Follow-up to the small restaurant I opened

[weelittletimmy]

Last year I wrote this post:

I ended up opening a breakfast and juicebar place. I'd like to give some random thoughts on how it went in case it helps others:

• The business made profit from the very beginning, since it opened during high season. It did about 4000 baht/day profit until March, where it gradually decreased until break even point. It lost money in April and May, now in June I'm back at breaking even. April and May almost cancelled out the profit made in the initial  months.
• I initially planned for 350k setup costs. In the end, it was about 420k setup, which includes corporation, my visa and work permit, renovation, furniture, kitchen equipment. I also changed the concept to add meals, not just a juicebar, so I needed more kitchen equipment.
• I initially planned 25k/month for rent + 1 staff (150k for 6 months). (Note there are more fees, discussed below). It ended up being 43k/mo, because I rented a place twice the size at twice the price, and also hired 3 staff instead of 1. And even those staff, since I was hiring them in high season, I had to pay over market rate.
• Additionally there is social security fee for each employee (5k/month total), electrical bill (4-5k/month with always-on aircon), accountant's fees (3k/month), internet (700/month), and a couple of other more minor fees which you should plan for.
• Due to repeated warnings from many people about the unreliability of thai staff (that they can just stop coming in overnight and not answer your calls), I ended up hiring 1 extra staff, even though it only takes 2 people to comfortably run the place with our customer count. Last couple of months I've been in a low season slump with very few customers. My staff are idle most of the time. But I don't have the heart to lay off one of them since they live paycheck to paycheck, and would likely not be able to find another job at this time. I can take the hit, they can't. I know this isn't how you run a business, but what can I say, I'm not a real businessman. Let's see if next high season makes up for this slump, especially with the improvements I have planned.
• If I'm honest, in terms of food the place is a solid 7/10 to me right now. Review score is 4.1/5, with the sole 1/5 review being a Thai person I don't know and who never came here. Customers are all expats and mostly repeat visitors, but tourists are rare. I need to improve the outside sign, put signs of fruits and whatnot. I haven't been able to do any marketing or decoration due to lack of time with my full-time day job.
• I have not yet added food delivery even though it's a must during low season. Paperwork takes time, and dealing with Thai people is extremely slow and inefficient. Anyway, for people who might do this, know that you need a company bank account and a VAT number to apply for Grab. I had been using my personal bank account this whole time and had no VAT so I wasn't ready. Only Thai people can apply to Grab with a personal bank account and open a Grab account instantly.
• I generally sell meals at 200% cost. So if it costs 50 baht to make, I sell it at 150. The exception is coffee, which I sell at 700-1000% profit.
• All my Thai staff live paycheck to paycheck. They will get paid on the 31st, and one week later all the money is gone and they are likely to beg for a small advance, which I give out occasionally depending on circumstances (which might be lies for all I know), but I made it a point never to do it in consecutive months. I will soon switch to weekly salary payments because giving them a full month's salary in one go is like handing a 7yo kid a bag of candy and telling him to eat only one per day. I'm sorry if this offends any Thai people reading this, I base my beliefs on my personal experience, not any prejudice, and my belief is that Thai people are financially irresponsible. I realize this probably only applies to working class Thai people.
• Broke people living paycheck to paycheck will steal from you. Early on I had to fire a staffer I found out was stealing. Another one I had put in charge of the emergency change money (so we don't need to do a bank run in the middle of the day when we run out of change), used some of the backup change to pay for personal expenses when she became broke, figuring she'd pay it back in 3 days when she got her salary. Make sure you accept electronic payments ASAP to decrease usage of cash, use an electronic POS like Ocha, and have a security camera aimed at the register to counter bad behavior. Do a random spot check every week, which is how I caught both situations.
• Social media is important in this day and age, and how most young people find the place. They'll take a photo of their food before eating, post it on Instagram while tagging the place, then their followers might visit it based on that. It's mainly 40+yo people finding it randomly by walking around. Make absolutely certain you set up Google Maps and Instagram (link to Maps location). I'm not sure if Facebook had any impact.

 

Overall it's been a pleasant experience, though it's not doing as well as I hoped. I think there's a lot of potential and I just need to put in more of my own time to achieve that potential.

Thanks to the people who provided non-snarky advice in the last thread.

[steven100]

very good evaluation of how things are going.   thanks

[recom273]

Good luck, I don't remember the initial post, but thanks for the update.

