Starting a restaurant business from scratch can be intimidating especially if you don’t have a background in entrepreneurship.
But you don’t have to let your fear stop you from making your dream a reality.
In this guide, we’ll walk you through the step-by-step process of starting a restaurant business.
Pick Your Niche and Restaurant Style
This will not only create a steady stream of revenue but will also help you establish a loyal audience.
How do you find your niche?
Start by understanding the current market. What is the trend in your town or city? What are the most popular restaurants and what makes them different? What are the most popular cuisines or food being served in your area?
Next, decide on the style of restaurant you want to put up. Typically, restaurants are categorized into three: quick-service, midscale, and upscale.
Study the demographics in your area and what types of restaurants thrive.
Write a Business Plan
Another major reason why restaurants fail is the lack of planning. That said, you need to have a solid business plan. Think of it as a living document that you can return to when planning for growth or measuring your progress.
Your business plan should include a market overview, competition analysis, information about your target market, and budgeting projection.
You also need to write down your business model, branding concept, sample menu, organizational structure, service, location, and more. It has to be as detailed as possible.
Choose a Location
To thrive in this industry, location is everything. Needless to say, you should aim for a spot that draws crowds and is easily accessible. However, it should fit your budget too.
Aside from visibility and costs, other factors to consider when choosing a location are the space size, parking, surrounding businesses or competitors, and safety.
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Choose a Name for Your Resto
Naming your restaurant isn’t only essential for creating an identity. It is also your first step in branding. Your restaurant name has the power to enhance your business, engage customers, and attract more people.
Once you come up with a name, you have to protect it. This means you have to create a legal identity for your business by registering your company.
File a “doing business as” (DBA) to your state’s agency. You may also apply for a trademark or patent before the United States Patent and Trademark Office (USPTO).
Next, you’ll need to select a business entity type. Most entrepreneurs choose “sole proprietorship” over other entity types like partnerships or corporations because it has fewer requirements and the processing is easier.
Don’t Forget the Taxes
The next major step before you could open your restaurant is to get a Tax ID or an employer identification number (EN). This helps the IRS keep track of your business taxes.
Applying for an EN can be done online via the IRS official website.
You should also register your restaurant to state and local taxes. The requirements and application process could vary by state so check out the business tax information relevant to where you plan to open your restaurant.
Buy Kitchen Equipment
Investing in the right commercial kitchen equipment is crucial to providing quality food and services. Without enough tools, machines, and supplies, your business can’t function properly.
Each restaurant has different needs, but the most basic and essential equipment all restaurants need are refrigeration units and cooking equipment.
Depending on your menu, you might need specialized equipment like dough mixers, pasta cookers, deep fryers, or pizza deck ovens.
Restaurant equipment is costly so you should take time to research for the most budget-friendly yet high-quality items you can find.
You might be wondering if it’s better to buy brand new restaurant equipment or used ones. Whatever you choose, it comes with advantages and drawbacks.
Obviously, used equipment is far cheaper. For items like ovens, refrigerators, stoves, tables, and racks, you may opt for a second-hand model. However, do check its condition and whether or not it’s energy-certified.
Meanwhile, for smaller equipment like commercial ice maker machines for restaurants, coffee machines, food processors, it’s better to purchase a new one to ensure efficiency.
Create a Menu
In your business plan, you would have already identified the types of food you’d like to serve. At this point, you want to create a final menu that your customers can choose from.
First and foremost, you should develop your menu concept. From there, you can begin to develop a flavour profile, including your core ingredients. Your goal is to make your menu simple and memorable. Keep your list under 32 items for optimal productivity and to minimize confusion among your guests.
The next step is to examine your supply chain and ensure you have enough sources of ingredients. Then, cost your menu items and how they should be presented. Lastly, run a kitchen test. This is extremely important.
Hire Your Staff
Every restaurant is different and the number of staff you need depends on many factors, such as your location, your restaurant type, and the services you offer.
For a self-service restaurant, you may need one server per 12 tables per shift, and four people in the kitchen to cater to 50 guests at the same time period.
Seated but casual dining restaurants will need more staff. Typically, you need one server per 5-6 tables and 6-7 people at the back of the house for the same number of guests.
If you’re opening an upscale restaurant, you need one server per 3-4 tables and 6-7 at the back.
Market Your Restaurant
Once you’ve put up your restaurant, you need to let people know that it exists! Since the competition among restaurants is fierce, you want to invest in marketing.
Needless to say, you should create a social media profile where you can post foodie photos. Instagram, Facebook, and Twitter are the best places to start.
Other marketing strategies that successful restaurants swear by are loyalty programs, geo-targeted ads, and Google listing.
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Fund Your Newly Opened Restaurant
The average startup cost for a restaurant is $275,000. Depending on other factors, your upfront cost could be more.
To make your dreams happen, you need to fund your business. There are many ways entrepreneurs fund their businesses. The most popular approaches are business loans, equipment financing, and lines of credit. You can also find people to invest in your business.
Opening a restaurant can be challenging. But as long as you take it one step at a time, you’ll be geared to success.
Author BIO: Damon Shrauner, Senior Sales Consultant and VP on B2B Sales at CKitchen, working in the foodservice equipment sector since 1994. With his expertise in market analysis, product placement, sales, and project management, he will always tell you what to do for the best of your business.
I am a passionate blogger sharing business tips. I write primarily on SEO, Email Marketing, CRM, Marketing Automation and covers the entire gamut of marketing.