How to Open a Restaurant - The 13-Steps Success Guide

How to Open a Restaurant - The 13-Steps Success Guide

October 15, 2021

A Step-by-Step Guide on How to Start Your Own Restaurant Business

Many people want to open a restaurant, although many aspiring restaurant owners abandoned their plans because of the COVID-19 pandemic. It forced most establishments to stop serving meals indoors or even shut their doors altogether.

The coronavirus is still having an impact on restaurant owners as the restaurant industry tries to recover. As a result of the challenge, the food service industry has implemented new working practices and expanded revenue sources.

Many experts think that developing a successful restaurant is still viable. So we've compiled a step-by-step guide to answer the question - exactly what do you need to start your restaurant?

What are the requirements to start a restaurant?

  1. Legal: You need to comply with local laws according to the state where you start your food business. The first stop would be city hall to find out about the laws in covering restaurants. Then, there's food safety training, licensing requirements, getting a health inspector booked before opening, and organizing contracts with employees (with federal requirements like minimum wage, overtime pay, etc.).
  2. Non-legal: Start by looking for a space. Once you find the right location, figure out what cuisine you will serve. Next, you'll need to develop a full menu that includes appetizers, entrées, desserts, beverages, and finally, hire staff. But you can't just start a brick-and-mortar restaurant business without putting some thought into it. Starting a business is easier when you do it step by step. So let's dive in and discover how to start your own restaurant business.

1. Decide the concept of your restaurant

Thinking about starting a restaurant? The first step is to come up with your concept. What does this include? It describes the kind of restaurant and food and the method of customer service. The restaurant interior design should reflect this concept. Need some help? Here are a few ideas for restaurant concepts:

  • Mobile food trucks - comfort food served locally or for delivery
  • Casual dining - casual eatery specializing in create-your-own dishes
  • Upscale gourmet dining - selection of gourmet dishes with higher price points
  • Catering business - cater for events, weddings, and other clients
  • Convenience restaurant - popular menu choices prepared quickly for people on the go

Everything from the business name, the logo, the design of the menu, and other items should all work together to form a coherent brand image. Brand identity is critical in defining your approach to advertising channels. More on branding later.

Who are your target customers? Do you have a potential site for your restaurant? Consider the local demographic to make sure the restaurant's location can support your concept.

2. Write a restaurant business plan

A comprehensive business plan is critical for starting a new business. Writing one may be challenging if you don't know the business planning process. But many startup restaurants fail because they don't plan. Even if you open a small restaurant, you should have a comprehensive overview of your planned business, including everything from the menu to finances. The plan assists you in compiling detailed information and summarizing your restaurant venture for any potential investors. Yes, when you seek startup capital, investors expect to see a solid business plan to back up your claim that the restaurant will be profitable.

So what do you include in your restaurant business plan?

Here are the main elements:

  • Summary - The first section is the executive summary, which should be written last and summarize the main points of your plan.
  • Overview - In this section, include your mission statement and expand on what you outlined in the executive summary section. Provide more details and dive deeper into your plans.
  • Concept & Menu - Explain how you came up with the restaurant concept, why it will work, and how you designed the menu to be profitable.
  • Business Structure - Describe the ownership structure of the business: sole proprietor, business partner(s), or limited liability company.
  • Staffing Needs - Present a realistic estimate of the staff the restaurant needs.
  • Competitor Analysis - You must research any competitors already operating in the area.
  • Market Research - You need to know the demographics in your selected location. Refine your ideal 'customer persona' so you can target your marketing efforts.
  • Marketing Plan - Choose the optimal marketing strategies based on the research completed previously.
  • Financial Projections - This part is vital to securing funding. The business model should show a sales forecast and define the break-even point.

3. Get investment to fund your restaurant business

Few people can open a restaurant without additional funding. So how can you secure funding? Start by calculating the total startup costs and day-to-day operational costs. You can then create a working budget and predict your restaurant's yearly costs using this data.

How much cash do you have for investing? What is the shortfall? Include costs for licensing, equipment, building maintenance, repairs, and employee salaries in your calculation of the restaurant funding you require. This will give you a good idea of the working capital you need to get started.