 

I can identify with your problems, we are building a house at the moment, and face similar challenges as mentioned on a daily basis. 
 

 

[bignok]

Where is the bar?

[proton]

25 minutes ago, bignok said:

Where is the bar?

somewhere on Phuket

[bignok]

1 hour ago, weelittletimmy said:

The business made profit from the very beginning, since it opened during high season. It did about 4000 baht/day profit until March, where it gradually decreased until break even point. It lost money in April and May, now in June I'm back at breaking even. April and May almost cancelled out the profit made in the initial  months.

Sounds like a 6 month business. 

[OneMoreFarang]

2 hours ago, weelittletimmy said:

Overall it's been a pleasant experience, though it's not doing as well as I hoped. I think there's a lot of potential and I just need to put in more of my own time to achieve that potential.

You are still optimistic. Good for you.

I like to see another update when the next high season starts again.

I wonder how many of your employees, who you paid by making loss in the low season, will stay with you in the high season. Maybe someone will offer them a bonus to change (for the high season).

 

And when you have to put more of your own time into this to make it profitable, how do you calculate that?

I.e. if you calculate your own time with 1000B per hour, are you then still making money?

And is it then a business or a hobby?

 

Good luck!

 

[eisfeld]

Fantastic post @weelittletimmy! We need more valuable content like that on this site.

 

Best of luck for the future with your side business. If you post the name I'm sure a few readers, me included, might hop by and check it out. Can be via PM of course.

[taninthai]

57 minutes ago, bignok said:

Sounds like a 6 month business. 

Run a few business like this it’s more like a 3 month season very very good profit next 3 months break even/small profit next 6 months start to lose your profits especially if keeping staff on.

throwing more money/time at it doesn’t make much difference that’s simply how tourism business works unless you are in prime prime location.

we had it running sweet for a while work crazy for 6 months then have 6 months off , it’s more a lifestyle the profits see you through the 6 months never needed to touch my own money.

[Mickeymaus]

Really great story. Thank you for sharing it with us.

 

I see so many businesses owned by Farangs here in Pattaya (bars mostly). But I never understood their motivation. I don't know any of them personally. But it may be easier to start/run a business and make more money in their home country. At least this is what I think. What was your motivation for doing this in Thailand? What are your long term plans? Stay here 'til the end of your days or do you plan to sell it for a profit one day? And then what? 

[nglodnig]

Good luck! Many years I knew somebody who opened a coffee/cake shop next to a book shop in Chiang Mai but that seemed to disappear. Here's hoping you have more success. P.S. could not read the small print in your post but I'm sure it was all useful info.

[it is what it is]

having been involved in two successful start ups my advice is simple; have a realistic and workable business plan, build, test re-scale, and finally; turnover is vanity, profit is sanity.

 

[1FinickyOne]

7 hours ago, weelittletimmy said:

it's not doing as well as I hoped.

You mention opening a 'tiny restaurant' - - how high is the upside? If it is tiny how many customers could you seat at one time? Tiny restaurants would be lucky to have tiny profits - is it unrealistic to have high hopes for a very small venture? 

 

good luck but you may be achieving your mark.. maybe you might shoot higher if you want more money.

[bigt3116]

8 hours ago, weelittletimmy said:

generally sell meals at 200% cost. So if it costs 50 baht to make, I sell it at 150.

That is 300%

[steven100]

8 hours ago, bignok said:

Sounds like a 6 month business. 

6 month newbie ... lol  ????

[bignok]

2 hours ago, bigt3116 said:

That is 300%

Wrong, 200% profit.

[bignok]

22 minutes ago, steven100 said:

6 month newbie ... lol  ????

Many shops and restaurants close low season on Lanta.

[KannikaP]

15 minutes ago, bignok said:

Wrong, 200% profit.

WRONG. 200% TAKINGS

[OneMoreFarang]

@weelittletimmy

It seems you run this business by yourself. Farang boss, a few Thai employees, correct?

Do you have a Thai manager or supervisor? Maybe you wife or girlfriend?

 

I ask because even after almost 3 decades in Thailand I still have difficulties understanding and communicating with "ordinary" Thais in work environments. I know several farangs with small to medium size businesses and from what I see all successful businesses have a Thai manager between the farang boss and the "lower" employees.

 

IMHO it is difficult enough for a middle class farang to understand middle class Thais. It is almost impossible for a middle class farang to understand working class Thais. 

