Risk analysis for bankers/investors

For bankers, venture capitalists and private investors, DKCI’s Restaurant Risk Analysis (RRA) is a due diligence process applicable solely to foodservice operations.

No other business is like a foodservice operation. And no other risk analysis process commonly used by banks or accountants now spots the fatal flaws.

Restaurants do not operate on business principles alone. And the business models under which they run successfully are constructed with different assumptions.

For instance, most models presume  the business involves raw materials come in the back door, it’s cooked in a kitchen, then served to customers in the dining room. The first thing those models ignore is the food coming back from the dining room, through the kitchen and out the back door for disposal.

A successful restaurateur inspects the food coming back to control his core business night by night; his business model accounts for that.

And you won’t believe how many proposed restaurant sites don’t have a back door, literally and figuratively.

Restaurant Risk Analysis is conducted on an application by application basis but DKCI also conducts Bankers Seminars upon request to guide risk analysts through the quagmire.

The DKCI analysis is the product of more than 45 years of practical experience of one man, the late Harry Barberian, and of his association and friendship with the best and most successful operators of restaurants, bars and hospitality venues in North America. During his storied career, Harry owned and operated more than 20 restaurants of all types and sizes in both Canada and the United States, all of them successful. He is best known in the Toronto area as the founder of Barberian’s Steak House on Elm Street. But Harry’s creations over the years included everything from Ed’s Warehouse and the CBC cafeteria to La Petite Marmite, the four-star Palm Beach, Florida, legend. He was a founder of both the Canadian and American Restaurant associations and was recognized continent-wide by operators and the finest educators alike.

Over the course of seven years, Kingsmill and Barberian examined thousands of Barberian’s files from Toronto and Palm Beach to find the common denominators of how successful restaurateurs established and worked their businesses over the years. The models that emerged took into account everything from demographics to floor plans, menus to leases, food and labour costs to traffic patterns weighed against all sizes and types of ventures, from chip wagons to five-star service. The goal was to be able to answer one question: How would a successful operator set up a given proposal in a specified location to make a profit. Although the models derived from this research are proprietary, thousands of Harry’s documents, interviews and notes were donated to Ryerson Polytechnic University where they are being coded for a food service and hospitality wing of its library named in Harry Barberian’s honour.

Four of every five restaurants fail within the first three years,according to all banking and industry statistics. Yet four of every five restaurants that have undergone the scrutiny of DKCI’s RRA since 1989 continue to succeed. It’s a reversal of fortune that profits everyone involved.