Should my first store be small?

Before I begin the question, for the sake of discussion, please assume in my scenarios that I am a competent business owner and have chosen a great location and that the business will succeed. With that being the story we’re all imagining, I have a question of how the first store should be set up…

My vision is a dine-in pizzeria for the community that is featured with pizza, beer and wine, a large salad bar, and a fun dessert bar for the kids. I don’t want an enormous restaurant, I want it to be a small neighborhood spot and follow the KISS mentality. I only want to offer carryout and not delivery, but that is a very complicated question that requires extensive research.

In that research I found lots of interesting information on del/co ONLY stores. In particular, my attention was caught by the low start up cost. By omitting dessert, salad bar, alcohol, and dine in accommodations, I am able to erase:

-countless pieces of equipment for storage and production of salad and dessert product
-alcohol inventory and necessary licenses
-dine in furniture, dine in dishes, and go down to three compartment sink vs dishwasher
-perhaps 1/2 amount of needed square footage for buildout
-overall decorations dropped to bare minimum
-half the labor

I have $50K in savings. Originally, I was going to kick in $30K of my own money and apply for a business loan for the rest. I have yet to perform my feasibility study so I am not quite sure what that number will be, but I expect for the dine-in concept to perhaps run me somewhere between $75K-$100K.

So my question to you guys is should I consider starting sort of an express version of my concept by opening a del/co only store and roll the profits from that store over into building the bigger dine-in store? That way, I would avoid needing a business loan for my first store, and would be a stronger candidate for a loan on the second bigger store when I have one successful business under my belt? OR do even the successful del/co stores just take too long to generate enough profit for me to attempt this route? Should I just take the big leap and go for the dine in concept now? The sooner I figure this part out, the sooner I can get the business plan started, however, maybe you guys are going to tell me I just need to perform a feasibility study for both store types anyhow to help answer this question?

Thanks!

Just want to clarify, your estimate for a full service dine in is about 75k to 100k? That’s what I would estimate on the low end for a delco pizzeria. Delcos can be profitable, that’s what I have and it does quite well. I would be cautious though to make sure you have enough capital.

Hm… I might be far off huh? It’s not going to be full service, but QSR with somewhere around 50 seats. Order from the counter and we’ll bring the pizza to your table with a self service fountain machine. Beer and wine is ordered and poured at the register. Does it still seem like a higher than $100K buildout?

I am definitely trying to be as cautious as possible with the starting capital. My dad went under with his pizza place 30 years ago from not having enough capital so his story rings in my ear constantly. Being a delco owner, do you think my own savings is not enough to cover opening up a small suburban shop? If it ends up being the case that I’ll need a loan for either store anyway, then I feel like I’ll steer back towards my QSR concept.

Thanks for the insight clownhair, definitely seems like I need a better grasp on my numbers. Looks like I should probably do a feasibility study for both concepts to make the decision.

100k does seem low to me for that concept. Since I have never done it I can’t be precise, however I have done a delco and if I was going to do another one right now I, personally, would want at least 100k to do it. Thats inventory, equipment (may have to buy used), negotiating with the landlord to fit the bill for some of the build out, a small operating cash reserve, and money for grand opening marketing.

Okay talking this through a bit just makes me more anxious to collecting my numbers and get the study going. I’m going to put together my calendar next week for building the business plan and I think I’ll go with a delco only store and prepare myself for needing financing. It seems like a wise decision as a first time business owner to try being the captain of a smaller boat before taking on a ship with my QSR concept.

Freese from Houston, TX? Sounds familiar

I was going to message you pretty soon for some advice old friend!

Delco only or sit down with larger menu and bar I will be happy to do a foor plan for you at no charge .
George Mills

Listen carefully to what you are being told about costs! If you are taking over a space that is already plumbed and wired for restaurant use and has HVAC, hood and trap you could probably open a nice delco from there for 100K. But that is before operating losses while you get ramped up! If you are looking at taking a lease and having to add those items yourself, that number is low. Adding sit-down to the concept will take the numbers up from there.

A cheaper way to go is to find a failed restaurant that has most of what you need and buy it for a song. 18 years ago I purchased a build-out and equipment package from a failed Papa John’s for 35K. That was 10 cents on the dollar for what they had into it. Even with that head start I still spent another 30K on additional items. (POS was half of that!) After that, I spent another 20K in operating losses during the first year or so while I ramped up the marketing to get sales up to a survivable level.

Some ideas that can save you cash requirement up front: Leasing equipment. If you have good credit you can lease ovens, P.O.S. and maybe some other items. Overall a bit more expensive than buying but it will lower the cash outlay to get open and it will be a LOT easier than getting a bank to lend to you. My guess is that your chances of getting a bank loan to open without putting up other collateral (your house) are slim to zero. Have you been in to talk to the bank yet?

Your store sounded familiar and when I went to your website I realized it’s cause I’ve been there! My family loves Steamboat…

I haven’t been to a bank yet. I am putting together my calendar this week for writing up the business plan. I figured I would get this plan together first and understand my numbers better before my first visit to a bank. I’ll have so many questions, want to be sure I’m prepared. I’m pretty set on sticking with a delco only store for this first shop so that is the type of plan I’m going to focus on putting together. I appreciate everyone’s feedback on what their numbers were, it has helped me choose a path to follow before I wasted time putting a business plan together on a store I can’t afford the risk on.

Thank you! I’ll be in touch soon.

Have a look to find out if there is a S.C.O.R.E. chapter near you. It can be a mixed bag as sometimes the volunteers they have don’t really know about your type of business but other times they could be a lot of help in pressure testing the assumptions you are including in your business plan and pro-forma.

Good luck.