I.e. the way they spent money in the first week after they get their salary, the way they just don't turn up for work, the way we have to explain in a nice tone when they do things wrong, ...

It seems very few farangs are able to understand and communicate with anybody below supervisor level.

 

I don't want to make this about middle class or working class or any class. I use these terms to describe a normal worker, like a waitress, compared to i.e. a restaurant manager.

Another example is construction work: I am able to communicate with my educated contractor. I have difficulties to communicate with the ordinary workers. And the communication problem is more about attitude and not so much about the language barrier. 

 

[bigt3116]

59 minutes ago, bignok said:

Wrong, 200% profit.

"I generally sell meals at 200% cost. So if it costs 50 baht to make, I sell it at 150"

 

Wrong, nowhere does he mention profit, he specifically says 200% of cost!

[bignok]

9 minutes ago, bigt3116 said:

"I generally sell meals at 200% cost. So if it costs 50 baht to make, I sell it at 150"

 

Wrong, nowhere does he mention profit, he specifically says 200% of cost!

Basic math. 200% markup is 100 baht. 

 

Cost plus 200% 

 

Obviously you never ran a business.

[bignok]

In the food business your costs should be 1/3 of the price. That's what you aim for. 50/150 is 1/3. If you get more great but price too high you lose customers, price too low you don't make enough money.

 

 

[bigt3116]

5 minutes ago, bignok said:

Cost plus 200% 

He does NOT say "plus" he says "at 200% cost", totally different.

 

6 minutes ago, bignok said:

Obviously you never ran a business.  went to English or Maths classes in your youth.

 

????

 

[bignok]

1 minute ago, bigt3116 said:

He does NOT say "plus" he says "at 200% cost", totally different.

 

????

 

The OP doesn't know you. He doesn't have to spell out every detail to some guy who doesn't know the 1/3 ratio which has been used for 40 years in the food business.

 

If you don't know something find out. Don't blame others.

[bigt3116]

10 minutes ago, bignok said:

If you don't know something find out. Don't blame others.

Woa there cowboy, not blaming anyone, merely pointing out that 200% of 50 is 100, not 150.

 

11 minutes ago, bignok said:

some guy who doesn't know the 1/3 ratio

Don't care about the food service ratio, I care about maths.

 

????

[bignok]

12 hours ago, weelittletimmy said:

I generally sell meals at 200% cost. So if it costs 50 baht to make, I sell it at 150. The exception is coffee, which I sell at 700-1000% profit.

Pretty clear the 200% refers to profit.

[lom]

But it isn't. The 200% (100 baht) has to pay rent, salary, etc. Profit is what remains after that.

[patman30]

43 minutes ago, bignok said:

Basic math. 200% markup is 100 baht.

Cost plus 200%

Obviously you never ran a business.

lol thanks saves me correcting them
 

 

40 minutes ago, bignok said:

In the food business your costs should be 1/3 of the price.

but i will give my thoughts on this
every resturant i have worked in went on 25% food costs (UK, Fr, Es)
obviously here this is a bit different, and (dumb) competition drives the profit margin too low
and as you state drives them out of business
rent and running costs can be cheaper too so 1/3 would probably be fine here
typical biz model for many places in EU is
25% food costs
25% labour costs
25% rent, disposables, whatever else
25% profit

That is basically what they aim for
obviously you can make more or less on certain dishes but desired average is 25%
i used to run kitchens, and have thought about opening something here for nearly 2 decades
but the (dumb) competition just puts me off opening anything modest
it is why we see so many open then close.
 

[patman30]

18 minutes ago, lom said:

But it isn't. The 200% (100 baht) has to pay rent, salary, etc. Profit is what remains after that.

@bignok is correct
The OP made an small error in their statement
 

12 hours ago, weelittletimmy said:

i generally sell meals at 200% cost. So if it costs 50 baht to make, I sell it at 150.

This statement is false.
"cost" is the cost to produce.
i understand the argument above both right sort of due to OPs little error
what the OP should have written is:
i generally sell meals at 33.3% cost. So if it costs 50 baht to make, I sell it at 150.
or
i generally sell meals at triple the cost. So if it costs 50 baht to make, I sell it at 150.
or
i generally sell meals at 200% profit (gross). So if it costs 50 baht to make, I sell it at 150.

you generally use the sale price as 100%, and work out the cost percentage from that
not the other way around
selling at 200% cost, sounds like making for 2 and selling for 1

[Pink Mist]

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