Business plan Development

[thegupta]

Hello!

Business partner and I have a strong idea in formulation and currently building a business plan for our first Lounge (serving high end foods example: sushi /bar/ having good music (dj, live bands, etc.). My current assumptions on the amount of funding needed to get off the ground is in the range of $300 - 500k (all dependent on location, space, etc)

So, as the development of this business plan progresses the search for leasing locations begins. Therefore, communicating with various commerical real estate agents. However, we are hitting road blocks with these agents. Saying that I need an established business. How to pass this roadblock? Because it's a catch 22. Because knowing the location, amount of space (square footage), etc. is needed in order to figure out an accurate leasing cost, remodeling cost, number of employees, etc for the business plan in order to raise funding dollars via a bank institution or an investor.

Regards,
Amit

[advancemellc]

I represent AdvanceMe Inc. We provide anywhere from $2500-$125,000 for a business. However, you must be open and accepting credit cards. Maybe down the road we could help you out?

Edward

[thegupta]

I just spoke to the real estate agent (requiring $1 million of backing to be approved for space) that is representing the leasing space that my business partner and I are interested in. It's approximately 16,000 square feet (two floors: street level and basement) @ $50/square feet (negotiable) + triple NNN (negotiable). Location has heavy car and pedestrian traffic (tourist & locals & employees). Doing the math: It looks like $75 to 85K approx. a month just to have the space. My question for people out there is this location to over the top to be successful or within reach? Meaning...can a bar/lounge/club serving food make it?

Cost of drinks in that area:

$4 domestic beers
$5 Import beers
$7 to $10 mixed drinks, shots, etc.

Regards,
Amit

[clubdesign]

seems pricey! Are they proposing to charge you the same sf price (50) for lower level space?
This would need to be a PREMIUM space for these dollar figures.

[thegupta]

To Clubdesign and anyone else:

Yes, the leasing property is at a Premium location. I don't know yet if the basement sf cost is @ $50. I am awaiting an answer, but In my experience it should be at a lower cost.

Demographic information to keep in mind:

Note: HH = Household

1 mile radius:

Population: 33,850
# of Households: 16,850
Median HH Disposable Income: $50,643
Avg. HH Income: $125,108
Avg. consumer expeditures spent per HH (clothes, entertainment, food): $42,513

3 Mile Radius:

Population: 278,423
# of Households: 136,701
Median HH Disposable Income: $43,371
Avg. HH Income: $89,712
Avg. consumer expeditures spent per HH (clothes, entertainment, food): $30,694

Others to keep in mind: Money rich student population is quite significant in this area.

So with this information in mind. I believe the asking price of $50 is still quite steep, but I believe it's very negotiable. Right? What can the price be negotiated too? I say - 10%.

Any thoughts now to have a lounge/bar/food place in this location? What are the risks going into this location?

[clubdesign]

the space seems really high dollar for the revenue you can generate. Of the area households how many are truly your demographic? I think you either need to get a good deal of tenant improvement money or do a lot of sales to justify these costs. The basement space depending on what it truly is should be around 15 -17 ft.
Try and keep your rent to 6-8% of your revenue if you want to make $$$
what do you anticipate revenue to be?

[thegupta]

ClubDesign:

Street Level is 10,000 sf and the Basement is 6,000 sf.

I believe all aspects of the tenant deal will have to greatly negotiated. I will want a win win situation for both parties. From tenant improvements to per sf cost, etc.

The target demographics are the following:

1 Mile Radius:

Age 15-24 is 30.1 %
Age 25-34 is 25.7 %
Age 35-44 is 11.9 %

3 Mile Radius:

Age 15-24 is 16.2%
Age 25-34 is 25.1%
Age 35-44 is 16.8%

Projected revenue is currently being calculated. However, from your perspective it should be in the healthy $9.5+ million dollar range.

[keithd]

OK, I'm not trying to rain on your parade, but I see some major problems with your plans, unless I'm missing something.

First and foremost, $50 per square foot is EXTREMELY expensive, even for a high traffic location, and if this is your first bar I think you're nuts to tie yourself into a location that will be $75-80K per month in rent alone.

Second, that is HUGE for a Sushi bar/lounge, unless you're in Vegas and are going to spend buckoo bucks on some very unique areas/themes to add to the draw of the location.

