29.1　What Kind of Restaurant? The Business Plan

Before you open a restaurant, there is something you should first write on paper. It is who you will serve, what you will serve, and at what price. If you start with the premises or the interior without deciding this, the numbers will not add up later.

Together, these three answers are called the restaurant's concept. A concept is the core idea of the restaurant. Think of "a casual sushi restaurant where local families come on weekends." Now think of "a high-end restaurant that serves only omakase (chef's choice) and is used for business entertaining." The two need different locations, different numbers of seats, and even different fish. A restaurant that aims for both at once is usually chosen by neither kind of guest.

Three questions that decide the concept

• Who　What kind of guests do you want, and on what occasions? Solo guests on their way home from work, couples celebrating an anniversary, or tourists?
• What　Will you focus on omakase or on okonomi (ordering piece by piece)? Will you show off Edomae (Edo-style) shigoto (preparation work), or feature local fish? Will you open for lunch or offer takeout?
• At what price　How much will each guest pay? In other words, what will your average spend per guest be? You learned how to set prices in Chapter 27.

Planning the numbers

Once the concept is set, turn it into numbers. Monthly sales are the average spend per guest, multiplied by the number of guests per day, multiplied by the number of business days. Here you use the ideas from Chapter 27 to make an estimate before opening.

Let's work through an example. This is a made-up example for explanation. It is a different restaurant from "Sushi Restaurant A" in Chapter 27. It is a small sushi restaurant with 10 counter seats, open only in the evening. The average spend per guest is 10,000 yen. The restaurant expects an average of 12 guests a day and 25 business days a month.

1. Daily sales　The average spend of 10,000 yen times 12 guests is 120,000 yen.
2. Monthly sales　Daily sales of 120,000 yen times 25 business days is 3,000,000 yen.
3. Check　Out of this 3,000,000 yen, you pay food costs, labor costs, rent, and loan repayments. Then you see whether any profit is left. Chapter 27 shows how to find the break-even point.

People tend to make estimates that are too optimistic. Right after opening, guests do not know your restaurant yet. Assume the first few months will be below your estimate, and make a second, stricter plan as well. For example, if you get only half the guests, or 6 a day, monthly sales are 1,500,000 yen. In 29.3, we consider how many months you could hold out even then.

29.2　Choosing the Premises

Choosing premises for a sushi restaurant is different from choosing a home. What you need to look at is the location, the size and seating layout, the rent, and the building services.

Location

The right location depends on whether it fits your concept. A busy spot in front of a train station suits a casual restaurant. However, the rent will be high. A high-end restaurant that fills up with reservations can do well in a quiet place a little away from the station. That is because guests come with a clear purpose. Visit the site at lunchtime and at night, on weekdays and on weekends. See with your own eyes what kind of people walk by.

Seats and the counter

A sushi restaurant's sales depend on the number of seats and how many times each seat is filled in an evening. The counter is the face of a sushi restaurant. It is generally said that one chef can watch over about 8 to 10 seats. Check on the floor plan the length of the counter, the depth of the space where the chef stands, and where the refrigerated topping case will go. Adding table seats increases the number of seats. But table seats are farther from the counter, so it is harder to serve nigiri the moment it is made.

A guide for rent

Rent is money that goes out every month without fail. It does not go down even in a month with low sales. In general, it is said that rent should be no more than 10% of sales. In the earlier example, monthly sales were 3,000,000 yen, so rent should be at most 300,000 yen. Turn it around: if the premises you like cost 400,000 yen a month, you need sales of 4,000,000 yen a month. Multiply the rent by ten, and ask whether you can sell that much every month.

For restaurant premises, besides the rent, a large sum is due when you sign the contract. A security deposit is money the tenant leaves with the landlord. For a restaurant, it is higher than the deposit for a home and often equals many months of rent. There are also the agent's commission and rent paid in advance. When you move out, you may have to pay for restoring the space to its original condition, the state it was in when you rented it. Read the contract carefully.

Fitted-out spaces and bare shells

Renting premises where the previous restaurant's interior and equipment are still in place is called taking over a fitted-out space (inuki). Premises with nothing inside are called a bare shell space. Taking over a fitted-out space can greatly cut the cost of the interior. If the previous tenant was a restaurant, the water supply, drainage, and exhaust are already there. However, the refrigerators and ice machines left behind may be old and break down soon. Also ask why the previous restaurant closed. The cause may be hidden in the location or the equipment.

Building services: check what you cannot see

A sushi restaurant uses a lot of water, electricity, and exhaust. If you find out after the interior work has begun that something is not enough, redoing the work costs a great deal of money. Before signing the contract, check the following points together with a contractor.

