A healthful eating out strategy includes avoiding ________ appetizers

Financing And Leasing Restaurant Management - 10 Questions

1.In drawing up a sales budget for a casual Italian restaurant, what percentage

of weekly sales should be forecasted for Friday and Saturday evenings?

2.A casual restaurant with a $1-million sales volume should have how many

full-time equivalent employees?

3.What labor, food, beverage, and occupancy costs should the above restaurant

have? Express your answer as both a percentage of sales and as a dollar

figure.

4.Aside from its value in planning, why is it essential to do a budget forecast

of sales, costs, and profit?

5.Suppose that after forecasting sales and deducting expenses, you are left

with 3 percent operating profit before interest charges and taxes. What would

you do?

6.List, in order of priority, four sources of financing you would approach in

seeking funds for your restaurant.

7.In seeking a construction loan, would you expect to have the entire amount

of the loan given to you in a lump sum? Explain.

8.The procedure in seeking a loan from the Small Business Administration is

fairly elaborate. What is the usual sequence for this process?

9.The recommendation is made to “stockpile your credit.” What does this mean?

10.Is it possible (not probable) to start a restaurant without any cash of your own? Explain.

Restaurant From Concept to Operation Sixth Edition

John R. Walker, DBA, CHA, FMP McKibbon Professor of Hotel and Restaurant Management

and Fulbright Senior Specialist, University of South Florida Sarasota-Manatee

JOHN WILEY & SONS, INC.

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Library of Congress Cataloging-in-Publication Data: Walker, John R., 1944- The restaurant : from concept to operation / John Walker.—6th ed.

p. cm. Includes index. ISBN 978-0-470-62643-6 (hardback : acid-free paper) 1. Restaurant management. I. Title. TX911.3.M27W352 2011 647.95068—dc22

2010025727

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To Donald Lundberg, Ph.D., my mentor, colleague, and friend. Don was admired and respected in the halls of academia as a scholar and pioneer of hospitality and tourism education.

And to you, the professors, students, and future restaurant owners, wishing you success and happiness.

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Contents Preface xiii

Acknowledgments xvii

Part One Restaurants, Owners, Locations, and Concepts 1

Chapter 1 Introduction 3 Early History of Eating Out 6

French Culinary History 7

Birth of Restaurants in America 7

Challenges of Restaurant Operation 13

Buy, Build, Franchise, or Manage? 15

Starting from Scratch 19

Restaurants as Roads to Riches 20

Summary 21

Chapter 2 Kinds and Characteristics of Restaurants and Their Owners 24 Kinds and Characteristics of Restaurants 25

