How much does it cost to operate a restaurant on the avenue? |

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Edward Kim arrived from Korea with ambitions to open a restaurant with a business partner in the United States, hoping that settling near a university would attract more business. In 2019, Kim rented a space on the corner of University Way Northeast and Northeast 42nd Street, which is now home to local Korean favorite, The BoB.

Running a restaurant, however, is difficult, with high expenses that drastically reduce income. In the U-District, for example, rental costs alone can range from $1,800 to $18,600 per month depending on the size of the business, and utilities cost around $3.75 per square foot per year.

The cost of goods sold, labor, and overhead such as rent and utilities can leave restaurants with potentially slim profit margins of anywhere from 0% to 15%. Even before the COVID-19 pandemic, average full-service restaurant profit margins were around 3% to 5%.

Running a restaurant during a pandemic on the avenue, where students are looking for their next inexpensive and delicious meal among competing restaurants, can make those margins even thinner, even when students return to campus, Kim revealed.

“I’m a little worried, because the students are still there, and the class is in person, but still, the sales [are] very similar [to] COVID,” Kim said. “Students come here, so it’s a little better than before, but not much.”

Initially, Kim’s role in 2019 was to manage the restaurant, while her business partner served as chef. A few months later, classes went online and countless potential students left the area. Shortly after, the chef left the company, leaving Kim to take on both roles.

Before Kim acquired the restaurant’s lease in 2019, the space was a teriyaki restaurant with monthly sales of around $50,000 and annual sales of at least $500,000. Kim used it as a benchmark to guide her income and expense calculations in hopes of keeping her new restaurant afloat.

Yet when The BoB took over, the new restaurant was only able to generate about half of the old restaurant’s sales, largely due to lack of customer knowledge.

“I lost a lot of money the first year,” Kim said. “The second year COVID started, 2020. It was tough until last September.”

However, the return to school and the return of student clientele have been good for The BoB. According to Kim, from August to November 2021, monthly revenue hit the target of $50,000. In December, however, the winter holidays combined with the omicron variant once again brought sales down to 50% of that target. Since then, sales have started to rise to around 60% to 70% of Kim’s target, but revenue is still lower than he hopes it will be.

“Right now it’s still difficult,” Kim said. “A few take-out restaurants are fine, but most restaurants are not popular at the moment.”

Currently, take-out orders make up around 30% of The BoB’s sales, but Kim tries to avoid promotional partnerships with third-party delivery services, due to high service fees. In fact, a federal judge in New York approved an antitrust lawsuit against third-party delivery services like Uber Eats and Grubhub in March 2022. The lawsuit examines monopoly deals by online delivery companies that drive up prices. prices of all menu items, regardless of platforms, including a restaurant’s own delivery, takeout or catering services.

“Working in the kitchen is quite a tough job. All day, you’re up, then you cook, prepare, wash. A lot of work. So after [I] go home, I’m pretty tired. -Edward Kim

“[Around] 25% or 30% they charge,” Kim said. “That means if I sell $10, they charge $3, so we return $7 for ourselves… Other restaurants are the same, so we have competition, so we try to cut costs, because this neighborhood is for students. If it’s a good restaurant, but expensive, nobody comes here. A little pricey is fine, they can pay, because “Oh, it’s delicious!”, they can pay. But most don’t. It’s hard to offer the promotion.

Kim used a calendar to show how the revenue needed to cover overall expenses was calculated. Out of 30 days in a month, 26 are working days, with one day off per week.

Kim said employee labor accounts for the majority of costs, requiring about 10 out of 26 working days of income to cover expenses, leaving 16 days to cover other expenses.

“A Korean restaurant is more difficult than other restaurants because we need a lot of people.” said Kim. “Usually we need two chefs, then a dishwasher, then a kitchen helper, then a waiter or two.”

Kim used Chipotle as an example of a restaurant with lower labor costs because employees can easily be trained to cook and serve, and choose which role to play per shift, saving the restaurant money. additional hiring costs. At BoB, Kim is unable to do so due to a higher skill level needed in the kitchen, although college students can be hired for cashier and waiter roles. To reduce labor costs, Kim works as a chef and also goes to buy ingredients from Korean markets to prepare them himself in his spare time.

“I don’t have a lot of time,” Kim said. “Working in the kitchen is quite a tough job. All day, you’re up, then you cook, prepare, wash. A lot of work. So after [I] go home, I’m pretty tired.

The second largest expense was the overhead of rent. While Kim was unable to share exact rental cost figures due to an agreement with landlords, he said that depending on location, rental costs could range from $6,000 to $10. $000 per month. According to Kim, if you can cover your lease payment in about three business days of income, you’re getting a good deal.

However, with slower-than-usual business right now, many restaurants, including The BoB, are taking four to five days to cover that cost, according to Kim. The BoB uses five of the remaining 16 working days to cover the lease, leaving 11 days for other expenses.

Overhead would include utilities such as gas, water and garbage disposal, which would take about two days of revenue to cover, bringing the remaining days to nine.

Usually, after all the expenses are taken into account, there are only four to five days of activity left as profit for Kim.

The cost of goods sold includes the ingredients needed to prepare the dishes. Kim notes that in Korea, the ingredients for Korean dishes were much cheaper and fresher. In America, costs are higher and some ingredients may have to be purchased frozen, making it harder for Korean restaurants to recreate an authentic taste. For this reason, ingredient costs may require four days of income to be covered.

Usually, after all the expenses are taken into account, there are only four to five days of activity left as profit for Kim.

Eventually, Kim hopes the restaurant will become more financially stable, allowing her to spend more time running the business and incorporating new, unique dishes from Korea into the menu – different from those found in almost any restaurant. Koreans in the United States.

“American Korean restaurants, 50-60%, it’s the same menu,” Kim said. “I want to introduce the other Korean foods. I still remember the Korean taste. I lived in Korea [for] 45 years old.

Kim knows it will be difficult to introduce new dishes while competing with tastes heavily influenced by America. Nevertheless, he is completely devoted to sharing his dishes with those who want to try them. For those looking for authentic flavors, Kim says there’s nothing better than The BoB.

“Usually Koreans say the taste is ‘mother’s hand’…I offer the real Korean taste,” Kim said.

Contact writer Alvin Luk at [email protected] Twitter: @AlvinLuk5

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