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Planning a Restaurant, Cafe and/or
Foodservice Operation
How large do we have to be to support a restaurant
operation or, how many annual museum visitors are required to operate
a profitable restaurant?
There are many factors that make a museum restaurant profitable besides annual visitor count. Is admission required to be paid to access the restaurant? Where is the restaurant located in the museum (near the entrance where visitors will likely pass it twice, on the way in and the way out or some interior area where it is hard to find)? What is the likelihood your restaurant can and will develop a reputation to "be part of the visitor experience", that is, be "top of mind" when planning a visit ("let's go to the museum and have lunch while we are there")? Does your restaurant have "direct access" from the street without having to go through the museum entrance? Will the restaurant be providing any catering services? If yes, will catering services be exclusive to the restaurant (operator) or non-exclusive? A very general rule-of-thumb would say you need about 500,000 annual visitors to operate a profitable restaurant (not counting catering sales). However, this number can go up or down dramatically depending on your answers to the many questions we have asked above.
Some of my associates want a fine dining restaurant
but I think our customers would like fast food. How do I determine
which would be best for my institution?
Market research (surveys and focus groups) will give you excellent insight into what kind of restaurant would best serve the various needs of your institution (visitors, members and staff).
Will food service (restaurant) operators provide
capital investment to build a new restaurant or expand an existing
one?
Yes, some will depending on the size, scope and profitability of your
food service operations (restaurant and catering services). However,
you should look upon an operator's capital contribution as a "loan" that
will have to be paid back through a lower return to your institution.
It is always recommended to consider it both ways, operator capital contribution
as well as providing the capital through your own resources, including
borrowing the capital if necessary, to determine which method has the
greatest financial benefit for you.
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Foodservice Operator Selection Process
What is a Request for Proposal process?
An RFP is a process where you first clearly identify your institution's goals and mission as it relates to food service (restaurant, café and/or catering and special events). The next step is to identify a list of prospective operators that have the experience and resources (financial and operational) to accomplish these goals. The prospective operators are then asked to prepare a proposal covering the scope of (food) services in a uniform and comparable way. Proposals are received, reviewed, evaluated and compared. References are checked and a short-list of operators that come closest to meeting your financial and operational goals is identified. Presentation and negotiating meetings are held with these finalist operators. A selection is made, letter of intent issued and contract negotiated, finalized and executed.
How long does it take to complete a Request for Proposal process?
An RFP can be fast-tracked and completed in 8-10 weeks if we limit responses to a short-list of preselected, experienced and qualified operators. Normal RFP process depending on the size and complexity of our client's food service operations is about 16 weeks.
We don't want to operate our own food service. How can we find a qualified company to run our restaurant and catering services?
Engaging a firm such as Manask & Associates that specializes in matching
institutions with qualified and experienced food service operators. This
is the best way find a food service operator that will fit into your
culture and provide the services that best match your goals and mission.
Why not find the operator on your own? Experience tells us that you will
not have access to "all" qualified prospective operators, and,
importantly, not know all the questions to ask or be able to prepare
an Agreement/contract with the selected operator that is most favorable
to your institution.
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Outsourcing versus Self-Operation
What are the pros and cons of Outsourcing versus
Self- Operation?
The primary issues are:
• Does your institution want to be in the
food service business including all the financial
and operational responsibilities that go along with it?
• Does self-operation of food service fit
with the mission of your institution, corporation
or business entity?
Foodservice can work on either an outsourcing or self-operation basis
depending on your philosophy and goals.
If we outsource our food service operation what are our operator options?
Following is a listing of the likely food service operators depending
on the size and scope of your food service (café, restaurant,
cafeteria, catering, vending machine, etc.) needs:
• Local Restaurant
• Local Catering Company
• Local Hotel
• Local, Regional or National Foodservice
Contractor
We operate our own food service and it is mediocre at best. What can we do to improve it?
A comprehensive evaluation and assessment by an independent, third party
consulting firm such as Manask & Associates would be the first step
towards improving your operation and services. Often times local restaurant
operators and/or food service contractors will offer to provide such
a review and assessment, sometimes at no cost to your institution or
business. An evaluation by an independent consultant that has experience
with food service operations in similar environments as yours, "nationally",
with no further interest or bias other that providing the best possible
advice and objective recommendations is always the best way to go. It
is likely you will earn back in future years whatever consulting fees
are paid many times over when consultant recommendations are implemented.
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UBIT (Unrelated Business Income Taxation)
How does UBIT apply to our restaurant operation?
Jeffrey M. Hurwit, principal attorney in the law firm of Hurwit and Associates
in Boston, wrote in an article on this subject in NEMA News (published
by the New England Museum Association) "that restaurants, cafés,
snack bars contribute to accomplishing tax-exemption because they 1)
allow visitors to devote more time to the museum's educational exhibits,
and 2) enhance efficient museum operation by enabling staff to remain
on-site throughout the day. Food sales like water coolers, rest rooms
and exhibit room benches facilitate and enhance the museum experience.
Thus resulting revenues are not taxable. Revenue Ruling 74-399 (1974)." Mr.
Hurwit further explains: "At least that is the legal conclusion.
