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Would-Be Restaurateur Wonders About All-Important Bottom Line

November 15, 2000|KAREN E. KLEIN

Q. I am thinking about opening a restaurant. How do I compare the asking rent (per square foot) to make sure I am not paying more than the area standard? Are common-area expenses negotiable? Finally, what is the standard profit margin for a fast-food restaurant?

--Cindy Cher, Rowland Heights


A. You will need to contact real estate agents in the area to compare commercial rents per square foot. A knowledgeable agent should be able to give you a good idea what the going rates are.

As for "common-area charges," including maintenance and lighting of the parking lots and other public areas, trash collection, security, heating and air conditioning, most small businesses typically do not have the clout to do much negotiating on these fees. Larger retail tenants sometimes can negotiate some of the common-area charges. But unless your restaurant is going to be one of the bigger tenants in the center, you probably will have to pay what is asked.

For fast-food outlets, gross profit margins after food and labor run between 40% and 47%. A good operator should be able to clear 10% to 15% once expenses are paid. If you plan to purchase a franchise, the franchise owners will provide you with financial statements that give you a detailed layout of costs and profits.

The National Restaurant Assn. ( publishes something called the Restaurant Industry Operations Report from the results of its annual industry survey. The report provides financial data on cost of sales, gross profit, direct operating expenses and other performance measurements for three types of full-service operations and fast-food outlets.

Prepared with Deloitte & Touche, the report includes a work sheet so you can see how your operation compares with those of a similar business profile. You can order it from their Web site. Also, most banks have restaurant study data available that you can obtain through their lending departments.

--Gerald Breitbart,

restaurant consultant, Los Angeles

Importing Wine: a Sampler

Q. I want to import wine. I have samples, but I don't know whom to send them to. I imagine that imported food needs to go through chemical analysis and other health checks before entering the U.S. market. Is there a book I can read on the health requirements that imported food must meet?

--Juan Mercogliano, Canyon Country


A. Importing wine for commercial purposes (even samples that are not for sale) requires a license from California's Department of Alcoholic Beverage Control. You should contact your local ABC office for more information on licensing. You can find the telephone numbers and addresses of all ABC offices at

Assuming your products contain at least 7% alcohol by volume, you should also contact the Bureau of Alcohol, Tobacco & Firearms, an agency of the U.S. Treasury Department, for information about product compliance. The ATF is responsible for testing alcoholic beverages and granting label approval for wine. Wine products containing less than 7% alcohol by volume are not within their jurisdiction.

The ATF has an office at 350 S. Figueroa St., eighth floor, Los Angeles, CA 90071. Call them at (213) 894-4815 to determine what requirements you will have to meet before you can begin your business.

--David K. Wright, chief, business practices

department, Alcoholic Beverage Control, Sacramento

Protecting Ideas Is Tricky

Q. I have an idea for a new magazine that serves a completely untouched demographic group. I want to present my idea to an established publisher and have them produce it with me as the associate publisher, since I do not have the financial means to launch it properly. How do I protect myself and my idea if those publishers decide to use the idea, but not me?

--Denice Sparks, Winnetka


A. Your question is one faced by many an author, whether of books, screenplays or other creative output. Under the law, if you voluntarily disclose an idea, you generally lose your ability to claim protection for that idea. Exceptions would be if the idea were sufficiently protectable to be patented, copyrighted or otherwise granted legal protection.

Another exception has been carved out by existing law. It says that if the parties who are present during the disclosure enter an agreement beforehand, the idea can be protected. The agreement takes the form of a signed contract that is called a "submission" or "nondisclosure" agreement. It states that the discloser (you) and the party to whom the idea is disclosed (the publisher) agree that if the idea is used, the party to whom it was disclosed will compensate the discloser by some means.

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