Sandwich Shops 30

Quick-Service Restaurants 34

Quick Casual Restaurants 35

Family Restaurants 37

Casual Restaurants 37

Fine-Dining Restaurants 39

Steakhouses 40

Seafood Restaurants 42

Ethnic Restaurants 43

Theme Restaurants 47

Coffee Shops 50

Chef-Owned Restaurants 51

Celebrity Chefs 55

Centralized Home Delivery Restaurants 58

Summary 59

vi ■ Contents

Chapter 3 Concept, Location, and Design 62 Restaurant Concepts 63

Defining the Concept and Market 68

Successful Restaurant Concepts 70

Concept Adaptation 77

Changing or Modifying a Concept 77

Copy and Improve 78

Restaurant Symbology 79

When a Concept Fails 79

Multiple-Concept Chains 80

Sequence of Restaurant Development: From Concept to Opening 80

Utility versus Pleasure 84

Degree of Service Offered 84

Time of Eating and Seat Turnover 85

Advertising and Promotion Expenditures 88

Labor Costs as a Percentage of Sales 89

Planning Decisions That Relate to Concept Development 89

Profitability 91

Mission Statement 91

Concept and Location 92

Criteria for Locating a Restaurant 93

Location Information Checklist 107

Summary 108

Part Two Menus, Kitchens, and Purchasing 111

Chapter 4 The Menu 113 Capability/Consistency 116

Equipment 116

Availability 116

Price 117

Nutritional Value 120

Contribution Margin 122

Flavor 122

Accuracy in Menu 123

Sustainable Menus 128

Kids’ Menus 128

Menu Items 129

Contents ■ vii

Menu Types 132

Restaurants in Las Vegas Represent the Best Countrywide 136

Menu Engineering 136

Menu Design and Layout 138

Standardized Recipes 142

Menu Trends 142

Summary 143

Chapter 5 Planning and Equipping the Kitchen 146 Back of the House Green 150

Open Kitchen 151

Kitchen Floor Coverings 154

Kitchen Equipment 154

Equipment Stars 159

Maintaining Kitchen Equipment 169

Meeting with the Health Inspector 170

Summary 171

Chapter 6 Food Purchasing 174 Sustainable Purchasing 175

Food-Purchasing System 178

Types of Purchasing 183

Buying Meat 185

Buying Fresh Fruits and Vegetables 188

Selecting the Right Coffee 192

Summary 192

Part Three Restaurant Operations 197

Chapter 7 Bar and Beverages 199 Alcoholic Beverage Licenses 200

How to Apply for a License 201

Bar Layout and Design 202

Placement of a Bar within a Restaurant 204

Beverages 206

Bartenders 209

Basic Bar Inventory 210

Wines 212

Responsible Alcoholic Beverage Service 219

viii ■ Contents

Third-Party Liability 220

Controls 221

Summary 226

Chapter 8 Operations, Budgeting, and Control 228 Restaurant Operations 229

Front of the House 229

Back of the House 233

Control 238

Liquor Control 239

Controllable Expenses 243

Labor Costs 244

Guest Check Control 250

Productivity Analysis and Cost Control 251

Summary 252

Chapter 9 Food Production and Sanitation 254 Our Culinary Heritage 255

Native American Influence 256

African American Influence 256

Italian Influence 256

French Influence 257

Receiving 262

Storage 263

Food Production 264

Production Procedures 266

Staffing and Scheduling 268

Food-Borne Illness 268

Hazard Analysis of Critical Control Points 275

Common Food Safety Mistakes 278

Approaches to Food Safety 279

Food Protection as a System 280

Summary 282

Part Four Restaurant Management 285

Chapter 10 Restaurant Leadership and Management 289 Leading Employees 290

The Nature of Leadership 293

Contents ■ ix

Employee Input and What’s in It for Me? 295

Management Topics 296

Communicating 299

Motivating 300

Performance Management 301

Restaurant Management Issues 302

Summary 310

Chapter 11 Organization, Recruiting, and Staffing 314 Task and Job Analysis 315

Job Descriptions 319

Organizing People and Jobs 323

Staffing the Restaurant 325

Civil Rights Laws 333

Questions to Avoid on the Application Form and during the Interview 338

Careful Selection of Personnel 343

Summary 345

Chapter 12 Employee Training and Development 348 Orientation 349

Training 350

Part-Time Employees 352

Training and Development 352

Methods for Training Employees 360

Leadership 363

Summary 369

Chapter 13 Service and Guest Relations 371 Service Encounter 373

Gamesmanship 374

Greeters 375

Server as Independent Businessperson 376

Foodservice Teams 376

Hard Sell versus Soft Sell 378

Formality or Informality 379

Setting the Table 380

Taking the Order 380

Magic Phrases 382

Servers’ Viewpoint 383

Difficult Guests 384

x ■ Contents

Service Personnel as a Family 387

Greeter or Traffic Cop 387

Tact: Always 388

Summary 388

Chapter 14 Technology in the Restaurant Industry 391 Technology in the Restaurant Industry 392

