| How to Close a Restaurant

Closing a restaurant is not an easy decision. Today's episode of The Restaurant Realty in 10 host, Michael Carro, walks you through the steps you should take to make the process as simple as possible.

• When and How to Tell Your Staff That The Restaurant Is Closing
• How to Handle Subscriptions and Vendor Contracts
• How to Properly Shut Down the Building to Avoid Damage

PRO-TIP: If you are considering closing your restaurant make sure to reach out to your restaurant broker. You may be able to find a way out through sub-leasing your restaurant space or even leasing some of your restaurant equipment to reduce your financial loss.

For more information on The Restaurant Realty in 10 or to get the show notes & BONUS TIPS from today's show head over to TheRestaurantRealty.com 

Subscribe to get new episodes that provide uncensored straight talk geared to answer your restaurant and restaurant real estate questions. 

Transcript

Michael Carro : 0:01

Welcome to The Restaurant Realty in 10. Ten minutes of uncensored straight talk for restaurant entrepreneurs. Weekly The Restaurant Realty in 10 dives into restaurant operations, facilities, real estate and investments. Hi, welcome to The Restaurant Realty in 10. This is your host, Michael Cara. And I wanted to dive into a very terrible subject. And that is how to close down a restaurant. Listen, you've spent a lot of time getting that restaurant open. It's your baby, you've poured your heart and soul into it. You made a lot of calculations, you may have even brought in outside investors. And suddenly you're at a point where you've realized it's not profitable. You don't believe there's any way you can get this turned around. So you've come to the realization it's time to close. So now it's time to set aside your ego. Yes, you're embarrassed, but you got to get through that as well. And so now we've got to start preparing for closing the doors. So what do you do? Well, it's not as simple as just locking it and walking away. You've got a lot of steps. To do and what I'm going to ask you in this podcast is to maintain a complete source of integrity throughout this whole process. So the restaurant world is small, and you will likely meet these vendors, customers and employees in the future. So the first thing I'm going to ask is don't do a midnight run, the first thing you should do is reach out to your restaurant broker in confidence, complete privacy, because maybe there's an opportunity that they can help you out of this bad situation. Sometimes, you can work through a sublease of your building or space in a way that makes financial sense. If you own the equipment, there may be an opportunity for them to lease that as well, which will get you much more of a higher value than if you close the restaurant and sell it off on pennies on the dollar. So there's a lot that you could potentially do in advance, so don't miss that opportunity. But now you've decided to close so what do you do? Well, you got to inform your team those have got you there, those you probably consider family. So the number one thing you want to do is sit them down and have an open and honest conversation with them. The key I think, is you need to wait longer than what you think you almost need to let them know at the bitter end, for a variety of reasons. And this is difficult for a lot of folks to hear. But if you're absolutely trying to still operate the business for the next week, two weeks month, if you let your staff know too early, they will start bailing on shifts, your food costs will likely increase. Maybe you'll bring on a private partner that decides that they deserve the money in that register as well. And again, these are very unpopular things that most of your staff are going to be fantastic, but there may be those that put you into a worse situation when they know in advance that their job is ending but when the right time is upon you, sit them down, be open and honest. Listen, they're not stupid. There's a good chance that they have seen the difference. In your business, there's a good chance that they have been wondering how long that you can last. And so now you're at the point where you can sit them down and say, Hey, here's what's going on. Now, allow them the opportunity to ask questions allow them the opportunity to vent, but at the end of the day, they're in a difficult position in the same way that you are. So you now have an opportunity to offer some of them a few extra days to dive into deep cleaning, they have resolved to the point that they're going to be laid off and they may stick around to earn some additional income while you are working through the closing. In the interim, there's a lot of other things that you'll begin to do. So you should go into this closing process and consider it that a process in which you have got to be as organized closing as you were when you originally opened. So the next thing you want to do is hit all of your social media websites, everything else and change the hours so now the customers aren't wasting their time. Trying to come in order things of that nature. go onto Yelp, TripAdvisor your delivery services like doordash or Uber Eats waiter, all of those companies that you're in their systems, go ahead and let them know that you are closing the doors. Another item on the list are your vendor partners. Now, let me tell you they have seen all of this before the restaurant business is a high risk, high turnover business and each of your vendors have seen restaurants open and close countless times. This is not new to them, even though it may be new to you. So with a level of strength and confidence, muster it up, reach out to them and let them know what's going on and work through any pickups of unopened cases and other things that they may be able to take back there's a good chance that you can't pay them because of the situation you're in. But again, they have seen this before and will do their best to work with you any way that they can. So you have all of your food, your fish, your protein. vendors, you've got your beer and wine distributors, you may have Coke or Pepsi, you've got a lot of different food vendors, then you have a million others but just right down the list. If you go to your p&l and look at your itemized list of expenses, that'll be a great place to start. Since your head is already swirling with so much activity, go back to your financials as that tells the story. You will also have a list of subscriptions for the restaurant that may be coming out on a monthly basis. Make sure you cancel each of these payments in advance. Even if you're under contract. Whether It's Your POS company, your music company, most restaurants will rent their dishwasher, so make sure that you contact them in advance to stop all payments. Doing a great cleaning project for the restaurant is something you will want to do, especially if you are leasing the space and have completed your lease. If you own the building. This is obviously a natural thing you want to do to preserve the intent Have the space and prepare it for the next tenant. But if you have completed your lease, this will be the opportunity to work hard to get your deposit back. But again, like I mentioned, this is a small community. So you want to manage this cleaning process with the same integrity that you opened the restaurant in the first place. So start off by pulling all the equipment away from the walls, do a deep clean, clean those floors, clean every piece of equipment, just have a good time with your team, knowing that it's the end, but at the same time, a lot of these employees were probably like family and this is a great opportunity to continue to break bread with them and work with them in this difficult time not only for you but for them. As it relates to all the food in your pantry and in your fridge and freezers. This may be an opportunity that you can give some to your staff or you can donate it to local food pantries. Now, you might want to reach out to them because sometimes they can't accept all different types of food. So just let them know what you have and they'll let you know what they can accept This is also an excellent opportunity to run every single item in that restaurant through your dishwasher, getting it as clean as possible before you pack it all up. Once you clean out all of the equipment, I recommend leaving the doors cracked open to allow air to circulate through them so they don't get musty and moldy with all the doors closed since it will get hot in there as it relates to your utilities. Personally I shut everything off except the power I think it's really important that we keep the HV AC system on. Certainly it does not need to be cold or cool in there. But the air conditioning works as a dehumidifier and you want to pull all that humidity out of that restaurant so mold doesn't grow. This will help maintain a good integrity within that space. After you've cleaned out all of the equipment, all of the ovens, the grill the fryers once everything is spotless as you can make it wipe down all of the walls, scrub the floors and then work on the drains because there's a lot of bacteria that can grow in the drains. So maybe pouring a bleach compound down each of the drains and flushing them thoroughly will help leave the property in the best possible condition. Listen, another opportunity will present itself and what you learn from this experience. We'll carry on to the next so I'll have plenty of podcasts on how to open restaurants so keep listening. Thank you for listening to The Restaurant Realty intent. If you're interested in restaurants, whether operations facilities buying leasing or investment, The Restaurant Realty intent is for you. Please subscribe to this podcast and you can also visit The Restaurant realty.com for show notes, topics and additional information