This is the second part of a two-part story on Jack & Lois. Go here for part one ≫
The first time around at Jack & Lois, we did a lot of things right.
We were voted best new restaurant by Hamilton Magazine. We got on the TV show ‘You Gotta Eat Here’, E-Talk Canada, Vice Canada, as well as numerous articles and accolades for our food and our patio.
But I also did a lot of things wrong and humility has been my greatest teacher over the past 10 years. Hopefully I can help some potential entrepreneurs steer clear of some dangers with this next piece.
First off: Recognize your actions and their consequences before you spend all your energy looking at what everyone else is doing wrong. It’s a lot easier to correct a problem when you know that you’re doing things right. Having said that, don’t beat yourself up trying to meet EVERYONE’S expectations. Find a benchmark and operate based on that.
If you’re going to get into the restaurant business, follow the model of The Other Bird. That group knows good concepts and they also know when to pull out and start fresh.
I didn’t have any model to follow when I fumbled into this. So… here are the things that I found out – the hard way – to be of the utmost importance when going into any business, but especially the restaurant business.
GET A GOOD ACCOUNTANT AND BOOKKEEPER FROM DAY ONE
Sit with them. Learn and understand their processes with the intention of being able to do it yourself. When you know what’s happening, it’s like playing a word search in bold print. When you don’t know what’s happening, and the CRA comes knocking, it’s like trying to do a Rubik’s cube in the dark.
Here was my situation: I incorporated while working in film and stayed on top of all of my returns. I used the CRA website and phone line (which were both surprisingly helpful) to learn how to run a corporation. I was my own bookkeeper at the time. Then I opened the restaurant and two months later had twin boys, all while still working full time in film.
My books got behind fast, so I hired a Certified General Accountant (CGA) to take over and his rates were astronomical… so I fired him. That was my first mistake. My second mistake was to hire a series of bookkeepers that were only concerned on catching me up and were not concerned with keeping my remittances current. Hence, I fell further behind and my penalties and interest were increasing exponentially. Then I was paid a visit from the CRA. We got on a payment plan and I paid off what was owing.
Once that was complete I went back to a CGA. I sat in his office with all of his staff and explained my situation. I told them all that I had just dug out of a hole and could not afford one more mistake with the CRA — I was crystal clear on this. Nine months later I woke up to find that my accounts were frozen and the CRA had seized any available funds. My accountant hadn’t filed my last three quarters of HST. It took them only two days to get all three quarters filed based on estimated numbers. When I asked the assistant why they didn’t do that in the first place, she replied “I don’t know”.
NEGOTIATE A 5+5 LEASE AND HAVE A COMMERCIAL REAL ESTATE AGENT LOOK IT OVER
For a residential lease, the landlord can not increase the rent more than 4% (generally) per annum for the duration of the time that you live in your residence. The rules are completely different for a commercial lease. The landlord has the law on his/her side when it comes to rent increases. You could sign a 1 year lease at $1,000 per month, sink $100,000 of your money into a property to get it operational and the landlord could increase your rent to $10,000 per month on your renewal, with no governing bodies to protect you or your investment.
Here was my situation: I was to pay for any improvements to the property — aesthetic, structural, electrical. I asked for a 5 year + 5 year lease, but was refused. I was instead given one year. It was a straightforward two page lease at $900 per month with the promise that when we re-signed, the rent increase would be reasonable. I put in about $30,000 of my money into the building the first year. The second lease saw my rent increase around 27%. I was still responsible for all leasehold improvements and they would not count against my rent. It was another one year.
Every time it rained, my basement would flood. My electrical capacity was 100 amps — half of what a commercial property should be and not enough to run my restaurant. Twice my basement backed up with sewage. This was still on me.
The next few leases were two years in length and twice the landlord texted to inform me that he was increasing the rent mid-term and if I didn’t agree, then there was going to be a problem.
Also, part of my rent agreement was that I had to pay for the water usage for the tenant upstairs as the landlord didn’t want to pay for separate hot water tanks. “Sorry. Just the way it is,” I was told.
Here’s the story of my final lease: After numerous threats of losing my lease to another business, I finally succumbed to the landlord’s demands and threw in the towel. The stress alone was killing me slowly, knowing that I would have to go through this extortion every time that I needed to renew… and sometimes even in the middle of my lease. I had accepted the fact that I was losing my business and sent my landlord an email stating that I was pulling out of the race for the lease at 301 James N.
Two days later I get an email from the landlord informing me that he was going to accept my offer that he had originally scoffed at. He brought me a 20 page lease and wanted it signed that day. I told him that I needed time for a lawyer to look it over as we had only done two page leases in the past. He told me that he needed it back right away to get some financing from the bank. He said, “It’s just a standard lease and nothing has changed from the last lease.” I trusted him and signed on for another two years, as I was glad to secure my business and I just wanted the sick feeling of uncertainty out of my stomach.
Well… here’s the kicker: he wrote into page 19 that all chattels of Jack & Lois were now property of him. This is NOT a standard lease clause! Not in any galaxy. This meant that, legally, everything that I had acquired over my 9 years of tenancy belonged to him. I didn’t realize that until I was moving out after Supercrawl.
