Restaurant Case Study with Agnes- Business Killer 4: Non-traditional Competitors Cont’d –
Posted by Ryan Volberg at January 29, 2008 3:00 PM
“Check Please” – How to Approach Costly Renovation Costs
As she poured over her financial statements, Agnes evaluated her three options for funding her renovations.
The most favorable rate would likely come from a bank loan. However, the bank manager already hinted at refinancing her house in order to make it happen. Agnes was reluctant to put her largest personal asset on the line.
Leasing was another alternative. However, the company that offered her the best rate would only finance the kitchen equipment in the package, not the rest of the renovation that included furnishings, lighting and labor.
She also considered bringing in another partner. One of her regular customers had expressed an interest in buying into the location. Agnes had a feeling that an additional partner might lead to her losing control in the business.
The reluctance that she was feeling was gnawing at her. It meant that something wasn’t quite right about this. She put it out of her mind and went home for the night.
The next morning, everything seemed clear. The underlying problem was the total amount of money that she was putting into this renovation. She went back to the designer's recommendations and questioned everything. Part of what was appealing about her restaurant was the rustic charm. Clearly, many of the fixtures and even the fabrics were going to raise the level of the restaurant. But, was it too much? What if she were to scale back on some of the changes? She called her designer.
At first, the designer resisted. Agnes responded by insisting that 30% of the budget must be cut. Reluctantly, the designer began to make some changes.
When she was finished, the budget had been reduced by 26%. It was enough that Agnes could finance the kitchen equipment through a lease and pay for the rest with cash on hand.
With that in mind, she returned to her bank. Since she didn’t really need the money, the banker was more than willing to lend it to her, so she left her money in term deposits. According to her accountant, this would give her tax advantages while preserving her ability to access cash in a pinch.
It was a slower time of the year, so Agnes closed the restaurant for one week to complete the renovations. If it was during her busy season, she would have found a way to keep the doors open.
In between helping out with the renovation, Agnes worked on her marketing plan for the next 12 months. She’d do a soft re-opening in order to make sure that everything ran smoothly, and kick off her new plan two weeks later.
In our next visit, we’ll see how Agnes changed her marketing to reflect all of the changes she made over the past few months.
She’ll incorporate what she’s learned during each leg of her journey from her changes to the menu, to her implementation of delivery and finally to her renovation and the work she did with her designer.
Ryan Volberg is the CEO of Vivonet, a company dedicated to ensuring retail and restaurant success.
 Category: Survival Tips Story of Agnes the Restaurateur
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