Money Maker

Chef Mario Batali discusses celebrity, his biggest mistake, and cautions about the possible perils of opening a restaurant in this economic climate

As the owner of 14 restaurants, the author of six cookbooks, and a familiar presence on several TV shows, Mario Batali has entered the rarefied ranks of what is known as the celebrity chef. Born in Seattle and trained at Le Cordon Bleu in London, Batali became known to millions as the host of the Food Network's Molto Mario and Ciao America as well as an intense culinary opponent on Iron Chef America. Batali, who recently kicked off his PBS television series Spain…On The Road Again (with his friend Gwyneth Paltrow), spoke with BusinessWeek's Stacy Perman about starting a restaurant in a bad economy and keeping it going in an industry known for its high failure rates (BusinessWeek.com, 4/16/07). Edited excerpts of their conversation follow.

You opened your first restaurant, Babbo, in 1998. Having just opened your 14th restaurant in September, do you find that it is easier or harder to open another eatery given your track record? Is there pressure to outdo yourself?

It doesn't get easier. You can predict a lot of snafus and be prepared for them. That said, each location is different with a different set of dilemmas and problems that arise.

How did you make the switch from chef to restaurateur?

I still like to think I'm a chef. That said, I realized as I was moving in and around the kitchen, it was kind of the financial center of operations. All of the decisions that you make affect the bottom line.

Then would you say that there are a particular set of skills in being a chef that is directly translatable to being in business?

It happened naturally, but I have a business partner, Joe Bastianich. We each have a different perspective, and we've learned a lot from each other about the front of the house and the back of the house and wine along the way.

What do you account for your success?

I think at the end of every month when someone looks at their credit-card bill and looks at the name of a place and how much they spent there, whether it was $220 at Babbo for two or some place else, they equate it with remembering the experience. [If they think,] yes, it was worth it, they will go back at any price point. That is what keeps people coming to our restaurants.

What do you think of the phenomena of the celebrity chef?

It certainly worked for me. A funny thing happened socially 20 years ago. [Back] then people went out to a show and got a bite or to a game or the opera. Now, there is a fascinating amount of information on how to cook. What happened is suddenly cooks are the performers and actors. People make reservations at restaurants a month in advance—at mine, I hope. People send fan letters. They call us celebrity chefs and there is a brand recognition in what we are selling and making. It is free publicity but it takes a lot of time to make those shows. The only real celebrity chefs are Wolfgang Puck and Emeril Lagasse. Paul Prud'homme was the first. I'm on the B-tier. Julia Child was a famous cook but she was not a restaurant chef.

What were some of the biggest lessons you learned along the way?

Clearly the people are the true gold supply in a restaurant, and they are not as quickly or easily replaceable as you may imagine. I'm talking about everyone from the coffee maker to the bartender to the captain. You have to have everyone committed, and you have to commit to them.

What would you say was your biggest mistake?

Letting people get lured away by people offering them 10% more. The big lesson is that you do not have to make all the money—you can share a lot of it.

What would you advise a young restaurateur wanting to open a restaurant in this economy?

I would advise them to wait. This bailout could be a disaster or a bump in the road. But if you have the capital and the real estate, proceed.

Customers are not looking for exotic, hot restaurants—now they want comfort, something they can afford. There are still lots of people with disposable income. Our restaurants are still all up compared to last year.

What would you say is a reason to open a restaurant?

The main reason is because you love the business of making food and beverage available to customers. They come in and you treat them like special members of your family or a fan base. It is evident to anybody who talks to me that I love to go to my job and that I am not looking at the clock to see that there are only two more hours until I can go home. I look at the clock and say, I should have gone home two hours ago. You have to love it, or it's a job and then you should do something else, because owning a restaurant is fraught with risk. The first year failure rate is 70%.

Why is the restaurant business such a risky venture?

I'd say it is because most restaurants are usually undercapitalized. What happens is lots of people come over to your house for dinner and they say you should open a restaurant. But opening up a restaurant is so much more than just being a good cook. That is the hard thing for a lot of people to understand: it's about purchasing up the volume without compromising.

