First, admit the dismal stats:
17% of projects in a new restaurant business fail within their first year of operation. This statistic does not include food truck business – only brick-and-mortar businesses.
The average age of new restaurants is 4.5 years. However, new restaurants are opening all the time. You can flip that first statistic and say that 83% of new restaurants are successful.
And if 17% of restaurants fail and the average lifespan is 4.5 years, this means that many restaurants remain in operation for many more years.
Here’s everything you need to know before you open your doors.
Why should you open your own restaurant
Here are the top 5 reasons to open a new restaurant:
She loves restaurants.
You are a small business owner who wants to create a cornerstone of the community.
You want a job that shows your personality, where you are your own boss.
You love the everyday social scene of making and meeting friends.
You like a different job every day.
The restaurant industry in the United States
Restaurant businesses have been one of the small businesses hardest hit by the pandemic.
In 2020, there were more than 1 million restaurants in the United States. These restaurants employ 9.9 million workers.
In 2021, this number of restaurants decreased to about 625 thousand, and they employ about 16 restaurants per restaurant. Total sales for restaurants in 2021 averaged $1.2 million.
How much does it cost to start a restaurant?
The main cost of a future restaurant is the purchase or rental of a facility. Whether you buy or rent, you can expect to spend anywhere from $250,000 to $2 million annually on the space.
Even if you buy an existing restaurant, you can expect to spend anywhere between $10,000 and $1 million on renovations.
Finding the best facility for your restaurant concept is the most important part of your new business search. Make a mistake there, and you will negatively affect the success of your restaurant. So, how much does it cost to start a restaurant? The answer is that it will vary greatly, and the final cost will depend on your operations.
17 simple steps to open a small restaurant
Every business owner takes steps to open it up, and restaurateurs are no different. However, there are several unique and important steps that must be followed in order to be able to create this dream restaurant:
1. Determine the niche
Breakfast, lunch or dinner? Service style? Specializing in cuisines like Italian, Greek and Vietnamese? A family friendly atmosphere or a fancy restaurant?
Quick service restaurants, fast food restaurant competition or full service restaurants? Which of these restaurant concepts best suits your goals and target market in the food service industry? With your niche in hand, your next step is to consider how to come up with a restaurant name that best describes the place.
2. Choose a location
Remember, whether you buy or rent, the facility is the bulk of a restaurant’s costs. And a facility that is exactly what you want inside may not thrive because it’s not the right location. Finding the best places to start a restaurant is important, but chances are you’ve also seen a restaurant in an unknown location. Therefore, location is important, but good food will bring customers no matter where they are.
For example, is it accessible in order to deliver food and supplies? Can potential customers find it and is it close to enough customers to support your projected sales volume and hire employees?
3. Restaurant business plan
Before opening a restaurant, plan all the details. You will need an excellent written business plan, which will help you if you approach a financial institution for a loan.
Here are some key elements of a solid business plan:
Job description / company overview
Market Research / Market Group
Detailed financial information for you and any partners
4. Create a business entity
The recommended setup in the food business is an LLC or an LLC. The LLC will keep your business and personal assets separate, protecting your personal assets.
Before you decide firmly, seek legal advice.
5. Research licenses and permits
Here are the basics. You may need additional licenses and permits depending on your state and local regulations.
Liquor license (if required)
food service license
Work permit and other requirements of the local health department.
Food handlers permit (for restaurant workers involved in preparing and serving food (these permits are part of the Food Safety Regulations).
Residence permit for a commercial sign. Local laws vary in size and lighting.
EIN – Employer Identification Number
6. Get your taxes in order
You will need an Employer Identification Number (EIN) to pay federal and state taxes on your payroll. You will also use your Employer Identification Number (EIN) to pay taxes on sales and on restaurant tips.
New for many states is the additional “health tax.” A health tax is assessed on the sale of food products that are considered unhealthy, such as soda.
7. Open a commercial bank account
A separate account makes it easy to keep track of financial data. You will also need a business credit card.
8. Get business insurance
If you buy or own your own building, you will need commercial property insurance. You will also need general commercial insurance for the restaurant and its equipment and supplies.
If you plan to deliver food using employees, these vehicles will need commercial auto insurance.
If you have employees, you will need to pay workers’ comp insurance and unemployment insurance.
9. Consider Small Business Loans
One of the best financial resources for financing restaurants is the Small Business Administration. Cadillac’s SBA Loans is an SBA 7(a) that provides a low-interest small business loan to companies with fewer than 40 employees. For more information about SBA Small Business Lending for Restaurant Loans, contact an SBA cooperating lender for a bank loan.
10. Signing the lease contract
Ask an attorney to review the lease agreement before signing.
11. Design your restaurant space
In the food preparation area, designing a seamless workflow is essential.
In the dining room, you can let your personality shine through and use the decor to help attract target customers. Whether it’s a large or small restaurant design, make sure it compliments your menu and your customers.
12. Create your own menu
When you start try to keep a limited menu. As you choose your menu items, make it a point to “mutually take advantage” of the food supply. For example, crab meat can be used for crab patties today, if not sold, for crab dip tomorrow.
13. Find a food supplier
Remember two things about food suppliers – they also strive to make money as they save for local competition.
You can use the Better Business Bureau to get ratings of available sellers.
14. Buying restaurant equipment
Here are some of the main items: ovens (pizza ovens), ranges, exhaust equipment, grills/grills, deep fryer, rotisserie oven, coolers and freezers, cash register/catering system, security system, tables and chairs, pots, dishes, pots and pans. And remember that you can always get commercial kitchen equipment used, which will save you a lot of money.
An important part of all restaurants is the ability to wash and rinse dishes in water heated to the required temperature.
15. Start a Marketing Campaign
While raising funds for your new venture, don’t forget to dedicate a large portion to marketing your restaurant. Here are some of the ways you can promote your restaurant:
The house is open when it opens.
Local community support – sponsoring a youth team, providing food for local events, etc.
Use your website and Facebook page to advertise specials and events at the restaurant.
Offer holiday specials for occasions like Mother’s Day, Father’s Day, Valentine’s Day and more.
16. Staff recruitment
The main role is the general manager, who is usually responsible for hiring, firing, purchasing and marketing.
Other key roles include assistant manager, hostess, cashier, wait staff, line cook and chef. Be prepared to offer above minimum wage to attract and retain employees. The number of employees you need depends on the scope of your operation.
17. Start your business
finally! Invite the local media to the ribbon cutting grand opening. Provide food samples.
18. Grow your business
One way to increase engagement with the community is to partner with other businesses. Partner for a special event. For example, for a Mother’s Day partner with a florist and a spa, all three companies offer an all-inclusive deal.
Successful restaurants with a location within the city increase foot traffic by using sidewalk message boards. Add outdoor dining if your site is able to.
19. Become a successful restaurant owner
Dance with the person who impressed you. In other words, if Wing Night or your sushi night is incredibly popular, don’t change it. Add to it.
Always be on the lookout for popular food options, such as the popularity of the keto diet or vegetarian offerings.
Is the restaurant profitable?
This is the key – sell more than you spend (food, labor, equipment, expenses, utilities). Know the breakdown of your expenses so you can keep up with the profits and you will have one of the most profitable restaurants.
Can I open a restaurant without experience?
Yes. In fact, many owners lend their business and marketing expertise to the project and know very little about the business.
Remember that location is of paramount importance. Then, hire the best.