Genki Buffet

[Carey]

And they took out the bar at Genki...so... I am going with a loss ratio venture...

[Punatic007]

Why would anyone in their right mind embark upon a new and misnamed restaurant under such ridiculous odds of ever making a profit? Another write-off scam on top of the landlords scam? Guess we the often hungry populus are inconsequential in the grand scheme of it all. Geez.

[kalakoa]

Another write-off scam on top of the landlords scam?

Yes: maybe the landlord makes more money by "losing" rent every month on the empty space.

[Punatic007]

quote:

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Originally posted by kalakoa

Another write-off scam on top of the landlords scam?

Yes: maybe the landlord makes more money by "losing" rent every month on the empty space.

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And the new restaurant owner as well?

[terracore]

When we lived in Alaska the Taco Bell closed. At the time it was the largest Taco Bell in the country and most of the business was drive-through. It went under because the rent was too damn high for a huge mostly empty dining room.

The next restaurant that opened in that location was a BBQ Smokehouse place. The food was good initially but bad management caused quality and service problems and it went out of business in a few months.

The restaurant after that tried to do a sushi and Benihana style venue- imagine the dining guests sitting around the huge griddle thing while the well paid chef entertainer cooked the food right in front of you while tossing things up in the air and catching it with his hat etc. With the same show happening at all the other tables. It was an instant success but it was a small town. Anybody who has lived in a city with a Benihana's knows that if you go once, you're good for a few years. They are expensive and once you've seen the chef catch an egg in his hat, you've seen a chef catch an egg in his hat. You're good. So after the initial success the business started circling the drain.

Despite the high startup costs they ripped out all those dining room cooking stations and reinvented themselves as a sushi / Asian place with the kitchen in the back and good taste and quality. The show was over but the business lived on. As far as I know its still there probably 10 years later. I think the huge pile of stainless steel from the show cooking stations and their vent systems still sits behind their restaurant, sort of like a visual reminder to build a restaurant people will come back to.

The Genki Buffet could learn from this lesson, though I would suggest a name change to go along with the exit from the overcrowded "Bland Asian Food" market. Their landlords might not be interested, however when we ran a store in a mall we were able to renegotiate the terms/payments of our lease- maybe they can too.

[Chunkster]

Somewhat off topic here, but how do the other businesses in that complex make money if the rents are so high? Some of them, like the health food store and Lemon Grass, have been there for years. Of course, they are much smaller than Genki Buffet. Is the space too big for the concept? Does Shipman, for whatever reason, charge more per square foot for that one location?

[shockwave rider]

Strip malls often charge rent based on a combination of square footage and type of business, "anchor" tenants like the grocery or hardware store that draw customers to the site often pay less per square foot, long term tenants also often pay less than a newer tenant. Each lease is negotiated as a stand alone deal with different terms.

[Chunkster]

Thanks, Shockwave, that makes sense.

[terracore]

Whether you are running a store or a restaurant, when you are calculating return on your lease payments you need to focus on return per square foot.

The best example of this is a used furniture store. Lets say you want to sell a couch. It is 8 feet long and 3 feet deep. Considering that you need room for people to walk around it, plus space to present it in an uncluttered manner, the 8x3 couch needs an absolute minimum of 12x5 feet, or 60 square feet. If your lease is $2 sq/ft, it will cost you $120/month to offer that couch for sale. If the couch is for sale for $200 and you don't sell it for two months, you lost $40 on the couch just in RENT. Not counting acquisition cost of couch and other business expenses.

If you run a store or restaurant, when determining how you are going to pay your square footage, you have to consider how much money you can extract per square foot and that drives the products you offer. In one business we ran, the most profitable real estate we had was the gumball machine. It took up nearly exactly 1 square foot of space and returned several times it's expense in profits and didn't require any employees to complete a transaction. AND, it saved us trips to the bank to acquire quarters for the cash register. A real value-added product that gumball machine.

As for grocery stores, my hats are off to them. High rent, the requirement to refrigerate or freeze huge portions of that already high rent, products that lose their freshness and have to be thrown in the trash, shoplifting, high labor costs, high regulation costs... How they can sell a dozen eggs cheaper than we do on the farm is practically a miracle. The only thing they have going for them is guaranteed EBT dollars and the fact that everybody has to eat. Oh... and they probably make much of their profits in liquor sales.

[kalakoa]

Considering that you need room for people to walk around it, plus space to present it in an uncluttered manner

You also have to be open during certain hours, and carry liability insurance in case people hurt themselves on your premises. Customers also need to spend time and energy transporting themselves to the location, and you have to provide somewhere for them to park their cars...

That's why I keep saying that ground-based retail with in-person transactions is obsolete.

At the other end of the spectrum, Amazon has discovered that they can increase the density of their warehouses with automation: robots don't need as much space to pick merchandise.

A 7-11 (somewhere on the mainland) has already successfully tested drone delivery over a 1-mile radius.