By Nina Wu
He’s one of the only people in The City cashing in big on the restaurant industry this year. After helping out in his father’s restaurant chain, Zim’s — a burger and milkshake joint in The City — Steve Zimmerman went on to work in real estate. Now he’s the president of Restaurant Realty Company, with close to 250 sales since 1996.
Nina Wu: How long does the average restaurant last in The City?
Steve Zimmerman: I have heard that close to 90 percent of independent restaurants that start out in year one go out of business. The statistics are reversed for franchise restaurants.
Q: What happens?
A: They can’t make it. They have a misconception as to what it takes to be successful. They miscalculate.
Nobody can project all the future variables. Who knew that 9/11 was coming? Restaurants have hurt badly, especially South of Market.
Q: What’s the most common mistake that restaurateurs make?
A: I would say it’s a combination of under-capitalization — they don’t have enough money. They opened a restaurant and don’t have enough working capital to keep going.
Q: They’re all optimistic, of course.
A: The ones that have a propensity to succeed are certain ethnic groups, especially Asians.
Q: Really. Why?
A: Because they have a high work ethic and they sort of join forces with the family.
Q: Do you relate to that work ethic? Where does your work ethic come from?
A: It comes from the way I was raised. When you’re raised in the restaurant business, you work all the time.
We had 24-hour restaurants open seven days a week. Working weekend and nights was the norm. I didn’t think twice about that.
Q: Your father was the first one (in your family) who got into the restaurant business.
A: He got drafted during World War II. He went into the infantry in Germany and came back from the war and had this great juicy burger/big milkshake idea that he used to talk about with his buddies.
He raised $1,000 and opened this 22-seat counter restaurant with stools and a U-shaped counter with a fountain in the middle and open kitchen. The original hamburger price was 45 cents in 1948. Coffee was only a nickel. It really took off.
Q: Did you want to work in the restaurant business because you grew up with Zim’s?
A: I wanted to work in restaurants at an early age. I was the only son….. it’s the tradition to carry on the family business.
Q: What interested you in becoming a broker?
A: I like doing deals. There’s only about 4,000 business brokers in the United States. It’s a very small field.
Q: So it’s a small niche.
A: It’s a small niche, but actually, if you’re good, there’s plenty of business.
Q: But you have to be good.
A: You have to be very good. The reality is that about 5 percent of the brokers do about 95 percent of the business.
Q: What are the prime spots to open a restaurant in The City?
A: Noe Valley, Upper Fillmore. Castro, Inner Irving district, Chestnut Street, Union Street.
Q: How much does a restaurant go for?
A: The average? Probably $150,000. They will vary anywhere from $50,000 to a million dollars.
Q: The longest and shortest time you’ve ever had a restaurant on the market?
A: Longest time is about two years. The shortest time is one week.
Q: Are prices going down now because of the economy?
A: When unemployment goes up, there are more buyers in the market.
A: Because they’re unemployed. People need a job. So, in a lot of cases, people who are unemployed may join forces with a partner that has food service experience and they end up being the buyer pool.
I have a lot of stockbrokers looking to buy bars. There’s a big demand for bars right now.
Q: So it’s a good time for you.
A: What I do is recession-proof. Because of the nature of the business, there’s high turnover all the time. This is going to be the best year I’ve ever had.
Q: Do most people buy a restaurant because they’ve always dreamed of owning a restaurant?
A: It’s a very ego-driven business. But if that’s the only reason they go into the business, it’s the wrong one.
Q: During the dot-com boom, what happened to restaurant real estate?
A: With the dot-com boom, people were just irrational, so there was a lot of money flying to every segment of business probably.
There were a tremendous number of restaurants that opened South of Market that are no longer there. I’m trying to sell some restaurants South of Market right now. It’s very slow. Vacancy is tremendous.
Q: Have you ever thought of buying a restaurant again?
A: Not at all. I like to do deals. I enjoy the certain highs that go with putting a deal together — and every deal is different.
Q: What percentage do you get out of every sale?
A: 10 percent. That’s standard.
Q: Do you go to five-star restaurants?
A: I’m not a big foodie. I love burgers, fries and milkshakes. I don’t have a fancy palate.
Q: Is it smart to follow the trends to stay competitive here?
A: I think you have to have a good core concept and some of it can be according to trendiness, but you have to have a good, solid base. Things that are strictly trendy have a higher probability of failing.
Q: What was your best year and worst year?
A: My best year is this year. My worst year was the year I started.