before. Then something unexpected cut their luck short. “When our contract was about to expire, we already had an oral agreement with our landlord that we would be renewing for another year. Then three months into the contract, I received a notice from him ordering us to vacate in a month’s time.”
“You would have spent the same amount on a business degree doing an MBA anyway, so just think of it as tuition and it’s never a lost experience because you can take it with you.”
“Choosing the right location, at the right rent, for the right concept is very important,” shares Zubiri-Crespi. “As much as I wanted to be away from the mall, I wasn’t really trendy then. At that time, everyone was going to The Fort so I was always competing on weekends with restaurants that were in that area.” She also admits that the high rent was a big factor in the restaurant’s closure. “I was supposed to exclusively provide the food service in the hotel. The rent was justified that way. Everything looked fine on paper. In reality, however, the hotel failed to bring in some guests. It was always empty!”
It also didn’t help that she was not able to maximize the leased space. “My contract covered two floors of leasable space but the second floor was not income-generating. Our original plan on the second floor did not materialize since we became too busy with the restaurant operations on the ground floor.” Sure, the restaurant was making money, but it simply could not keep up with its operating expenses, putting more weight on the restaurant and consequently giving it a harder time to break even. “I would not be making millions but I think we would have still run for a longer period of time.”
As for Pacheco, he has now learned the value of putting everything in black and white. “I should have insisted early on to reflect our renewal agreement in a written contract. Losing it all of a sudden was really unexpected and painful. Life’s a risk and this is what we chose.”
Zubiri-Crespi was forced to learn the basics and tricks in operating a restaurant the quickest way possible. “I had to study, and learn the language of business along the way. I thought that running a restaurant was mostly about serving good food. Then I realized that, at the end of the day, a restaurant is a business.” If anything, her short-lived time as a restaurateur helped her define what she really wanted to do in life. “It made me realize that the restaurant business, the food industry in general, is not for me. It’s like an ex-boyfriend that I don’t want to be with or ever want to see again.”
“The best advice I ever received after the restaurant closure would be from Marivic Lim of Apartment 1B. She said ‘You know, I also closed my restaurant before. Just think of it as tuition. You would have spent the same amount on a business degree doing an MBA anyway, so just think of it as tuition and it’s never a lost experience because you can take it with you.’”
“I had to study, and learn the language of business along the way. I thought that running a restaurant was mostly about serving good food. Then I realized that, at the end of the day, a restaurant is a business.”
When opening and running a restaurant, one can expect countless pitfalls and mistakes that will eventually manifest as valuable insights and lessons. But nothing can bring more impact, work value, and appreciation than closing shop. I would know, as I went through the same misfortune.
In 2008, I decided to open a Hong Kong Stir Fried Noodle franchise located in a 24-hour food court at the basement of a commercial building along Buendia, Makati City. Back then, I was looking for a means of escape from law school life and an avenue to channel my entrepreneurial self. Six months in, I had to close shop. I realized that I was ill-equipped and was not cut out to live the entrepreneurial life just yet. And perhaps that was the best thing to come out of this kind of ordeal. As Zubiri-Crespi and Pacheco would attest and agree, you walk out of it knowing more about yourself.