How to payback culinary school student loans and open a restaurant: channel Emeril!
Serena Freewomyn has a way with words. She also has a way with food. In January, she began attending Le Cordon Bleu’s Culinary Management Program at Scottsdale Culinary Institute. In between all the braising and sautéing, she’s a contributing writer at the The Bilerico Project and recently interviewed Top Chef contestants and partners in life: Zoi Antonitsas and Jennifer Bietsy. She has big restaurant-owning dreams that are backed up with a solid plan to get her there. These are her words…
When Nina approached me about writing a piece for Queercents, I was pretty flattered. After giving it some more thought, I think she must be nuts! What could I possibly have to say about money that would be of interest to anyone?
Like most of my friends, I am worried about how I’m going to pay back my student loans. I’m currently going to culinary school and racking up at big stack of loans that will take forever to pay back. Working in the restaurant industry comes with long hours and very low pay. So why would I decide to go into the restaurant industry and aspire to open my own restaurant, when something like 60% of new restaurants go out of business in the first two years? What the hell was I thinking?
Actually, anyone who goes into business for themselves is taking a financial risk. According to Businessweek:
While a 60% failure rate may still sound high, that’s on par with the cross-industry average for new businesses, according to statistics from the Small Business Administration and the Bureau of Labor Statistics.
I think people who go into business for themselves do it because they have a passion that drives them. I love to cook, but opening a restaurant takes more than a few good recipes. It means loving the insanity of turning 250 tables a night and obsessing about food cost. I means being willing to give up your nights and weekends because you absolutely love being in the kitchen. If someone is that committed to what they do, why is it that so many people fail?
One reason is that people don’t know how to write a business plan. And the other is that they run their food cost too high. Knowing this, banks are very wary of lending money to new restaurants. The Businessweek article goes onto say that:
While it’s certainly not the first urban legend to fly in the face of facts, Parsa holds the banking community largely responsible for perpetuating it. “They are the ones that benefit from the myth, and they use it more than anyone else,” he explains, though he’s quick to note that his opinion is based on logic, not research.
Because of the belief that restaurants are high-risk investments, he says, many banks won’t lend to restaurants at all.
Typically, the ones that do require would-be restaurateurs to pay sky-high interest rates or put up significant collateral (say, a house) to mitigate the perceived risk (see BusinessWeek.com, Winter, 2007, “Tapped Out”). Ironically, Parsa’s research identified lack of sufficient startup capital as one of the major elements that contribute to a restaurant’s failure—making the myth a self-fulfilling prophecy of sorts.
Since the credit industry is in a shambles and it’s hard enough as it is to get access to credit as a restaurateur, I’ve had to think long and hard about my decision to go into this business. How am I going to come up with the capital to open my own restaurant? I still don’t have the answer to that question. But I’ve been reading a lot of books by restaurant owners I admire to find out the secret of their success.
One of the people I respect is Emeril Lagasse. Say what you like about his campy demeanor, but the man can cook. And with ten restaurants under his belt, I’d say that Emeril knows a thing or two about how to run a business. When Emeril opened his first restaurant NOLA, he had a little bit of luck and a little bit of business savvy on his side. He decided to open up in a part of town that wasn’t the best neighborhood. He got a great deal with his landlord because he was willing to give the landlord a share of his profits. The landlord knew that Emeril’s reputation would be a draw to customers and other businesses, so it was a good business deal for both of them. That neighborhood is now one of the trendiest parts of New Orleans (Katrina damage aside). And with each successive restaurant, Emeril has approached potential landlords in the same way.
One person who didn’t have Emeril’s reputation when she decided to go into business was Paula Dean. Paula was an agoraphobic for almost 20 years. She started out doing catering out of her home kitchen and her sons would deliver lunches to local businesses. She called her business The Bag Lady. Paula eventually got over her fear of leaving the house and moved into a kitchen in the Howard Johnson hotel. When her lease was up, she was ready to go into business for herself. She came up with the down payment by borrowing money from her aunt because the banks wouldn’t lend her money. Paula’s aunt had a CD worth $40,000 that she put down as collateral to open The Lady & Sons. Paula told her aunt that she would pay her double interest on the loan. It was a great deal for her aunt, because she was still earning interest on the CD, plus she was earning money from Paula.
I’m not Emeril and I’m not Paula Dean. But both of them have inspired me to be creative about garnering the capital I need to go into business. I’m still searching for the right path. And in the mean time, I’m learning how to write a business plan and constantly brainstorming ideas that will make my restaurant stand out from the crowd.
I still don’t know how I’m going to pay off my student loans, but I’m determined to make it all happen by the time I turn 35. Maybe when I officially open the doors of my restaurant and we’re turning 250 tables a night, Nina will ask me to come back and let you in on how I did it. I can’t wait!
More about Serena Freewomyn
Serena Freewomyn has a degree in Women’s Studies from Arizona State University. She is a long time community activist who has worked for the rights of immigrant and homeless communities. She’s a self-described anarchist, a peace activist, and a big fan of the WNBA (Go Mercury!). After graduating from ASU, she landed in Long Beach, California and for two years, had the privilege of running an after school program for LGBTQ teens. If there is a heaven, she thinks it’s filled with queer kids with bedazzlers who go on sailing trips and produce their own musicals. She is currently working at ASU and attends the Le Cordon Bleu’s Culinary Management Program at Scottsdale Culinary Institute. Her writings can be found at The Bilerico Project.