For now. Usually. But, as an example of how small facts make big legal
differences, if a dining facility is accessible not only through the
museum but also through a door directly to the street, then it has been
held by the IRS not to be primarily for visitor convenience but for general
public use, and therefor taxable." Other factors that need to be
considered are "whether your restaurant is advertised regularly
in magazines and whether your restaurant can be accessed without paying
admission to the museum."
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Catering & Special Events
Should we have a contract for our approved caterers
and outside groups and organizations that have events at our institution?
Yes, all caterers that work at your location should be required to sign a contract that covers the institution's rules, regulations, policies and procedures, insurance requirements, other terms and conditions and term and termination. We recommend the contract state that catering customers and the institution rate (using a survey form) the caterer's performance after each and every event. The caterer's rating should be part of the basis that they can continue to work at your institution. Further, caterers that do not follow the rules should be written-up and after a formal warning and notice for repeated infractions, these caterers' contracts should be terminated. Customers should have their own facility rental contract to sign covering similar terms and conditions at the caterer.
We want to have non-exclusive catering but the
restaurant operator wants exclusive catering?
Most institutions want to have the ability to use a variety of caterers
for special events. The advantage of having a non-exclusive catering
arrangement is that it provides internal and external (outside groups
and organizations) customers a variety of menu, pricing and services.
In the case of an institution that wants to optimize facility rental
income from outside groups, a non-exclusive caterer policy allows outside
caterers to bring their customers that can increase overall institution
earned revenue.
Many restaurants, however, can not be profitable without also doing all
of the catering services at your institution. The institution needs to
carefully weigh its needs, goals and financial objectives when deciding
on an exclusive or non-exclusive catering policy.
If we have a non-exclusive caterer policy, which
is better, allowing most any caterer to work at our institution or
only a limited, approved list of caterers?
It is highly recommended to establish an approved list of caterers. Among
the reasons include less wear and tear on your building and property,
it is much easier to work with a short list of caterers that you know
and that are familiar with a your policies and procedures. It is also
possible, in many cases, to establish a commission policy with your approved
caterers whereby they will pay you a percentage of their food (and alcoholic
beverage) sales (usually about 8%-10% depending on annual volume).
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Foodservice for Small Museums
We are too small to install a restaurant, what
are our options for food service?
We would recommend installing a "cart" program. This can be
as simple as a coffee cart that will provide a variety of fresh brewed
coffee, espresso, cappuccino, latte and related hot beverages. Most coffee
cart programs can also include a selection of cold beverages (bottled
waters, juices and soft drinks) and snacks such as cookies, scones, muffins,
biscotti and chips. There are independent contractor coffee cart operators
in many US cities that will place a cart at your location, operate it
and possibly provide a small commission payment in the form of a percentage
of their gross sales. If using an independent contractor be sure to check
references and confirm and verify they and their equipment is licensed
and approved by the local health department. Optionally you can purchase
your own cart(s) and contract with a local caterer or restaurant operator
to operate it for you. Last choice would be to operate it yourself. Be
sure to pick a high-traffic and high-visibility location and install
tables and chairs. If your cart program is very successful a small café or
restaurant could be in your future (expansion).
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Manask & Associates
What is Arthur M. Manask & Associates?
We are a consulting firm that serves museum, aquarium zoo and corporate
dining clients throughout the United States (and abroad) through its
principals and associates in Los Angeles (California), Chicago (Illinois),
Dallas (Texas) and St. Louis (Missouri).
We are the largest and most experienced food service consulting firm
to museums, zoos and aquariums. Our clients also include corporations
(corporate dining), clubs, schools and colleges. Our services include:
• Operational and/or Financial Evaluation.
• Request for Proposal (food service operator
selection).
• Self-operation versus outsourcing evaluation.
• Market Research
• Food Facility Design
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Engaging A Consulting Service
We don't have a lot of money for consulting services.
How can I justify this expense?
Manask & Associates and other consulting firms regularly help institutions and businesses like yours improve their operations by increasing sales and profits while reducing expenses. In many cases these efficiencies and recommendations pay for the services many times over. Is it really worth it? It is highly recommended to "check references" of your prospective consultant, especially the consultant's clients where they have done engagements "most similar" to what they are proposing for you. Ask the reference about their opinion of "cost-benefit". Was the service worth the cost?
Do food service consultants specialize?
Yes, you should always look to firms or individuals that are specialists
in their respective fields.
First look at the consultant's clients to see what markets they specialize
in. Some consultants have successful practices in more than one area.
Be sure to determine their area of specialty and "competency".
Primary client categories include:
• Commercial Restaurants and Restaurant Chains.
• Design and Concept Development.
• Schools and Colleges (higher education).
• Health Care (hospitals and retirement homes).
• Corporate Dining
• Museums, Zoos and Aquariums
• Convention Centers, Stadiums and Arenas
• Theme Parks Following is a listing of specialty consulting areas (within the above markets) offered by veteran food service industry consultants:
• Operational evaluation and assessment
• Financial review and audit
• Purchasing review, audit, systems and procedures
• Market research
• Food safety and sanitation
• Marketing
• Request for Proposal process
• Contract preparation and negotiation
• Food Facility Design
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