Third, I don't think 300-500k is anywhere near accurate for the design, building, staffing, and setup of a 16,000 square foot lounge like you're talking about, especially if you're talking high class decoration and building (which you must have to charge $8 for a drink/shot). Unless you're getting rent relief, just your rent alone during the building period of 3-6 months will eat up most of your budget.

Finally, I think 9.5 million in revenues is nearly impossible for a bar this size, especially something like a sushi lounge where a significant amount of space will be necessary for cooking/staff/seating areas, etc. I know of a number of nice lounge/bars this size that have pricey drinks and are very busy compared to most that only ring 200-300k per month, and you're talking about almost a million a month. There are very few bars that can do that number in a month, I'd say only a handfull in the entire country, and most of those will be in either LA, NY, or Vegas. If you're in one of those markets then maybe, but otherwise, I don't see how any of your numbers are going to work out the way you plan.

Again, i'm sorry if you feel I'm focusing on the negative, but I just don't see this working our like you think it is going to.

Good Luck with your venture though.

[thegupta]

Keithd:

Thanks for your comments. You have to play devil's advocate....which I greatly appreciate. Keep in mind that I am just in the search phase of finding a location. Nothing is never set in stone until you sign on the dotted line. Also, the dollar amounts you saw in these posts were very very early preliminary assumptions with not knowing much about the property at all (so no serious math was done). But I can tell you as soon as the real estate agent told me the $50 square foot cost. I pretty much knew that this space would be impossible to be a profitable venue. At the same time I don't make a final decisions til all information is in.

Things about me you need to know is that I very strategic and tactical type of person, and I'm smarter than what you are probably thinking right now. I currently manage $400 million dollars in government contracts a year. So I know my math.

Anyways...i lived in Austin TX for four years. What venues do you own there?

[lounge5575]

i believe that the advice given is right on, and this potential business needs to be completely re-evaluated. your demographics reflect only a portion of potential loss and gain, but i think more importantly is your lack of knowledge regarding the hospitality business. if you are already arguing with a consultant, you may have a hard time accomodating the upscale clientele that you will need to sustain even a fraction of what you hope to accomplish. good luck...

[thegupta]

To Keithd and Lounge5575:

I agree that the advice that you both have provided are dead on. I do appreciate it. After running through the math with all correct information provided. I have come to the conclusion that the property @ $50 square foot (sf) is not a viable location. Thanks for steering me in the right direction.

After futher thought. The basement of this building which is 6000 sf @ the asking price of $25/sf (negotiable) seems appealing and manageable. An entrance can be made from the street level going to the basement. The concept for a basement piece of property would be for bar/live entertainment (bands, comedians, etc)/ and maybe small scale food service (simple foods easy to make).

Any thoughts?

It seems in the bar/nightclub industry it is the simple ideas that always work, and I admit I was just thinking to big (property size and sf cost wise) in the previous concept. Another thing to remember is that I am not being argumentative, just throwing out ideas to get opinions and have discussion.

[lounge5575]

i want to compliment you on the way that you expressed yourself regarding your evolving project. i have been doing so much in research regarding these issues, and being in hawaii am familiar with the high rent, and importance of location. i think that is basically what you were going back and forth with.
every day i am learning about the small details that one never even thought would come up. it seems as if opening a door means walking into 10 more in and out to just get out the first door you walked into.
keep the open mind that you have. but, dont lose sight of your vision, as i think that is a fabulous concept. and remember this is all work, and as tiring as it gets, keep trying. you will regret it if you do not fight for it to materialize till the end.
and also, i appreciate that you are sharing the experiences of space hunting. it is consuming, and can take so much time that sometimes we are willing to go with something, even though our gut says no. good luck and pass on any new experiences. we could all benefit!!!

[sawdust]

First, I will tell you that I have been an owner/ partner in a number of night club and restaurant businesses. I also own a millwork company that works for a number of national chain restaurants. Currently, I am involved in a number of national restaurants in the Pacific Northwest and a couple in Tampa.

I am familiar with development costs because of my construction background and operational costs from involvement in the cash regester side of the business.

You have gotten some good insite on this thread. If you can keep rent at 6% of gross, you are doing well, 9% is acceptable, much higher and you're working for the landlord. Sixteen thousand square feet is ambitious, as is 9m in sales. My company has worked around Washington and I know that rents are expensive there.

I wouldn't try to start at the top. Build a smaller unit, control your overhead and grow a successful business. Use that as a springboard for growth.