Setting the Table by Danny Meyer paper

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Developing a Restaurant Chapter 2

David K. Hayes | Allisha A. Miller | Jack D. Ninemeier

The Professional Restaurant Manager

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

The Rise of the Restaurant Chain

Franchise A relationship through which a business is run using the same name and operating system of

another business.

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

The Rise of the Restaurant Chain

Franchisor A person or business entity that sells a franchise.

Franchisee A person or business entity that buys a franchise.

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Costs of Franchise and

Independent Restaurants

Initial franchise fee

Royalty fees

Marketing fees

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Costs of Franchise and

Independent Restaurants

The Initial Franchise Fee

Franchisors charge a one-time fee to their

franchisees.

Fee amount is directly related to the chain’s history of success.

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Costs of Franchise and

Independent Restaurants

Royalty Fees

Fees paid over the life of franchise agreement.

Fees expressed as a percentage

of total revenue.

Fees typically range from 4 % to 10%.

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Costs of Franchise and

Independent Restaurants

Marketing Fees

Used to finance chain- wide advertising and marketing programs.

Intended to supplement individual unit marketing efforts.

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Costs of Franchise and

Independent Restaurants The Cost of Independence

Avoid high franchise fees

Must pay for services otherwise provided by the franchisor

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Operating Franchised and

Independent Restaurants Advantages of Franchise Restaurants

Success in the market

Opened and operated at a lower cost

Training systems are in place

Enhanced ability to secure start-up funding

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Operating Franchised and

Independent Restaurants Disadvantages of Franchise Restaurants

Large fees charged by franchisors

Expansion may be limited

Restricted operating control

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Operating Franchised and

Independent Restaurants Advantages of Independent Restaurants

Best for unique operations

Total operational control

Profits and expansion potential may be greater

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Operating Franchised and

Independent Restaurants Disadvantages of Independent Restaurants

Lack of name recognition

Higher operating costs

Reduced ability to secure external funding

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Securing Needed Capital

Capital

The investment cash used to start a new restaurant.

Equity funding The personal money used to finance a new

restaurant.

Debt financing The borrowed money used to finance a new

restaurant.

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Securing Needed Capital

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

Securing Needed Capital

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

The Impact on ROI

Annual Profits

Investment

ROI

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

The Impact on ROI

$50,000 Annual Profits

$500,000 Investment

10% ROI

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

The Impact on ROI

$50,000 Annual Profits

$250,000 Investment

20% ROI

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

The Impact on ROI

Leverage

The use of borrowed money to fund an investment.

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

The Impact on ROI

Book Title Author name

The Professional Restaurant Manager, 1e David K. Hayes, Allisha A. Miller, and Jack D. Ninemeier

The Impact on ROI

Effect of Debt Service on Debt Coverage Ratio:

Annual profit generated

Required debt service

Debt coverage

ratio