This is the eighth and final part of How To Open a Restaurant, an occasional series about the realities of opening a restaurant in Toronto. Last time we looked at building the team. To close the series, we appropriately look at when to know to close a restaurant.
It was the second last day of operations at The Gabardine on Bay St., just south of Old City Hall. Diners gave owner Kate Rodrigues and chef Graham Pratt a hug after one last lunch of mac and cheese and fish tacos. Since it opened just shy of nine years ago, the restaurant was a gem as one of the few non-chain or corporate-owned restaurants in the downtown core. But this past summer, they decided that it was time to sell the business. This past week, The Gabardine closed for good.
Running a restaurant in Toronto is tough. As previously covered in this series, even restaurant consulting companies say that out of 100 aspiring restaurateurs, maybe one of them will have a successful business. It can take years to find a location that meets your budget, which better be somewhere in the six figures. Dealing with contractors and inspectors can be a time and money pit. Staffing continues to be a challenge as there’s a shortage of cooks willing to put up with the long hours and low pay. Most recently, French bistro Le Select launched a petition against the city’s rising property taxes, which currently stands at $20,000 a month for the restaurant. Even after all that, restaurateurs can’t charge too much for food and alcohol or else customers won’t come.
“It’s a confluence of a lot of reasons. We started to run into issues at the beginning of last year with the price of food, labour and rent going up,” says Rodrigues, who opened the restaurant with then co-owner Alison Mackenna in 2011 as a cosy refuge from hectic Bay St. “This January would have been nine years since the restaurant opened, and we haven’t had a break.” She and Pratt have been engaged for the past three years and have yet to find the time to plan a wedding.
“Our landlord also told us that we had to redo the HVAC (the heating, ventilation and air conditioning system). That would cost around $70,000 before taxes and the restaurant would have to close for a month. That was the straw that broke the camel’s back,” says Pratt, adding that after nine years of heavy usage, the kitchen’s stoves were also running on their last legs.
They tried to find ways to save as well as bring in more money, including stopping breakfast service since coffee has a smaller profit margin than serving alcohol, plus two baristas were needed to fulfil takeout and dine-in orders. They also tried to add more seats to the dining room as a way to keep up with the rising rent, which was steadily going up a few hundred dollars annually until it hit just under $11,000 a month.
In August, Pratt, Rodrigues and her father, who is a silent partner, decided it was best to sell the business. The staff, many of whom were working at the restaurant since opening day, was immediately notified. A month after the staff found out and a day after the restaurant was listed for sale, the closure was announced to the public. Rodrigues is looking forward to a break while Pratt is looking to work at other kitchens in the city but in the meantime, both are busy with tying up loose ends at the restaurant.
Accounts with suppliers, be it food or alcohol, have to be closed and any outstanding debts have to be paid off. The restaurant has already ended its contract with its dry goods and cleaning product suppliers, so Pratt has been going to Costco to buy just enough cleaning supplies, juice and pop to get through The Gabardine’s final days. Internet and phone service accounts have to be called off. Payroll is scheduled to end. Some of the staff have already left, so Pratt and Rodrigues have been working overtime. They, along with the realtor they hired, have also been busy fielding offers from potential new owners. The sale includes everything including the restaurant name and the furniture, but if the new owner doesn’t want the existing furniture, it gets auctioned off. Even though the restaurant officially closed Nov. 1, the two still have the place until Dec.1, giving Pratt and Rodrigues time to clean up, move things to storage and organize the place.
“Running a restaurant is something you need to have a very keen understanding of, and not just because you want to cook or that it’s your dream” says Rodrigues, who started working at restaurants 12 years ago when she was 15. “You really have to be ensconced in the world and know about every job it entails. I guess it’s a testament to the people who worked here and it’s an honour that they’ve stayed so long. I think we were one of the last bastions of neighbourhood restaurants in the area and we didn’t go corporate. It was the neighbourhood spot we aimed to open.”
Andrew Lin is a real estate agent specializing in buying and selling restaurants (he literally has a site called TorontoRestaurantForSale.com). When putting a restaurant on the market, he’ll look at the lease conditions, such as whether the seller still needs the buyer to take over the remaining years of a lease, or how long the lease is under. Anything under five years is considered undesirable as it leaves the buyer uncertain what will happen once that’s up. He’ll also look at financial statements from previous years, what equipment is included in the sale, and get a lawyer to make sure that the seller doesn’t have any outstanding permits on the site such as construction projects.
“I think in a year’s time, if you’re not making money, it’s time to sell it,” says Lin, who before getting into real estate owned a Thai restaurant and an Asian fusion spot in the city. “Most of the reasons why people sell restaurants is because it’s not profitable. I deal with a lot of restaurant owners and they’ll call me a year in to put the place on the market to get as much of their money and investments back.”
This past April, chef Matt Basile of the Fidel Gastro’s food company also closed his restaurant, Lisa Marie, on Queen St. W., just west of Bathurst St. (it’s now a barbecue restaurant). Basile left his office job eight years ago to sling sandwiches at pop-ups. He used that money to buy a food truck before opening Lisa Marie in April 2013. While restaurant ownership is the end goal for many cooks, Basile saw it as just one part of the food empire he was trying to build.
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“When you start thinking about your company on those terms, you’re able to put your ego aside and think about what’s best for business,” he says. The restaurant was busy, especially during brunch, and it outlasted a lot of other businesses that came and went on the trendy Queen West strip, but Basile says he sold the place for two main reasons.
“I was running out of energy. We had the restaurant, the catering business and food truck, and the media side of the business (TV appearances, brand partnerships, YouTube channel). It was like running three full-time companies simultaneously,” he says. “Can I physically do all these things at the same level of quality? No.”
While he says the restaurant was seeing growth, the amount of energy required and operating costs spent on Lisa Marie were more than what was spent on the other aspects of his food business. He was paying $13,000 in monthly rent, almost double what he was paying when the restaurant opened six years ago. There were also bills for things such as electricity, gas, water, garbage removal and pest control.
“By the time we closed we had to charge $9 for a pint of beer. I wasn’t happy with that, but it was the only way to pay the bills. If it was problematic then, it would get worse two or three years down the road,” he says. “It was hard to close it from an emotional standpoint because the staff became a family and we became a part of the community, but ultimately it was a business decision, and it was the only decision that made sense.”
When Basile gives talks at culinary schools, he encourages students to think beyond restaurant ownership when it comes to working in food. “You can be a recipe developer, food stylist, or look into food science and research and development,” he says, adding that he is expanding his catering division with a larger kitchen. “There are so many opportunities. Restaurants will always come and go, which sucks, and I’ve seen a lot of my favourites close even though they were always busy. You have to understand that there are large projects and more things out there than opening a restaurant.”
“At the end of the day, I would never have done things differently,” says Basile. “We need restaurants. It’s a huge part of the city. I just think you have to really know what your business is and what you want it to be.”