Monday, September 20, 2010

Svengali

Before purchasing Avalon, my restaurant, back in 2002, I used my immense knowledge of business and incredible savvy to negotiate a fair market price. Labor reports, sales reports, P&L statements, rent, property tax, pass-through fees, lease type, insurance? Clearly just from me throwing these few terms around, you must I think I was smarter than the average bear. At least smarter than I had appeared in my first blog post. Right? Wrong! I was about as dumb as they come.

I had about three or four meetings with the prior owner before moving forward with the purchase. We always met at the restaurant, and he went out of his way to make me feel special. His staff treated me like I was a king. He had a relaxed, calm, dominating power that is hard to put into words. I always had a list of questions for him that somehow, managed to get averted. I hate to use the phrase “smoke and mirrors” but this guy was a regular freaking magician. For example, I would ask about the sales, (the only real question of substance I had anyway) and he would give a vague answer, something like, “the sales are really good,” then, with a quick-witted diversion, he would go on to say “but if you started doing lunch and open seven days…my God, Johnny, you would make so much money it’s unbelievable, man.” He would then signal for a waitress and suggest that we order something from the kitchen. After dessert, a few cigarettes and a cup of coffee, my concerns about sales passed. He always controlled the conversation without making me feel like he was controlling the conversation, a regular Svengali. Suffice it to say that I left each meeting feeling more and more excited about the restaurant. However, I never learned anything about the business.

At one point in our last meeting, I remember asking him once again about the numbers. Not really knowing how to ask, I simply said, ”So what are the sales?” This time he looked at me, smiled and pulled out his briefcase. As he opened it, he said in his thick European accent, “I don’t know exactly, but I can show you this…” and he proceeded to unveil two rather large piles of cash and a stack of papers. He handed me the first twelve months of credit card deposits from the restaurant sales. Finally, I would get to see some figures in black and white and I was dumbfounded. The totals of the Visa, MasterCard and Amex checking account deposits seemed quite large and that didn’t include the cash sales. One thing was clear to me at this point: He seemingly barely worked, walked around with a briefcase that had a few thousand dollars in cash in it and his total monthly sales without cash were about $50k. There was no way could I screw this up, or so I thought. The rent is $3,000, my loan is $2,900, food cost would be based on sales….this was a no brainer. Cha-ching!

While sorting out the last of the legalities, my wife, Michelle, and I started spending more time at the restaurant. The prior owner didn’t want the staff to know what was going on until everything was finalized, so he introduced us as the new manager and hostess to the restaurant. As the big announcement drew closer, the prior owner had some last bits of advice: “To make the transition smoother, make sure you let customers think I am still involved,” he said. “Better yet, just tell them you’re the new manager and keep the name the same “In fact, if I were you, I wouldn’t change anything. Keep the chef, the menu, the d├ęcor and the name.” Since he built the restaurant, had all the cash and seemingly knew way more about the business than me….we decided to keep everything the same. All I can say now, eight years later, is ….how dumb could one person be? Screw the restaurant advice—teach me how to be Svengali!

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