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Author Topic: Timeshare Restaurants - Affordable Restaurant Ownership  (Read 5484 times)

Jay Sadie

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Timeshare Restaurants - Affordable Restaurant Ownership
« on: July 20, 2010, 06:43:13 AM »

We have all heard of Timeshare, a form of ownership or right to the use of a property, or the term used to describe such properties. These properties are typically resort condominium units, in which multiple parties hold rights to use the property, and each sharer is allotted a period of time (typically one week, and almost always the same time every year) in which they may use the property. Units may be on a part-ownership or lease/"right to use" basis, in which the sharer holds no claim to ownership of the property.

The other night my wife and I were having dinner at one of our favorite restaurants. There was a nice fire going, and our conversation somehow ended up in discussing how much more it costs to buy a bottle of wine at a restaurant, versus at the local liquor store. Most restaurants charge a corkage fee if you bring your own wine, and if you add that to the price you paid at the liquor store, combined with the hassle of having to carry it with you, it almost makes more sense to just buy it at the restaurant. Obviously this only applies to less expensive wines. When it comes to expensive wines it makes more sense to bring your own wine.

During our discussion we tried to come up with an idea of how to possibly create a system that would make more sense. One of our ideas was for restaurants to provide regular patrons with wine lockers. There could be a small monthly fee for this courtesy, which could also include the corkage fee. Or, an even better way would be for restaurants to work closely with wine suppliers/farms, offering special deals to patrons. Think of how wine clubs work. If a patron spends more than a predetermined amount in wine purchases per month, then the monthly locker fee can be waived.

Why would restaurants want to offer wine lockers? What's in it for them? Surely a big part of their profit is derived from liquor sales. Well, by providing such a service they will ensure more frequent visits to their restaurants. Think of it as a hook. If you have a nice collection of wine at one of your favorite restaurants you would tend to visit that restaurant more often than one where you have to purchase wine at a premium price. This ensures a steady flow of regular patrons.

Okay, enough said about wine lockers. Why I mentioned this is because this idea sparked another, grander idea. Don't know where it came from, but when one is relaxed, with a glass of fine wine, and mesmerized by the flames of a crackling fire, it can sometimes spark a thought.

Would it not be nice to own one of the tables in the restaurant?

At first it didn’t seem to make much sense, but as we talked about it, it started to sound like a pretty good idea.

Owning or opening a restaurant has probably crossed most people’s mind at some point, especially when thinking about starting a business. For those who seriously considered it, it would have soon become apparent that there were many drawbacks in going down that path. Firstly, it costs a small fortune. Secondly, it requires hard work, with very long hours, sometimes till way after midnight. It is definitely not a business for the average entrepreneur.

Now imagine that you could own just one table (or more if you prefer) in a restaurant, without having to work long hours, or having to come up with a large sum of money? Take it further than this if you like, and own one or more tables in multiple restaurants. This will spread your risk, addressing the “Don’t put all you eggs in one basket” dilemma.

How will this idea work?

Firstly, it will have to be implemented by a company who has the money and resources, preferably a company who has timeshare experience.

Secondly, a new chain/brand/theme of restaurants should be developed, preferably on a franchise basis. Marketing is vital, as with other forms of timeshare. Opening a single restaurant with this concept will pose many challenges, although it might still work. An existing, popular restaurant switching to this model may be a good example. Maybe the owner would like to retire, and by doing so, he/she would not have to sell the business, but in stead change its structure to provide a great income during retirement, without the hassle of managing a restaurant.

Thirdly, a very capable restaurant management team must be assembled. These managers are vital to make this concept successful. The timeshare owners will be “silent” partners, and will not be responsible for the day-to-day running of the business.

Fourthly, a monthly fee must be paid by each timeshare owner. This fee will cover all costs associated with running the restaurant, and will ensure a steady cash flow, especially during slow or bad times.