Table Management 404

POS Systems 408

Web-Based Enterprise Portals 410

Gift Card and Loyalty Programs 411

Guest Services and Web Sites 412

Restaurant Management Alert Systems 412

Summary 413

Part Five Business Plans, Financing, and Legal and Tax Matters 415

Chapter 15 Restaurant Business and Marketing Plans 417 Business Plan 418

The Difference between Marketing and Sales 422

Marketing Planning and Strategy 423

Market Assessment, Demand, Potential, and Competition Analysis 425

Marketing Mix—The Four Ps 429

Summary 445

Chapter 16 Financing and Leasing 448 Sufficient Capital 449

Preparing for the Loan Application 450

Uniform System of Accounts for Restaurants 457

Securing a Loan 463

Leasing 476

What Is a Restaurant Worth? 483

Summary 485

Chapter 17 Legal and Tax Matters 487 What Business Entity Is Best? 488

Buy–Sell Agreement with Partners 495

Contents ■ xi

Legal Aspects of Doing Business 495

Depreciation and Cash Flow 499

Retirement Tax Shelters 501

Business Expenses and Taxes 502

Reminders 503

Local, State, and Federal Taxes 504

Federal Laws Governing Employment 505

Legal Aspects of Contract Services 510

Complications in Discharging Employees 510

Reporting Tips to the Internal Revenue Service 510

Selling Liquor to Minors 511

Time Off to Vote 511

Wage and Hour Audits 511

Interpretation and Clarification of Government Regulations 512

Falls 512

Summary 513

Glossary 515

Index 529

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Preface A one-stop guide to the restaurant business, the Sixth Edition of The Restaurant continues the success of previous editions, providing all of the skills and infor- mation needed to master every challenge and succeed in this highly competitive and rewarding industry.

However, there are numerous hurdles to overcome before opening day. The good news is that, with careful planning, including the writing of a solid business plan, coupled with perseverance and a pinch of luck, the chances of success are improved. The opportunity to be the boss and call the shots is appealing. To be responsible for the buzz created and orchestrated is a rush. Maybe the concept will have legs. If successful, a restaurant operator might become a small-town, or even large-town, dignitary.

Restaurants are struggling with continuing economic uncertainties and ris- ing labor and other costs—particularly health care. The conditions for restaurant success change quickly, leaving financial scars on some operators. There are sev- eral new styles of restaurants, and delivery of their products and services has changed as well. Foods formerly considered exotic are now routinely accepted and expected. Taste titillation comes by offering interesting foods and flavor com- binations that challenge chefs and owners, and entice guests.

For the Student

Opening a restaurant is a distinct challenge. It is also a thrill that gives one the opportunity for tremendous creative expression. Developing the menu, creating a new dish, designing the decor, attending to the level of service, or establishing an ambience—these factors all contribute to exceeding the expectations of guests.

The Restaurant will help those who are interested in learning more about the restaurant industry. It will help students gain the knowledge they need to be successful in an easy-to-read style with several features like sidebars and profiles of successful restaurateurs that impart the knowledge of experts for your benefit.

For the Instructor

The Restaurant is a comprehensive primer for restaurant management courses at the college and university level. It is used for a variety of restaurant courses and covers everything from the concept; types of ownership; types of restaurants; menus, planning, and equipping the kitchen; purchasing; bar and beverages; opera- tions, budgeting, and control; food production and sanitation; restaurant leadership and management; organization and staffing; training and development; service and

xiv ■ Preface

guest relations; technology; business and marketing plans; financing and leasing; and legal and tax matters.

The Restaurant assumes no specific knowledge other than a general familiar- ity with restaurants. It can be used at any course level in a restaurant, hospitality, or culinary arts program. It is also suitable for seminars and continuing education courses.

Helping to meet the continuing restaurant challenges is the oncoming wave of students who have studied the culinary arts and restaurant management and who view the restaurant business as a career of choice. A restaurant can be fun to operate, and the profit margins can be substantial. It is interesting to learn that at least one billionaire, Tom Monaghan, made his fortune in the pizza business, and that dozens of millionaires have acquired fortunes in restaurants. Some of their stories are told in this book.

New to this Edition For The Restaurant, Sixth Edition , revisions include:

■ New reorganization of the chapters. Characteristics of restaurants, the menu and kitchens, and restaurant operations now comprise the first three parts of the text. Management, planning, and finance topics are now orga- nized in the last two parts of the book.

■ NEW! Chapter 10: Restaurant Leadership and Management. This new chapter defines the characteristics of being an effective leader as well as what it takes to successfully lead restaurant employees.

■ It’s easy being “green.” The themes of sustainability and sustainable restaurant management have been added throughout this new edition.

■ New sections on the early history of eating out and restaurants in America are included in Chapter 1.

■ An increased focus toward the independent restaurateur. ■ A new section on purchasing meat has been added to Chapter 6: Food

Purchasing. ■ New sections on cocktails, spirits, and nonalcoholic beverages have been

added to Chapter 7: Bar and Beverages. ■ New sections on the influences of Native American and African

American food have been added to Chapter 9: Food Production and Sanitation.

■ Greater emphasis on restaurant business plans, restaurant manage- ment, and restaurant operations.

