Opening a Restaurant in a Hotel: What You Need to Be Successful
Gordon Ramsay at Claridge’s in London, Jean George at the Trump International Hotel in New York City and L20 at The Belden-Stratford Hotel in Chicago are all famed restaurants in well-known and high-end hotels. Although these establishments are all run by successful brands with renowned chefs, they all have something in common with hotel restaurant’s everywhere: They all started with a concept, a contract and a partnership.
Find Your Location
A hotel with space for food and beverage service provides a business opportunity for independent restaurants to operate with week-day hotel guest traffic as well as weekend guests and local weekend traffic.
That is, as long as it’s a hotel with regular traffic during the week and a vibrant local crowd looking for a brunch or Saturday night dinner spot.
Scout your location for guest traffic. When beginning talks with a hotel about opening a restaurant on their property, look at the average number of guests in every season, what type of guests the hotel is attracting and what the local scene has to offer in competition.
Deciding on what type of business agreement to agree on will depend on what the hotel owner or general manager is looking for.
Consider the following:
- If the contract is made between the restaurant and an off-site hotel management company, consider obtaining an independent contractor agreement that is consistent with the hotel owner and the management company’s existing business agreement.
- If the contract is made between a private hotel owner and the restaurant, consider obtaining a commercial lease to keep some independence without conditions or limitations.
Forecast Start-Up Costs and Shared Revenue
In the body of your contract be sure to specify how the build-out costs will be handled or shared. These are costs that will incur from finishing the space to meet the restaurant and hotel’s specifications. Some hotels may have an architectural or design style that is maintained throughout the property.
Regard these details:
- What improvements are needed?
- Who will pay for the improvements?
- Who is hiring the labor to complete the work?
- What can the restaurant owner take when the lease has ended?
- Can the hotel receive a portion of the revenue for providing restaurant guests?
Meeting Hotel Guest Expectations
Hotel guests will expect to charge meals to their room and will want a room service option. Hotel restaurants will need to work out a shared point-of-sale system with the hotel as well as a standard accounting practice to properly record owed revenue.
Also examine these profitable options:
- Consider catering private parties in meeting spaces or ballrooms.
- Offer more than one meal service a day and extended room service hours.
Hiring and Sharing Employees
Discuss how employment will be handled, whether it will be shared or independent of each other. There are advantages and disadvantages of sharing employees with the hotel.
Acknowledge these points:
- Shared employees can keep regular hours in the low season by taking on other hotel duties. This may assist in retaining year-round employment.
- Hotel employees can cross-train for restaurant positions. This will give the restaurant additional staffing options during high season or high-volume nights.
- Hotel employees may be part of a labor union, which could affect an independent restaurant’s operation.
- Separated employees may have restricted access to areas of the hotel or restaurant which could get in the way of running a smooth room service or catering operation.
- Hotel and restaurant management need to have a unified agreement on handling guest issues.
The hotel may or may not provide certain utilities, licensing or facilities to the restaurant. Know about what resources the restaurant will have access to and what expenses will be taken on.
Some responsibilities could include:
- Access to utilities such as gas, water and electricity. Ask about installation and billing for these services.
- If a liquor license is needed, find out if the hotel will provide one either temporarily or permanently.
- Ask about the cleaning duties and whether or not the hotel housekeeping staff will be available.
- Large spaces may want to include live music nights. Agree on what type of music can be provided and also on what quiet hours need to be observed.
There are challenges and advantages to owning and operating a restaurant within a hotel. Anticipate as many issues as possible ahead of time so agreements are made before problems occur, and keep your agreements in writing. An open line of communication is imperative in keeping investments in a sound and profitable venture.
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