Structure:

  • Each table in a restaurant can be purchased, and will belong to the “owner”.
  • The purchase price of a table depends on the number of seats, and the location of the table.
  • Accurate transaction records will be kept per table. Based on sales, the owner of the table receives a percentage of the sales for that table on a monthly basis. This makes it possible for the owner to promote his/her table(s). An owner can for instance promote his/her table to colleagues, friends, or by placing an ad in a local paper, or other forms of advertising. A coupon can be associated with such an ad, something like “Get 10% discount on table 17 by presenting this coupon.” Obviously the discount will be paid (subsidized) by the owner (it will be deducted from the month-end payment).
  • Just like with vacation timeshare you have to still make a reservation if you want to visit your own table. However, you will receive first preference.
  • Owners do not have creative control over their tables, menus, decor or personnel. However, a Restaurant Owners Association can be formed in which owners can collectively be part of the decision making process.
  • Ownership of a table can be transferred or sold.

Financial Motivation:

Franchise or Business Owner:
  • Up-front profit for Franchise or Business Owner of this model.
    Example: Number of tables: 30
    Average selling price per table: $100,000
    Total selling price: $3 million
    Cost of restaurant: $2 million
    Profit: $1 million
  • Monthly Residual Income.
    Example: Number of tables: 30
    Average income per table per month: $14,000
    Gross Income: $420,000
    Percentage paid to Franchise/Business Owner: 7.5%
    Income per month: $31,500

Timeshare Table Owner:
  • Average Gross Income per table per month: $14,000
    Percentage paid to Timeshare Owner: 32.5%
    Gross Income per month: $4,550
    Less Monthly fee: $2,000
    Net Income per month: $2,550

Restaurant:
  • Number of tables: 30
    Average Gross Income per table per month: $14,000
    Gross Income: $420,000
    Percentage share to Restaurant: 50%
    Add Monthly Fees: $60,000
    Gross Income per month: $270,000
    Less Monthly Salaries: $35,000
    Less Utilities: $5,000
    Less Maintenance: $5,000
    Less Insurance and Taxes: $5,000
    Less Purchases: $200,000
    Net Income per month: $20,000

Restaurant Manager:
  • Number of tables: 30
    Average Gross Income per table per month: $14,000
    Gross Income: $420,000
    Percentage share to Manager: 2.5%
    Manager’s Monthly Profit Share: $10,500
    Manager’s Monthly Salary: $5,000
    Net Income per month: $15,500

Restaurant Employees:
  • Number of tables: 30
    Average Gross Income per table per month: $14,000
    Gross Income: $420,000
    Percentage share to Employees: 7.5%
    Employees' Monthly Profit Share: $31,500
    Number of Employees: 20
    Average Monthly Profit Share per Employee: $1,575
    Average Monthly Salary per Employee: $1,500
    Average Net Income per month: $3,075 (excluding tips for waiters)

At the end of each fiscal year any accumulated profits by the Restaurant (after all costs and percentage distributions above have been deducted), less a 40% retainer, will be divided amongst all parties, based on the same percentage structures. This will provide another financial incentive to all parties concerned.

Challenges:

  • Restaurant managers may not be as motivated as traditional owners/managers.
    Solution: Pay managers a good base salary and more importantly, provide them with profit-sharing incentives.
  • Timeshare owners may want to interfere with how restaurant is run, or reprimand waiters if service levels are not to their satisfaction.
    Solution: Ownership agreement must clearly specify rules, which state that owners may not approach staff members directly with grievances under any circumstances. Complains must be directed in writing to senior management only. Failing to do so will result in suspension of visitation rights for a certain period of time. After three suspensions permanent suspension may be invoked.
  • Owners defaulting on monthly fees.
    Solution: Penalties, and/or foreclosure proceedings if repeat offender.

Summary:

Restaurant timeshare makes it possible for the average person to own a piece of the restaurant business. Imagine getting seated at your own table in a restaurant. Imagine giving someone you know an invitation to enjoy an evening at your table, a great gift for someone’s birthday, anniversary, or any other special occasion.

And finally, imagine receiving an income every month from your own restaurant table(s).


For more of my own personal ideas please click here...
« Last Edit: October 04, 2011, 06:01:04 AM by Jay Sadie »
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"I do not think there is any thrill that can go through the human heart like that felt by the inventor as he sees some creation of the brain unfolding to success." - Nikola Tesla
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