Hello from Seoul! I apologize for being late with my weekly missive and planning two newsletters this week to make it up to you all! It’s been four years since I’ve been in Korea, and we finally were able to take our toddler to meet grandparents and the rest of our family and friends. Also, we have some work meetings and picking up some things for our new restaurant along the way. All of the miles and points we’ve been accumulating over the past three years are proving their worth! More from our Korea trip in future Sook dispatches…
This week, I want to write about a topic that isn’t often discussed publicly, and rarely discussed in detail even among restaurant friends – the financials of the restaurant business. In fact, as I write this, my cheeks are flushed because it feels quite odd to be writing about finances! I’m calling this series Show Me the Money, at least for now. My jet-lagged brain can’t think of anything better at the moment. Suggestions always welcome! We have been knee-deep in fine-tuning our opening budget and in discussions with potential investors while exploring our options for raising money for our restaurant. So this week, I’m going to kick off this series with an introduction to how baroo, and especially Kwang, approaches opening a restaurant.
What does it cost to open a restaurant? I can’t speak to what a large restaurant group or a restaurant with big backers might spend. Before the pandemic, you might read in the news that a restaurant cost $4 million to open, for example; and that is not a world in which our restaurant exists. I’m not sure any restaurant, in LA at least, exists in that world anymore. Actually, as I write this, I realize there are probably some very flush investors and developers working on flashy, luxe projects in West Hollywood or Beverly Hills or somewhere like that that will prove me wrong. I recently read Daniel Boulud is opening a restaurant in Beverly Hills this year, and I’m sure his budget is not paltry.
In the before times, for small-scale restaurants more similar to new baroo, we have heard of people spending somewhere around $1 million or a bit more to open. But it appears to us, the pandemic and all the resulting stress has made it very difficult for many independent restaurants to make a 7-figure starting budget work. But again, I’m just guessing. Baroo doesn’t exist in this $1 million dollar world either.
As I’ve mentioned in my dispatches on our location search, we have a very small budget, especially for a fine dining restaurant (more on that next time!). But the budget we’re working with is multiples of any amount in baroo history. Let me first walk you through the baroo budget mindset…
Baroo 1.0 (2015)
For anyone who’s dined at the first baroo in the East Hollywood strip mall at the intersection of Santa Monica Boulevard and Wilton Place, you won’t be surprised to hear that not much was spent on renovating the space, either the kitchen or the dining room.
Kwang and his former business partner painted the walls and floors themselves, painted the chalkboard menu on the wall. They didn’t hire cooks or cashiers. When you came to baroo, either Kwang or his business partner would take your order and then go back into the kitchen and the two of them cooked every dish. There was no outdoor sign which some people thought was intentional to seem cool and underground, but was simply because they didn’t have the money to pay for a sign.
You may be surprised to hear that it still took $100,000 to open baroo. This amount included $55,000 key money paid to the Thai noodle restaurant that occupied the space. Key money is the amount often asked by the existing restaurant tenant for their equipment and furniture; i.e. the amount to buy them out of the space. The rest of the funds were used for working capital, to buy some equipment and things like Ikea chairs and shelving, some lighting from Amazon, and a wooden communal table from the Rose Bowl Flea Market.
Kwang borrowed $50,000 from his business partner’s family to come up with his half of the starting costs. To repay that loan, Kwang slept in the restaurant on an air mattress for almost two years rather than spend money on rent. He explains that since he was always working and would only have been at home for 5-8 hours a day anyway, he considered it a waste to pay rent. He spent almost nothing during this time other than on cookbooks and some late night, post-service food delivery, and paid back the loan as soon as he could.
I’m not aware of any other James Beard semi-finalists who slept in their restaurants for almost two years to fulfill their dream of having their own restaurant. But that’s Kwang.
Baroo Canteen (2019) and Shiku (2021)
For our next projects, Baroo Canteen (2019) and Shiku (2021) took a similar thrifty approach to opening. For Baroo Canteen, which was a nine-month pop-up, we had to pay around $6,000 to the former tenant to buy or rent the existing equipment. We also had to pay a small deposit and acquire restaurant insurance and a health permit, which was inexpensive since we just had to transfer the existing permit to our name. We bought one used grill from a Korean used restaurant equipment warehouse, which we have now vowed not to frequent anymore because as-is condition sometimes doesn’t work out, as you probably know.
For Shiku, we did have to spend larger amounts than ever before to build out the front of our stall and around $8000 for a neon sign that all of the vendors in our food hall are required to have. We love that sign, but it’s partially stopped working and we are still trying to figure out how to get it repaired affordably.
I think our most extravagant expense that wasn’t technically required was to pay a graphic designer in Korea to design logos for baroo and Shiku and do simple websites for both. And we debated whether or not we could just design websites on our own using Squarespace templates. If I were more tech and design savvy, we probably would have saved that bit more.
While you could say we are cheap, where we do prioritize spending money is on ingredients, our team and our community. We tried so many cuts of pork belly for Shiku and went with a supplier that is more expensive but for us, had the right ratio of fat to meat and produced the best texture. And for a small restaurant, we try to pay our team fairly and provide help where we can like paying for everyone’s parking passes at Grand Central Market and giving a monthly stipend to offset health insurance costs. We have big hopes of providing even more for our team once Shiku is more profitable. We also make sure we support local community organizations we love through donations, both monetary and in-kind.
And this is the foundation of the baroo attitude towards finances which is based in practicality, but also compassion, and without ego or concern for what others think.
The thrifty part doesn’t come naturally to me, frankly. So, it was a struggle for me at the beginning to adopt this frame of mind. But after the pandemic, and after witnessing the closure of many beloved restaurants and working so hard to get Shiku on stable footing (still working on that), I now will be the loudest champion for stripped down opening budgets. I would rather sacrifice nice tilework to be closer to stability and provide a little more for our team and community.
In many ways, baroo is more aligned with what I think of as a traditional first-generation immigrant approach to business. Which makes sense since Kwang is technically first generation. No nonsense, no frills, look for the best deals, be willing to make huge sacrifices for the business to succeed and to take care of your family. We hope that our businesses can be as long-lasting as many of the first generation restaurants we cherish.
Now our challenge is to see how we can apply this approach to our fine dining dreams. More on that in the next dispatch later this week.
xx Mina
Nice post! BUt ... you folks won’t be at central market this weekend? :-(
This is incredible. Thank you for being transparent about how much it costs to open a restaurant, and sharing what it took to get baroo out there.
Nothing but admiration for the food, atmosphere and inviting community you’ve created. Also had no idea about the air mattress. That’s hard work and sacrifice! Looking forward to seeing baroo in the Arts District.