Where can you raise money? There is a wide variety of restaurant financing options:

  • Bank Loan - Most banks provide commercial loans and at low interest rates. Collateral is necessary, and you need an excellent credit rating. A bank loan is one of the most affordable ways to raise finance at a low cost.
  • Business Line of Credit - You can obtain a business line of credit with a maximum borrowing limit. Interest is charged as you spend the cash; nevertheless, lending requirements are stricter, and borrowing limits may be less than with other kinds of loans.
  • Small Business Loan - Many banks collaborate with the SBA (Small Business Administration) (SBA) to provide small business lending. Even if your credit is marginal, you may get a loan, and the SBA's standards offer protection for lenders and small business owners. You need to put up collateral, and the approval process can be lengthy.
  • Crowdfunding - If you're looking for a way to fund your food truck or restaurant startup, there are several options. The most popular ones include Kickstarter, FoodStart, Indiegogo, and GoFundMe, which are excellent sources for reaching investors willing to consider restaurant loans.

4. Evaluate restaurant costs involved

Restaurant expenses consist of rent, staff salaries, utilities, equipment costs, and supplies. Other costs include marketing and promotions, new menus, signage, or decor. Some restaurants order food in bulk through an outside supplier while others purchase fresh produce daily. Operating costs for a restaurant vary depending on the location and the type of restaurant.

What is the cheapest way to start?

If the restaurant turns out to be successful, you can then look for real estate or pursue other options for opening. Sometimes location plays an important role in determining costs.

What is the minimum I should budget for starting a restaurant?

A variety of factors play into the total start-up cost for a restaurant. In addition to location, other factors can include whether or not you plan to own the building, design and construction costs, equipment needs, kitchen layout, and design, types of service offered (table service or quick-serve), licensing fees, and insurance premiums.

You should allow a minimum of $100,000 to $150,000 for opening a restaurant. This figure does not include any marketing or financing costs that you may incur.

How much is it to build a restaurant from scratch?

Without all the details of size, style, design, it's impossible to give an accurate estimate.

But building a restaurant from scratch can be expensive!

Contractors charge about $250 per square foot for constructing commercial office space from scratch. Restaurants cost more because they need extra work such as extraction and ventilation systems. That means you could spend tens of thousands of dollars extra just on labor costs fitting it out.

In the grand scheme of things, it might save you money in the long run if you rent a location instead of buying one. Many small businesses rent commercial space initially, as it is less expensive than purchasing outright. You might also benefit from any tenant improvement allowance provided by the landlord.

How much does it cost to open a to-go restaurant?

Startup costs vary depending on the location you are looking at. They could be anywhere from $40,000 to $120,000. This includes rental expenses, food permit fees.

The size of the restaurant will also play a role in determining how much money is required to get it started. You should remember that many restaurants do not succeed even if everything is done right and researched thoroughly.

Quick-service restaurants are usually more expensive than full-service restaurants because many landlords want fast-food restaurants with drive-thrus. So consider the service style when planning your restaurant.

5. Create your menu

Next, you need to create your menu. You probably have a good idea of the menu items you want to include, but make sure you do so thoughtfully. Why is the kind of food you serve crucial? Because it will influence the new equipment you buy, the employees you hire, and the clientele you attract.

A chef may well need equipment for different cuisines. For example, if you want delicious French pastries for desserts, you need to recruit an experienced French pastry chef. If your concept revolves around pizza, you need to buy commercial dough mixers and specialist pizzaiolos.

Consider your target customers. If you open in a college town, gear your cuisine toward college students. But, if you're unwilling to compromise on your desire to open a fine dining restaurant, you must select a place where the clientele is willing to pay higher prices.

With your concept and clientele defined, you can get to work on creating the perfect menu selections - dishes that are appealing to customers and generate profits for you!

6. Decide the location of your restaurant

How do you decide where to establish your new restaurant? You need to consider the following crucial questions:

  • Is the site visible and accessible? - Choose a spot easily seen from the road or in a high foot traffic area. Consider car parking and how easy it is for people to arrive. The site should be easily accessible to attract customers.
  • What is the local demographic? - Be sure your restaurant's target market matches the demographic of surrounding neighborhoods.
  • Is there competition? - Observe and study the restaurants in the area. You need to find a location where your restaurant will thrive but won't be threatened by too many competitors.

We recommend that you lease space initially. Why? If you plan future development, expansion, or relocation after establishing your business, leasing allows for greater flexibility.

7. Restaurant permits and licenses

Startup restaurant costs don't only cover equipment and staff. The restaurant industry is heavily regulated, and you must comply with local, state, and federal requirements for licenses and permits. Before applying for a restaurant permit and license, consult an experienced attorney for legal advice to guarantee you don't overlook anything.