• Water supply and drainage　Is there enough water to wash rice, rinse fish, and wash dishes? Are the drainpipes wide enough, and do they slope enough? Is there room for a grease trap? A grease trap is a device that separates oil and food scraps from the wastewater and holds them.
• Exhaust　Can you send smoke and heat from the grill and stoves outside? Where can the duct exit the building? In a building with homes on the upper floors, smells can lead to complaints.
• Electrical capacity　Is there enough power to run the refrigerators, freezers, topping case, ice machine, rice cooker, and air conditioning all at once? Some commercial equipment needs a different type of electrical supply from household equipment.
• Gas　Are the gas pipes wide enough for the amount of gas you will use to cook rice and simmered dishes?
• Building rules　Are you allowed to open a restaurant in that building and at that site? Has the landlord agreed?

Then, before construction begins, take the floor plan to the public health center (hokenjo) and consult them. If the handwashing stations or the number of sinks do not meet the standards, you will not get a license (29.4).

29.3　Start-Up Funds and How to Raise Them

To open a restaurant, you need money to pay before opening day. You also need money to keep going after opening, until the restaurant gets on track. It is important to think about these two separately.

What start-up funds cover

Start-up funds fall into four main groups. They are money to rent the premises, money for the interior and equipment, money for preparations before opening, and working capital. Table 29-1 shows what goes into each group. The amounts change greatly with the region, the year, and the condition of the premises. They can differ several times over depending on whether you take over a fitted-out space or start from a bare shell. For this reason, this book does not give specific amounts. Always get estimates from more than one contractor.

The item in the table that people forget most often is the last one, working capital. If your wallet is empty on opening day, low sales in just the first month will leave you unable to pay rent or wages. You learned in Chapter 27 that profit and cash on hand are not the same thing.

How much working capital to keep: an example

Base your working capital on the money that goes out every month even with no sales. In general, it is said that you should keep 3 to 6 months' worth of that amount on hand.

Let's calculate an example. This one is also made up. Suppose a restaurant pays 300,000 yen a month in rent and 700,000 yen a month in labor costs. Utilities and other fixed costs are 200,000 yen a month, and loan repayments are 120,000 yen a month. Added together, 1,320,000 yen goes out every month. For 3 months, that comes to about 4,000,000 yen. For 6 months, it comes to about 8,000,000 yen. There is never a month with no sales at all. Still, keep enough money that you will not have to close even if several months in a row bring only half of your estimated sales.

Own funds and borrowing

You raise start-up funds from money you have saved and money you borrow. Money you have saved yourself is called own funds. In Japan, people opening a new restaurant often borrow from three kinds of lenders. The first is the Japan Finance Corporation (JFC), a financial institution funded by the government. The second is loan programs backed by local governments, which help with interest and other terms. The third is banks and shinkin banks, which are local cooperative banks.

Lenders decide by looking at your business plan. Who will you sell to, what will you sell, and at what price? How much will you sell each month, and how will you repay? The numbers you made in 29.1 are useful here. Lenders also look at how much of your own funds you have. That is because lenders are cautious about a plan in which the owner has put in none of their own money.

You repay borrowed money out of profit. The repayment itself is not an expense. For example, if you borrow 10,000,000 yen and repay it over 7 years, or 84 months, the principal alone is about 120,000 yen a month. Interest is added to this. Your profit, meaning sales minus expenses, must be larger than this repayment every month. If it is not, the restaurant's money will keep shrinking.

Subsidies and grants

The national and local governments offer subsidies and grants for people opening a business or installing equipment. However, the details change every fiscal year, and the application periods are limited. Most of them pay afterward. You pay first, and the money comes back after a review and a report. Do not count on them for the money you need on opening day. Check the latest information at local government offices or at a chamber of commerce and industry.

29.4　Permits and Notifications in Japan

Here we look at the main permits and notifications needed to open a sushi restaurant in Japan. The rules can be revised, and the details differ from one local government to another. Always confirm the rules for the country, the region, and the time you will operate at a government office.

Restaurant business license: the public health center

To open a sushi restaurant in Japan, you need a restaurant business license under Japan's Food Sanitation Act. You apply to the public health center for the area where the restaurant is located. The license is issued after checking whether the restaurant's facilities meet the standards. These standards are called facility standards. They set rules for handwashing equipment, the number of sinks, refrigeration, the materials of floors and walls, and more.

