Blog / October 31, 2020
How to Open a Restaurant in 8 Steps
Have you always dreamt of opening a restaurant? You’re not alone. According to a study by the Small Business Administration, the hospitality industry is the second most popular sector for small businesses. While opening a new restaurant business isn’t easy, it comes with many rewards like being your own boss and making a difference in your community through food. This article about how to open a restaurant will help you join the ranks of other successful restaurant owners. Follow these eight steps to open a restaurant that will thrive:
- Come up with a winning business plan
- Create your menu
- Fund your startup restaurant business
- Find a great location
- Obtain necessary permits and licenses
- Hire a rockstar team
- Find tech partners that work in your best interests
- Let customers know you exist
1. How to start a restaurant business: Write your business planYou need to create a business plan for your restaurant before you do anything else. Putting together your business plan will help inform your own restaurant’s concept. First, do your market research. What kinds of restaurants already exist in your area? What kinds of restaurants do well? Is there a concept that hasn’t been tried yet in your area? Avoid oversaturation; if there are already a dozen diners in your area, your chances of opening one that will be better than the rest will be slim. After you’ve nailed down your concept, figure out your restaurant’s operations and finances. How much will it cost to create your own restaurant? How much will kitchen equipment cost? Where will you get the money? How many employees do you need to hire? Thinking about these important questions will ensure you’re building a business with a strong foundation. When looking into how to open a restaurant, don’t overlook the importance of having a business plan.
2. Create your menuAfter you’ve chosen your concept, create a menu around it. If you’re a chef, you can start developing recipes immediately. If you don’t have a culinary background, you can come up with several ideas for dishes and develop the recipes later with a chef. Make sure to digitize your menu in the form of a QR code to display at your restaurant and online! QR code menus help guests safely scan, view, order and pay for items on your menu – creating a touch-free, hygienic alternative to a physical menu.
3. Fund your restaurantOn average, opening a restaurant costs between $175,000 and $750,000. This figure incorporates rent, renovations, furniture, kitchen equipment, technology, licenses, and marketing costs. The most significant cost variances are in location and space size. Opening a new restaurant during the COVID-19 pandemic is tricky. Funds are tight for everyone, which means it may be challenging to get a loan or investors. However, now is also an exciting time to understand how to open a restaurant. So, where can you get the money to open a restaurant? There are popular funding options:
- Self-funding: If you’ve saved up for some time, you may be able to dig into your savings to fund your own restaurant, or at the very least a significant portion of its startup costs.
- Loan: Alternatively, or in addition to your savings, you can get a bank loan to cover all or part of your costs. The downside of this funding method is that you’ll have to pay the loan back with interest.
- Family and friends: Some startup restaurant owners ask friends and family for loans or investments. Unlike banks, family and friends typically don’t charge interest or can offer better rates. The downside is that your close circle may not be able to provide the total funds you need.
- Investors: Investors can provide ample cash and the strategic counsel you need to open your restaurant. However, they also take part of your business in exchange for their money.
4. Location, location, locationYour restaurant’s location can make or break the business. The better the location, the more expensive your rent will be. Less popular locations are more affordable, but you may have to spend more on marketing a new restaurant. However, because of the pandemic, what was once considered a prime location may not be as coveted now. Sahil Rahman, co-owner of RASA in DC, predicts that restaurants may no longer vie for expensive downtown spaces since so many people will continue working from home for the foreseeable future. Before you begin your real estate hunt, have a budget in mind and create a list of must-have features.
5. Obtain permits and licensesYou’ll have to get a number of permits and licenses before you can do most things in your restaurant. Check your local laws to see how to obtain the following permits:
- A business license
- A food service license
- Sign permits (check your city’s website for local regulations)
- Food handlers’ permits for your kitchen staff
- Outdoor seating license (check your city’s website for local regulations)
- A liquor license
6. Staff upMany first-time restaurateurs overlook the importance of staffing when researching how to open a restaurant. However, the restaurant business’ annual staff turnover rate stands at a shocking 73% and can cost businesses $5,864 per employee. You must hire employees for your front of house and kitchen who share your values to avoid costly turnover. When employees share your values, they’re more likely to be engaged at work and create happy diners. Offer benefits to take care of your team so that they’ll do a great job.
7. Choose your tech wiselyYou can’t run a modern restaurant without technology. Tech automates many monotonous tasks and empowers smart business decisions. Your restaurant’s basic tech stack should consist of a POS system, restaurant reservations system, and an online ordering platform. With online ordering predicted to grow 20% by 2030, ignoring this lucrative revenue stream is unwise. It’s also crucial to choose technology partners that let you own guest data. When you select direct tech partners, you’ll be able to serve guests a customized experience both through service (on- and off-premise) and your marketing efforts, so they’ll keep coming back. Diner loyalty, after all, is the key to restaurant longevity. In fact, a 5% increase in loyalty can increase revenue by up to 95%.
8. Marketing a new restaurant: Spread the word with a restaurant grand openingCreate fanfare for your new business by throwing a restaurant grand opening event. Invite press, influencers, friends, family, and community members to your opening day to create buzz. You’ll also need to continue marketing your business beyond its restaurant grand opening event to ensure a steady stream of business. Here are a few methods to try:
- Build a strong social media presence. At a minimum, your restaurant should be active on Instagram.
- Email customers to stay top of mind. When you have guest data, you can do targeted marketing campaigns to keep guests coming back.
- Host special events like football watch parties and Mardi Gras celebrations.
- Form connections with community organizations and schools.
- Send out fliers and coupons in the mail.