The following are some essential licenses and permits needed:

  • Business License - In the United States, every restaurant must have a license to open. Which type of license, the cost, and renewal frequency vary from state to state.
  • Employer Identification Number - Apply for an EIN as soon as you can. Approval takes time, and you need it to legally hire individuals and for payroll.
  • Food service License - For any kind of food service operation, you need a license. Your restaurant needs to meet the required food safety regulations and pass an inspection to get a food service license.
  • Liquor License - Do you plan to sell alcohol? Sales of liquor can be a good revenue stream, but obtaining a license to serve alcohol is time-consuming and expensive.

8. Design your layout and space

Before designing the layout, figure out how you want your guests to perceive it. There are two zones to any restaurant's design: front-of-house (FOH) and back-of-house (BOH) zones. FOH covers all the areas to which customers have access, and BOH is the kitchen and other zones where customers do not have access. The requirements for FOH and BOH zones are very different. Consult an expert for help in creating a bespoke design.

Consider the following important factors when planning your dining room layout:

FOH (Front of House)

  • Seating Capacity - How many seats can you fit in the dining room? The number of square feet required per customer is determined by local regulations, the overall square footage of the area, and how many exits the building has.
  • Furniture - Your restaurant furniture should reflect your concept. When selecting restaurant furniture, consider seating capacity and comfort level, and, of course, style.
  • Ambiance - Use decorative and lighting items to create a more inviting atmosphere in your eating area.
  • Practicality - Try to choose easy-clean flooring and wall fittings. Avoid carpeting if possible because it soaks up spills and odors, and cleaning is costly. Fabric blinds and drapes also have the same problem.
  • Technology - What technology will you need to provide service? An integrated restaurant pos system is essential to allow customers to order and pay for food.

BOH (Back of the House)

Consider how the service flow will operate in your commercial kitchen space and plan adequate task space:

  • Wareashing - Commercial dishwashers are efficient for cleaning dishes used by customers. But they must also allow servers to load and unload during peak periods when the kitchen is fully occupied. You'll probably need space for dishwashers, sinks, and racks for drying.
  • Storage (Dry and Cold) - Designated storage areas should be close to where deliveries are received. Then staff can store items away as soon as possible. Be sure to organize adequate shelving to store food and other essential items.
  • Food Prepping - Plan for food prepping stations, stainless-steel work surfaces, utensil storage, and other food preparation equipment.
  • Cooking Stations - This is where the cooking happens. You'll need space for large kitchen equipment like ranges, grills, deep fryers, and other appliances.
  • Service Area - It's vital to place the cook station as close as possible to the service area where servers or wait staff will collect food to be served.

9. Find an equipment and food supplier

Before you can open your kitchen, it must have all the necessary equipment. Refrigeration units and cookware are among the many items required by restaurants.

Depending on the food you plan to serve, you may need specialized equipment. The size and layout of your kitchen will determine the type and style of equipment you need to install.

Purchasing restaurant equipment online has several benefits. You can focus on other aspects of starting your new business while buying online, checking specs, and comparing prices whenever convenient. Look for suppliers that specialize in restaurant equipment with wholesale pricing and quick delivery.

You also need to find suppliers for food and other consumables and supplies you'll reorder regularly. When you order bulk materials, purchasing from a provider that provides discounts and free delivery saves you money on food costs. 

10. Hire the right staff

During the beginning of your new restaurant's operation, the recruiting stage offers you the chance to create a great work environment. Before hiring, it is critical to think about benefits, training programs, and incentives for restaurant workers. If you make these aspects a top priority, you will retain your staff longer.

What training should restaurant staff undergo?

Specialists chefs may already have their credentials from culinary school or elsewhere. But all restaurant staff should be trained in the following:

  • food safety
  • food handling
  • customer service
  • personal hygiene (this includes handwashing, cleaning uniforms, and aprons, etc.)

The training must occur before staff begins working at the restaurant. It's best to provide regular refreshers for all staff also.

Start by getting your management team in place, then they can help you with the rest of the hiring process. List all the positions you need to fill for the daily operations of the restaurant. How many days will you open? How many shifts do you need to cover?

These are some positions you might need to fill:

  • Management: Restaurant manager, kitchen manager, and FOH manager.
  • Kitchen staff: Head chef, sous chef, prep cook, line cook, kitchen assistant, and dishwasher.
  • Customer Service Staff: Hosts, servers, and bussers.
  • Bar Staff: Bartender, barback (busser).