For example, there's somebody's Italian aunt who is a great cook. Somebody says we'll back you in a restaurant—it is every mom and pop's dream. They get a critical review and they do one full seating and all of sudden they have twice as many people coming. Suddenly, auntie is tired of trying to figure out how to make more lasagna and she makes compromises, she let's others do the work, and they don't pick it up or don't capture it the way she has and suddenly her great food is lesser food. It happens in no time. There is no time to properly manage things, and the customers recognize that immediately. They come in less and less, and the hot restaurant six months ago is no longer hot. It's not an indictment, but if you don't carefully keep a watch on things, you can go from a really good cook to just O.K.

How have you avoided that fate?

I've not avoided it at all. There are a lot of angry people out there on the blogs masked by anonymity. They are the most vicious people in the world. I've developed a real thick skin, but every time I'm feeling real good, I go on those blogs.

Perman is a staff writer for BusinessWeek.com in New York.

How do you know whether you can be a successful entrepreneur, or if you are better off as a salaried employee? While there is no surefire formula for success, studies have shown that successful entrepreneurs share these ten characteristics. Check if you possess any one of them.

By Isabel M. Isidro
Managing Editor

Running a one-person business is a creative, flexible and challenging way to become your own boss and chart your own future. It is about creating a life, as it is about making a living. It takes courage, determination and foresight to decide to become an entrepreneur. From the relatively safe cocoon of the corporate world, where paychecks arrive regularly, you will be venturing into the unchartered territories of business.

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Is there a way to determine whether you can be a successful entrepreneur, or you are better off to work for somebody else? Alas, there is no formula for success. However, most successful entrepreneurs share these ten characteristics. Check if you possess any one of them:

1. Think success. To attain the kind of success that you want, you need to dream big. Every success story starts with big dreams. You need to have big dreams for yourself - which you want to be somebody rich, famous or fulfilled. You need to have a clear vision of what you want to achieve. But it doesn't stop in dreaming alone. You should actively visualize success in your mind that you can almost feel it, touch it or it is within your reach. Play this image back at every opportunity. What does it feel to triple your current income? How will your life change? What will your business look like if you achieved the million-dollar mark?

Successful entrepreneurs possess an attitude of openness and faith that you can have what you want if you can simply envision it as the first step on the path of action to acquiring it. Management gurus have taught us the power of visualization - seeing yourself in your mind as having accomplished your dreams. If you want to be a successful writer, envision yourself signing books for a throng of people who have lined up to have your autograph. If you want to be rich, picture yourself in luxurious surroundings holding a fat bank account. And the process of envisioning success for you should be a constant activity! You need to think that you are successful (or will be one) every single waking hour. A personal development coach shared me her secret to help her continuously visualize her goals for the moment: when climbing stairs, recite your goal with every step you take. So if you want more money, say "I will have money" in every step of the stairs. This technique will reinforce your goal and keep it fresh in your consciousness.

2. Be passionate with what you do. You start a business to change any or all part of your life. To attain this change, you need to develop or uncover an intense, personal passion to change the way things are and to live life to the fullest. Success comes easily if you love what you do. Why? Because we are more relentless in our pursuit of goals about things that we love. If you hate your job right now, do you think you will ever be successful at it? Not in a million years! You may plod along, even become competent at the tasks, but you will never be a great success at it. You will achieve peak performance and do what you have to do to succeed only if you are doing something that interests you or something that you care about. Entrepreneurs who succeed do not mind the fact that they are putting in 15 or 18 hours a day to their business because they absolutely love what they do. Success in business is all about patience and hard work, which can only be attained if you are passionate and crazy with your tasks and activities.

3. Focus on your strengths. Let's face it; you cannot be everything to everybody. Each of us has our own strengths and weaknesses. To be effective, you need to identify your strengths and concentrate on it. You will become more successful if you are able to channel your efforts to areas that you do best. In business, for example, if you know you have good marketing instincts, then harness this strength and make full use of it. Seek help or assistance in areas that you may be poor at, such as accounting or bookkeeping. To transform your weakness to strength, consider taking hands-on learning or formal training.

