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In a city like D.C. where roughly 96 percent of restaurants are independent small businesses, many chefs double as owners and lean leadership teams run popular eateries. They don’t have the same safety net as major chain enterprises or restaurant groups that can hire in-house talent to suss out traps and balance the books.
Recognizing an opportunity to help smaller restaurants stay afloat, MaryEllen Georgiadis founded her own small business, Finance A La Carte. Some of D.C.’s top hospitality groups have hired her as a consultant, including Drink Company, which operates Columbia Room and Pop-Up Bar; Fat Baby Inc., which is behind Doi Moi; Astro Doughnuts & Fried Chicken; and Todd Gray of Equinox and Manna at the Museum of the Bible.
Georgiadis, who went into public accounting after college, got her first taste of managing the books for a food operation at the restaurant inside Louis Boston, a legendary luxury clothing store that lasted 85 years. “They had just brought up a new chef to operate the cafe,” she says. “His name was Michael Schlow.”
The restaurateur, who Washingtonians know from his local restaurants like Alta Strada, The Riggsby, and Tico, tapped Georgiadis to be the treasurer at his first restaurant, Radius, in Boston. His cooking there earned him a James Beard Award in 2000. Georgiadis stayed on as Schlow opened more restaurants in greater Boston. After a short break when Georgiadis moved to Florida, Schlow brought her back as he grew his empire over a decade.
Having learned the ins and outs of financially managing a restaurant with Schlow, Georgiadis set out on her own in 2017. “I’ve had a ball doing it,” she says.
As the D.C. restaurant industry sits in a period of turmoil that’s likely to continue—the fourth quarter of 2018 and the first quarter of 2019 brought a rash of closures—City Paper sat down with Georgiadis to understand some common pitfalls and best practices related to running a restaurant.
City Paper: What types of services do you offer and why?
MaryEllen Georgiadis: My company wants to take the controls and the accounting off of the hands of the creative side of the business. I have some clients who say I want everything. We do day-to-day accounting, month-end closes, creating financial reports, tax returns, recording sales, paying all the bills, doing cash flow, reconciling bank statements, budgeting, and planning. It’s one thing to talk about the past. There’s some use to that. I want to focus on, “How do we fix it going forward?” In this industry, finding time to do that is where I struggle with my clients. They don’t find the time to do what they need to do.
CP: How can restaurants best position themselves for longevity?
MG: Really look at your numbers. Know your numbers. Whether it’s someone else preparing them or you preparing them, they can’t just be digits on a page. They need to mean something. All chefs and beverage directors know margins and know what they want. But are you looking at payroll as a percentage of sales? Operating costs as a percentage of sales? A lot of things can fall through the cracks. When you’re doing well and sales are up, don’t neglect all of this or it will bite you one day. People say, “We had plenty of money so we didn’t worry.” Well, you should have worried because this person was taking a little bit for themselves or these sales weren’t recorded correctly.
CP: Restaurants are throwing events to stand out from the competition and welcome diners into their spaces for new reasons. Are they a good idea?
MG: Events are a scary little sidebar that restaurants need to keep a better eye on. That money is the best margin in the business. You’re controlling everything. You’re controlling the menu, you have no waste, you know how many people are coming, you know what they’re going to eat and drink. Through hospitality, if you can earn 10 to 15 percent new customers out of it it’s all upside. But you have to make sure all of the money comes in. You need to have someone controlling the process to make sure that’s good cash.
CP: Through previous reporting we learned that restaurants sometimes make cents off of their most popular dishes. How is that sustainable?
MG: Doi Moi has a dish like that. You don’t want to change it because everyone loves it. Your menu can be designed to have some of those low-margin items, but you have to watch out if it becomes the most popular dish.
CP: Diners seem to accept price creep when it comes to appetizers. They used to be $7 to $8 and now land closer to $12 to $14. Yet it feels like $30 has been the defining price for entrees for decades. You’re either a $30-and-over or $30-and-under restaurant. Are we crazy?
MG: This is a real thing. If you have a $30 entree you can only have one or two. You have to have that average. At upscale casual restaurants, you can have one or two dishes over $30, but the majority have to be in the twenties. And don’t put the $30 on the top line. It has to be buried. You also can’t have a wide variety. You have to find your niche.
CP: Restaurants make the most off of alcohol because of the higher profit margins, but is there anything that can trip a restaurant up behind the bar?
MG: Make sure your inventory numbers are never too high in booze. Having too much booze is cash on your shelves, not in the bank. Just because you can get a deal on a case of Bombay Sapphire gin, if you’re not going to sell it for two months, it wasn’t worth the cost of money to have it sit.
CP: Restaurants have a love and hate relationship with delivery services like Uber Eats and Caviar that can take a fee as high as 30 percent. Should restaurants participate?
MG: That is a really important thing to look at. If you record a sale for a $10 item, [the delivery service] is only going to give you $6 or $7. You have to record that expense regularly. We do it every week to make sure nothing’s missing. You can lose dollars and every dollar counts. But delivery can be incremental business. Even if [the companies] take 30 percent and your cost of goods is 30 percent, that’s 40 percent still that you have to play with. Let’s say your labor and take out paper goods cost you another 10 percent. That’s still 30 cents you didn’t have before. If your calculation brings that to zero you shouldn’t do it. But if you can make an incremental 10, 20, 30 cents on the dollar, why not? You build your brand. It’s brand exposure.
CP: What are some of the most common financial missteps new restaurants make that can get them into trouble quickly?
MG: The main reason businesses close quickly is because they undercapitalized. They thought they could open a restaurant for $1 million, but they end up spending $1.1 million. The business didn’t take off at the beginning. Now they have all these creditors coming after them. The construction guy didn’t get his final payment. The architect didn’t get his final payment. Everyone’s getting nervous. You’re scraping every dollar that comes in. There are a lot of businesses that can’t weather that. That’s the reason a restaurant turns in three years or less.
CP: Are changes in labor policies top of mind for your clients? Are they looking at new models?
MG: We did when Initiative 77 passed in the summer. As some of my clients were looking at new projects, they were asking, “What can we do that’s not table service?” They were looking at fast casual or counter service with table delivery. Something that’s a blend, so front-of-house labor is much lower. A lot of the payroll systems are not advanced enough to do some of these crazy manipulations. I think after the D.C. Council voted it down in October, everyone went back to, “OK, what we’re doing works for us.” Most of my clients, we are paying everyone way over minimum wage. The price point my clients are at, they were frustrated by it. And I feel like it’s going to come back around in some form.
CP: How far in advance should restaurants plan?
MG: When you open your place, most investors are going to require a five-year plan. But an investment deck is so subjective. Some are going to be more conservative with it, some people are going to be way too aggressive. Five years is a long time in this industry. I recommend budgets, which a lot of restaurants and bars don’t do. Budgeting so you have a plan of action so you can see when your plan isn’t working in months one, two, and three. I have a number of clients who have never had one. A one-year plan for this industry makes more sense.
CP: Some D.C. restaurants are celebrating their 25th and 30th anniversaries. Is there hope for restaurants opening in 2019 to have that kind of lifespan?
MG: It’s rare. One percent of openings last that long. I think a 15-year run is something to be damn proud of. I would love if any of my clients or people I know in the business have a good 10 years with a five-year option.
This interview has been edited for length and clarity.