Additionally, each chapter has been revised, updated, and enhanced with numerous industry examples, sidebars offering advice, charts, tables, photographs, and menus.

All these additions and changes enhance the contents, look, and usefulness of the book.

Preface ■ xv

Features

The Restaurant, Sixth Edition is carefully structured for teaching and learning. The chapters of The Restaurant are organized into five parts and take the reader step-by-step through the complicated process of creating, opening, operating, and managing a restaurant:

Part One: Restaurants, Owners, Locations, and Concepts

Chapter 1. Introduction Chapter 2. Restaurants and Their Owners Chapter 3. Concept, Location, and Design

Part Two: Menus, Kitchens, and Purchasing

Chapter 4. The Menu Chapter 5. Planning and Equipping the Kitchen Chapter 6. Food Purchasing

Part Three: Restaurant Operations

Chapter 7. Bar and Beverages Chapter 8. Operations, Budgeting, and Control Chapter 9. Food Production and Sanitation

Part Four: Restaurant Management

Chapter 10. Restaurant Leadership and Management Chapter 11. Organization, Recruiting, and Staffing Chapter 12. Employee Training and Development Chapter 13. Service and Guest Relations Chapter 14. Technology in the Restaurant Industry

Part Five: Business Plans, Financing, and Legal and Tax Matters

Chapter 15. Restaurant Business and Marketing Plans Chapter 16. Financing and Leasing Chapter 17. Legal and Tax Matters

AIDS TO FACILITATE LEARNING The writing in The Restaurant, Sixth Edition , is clear and engaging, in a conver- sational style using numerous industry examples for ease of understanding topics and concepts.

Following are pedagogical features found within each chapter:

■ Clearly stated Learning Objectives so students and faculty can monitor learning progress.

xvi ■ Preface

■ Numerous Industry Examples are interspersed throughout to help students understand the topics and concepts being discussed.

■ Interesting Sidebars highlight facets of the restaurant industry. ■ New Illustrations and Photographs enliven the text, and diagrams, flow

charts, and sample materials provide examples and focal points for discussion.

■ Restaurant Profiles are featured at the beginning of each of the five parts of the book. These profiles highlight a particular restaurant and detail all components of its organization.

■ Key Terms and concepts are highlighted in the text and described in the glossary. A list of these Key Terms is also provided at the end of every chapter.

■ Review Questions help hone the students’ skills and offer critical-thinking opportunities.

■ Internet Exercises provide opportunities to go beyond the book in search of information relating to the chapters.

Additional Resources

To aid students in retaining and mastering restaurant management concepts, there is a Study Guide (ISBN: 978-0-470-93045-8), which includes chapter objectives, chapter outlines, and practice quizzes that include key term and concept reviews.

An Instructor’s Manual (ISBN: 978-0-470-62645-0) and set of PowerPoint Slides to accompany this textbook are available to qualified adopters from the publisher, and are also available for download at www.wiley.com/college/walker.

The Test Bank has been specifically formatted for Respondus, an easy-to-use software program for creating and managing exams that can be printed to paper or published directly to Blackboard, WebCT, Desire2Learn, eCollege, ANGEL, and other eLearning systems. Instructors who adopt The Restaurant, Sixth Edition , can download the Test Bank for free. Additional Wiley resources also can be uploaded into your LMS course at no charge.

A companion web site (www.wiley.com/college/walker) provides readers with additional resources as well as enables instructors to download the elec- tronic files for the Instructor’s Manual, PowerPoint Presentations, Test Bank, and Respondus Test Bank.

John R. Walker, DBA, CHA, FMP McKibbon Professor of Hotel and Restaurant Management