1. Consultation in advance　Before construction begins, take the floor plan to the public health center and consult them. If you find out after construction that the facilities do not meet the standards, the work has to be redone.
2. Application　Apply well before opening day. You also write the name of the food sanitation supervisor.
3. Facility inspection　When construction is finished, an officer from the public health center visits the restaurant and checks whether it meets the standards.
4. License　Start business only after the license is issued. You must not operate before you have the license.

A license is issued for each facility. If you move the restaurant to another place, you get a new license there. A license has a period of validity, and you must renew it to keep operating.

Food sanitation supervisor

Each restaurant must have one food sanitation supervisor. This person is at the center of the restaurant's hygiene management. People with a qualification such as a licensed cook can take the role without further training. People without such a qualification take a training course held by the prefecture or another authority. The course usually takes about one day. Naming a supervisor is not the goal. This person's job is to keep daily hygiene management running.

Hygiene management based on HACCP principles

In Japan, since June 2021, in principle all food business operators have been required to carry out hygiene management based on HACCP principles. Small sushi restaurants are no exception. Small restaurants follow guidebooks made by industry associations. They make a hygiene management plan, carry it out, and keep records. You learned what to record in Chapter 5. From opening day, make it a habit to record refrigerator temperatures and your preparation work.

Fire safety: rules for restaurants that use fire

Interior work on a restaurant and starting to use the space require notifications to the fire department. One is a notice before you start using the building. Another is a notice for equipment that uses fire. Before construction starts, check with the fire department what must be submitted and by when.

A restaurant where the total number of guests and staff reaches a certain level must appoint a fire prevention manager and report the appointment. A fire prevention manager keeps the escape routes clear, makes a fire safety plan, and runs drills. For restaurants, this generally applies when the capacity is 30 people or more. You get the qualification by taking a course. Also, a restaurant with equipment that uses fire must, in principle, keep fire extinguishers, regardless of its floor area.

Serving alcohol late at night

Some restaurants mainly serve alcohol between midnight and 6 a.m. In that case, they must notify the Public Safety Commission through the police station. A restaurant centered on food, such as a sushi restaurant, usually does not fall under this rule. However, if you plan to serve mainly drinks and small dishes until late at night, consult the police station in advance. To sell bottles of alcohol for guests to take home, you need a separate liquor sales license.

Notifications to the tax office

If you start a restaurant as a sole proprietor, you submit a notice of business commencement to the tax office. The deadline is within 1 month of opening. If you want to file a blue-form tax return, which gives you favorable tax treatment, also submit that application by the deadline. If you hire people and pay wages, you need to file a notification for that too. You also report the start of your business to the prefecture and the city, town, or village. The procedures differ depending on whether you start as a company or as a sole proprietor. It is wise to consult a tax accountant once.

This table shows the main offices and procedures for opening a sushi restaurant in Japan. Remember them as five pillars: the public health center's license, hygiene management inside the restaurant, fire safety, late-night alcohol, and taxes. You will learn the labor rules for hiring people in Chapter 31.

29.5　Opening a Restaurant Outside Japan

More and more chefs are opening sushi restaurants outside Japan. There is one thing to understand first. Japanese common sense is not the law of that country. The order of priority is: first, local laws and regulations; second, science; and third, Japanese tradition.

The main things to check locally are as follows.

• Business permits and inspections　Which government office's permit do you need? Will health authorities inspect you before opening and while you operate? In many countries, inspectors arrive without notice and look at your records (Chapter 5).
• Hygiene rules　Many countries require a plan and records based on HACCP as a condition for opening. To keep vinegared rice at body temperature (hitohada), you may be required to meet a pH standard or to control time (Chapters 1 and 6).
• Bare hands or gloves　Some areas forbid touching ready-to-eat food with bare hands. Check whether there is a procedure for getting permission to use bare hands as an exception (Chapter 6).
• Freezing fish served raw　In the United States and the EU, fish served raw must be frozen to kill parasites, and the freezing must be recorded. In Japan, this is not required. This is a major difference (Chapter 12).
• Importing ingredients　To bring in fish, rice, seasonings, or sake from Japan, you must follow that country's import and quarantine rules. Some items cannot be imported at all. Also think ahead about what you can make with ingredients available locally.
• The right to work　Can you, the chef, legally work in that country? A residence and work permit is needed separately from the restaurant's permits.
• Liquor licenses　To serve alcohol, you need a license from each country or region. In some countries, getting one takes a long time.
• Allergen labeling　The allergens covered, and how to show them on the menu, differ from country to country (Chapter 26).

All of these differ by country, and even by state or city within the same country. They also change from year to year. Do not judge only by information you looked up in Japan or by what acquaintances tell you. Always confirm with the local government office or with an expert who knows the local rules well.