4. Never consider the possibility of failure. Ayn Rand, in her novel The Fountainhead, wrote, "It is not in the nature of man - nor of any living entity, to start out by giving up." As an entrepreneur, you need to fully believe in your goals, and that you can do it. Think that what you are doing will contribute to the betterment of your environment and your personal self. You should have a strong faith in your idea, your capabilities and yourself. You must believe beyond a shadow of a doubt that you have the ability to recognize and fulfill them. The more you can develop faith in your ability to achieve your goals, the more rapidly you can attain it. However, your confidence should be balanced with calculated risks that you need to take to achieve greater rewards. Successful entrepreneurs are those who analyze and minimize risk in the pursuit of profit. As they always say, "no guts, no glory."

5. Plan accordingly. You have a vision, and you have enough faith in yourself to believe that you can achieve your vision. But do you know how to get to your vision? To achieve your vision, you need to have concrete goals that will provide the stepping-stone towards your ultimate vision. Put your goals in writing; not doing so just makes them as intangible fantasies. You need to plan each day in such a way that your every action contributes to the attainment of your vision. Do you foresee yourself as the next Martha Stewart of hand-made home furnishings? Perhaps today, you need to see an artist to help you conceptualize the new line of hand-made linens that you hope to launch. Intense goal orientation is the characteristic of every successful entrepreneur. They have a vision, and they know how to get there. Your ability to set goals and make plans for your accomplishment is the skill required to succeed. Plan, plan and plan - because without which failure is guaranteed.

6. Work hard! Every successful entrepreneur works hard, hard and hard. No one achieves success just by sitting and staring at the wall every single day. Brian Tracy puts it out this way, "You work eight hours per day for survival; everything over eight hours per day is for success." Ask any successful businessperson and they will tell you immediately that they had to work more than 60 hours per week at the start of their businesses. Be prepared to say goodbye to after-office drinks every day, or a regular weekend get-away trip. If you are in a start-up phase, you will have to breathe, eat and drink your business until it can stand on its own. Working hard will be easy if you have a vision, clear goals, and are passionate with what you do.

7. Constantly Look for Ways to Network. In business, you are judged by the company you keep - from your management team, board of directors, and strategic partners. Businesses always need assistance, more so small businesses. Maybe the lady you met in a trade association meeting can help you secure funding, or the gentleman at a conference can provide you with management advise. It is important to form alliances with people who can help you, and whom you can help in return. To succeed in business, you need to possess good networking skills and always be alert to opportunities to expand your contacts.

8. Willingness to Learn. You do not need to be a MBA degree holder or PhD graduate to succeed in your own business. In fact, there are a lot of entrepreneurs who did not even finish secondary education. Studies show that most self-made millionaires have average intelligence. Nonetheless, these people reached their full potentials achieved their financial and personal goals in business because they are willing to learn. To succeed, you must be willing to ask questions, remain curious, interested and open to new knowledge. This willingness to learn becomes more crucial given the rapid changes in technologies and ways of doing business.

9. Persevere and have faith. No one said that the road to success is easy. Despite your good intentions and hard work, sometimes you will fail. Some successful entrepreneurs suffered setbacks and resounding defeats, even bankruptcy, yet managed to quickly stand up to make it big in their fields. Your courage to persist in the face of adversity and ability to bounce back after a temporary disappointment will assure your success. You must learn to pick yourself up and start all over again. Your persistence is the measure of the belief in yourself. Remember, if you persevere, nothing can stop you.

10. Discipline yourself. Thomas Huxley once said, "Do what you should do, when you should do it, whether you like it or not." Self-discipline is the key to success. The strength of will to force yourself to pay the price of success - doing what others don't like to do, going the extra mile, fighting and winning the lonely battle with yourself.

Gas prices are soaring. Food prices are up. Unemployment is still relatively low, but the pervasive feeling is that nobody’s job is safe right now. Let’s face it, we’re all a little nervous. But the U.S. economy is a cyclical animal. What goes up must come down. Then, it always goes up again.

Despite the flagging economy, a reputable and proven business opportunity can be just the right option for many people. Whether you’re a stay-at-home mom who wants to make a little extra income, a retiree who’s finding your expenses are going up on a fixed income, someone who has been laid off or downsized, a recent grad who’s finding it hard to land that first job, or even just someone who wants to make a change, a business opportunity can re-energize you and allow you greater control over your own time and financial future.