and Fulbright Senior Specialist, University of South Florida Sarasota-Manatee

www.wiley.com/college/walker
www.wiley.com/college/walker
Acknowledgments For their insightful suggestions on this and previous editions of the text, I thank Dr. Cihan Cobanoglu, University of South Florida Sarasota-Manatee; Ken Rubin, CPA; Dr. Cora Gatchalian, University of the Philippines; Volker Schmitz of Cal- ifornia Cafe Restaurants; Dr. Jay Schrock of the University of South Florida; Dr. Greg Dunn and Dr. Katerina Annaraud of the University of South Florida Sarasota-Manatee; Karl Engstrom of Mesa College, San Diego; Brad Peters of Mesa College, San Diego; Dr. Andy Feinstein of California Polytechnic Univer- sity, Pomona; Dr. Karl Titz, University of Houston; Anthony Battaglia, Glendale Community College; Dr. Paul G. VanLandingham, Johnson and Wales University; Dan Beard, Orange Coast College; Marco Adornetto, Muskingum Area Technical College; Thomas Rosenberger, College of Southern Nevada; C. Gus Katsigris, El Centro College; Karl V. Bins of the University of Maryland—Eastern Shore; Marcel R. Escoffier of Florida International University; H. G. Parsa of the Uni- versity of Central Florida; and Chef John Bandman of The Art Institute of New York.

Thanks to the National Restaurant Association and to the restaurants that allowed me to include their menus or photos, and to these restaurant companies for their provision of resource information:

Burton M. Sack, Past President of the National Restaurant Association Charlie Trotter John Horn Red Lobster Restaurants Gary Harkness T.G.I. Friday’s Stephen Ananicz The Lettuce Entertain You Group The Hard Rock Cafes David Cohn and the Cohn Restaurant Group Dick Rivera Sean Murphy, The Beach Bistro Holly Carvalho Jim Lynde, Senior Vice President People, Red Lobster The Garcia Family John C. Cini, President and CEO of Cini Little U.S. Bank The Childs Restaurant Group Danny Meyer Culinary Software Services Outback Steakhouse, Inc. Union Square Hospitality

xviii ■ Acknowledgments

NCR ALOHA Technologies SYSCO Food Service Aria Restaurant B. Café Niche Panificio 21 Club David Laxer, Bern’s Restaurant Richard Gonzmart, Columbia Restaurants

And, finally, to the numerous restaurant operators who have graciously given their time and ideas, photographs, and menus, my sincere appreciation.

PART ONE

Restaurants, Owners, Locations, and Concepts

The Concept of B. Café

Courtesy of B. Café

B. Café is a Belgian-themed bistro offering a wide variety of beer and a cuisine that is a Belgian and American fusion. B. Café has three owners, Skel Islamaj, John P. Rees, and Omer Ipek. Islamaj and Ipek are from Belgium, and Rees is Ameri- can. The owners felt that there was a niche in New York for a restaurant with a Belgian theme. Out of all the restaurants in New York, only one or two offered this type of concept, and they were doing well. Since two of the owners grew up in Belgium, they were familiar and comfortable with both Belgian food and beer. Today B. Café offers over 25 Bel- gian brand beers, and the list is growing.

LOCATION

B. Café is located on 75th Street in New York City. The owners looked for a location for two years before

finding the right place. They came across the location after checking the area and finding a brand-new

restaurant whose owner offered to sell. According to owner Islamaj, going with a building that held

2 ■ Part One Restaurants, Owners, Locations, and Concepts

occupancy as a restaurant was ‘‘a good way to control cost.’’ They did some renovations and adapted what already existed.

MENU

B. Cafe’s third partner, John P. Rees (who is also the culinary direc- tor and executive chef) created the menu. The men wanted a menu that was a fusion of Belgian and American, but did not want to com- promise their ethnic backgrounds. They created a menu with many options that was not too ethnic as to alienate people. By doing this they hoped to target the main- stream.

PERMITS AND LICENSES

The building where B. Café is located today was previously a restaurant. This made the obtain- ing of permits and licenses a bit easier than it would have been had the building not been a restaurant before. Some of the licenses were transferred over. The owners hired lawyers to obtain other permits and licenses needed to gain occupancy. B. Café is a limited liability corpo- ration (LLC) with three owners. The owners of B. Café strongly recom- mend going with a preestablished site when opening a new restaurant.

MARKETING

The owners of B. Café were lucky to be well known in the food critic

and journalism community. Their preopening marketing consisted of contacting old connections, which landed them an article in a newspaper. They recommend that anyone who is considering open- ing a restaurant should send out a one-time press release.

CHALLENGES

The first main challenge for the own- ers of B. Café was finding the right staff. They also found organizing vendors and purchasing products (such as their beer) in quantity to be challenging because when you first open, ‘‘you have to buy, buy, and buy’’ to be sure that you have enough, but you don’t know what quantities you will need. You should also expect to go over budget. At minimum, you should take what your expected budget is and then add on 20 percent.

