Laid Off!....Opened Pizza Store....

http://money.cnn.com/galleries/2009/news/0906/gallery.silver_lining/index.html

Wow, not bad, $60K down and a $300K SBA loan for 2 former bank employees to open a restaurant with zero experience! I thought the SBA required purchase of the building as collateral…??? I guess I’m wrong - I’ll have to re-investigate the SBA. I’ve found over the past 2 years that banks won’t even consider talking to a restaurant owner in business for less than 2-3 years. Its amazing how they pulled it off! Best of luck to them, {still wondering how that happened}.

Your thoughts??

60,000 down and a lot of other assets for collateral???

It sounds like a supersized version of our story. Neither of us had any experience in food other than I did deliver pizza for a couple months in the early 80’s. We started 7 years ago with a 50K loan with one location. SBA only needed a couple of 100K colateral :lol: we planned on doing a couple more locations, but wife and I are both too “hands on” to try to have another location with a manager. So we are settling for one location. Heck on Friday nights I can’t get my wife to step back from topping to supervise. She would have to clone herself if we had more than one shop.

Rick

The new american dream…borrow, borrow, borrow…

Forgive me for not patting them on the back and being as hopeful as they are but to think you are going to borrow 300,00 and then turn around in the next couple of years and open 10+ stores is foolish. I guess they will continue borrowing for these next stores. Give me a break…

And people wonder why 3 out of 5 restaurants fail in the first five years. If people would use a little common $en$e.

www.daveramsey.com

Kris

I think the fact that they ‘plan’ to open 12 to 15 restaurants over the next five years says it all - no idea!

I wouldn’t be too quick to write off their chances of multi unit success. Some people are great at managing 1 store(me), while other people are great at setting up a system and growing a multi unit chain. You do have to have deep pockets(or access to other peoples money) to expand rapidly. Look at your competitors, dominos, pjs, the hut, etc. A large percentage of these franchisees own multiple units. The same can be said for a lot of mc dees, bk, and subway owners.

And to think, I couldn’t even get one of my local banks interested in filling out the darn paperwork for a SBA application. “It’s too much hassle”…

ha my thoughts exactly, almost word for word.

While I support the other things you say and am a Ramsey supporter who got to call him 2 years ago and proclaim my debt free status, I disagree with you assertation about the failure rate of restaurants. There has been some study into some of the failure claims and it shows that much of the rates we’ve come to quote are at best rumors. These rumors hurt our industry and make credit, loans and investment in restaurants scarce. Its up to restaurantuers to correct this image. posted are some interesting articles on this issue, especially the peer reviewed OSU study.
http://www.businessweek.com/smallbiz/co … page_2.htm
http://www.restaurantowner.com/public/302.cfm
http://researchnews.osu.edu/archive/restfail.htm

the last time I looked 3 out of 5 was not 90%!

I’d agree that 90% failure in year 1 is a myth but I’d bet 3 out of 5 in 5 years is pretty accurate. What it doesn’t take into account are businesses which sell up and the new owner keeps the name.

As one of the articles mentioned for franchises this is one way to keep the ‘franchise is better’ alive. My take on that one is that there is a much better chance of a weak franchisee getting someone money from a more successful franchisee than if it were an indy.

Either way the original article and comments were about someone with relatively little cash with rather large plans which I think most people on here would laugh at. If they manage to pull it off good on them! But lets see what the next 12-24 months holds for them!

Its up to restaurantuers to correct this image. posted are some interesting articles on this issue, especially the peer reviewed OSU study.

I think we can find statistics and articles all over the place to sit on either side of the fence. In my own experience of being open 15 years I used a statistic I find to be true. We see restaurants come and go all the time in our market. I see people here and in other forums come and go all the time as well. The common thread between those I have encountered is money. Not having enough of it. Overhead can sukk you dry.

That was my point. Sure each market might be different, each situation IS different and a whole host of reasons but for me the bottom line is to live in some kind of la la land and think you can borrow 300,000 bucks to open a business you have no experience in and then think you will be able to turn around and do it again 10 plus more times in the next year is foolish.

Congrats on your debt free scream :smiley: …I await mine…but the greatest lesson I have learned if I had do it all over again is I would not borrow money to do it. It would substatially decrease the stress and increase the success not only for my situation but those I have come to meet all these years.

I include www.daveramsey.com in my posts because the life changing perspective I have found I want to share to my fellow pizza operators. Just as many of them have over the years changed my perspective on countless other matters.

Kris

Kris, bravo!! I sort of agree with your post, but for more clarification…

Credit and Debt aren’t bad things. If managed correctly, along with employees, service, and product, they can greatly assist in the ‘growth’ of businesses. Provided a business has a path to growth. On a personal level, credit isn’t a bad thing, despite the ‘Ramsey’s’ and others. To me, its simply another management concern.

Like everyone else, the couple in question has a very ambitious growth plan with probably no experience to subsidize that plan. Best of luck to them, boy, its a very hard row (for just one store) much less 15.

I think that it is quite dangerous to start a business these days…but, if you think that it is the right time for you to start a business, then why not? I agree that if you manage your credits correctly, then you wouldn’t be too burdened…

Amen Kris. Heavy borrowing to open my first location is one of my biggest regrets. I had the money to do it all cash, but I wanted to keep it invested and borrow to open the store. That significantly increased my stress level for the first three years, and significantly decreased my cash flow.