Apart from staff handling the daily food service operations, you'll need help with marketing, accounting, and other business administration tasks.

11. Install the right technology at your restaurant

This is essential for efficient operations. There are many options when it comes to technology. Video surveillance, for instance, is a great way of monitoring the premises at all times. Also, consider:

  • Restaurant POS system: It helps streamline customer orders and payments, track sales, and control inventory. With this technology, customers order remotely without having to go through the line. For instance, food can be ordered ahead of time via tabletop tablets or mobile apps.
  • Restaurant software management system: Track inventory, employee time cards, payroll, and much more. It also provides reports on sales trends.
  • High-speed internet connection: It is crucial for digital operations in general. It allows your customers to place orders before they even leave their homes, and much more.
  • Restaurant accounting software: Managing your business accounts is much easier with accounting software. It can help you track your expenses, savings, and profits in real-time.

12. Consider insurance

Business insurance ensures that not only the physical restaurant premises but also all of its contents will be protected against damage or loss caused by accidents or other events.

Essential business insurance policies include:

  • Public liability insurance - indemnifies the business in case it accidentally injures a customer or member of the public, and costs often depend on the number of customers expected to visit the restaurant.
  • Employers' liability insurance - covers any claims for an injury that occurs when an employee is working in the restaurant. It provides additional coverage over statutory minimums.
  • Workers compensation insurance - this covers your employees if they get injured at work, it provides them with financial compensation. This ensures that if an employee gets hurt or injures themselves while working for you, they won't sue you!

Insurance premiums vary and it's best to consult an insurance broker to get the best deal.

13. Create a marketing plan

Brand your restaurant

How do you brand it? You need to focus on four main things, your concept, cuisine, location, and name. The concept is the most important of these because it affects everything else in your restaurant. Good branding needs to communicate what you do, who you are, and how you differ from your competitors. It is very difficult to shift away from a poor brand once set up so try to avoid generic ones such as diner or corner cafe!

Advertise your restaurant

You must reach out to prospective customers before the grand opening of your new restaurant. You can advertise your restaurant so that people can find where you are and what kind of food you serve. Effective marketing should also create enthusiasm for your restaurant. Here are a few ways to promote your business:

  • Website - Your restaurant's website should be intuitive and user-friendly and reflect the concept of your business. Include essential information such as location, contact number for bookings, operating hours, and a sample menu. It's best to hire a web designer to create your website to be sure it's optimized for search and reviews.
  • Reviews - Platforms like Google My Business, OpenTable, TripAdvisor, and Yelp, are invaluable tools for promoting your restaurant, receiving feedback, and being found by searchers looking for a place to eat. If guests enjoy the dining experience at your establishment, they may leave reviews. Good feedback helps boost the profile of your restaurant. Word of mouth advertising is still the most powerful!
  • Social Media - Your restaurant needs a high-profile online presence to succeed. Use Facebook, Instagram, and Twitter to spread information about your restaurant. You should have a presence on all social media platforms your clientele typically uses.
  • Promotions - Offer promotions such as a welcome bonus to first-time visitors. Giving customers a free drink, dessert, or a discount on their bill are all powerful marketing tools.
  • Opening Event - Create buzz around your new restaurant by hosting a special opening event. Events like cooking classes or live music are popular and attract attention.

More on launching your restaurant

Do a practice run before the grand formal launch of your new establishment. Invite a small number of your friends and family members to a soft opening. It will allow you and your staff to deal with any problems with your service. Popular ways to soft open include:

  • Limited Menu - Offer a few select dishes only. It helps staff ease into the routine without too much pressure.
  • Reduced Schedule - Avoid opening every day when you start. Give your team time to find their rhythm!
  • Neighborhood Night - Invite neighboring businesses and residents to come for a soft opening. It helps establish your business in the community.

Final thoughts

We hope you found these tips on how to start a restaurant useful! Starting a new restaurant is a huge undertaking. While it is possible to start small with limited resources, the more funding you have, the better your restaurant will be able to compete in the long run.

If done right, any business owner can turn their initial investment into a hugely successful chain of restaurants. Despite the obstacles that the food service industry currently faces, restaurants remain an essential component of the economy. There is always room for new food trends and new restaurants to satisfy changing consumer tastes.

FAQs

1. Can I open a restaurant with no experience?

Aspiring entrepreneurs or restaurateurs can open a restaurant with no experience. A restaurant's success depends on many factors, not only previous experience. And if done right, it may become a wildly successful business.