The Critical Path (Sherpa & His Hot Dog Mountain)

Richard opened the class with "In the News," in which the class will bring in food-related bits from the media and chew them over. Since none of us were prepared, Richard expounded on bits that caught his eye -- much of it from the dining section of Wednesday's NY Times. Squirrel in British cuisine, City Wine's concept of a wine bar that partners with a winery (to allow customers to 'make' their own wine and store casks in the basement), crushing drop in private parties for the big Meatpacking district restaurants, Bruni's review of a restaurant. Richard is open in his dislike for what many food blogs call "the Bruni," because he feels Bruni's critiques are a bit over-the-top. From a restaurant trade magazine, an article about corporate chains looking to incorporate rice as a central starch in new dishes because it's cheap.

The one article that caught my ear was about a hot dog vendor who recently won a bid on a location in front of the Metropolitan museum. He is going to pay $360 grand a year for the right to sell hot dogs on the northern end. That means he needs to generate about $1000 a day just to pay for the license. With a $2 hot dog, we guess his average sale will be $3. On a 10 hour day, he'll need to make 657 sales a day 7 days a week to cover that nut. That's 66 sales an hour. More than 1 sale per minute. A cart can't possible hold that much inventory, so someone has to be hired to restock multiple times a day. And perhaps another person to cover some shifts on the cart. To just break even. And let's not mention the other hot dog cart a few feet away who is sharing the corner because it's run by a veteran, who by law does not need to have a license!

The bulk of the day was dedicated to reviewing 'the Critical Path,' the framework that will be explored over the next six months. Here are the bare bones of it:

• Market Research: all about the needs and wants of the client. Who there are, how they communicate.
• Mission & Concept: Goals and key elements. What your business is going to do and how it's going to do it.
• Site Selection: Many variables are determined by the where. Rent, size of location, traffic patterns, competition -- all will determine whats served and for how much.
• Revenue Projections: Sales = # of seats x turns x average check (turn means how many times the tables are turned over for new customers over the length of a time period.) This can be worked out with a mix of assumptions and observations of similar places.

Financial Analysis: This is made up of a number of critical statements

• Capital Budget: start up costs. Research & Development, construction, equipment.
• Working Capital: salaries, inventories, money to cover expenses until break-even.
• Investment: Capital Budget + Working Capital. What you gotta get to get going! Hi there, rich person! Want to take a risk?
• Income Statement: a.k.a. Profit & Loss statement. Sales - costs = profit(or loss). Costs from actual material, labor, operating expenses (napkins, flowers), fixed & occupancy (insurance, rent, etc.)
• Break Even Analysis: at what level of sales does profit and loss equal each other? Higher the break even point, the higher the risk to the investor. The hot dog vendor in front of the Met has a ridiculously high break-even point.
• Cash Flow Statement: the timing of when the money comes in and when it goes out. The profit and loss statement is about what was gained or lost in a specific amount of time, while the cash flow statement is just about the money -- you can buy enough eggplant for three months, and the P&L will reflect that, but the cash flow will just say you just spent a lot of eggplant money in one day. A cash flow statement is, at it's simplest, the most recent accounting of your checkbook.
• Balance Sheets: Assets - Liability = Owner Equity. Everything the biz is worth - everything owed & all the debt = everything you actually own. Like the P&L, but a comprehensive look at the whole thing. The other statements kind of dwell in the past or project the future, this is the one that says where you are right now.
• R.O.I.: Return on Investment = Profit / investment. If you make $50G profit in one year, and Mr. Investor gave you $500 grand, 50/500,000 = .1 or 10% R.O.I. It'll take Mr Investor 10 years to recoup before seeing a profit on his money. A while ago that was considered low. Today, people may be happy with that.

All these numbers can be fudged, especially early on when it's based on projections and assumptions. The best numbers are accurate, truthful, and salable to investors.

The second half of the class was dedicated to the mission statement. The statements gotta say:

• what you are
• how well you do what you do
• who your clients are
• where you and your clients are
• which needs of your client your meeting

AND

• do it in one or two sentences.

Oy! It is from the mission statement that the next step develops from: the concept is directed by the mission to determine 1) design & decor, 2) service and 3) food & beverage product.

So the class broke into four groups. We each threw out a concept, chose one for the group then attempted to write a mission statement through brain storming. I was sitting with Jazzman, Lenin-pisser, Chicagoette and Pastry. Both Chicagoette and Jazzman mumbled something about a family-style casual restaurant of indeterminate cuisine, Pastry mumbled something about a bakery of no specific style, and Lenin-Pisser spoke of a Georgian wine bar with live jazz and small plates. I announced my pizza concept which I sketched out last night, but I dismissed it as not being a restaurant and not ideal for this exercise. So we went with Lenin-Pisser.

What: a wine bar with live jazz that serves wine from the Georgian region of the once Soviet Union and small plates of fusion Georgian food. How well: very well! We were a bit stumped on this one. Who: younger couples, adventurous singletons, expats, jazz fans, evening crowd. Where: someplace urban with a good 24 hour residential/commercial mix. Like the Village or he L.E.S. Needs being met: Georgian food outside of the Brooklyn enclave. Limited non-tourist jazz option on the Lower East Side.

By committee, this is the sentence we produced. English is Lenin-Pisser's third language.

Georgian Wine & Jazz introduces an elegant mix of Georgian small plates, fine Georgian wines and live jazz to adventurers in the Lower East Side.

Richard tore it apart, but kindly with good humor -- I remember cringing whenever Chef Al would give criticism, it was always so harsh. Anyway, where to begin? The names doesn't say 'what' exactly. Perhaps adding 'Lounge' or 'Cafe' will be more descriptive. Adventurers on the Lower East Side do NOT look for elegance, they look for excitement, fun. What kind of jazz? Really loud in-your-face stuff that's the center of attention, or quiet background stuff good for conversation? IS this more of a bar where the food is secondary and in service of the wine, or do people come here to eat, with focused wine-drinking just at the bar? Just because the LES doesn't have a Georgian wine-jazz bar doesn't necessarily mean it needs one. Is this concept appealing to the customers on the LES or to you? Georgian theme and jazz seem to be eclectic -- it doesn't seem to make sense together, but the vision of the proprietor seems to make it make sense. This doesn't seem to be eclectic, it just doesn't make sense.

I guess a mission statement made by an uninterested committee in 5 minutes will never be that great, but it's the process. For Monday, we all have to deliver 4 to 8 sentences. One to two sentences each on a mission statement and the three factors of a concept.