“When you first open a restaurant, no one wants to do business with you because they don’t think you can pay your bills,” said Steve Harrison, owner of Las Mecates restaurant in Brownsville. Harrison reviewed the surprises and struggles peculiar to new restaurant owners at an Accion Texas seminar, disclosing the seldom-discussed facts of life concerning restaurant startups.
About 25 percent of new restaurants close in their first year, and 60 percent close within the first three years. While this rate is, surprisingly, similar to other small businesses, restaurant owners fight the perception that their industry has more failures than others. Like Harrison, they almost all struggled to find good suppliers in their first year.
As an Anglo opening a Mexican restaurant, Harrison did not get a lot of respect, despite his years of business experience as an army officer and plant manager, his experienced partner-chef, Mary Luisa Villanueva and seemingly deep pockets. Prior to opening Las Mecates on Padre Highway near AmFELS, Harrison spent six months checking out other Mexican restaurants: their menus, décor, cash registers, credit card machines. During that time, he signed a lease, registered as LLC and got a tax number, got health and building inspection and permits for occupancy and signage, lined up employees and spent upwards of $30,000 to equip the facility.
“If someone offers free advice, listen to it. Some of it will fit your business and save you a lot of pain,” Harrison said. He valued the advice of Small Business Development Center (SBDC) which offers free information on demographics, traffic counts and similar businesses. “You need a business plan, budget, forecast and deep pockets to start. Otherwise you will be like all the other little restaurants that open and close around us.”
Harrison saw Las Mecates slowly build a customer base, yet at the end of the first year, he had maxed out five credit cards. He didn’t think Las Mecates would survive the long, slow summer without an infusion of cash. Yet he had paid all his various bills and taxes on time. “You can’t afford to lose your credit. Nobody will take mercy on you then,” he said.
So when Harrison told his banker, “I’m in big trouble,” she referred him to Accion Texas, a nonprofit small business lender with competitive interest rates. “They do things when we can’t,” the banker said. Harrison submitted a new business plan and numerous forms to Accion, not truly expecting to get a loan.
For more of this story by Eileen Mattei, pick up a copy of the August edition of Valley Business Report, on news stands now, or visit the “Current & Past Issues” tab on this Web site.