FINANCIAL INFORMATION

Annual sales at B. Café are expected to reach $1 million in the first year. They have about 540 guest covers a week. Guest checks average $38 per person. A break- down of sales percentages follows. . ■ Percentage of sales that goes

to rent: approximately 9 percent

■ Percentage of food sales: 85 percent

■ Percentage of beverage sales: 15 percent

■ They cannot estimate their percentage of profit (it is 0 percent so far), as the café opened three weeks prior to this interview.

WHAT TURNED OUT DIFFERENT FROM EXPECTED?

The sales the first week were as expected. Sales in the second week went down due to the holidays. This was not anticipated. Other than this, all went as planned.

MOST EMBARRASSING MOMENT

When I asked Skel Islamaj what his most embarrassing moment during opening was, he responded that on the day of opening, a customer ordered coffee. That is when ‘‘we realized that we forgot to order cof- fee!’’ There was none! All was okay though; a server went to a coffee- house and purchased some to get them through.

ADVICE TO PROSPECTIVE ENTREPRENEURS FROM THE OWNERS OF B. CAFÉ

1. Understand the business before you get into it.

2. Location, location, location! 3. Believe in your business, never

give up, and be persistent.

CHAPTER 1

Introduction LEARNING OBJECTIVES

After reading and studying this chap- ter, you should be able to: . ■ Discuss reasons why some peo-

ple open restaurants.

■ List some challenges of restau- rant operation.

■ Outline the history of restaurants.

■ Compare the advantages and dis- advantages of buying, building, and franchising restaurants.

Courtesy of Sysco

4 ■ Chapter 1 Introduction

Money

A Place to Socialize

Challenge

Habit

A Firm Lifestyle

Reasons for going into the restaurant business:

Express Yourself

Buyout Potential

FIGURE 1.1: Reasons for going into the restaurant business

Restaurants play a significant role in our lifestyles, and dining out is a favorite social activity. Everyone needs to eat—so, to enjoy good food and perhaps wine in the company of friends and in pleasant surroundings is one of life’s pleasures. Eating out has become a way of life for families. Today, more meals than ever are being eaten away from home.

The successful restaurant offers a reasonable return on investment. One restaurant, then two, then perhaps a small chain. Retire wealthy. To be a winner in today’s economy requires considerable experience, planning, financial support, and energy. Luck also plays a part. This book takes you from day one—that time when you dream of a restaurant—through the opening and into operation. What kind of restaurant do you want to run? Would you prefer quick service, cafeteria, coffee shop, family, ethnic, casual, or luxury? Most restaurant dreamers—perhaps too many—think of being in the middle of a restaurant with lots of guests; skilled, motivated employees; and great social interaction, food, service, and profits. The kind of restaurant concept you select determines, to a large extent, the kind of talents required. Talent and temperament correlate with restaurant style. Managing a quick-service restaurant is quite different from being the proprietor of a luxury restaurant. The person who may do well with a Taco Bell franchise could be a failure in a personality-style restaurant. The range of restaurant styles is broad. Each choice makes its own demands and offers its own rewards to the operator.

This book shows the logical progression from dream to reality, from concept to finding a market gap to operating a restaurant. Along the way, it gives a comprehensive picture of the restaurant business.

Going into the restaurant business is not for the faint of heart. People con- templating opening a restaurant come from diverse backgrounds and bring with them a wealth of experience. However, there is no substitute for experience in the restaurant business—especially in the segment in which you are planning to operate.

Chef-owner Bob Kinkead, of Kinkead’s Restaurant, Washington, D.C.

Courtesy of Bob Kinkead

So why go into the restaurant business? Here are some reasons others have done so, along with some of the liabilities involved. Figure 1.1 shows reasons for going into the restaurant business.

■ Money: The restaurant is a potential money factory. According to the National Restaurant Association (NRA) the restaurant industry totals $580 billion in sales.1 Successful restaurants can be highly profitable. Even in a failing economy the NRA is predicting restaurant-industry sales to advance 2.5 percent in 2010 and equal 4 percent of the U.S. gross domestic product.2 Few businesses can generate as much profit for a given invest- ment. A restaurant with a million-dollar sales volume per year can generate $150,000 to $200,000 …