So there I am dejected that I have to shut the doors on my business, exhausted from working 18 hours a day for the past week and now faced with the fact that he can keep whatever he wants of mine. Oh… and to add insult to injury, I get a call on Monday after Supercrawl at 9 am saying that he wants to change the locks in three days. What a nice way to say thank you for your nine years of tenancy and thousands spent on improvements. Yes, he owned the building but I paid for it. And I was walking away with nothing but debt.
By the time I left 301 James St N, my rent had increased 500% and I had sunk about $80,000 of my own money into improvements.
Of the estimated $90,000 in theft and vandalism that occurred due to my proximity to Mission Services, Barton Street & untrustworthy staff, I had only recovered $3,300 from my insurance company. The numbers weren’t good.
BE PRESENT AT YOUR BUSINESS
You need to convey your vision through practice and preach. Be there when you say you’re going to be there. Follow the same rules as staff. Have all of your certifications. Don’t drink during business hours!
It’s rare to find someone who is going to take care of your business and provide the level and quality of service that you will. There are some pretty good fakers out there but they usually expose themselves after time.
Here was my situation: When we opened the doors on February 10th, 2012 we were only operational from Friday to Sunday. I was still working in film, but had weekends off, so I could be there during most hours of operation. I was able to talk to the customers and observe staff behaviours and practices.
We moved to six days of operation, my sons were born on April 6th, and I needed to keep my job in film for the first year to keep money coming in. This meant that I had to have the utmost trust and communication in my staff. That’s a very vulnerable position for a business owner — do not do as I did!
As a business owner, you’re supposed to give directives and expect them to be followed. As I was absent from the business for a significant amount of the time, I felt like I was asking favours. Then I was being taken advantage. My head chef refused to make salads, regardless of how many times I told him that they needed to be on the menu. I couldn’t fire him, because I wasn’t financially ready to leave the film business… so I just had to take it. A year later he quit and opened a salad emporium across the street from me.
If you are not there you can expect theft; theft of time and theft of product. Some people will come in and clock in, then have a cigarette, get changed, talk for 15 minutes, and then start work. They’ll have 10 cigarette breaks during their shift, then take an hour to do their closing duties that could have been done during their allotted shift time. Crush a couple beers in the walk-in cooler, have a double whiskey on their way out, and tell the server to put it on their tab. If the server is their buddy, 90% of the time it never hits the books. The profit margin is very narrow for restaurants and if you add up all of the wasted time and missing product, it will cost you tens of thousands of dollars per year if you are not there.
You won’t know that you have good staff until you’ve experienced the opposite. When you do finally get there: treat them with respect / keep an open dialogue and make thoughtful improvements to their working environment. Holly and I are very appreciative of our current staff.
FINAL PIECES OF ADVICE
From my experience, if you follow those three major principles then you’ll greatly increase your chances of profitability and success.
And I just want to say this about the City, the big banks, and the Canada Revenue Agency: in all three entities there are good people that truly want to help you. Unfortunately, there are people that don’t, coupled with antiquated processes and laws. I witnessed this in my 5 years with the Department of Foreign Affairs and my time in the restaurant industry. Here are some quick point of advice.
City Hall: If you need something changed in the City, you meet the department heads face to face.
Banks: Branch managers have been stripped of their decision-making powers when it comes to lending and overdrafts. All final decisions come from Toronto and are made by people who know nothing about you, your personal investments, or achievements. Your risk is assessed by a grid and in the restaurant industry, you are at the bottom of said grid.
CRA: If you’re the director of a corporation, you are personally responsible for all of the money owed to the Canada Revenue Agency. Even if the corporation dissolves.
I have so much more to tell about the journey so far, both with Jack & Lois at 301 James N and with our new restaurant Pete & Kay at 946 King St W. I apologize that I’ve not given you much about the fun parts of the business. I’ve focused a lot on the challenges for two reasons: to let people know why we went the direction that we did AND to help people that are going in as naïve as I was. Maybe you can save yourselves some hardship.
It would be remiss if I did not state that there were lots of good times and even GREAT times. There are many cool stories about the people that we met along the way and the parties that were had.
Maybe I’ll pop up again somewhere, or you can come visit at the new resto and I’ll tell you the stories in person.
Huge thanks to Urbanicity for letting me get this off my chest. I appreciate this magazine and the people involved in making it happen.
ABOUT THAT AGCO STORY
To answer the cliff-hanger from last issue, what happened was that I called the officer that issued the charge. This is what I said: “I just want to thank you and your officers for the tact and candour in which you all operated last night. I also want to thank you for your leniency and to let you know that I will plead guilty with no contest on November 3rd.”
So for the next three months, the fate of my restaurant hung in the hands of the justice system. I showed up on November 3rd at 10:30 am to the John Sopinka Courthouse only to find that my name wasn’t on the docket. I spoke to the prosecutor and he informed me that there were no charges filed against me. The AGCO officers didn’t submit the infractions. YESSSS!!!