As we’ve seen over the last three months, the planning of a restaurant is a complex, delicate dance among many constituencies working together. Most of the time.
More important than the fancy spices, special china, Jerusalem floor tile, or even new plumbing in the bar is the means to pay for all of that.
Zahav means gold. Building a restaurant costs money.
Steven Cook and Michael Solomonov can exhale.
The loan for Zahav closed on Friday 1/18/08.
Cook let me in on some of the financials.
Zahav’s budget is $700,000 — double the budget of their nearby Mexican place, Xochitl.
Of the $700,000, $400,000 comes from a 10-year Small Business Administration Loan, $270,000 comes from private investors (whom Cook declined to name), and $15,000 each comes from Cook and Solomonov.
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Reminds me of a scene from The Producers:
Max: The two cardinal rules of producing. One, Never put your own money in the show.
Leo: And two?
Max: [yelling] Never put your own money in the show!
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Cook says their investors freed up $100,000 at the beginning. The closing of the loan, which cinched the deal, prompted the investors to free up the remaining money. Some deals fall apart at this point; if the loan does not close and investors get edgy, the restaurateurs are left without cash.
All the while, as the investors waited for the closing, Cook and Solomonov have been running up lovely bills on AmEx. Just after the closing, Cook could pay off a $25,000 AmEx bill, though he believes that an additional $25,000 is on the card, floating till next month’s payment date. The frequent-flier miles they now have!
One sobering note: Cook says he and Solomonov have personally guaranteed the SBA loan. “We are on the hook for a lot of money,” Cook says. The 10-year loan has a four-month window, so they pay “only” interest until mid-May. (See why they’re working so hard for a May 1 opening date.)
So far, they’ve spent $30,000 toward the $70,000 liquor licenses. They’ve spent “several thousand” in professional fees, $12,000 for floor tiles, about $100,00 in plumbing, electrical work, framing and demolition, and a $20,000 deposit to the landlord (who is giving them a grace period on rent during construction). There are PECO bills and insurance during construction.
Still to come will be $70,000 to cover furniture and "small wares." There is something in the neighborhood of $50,000 budgeted for kitchen equipment, appliances, pots, pans, shelving, storage containers, utensils, etc. The contractor will be owed a few hundred thousand on the buildout, which includes all the carpentry (two bars -- drinking and chef's counter), server stations, host stand, tiling, lighting and such.
Cook estimates that $10,000 will be needed for china -- $100 a place-setting times 100 seats. A point-of-sale system — those neat electronic gadgets that allow waiters to send their orders to the kitchen and bar and allow them to swipe credit cards -- is budgeted at $18,000. Thousands will be needed for an outdoor sign as well a crane to remove the old one from the brick wall. They’re figuring on $10,000 on a sound system. Plus inventory and a public relations. Thousands to prepare for the health inspection. And capital for the opening.
Then there's the big trip to Israel — six of which the restaurant will subsidize. (The blogger's budget might cover a container of Sabra hummus and a package of pitas from Costco.)
When they return, they will have to pay to train a staff, which requires salaries, all before the doors open.