The Current State of Home-Based and Other Small Business

America’s small businesses comprise the world’s third largest economy. Only the total U.S. economy and Japan’s are larger and home-based businesses represent more than half of those. Many of them are very successful. In fact, it’s estimated that over half of home-based small businesses will survive five years or more, and that the average income for income-generating home office households is $63,000 per year. And that’s just the average. In 2000, nearly 20,000 of them hit the $1 million mark, and that number has surely grown. The bottom line is that small business, and specifically the home-based business sector is booming and it’s actually revolutionizing the way America gets the job done.

As larger companies decentralize their operations in an effort to cut costs, outsourcing of everything from writing and accounting services to technical support, landscaping and lunch hour concessions, and every conceivable thing in between, has become commonplace. If you do your homework, you can find your own niche in any given marketplace or geographic area, even when the economy is in a temporary downturn. Of course, you also need a plan for how your products or services will set you apart from everyone else. Lower prices, better customer service, a particular specialty or unique mix of goods and services are just a few because that’s just good business sense. But, by choosing your business opportunity wisely and through careful planning, you can succeed no matter what the economic climate.

Now, Are You Really Ready To Be An Entrepreneur?

No matter what your background, you really need to ask yourself one very important question before you seek out a business opportunity. Am I an entrepreneur? It may sound silly, but knowing the actual definition of that word and, more importantly, your answer to it is crucial to your potential success.

According to Webster’s Dictionary, an entrepreneur is someone who wants to organize and manage a business undertaking such that he/she will assume all the risk for the sake of the profits. The key word here is risk. Owning your own business is always risky, no matter what the state of the economy. And some would even argue that there’s no better time to launch a business because if you can cut it when times are bad, you are really poised to succeed when things improve. They always do.

Being your own boss is hard work, but by choosing an established and proven business opportunity, you’ll be making your first, sound business decision. Here’s why…

Low Barrier to Entry

Unlike many franchises, home-based business and a number of other small business opportunities require a relatively small up-front investment, often times as little as $1,000 to $5,000. Also, once you pay for your business opportunity, there are no regular fees, other than the ongoing investment in what you may need from the seller to sustain your own operation, and even then, you decide how much and what to sell to meet your own financial goals. As a result, you’re overall risk is greatly minimized. And don’t forget the tax right-offs for home-based and other small businesses can be significant, offsetting many of your costs, especially in the first year.

Flexibility, Convenience and Money in Your Pocket

When you purchase a business opportunity, you have the flexibility to do it on a part-time basis and to put as much or as little effort into your own success as you see fit. According to Linda Miller, an independent distributor for Scent-sations, Inc. offers a home-based business opportunity utilizing their unique line of all-natural gourmet candles, bath and beauty products, “The part-time option is huge in this economy. You can basically get started on a shoe string, if you need to, and build from there,” she says. And, you can’t underestimate the time and money saved by not commuting and eating lunch out, buying a designer wardrobe and putting gas in the car.

Some of the Hardest Work Is Done for You

Perhaps the most appealing aspect of buying a business opportunity, particularly in an economic slow-down, is that it allows you to be your own boss and chart a course for your own success using someone else’s well-established and hard-earned map. “One of the benefits is that we’ve already gone down the hard road before you,” explains Campasano. “A person who is motivated and has the drive to succeed can just step in the footsteps we’ve already laid in the snow and, with our full support, get there in half the time it took us,” he says.

A given business opportunity can be just the right fit for any one person, depending on his or her specific circumstances. But, when the economy is at all questionable, one key element must always be considered as you evaluate your options.

The Key Element to Look For In a Business Opportunity

“When you are evaluating a small business opportunity, you have to choose a product or service that is high quality, consumable on an ongoing basis, has mass-market appeal and is competitively priced,” says Miller. In fact, it’s been her experience that people will seek out quality products and services in a struggling economy more readily because every dollar counts. “Certain products will sell regardless of the economy because quality is even more important in bad times when people need to know what they’re getting for their money,” she says.

Both Dominic Campasano and Linda Miller can attest to that theory first-hand. Their two companies have experienced and anticipate nothing but strong, if not greater, profits this past year and into the foreseeable future. “Despite a less than stellar economy, not only are we not dropping in sales, we’re increasing,” Campasano says. And that’s good news for those of you who want to take his and Miller’s lead.

Data sources: U.S. Small Business Administration; National Black Business Trade Association (NBBTA)