Restaurant and Make It Successful
- Make your restaurant business plan. Ask yourself the 13 biggest questions your business plan needs to answer
- Make your restaurant official.Taking the time to establish your new restaurant properly will save you a lot of headache later.
- Keep your finances in order.Be sure to acquire proper accounting software, hire a bookkeeper or accountant, and keep up with tax obligations.
If you’ve done much reading online on how to open a restaurant, you’ve probably mostly come across article upon article citing all the reasons you shouldn’t.
But don’t listen to the pessimists—you have a dream. If you’ve heard the arguments of all the naysayers, yet you still can’t let go of your restauranteur dreams—we’ve got the step-by-step instructions you need for starting a restaurant.
First, the Three Pillars of How to Open a Restaurant
Before you get overwhelmed by all the possibilities, focus on the three pillars of starting a restaurant:
Concept. Chef. Location.
Whatever background or level of experience you come from, nothing can totally prepare you for starting your first restaurant, or really starting any business. Even more, no matter how much you read or what research you do, there are certain things about being a restaurateur that you can truly only learn from experience. Nonetheless, with this guide on how to open a restaurant, we’ll do our very best to prepare you for most things that starting a restaurant could throw your way.
How to Open a Restaurant in the Perfect Niche
In our experience as diverse eaters, there are a wide variety of eateries out there in the world, and it takes lots of different skills to keep them running smoothly.
As you look around your own little corner of the universe, what cuisine, service, or convenience do you see as missing? What foodie need is still left to be filled? Do you want to open a pizza shop, start a food truck, or open a cafe?
You’ve got plenty on your plate—no need to reinvent the wheel!
Could a Franchise Restaurant Work For Your?
As you dream about your restaurant venture, perhaps you’re thinking, “I’m not looking to reinvent the wheel here, I just realized that our neighborhood is woefully lacking in honey butter chicken biscuits!”
If this is the case, then it sounds like you might be looking for a franchise.
When you open a franchise, a lot of the work is already done for you. You won’t have to agonize over a menu, how to decorate, or building a marketing planfrom scratch. Your future customers will already be well aware of the allure of a fresh glazed Krispy Kreme, a cold cherry limeade, or crispy McNuggets.
This kind of brand recognition—as well as a lower failure rate than independent restaurants—is part of the appeal of opening a franchise.
But as with anything, restaurant franchising has its pros and cons.
While a franchise will come with very helpful brand recognition and a tested plan for success, there are definitely some drawbacks.
First, starting a franchise isn’t cheap. Buying franchise rights is usually non-refundable, and often must come from your personal assets as opposed to a loan.
Plus, the business model you’re investing in isn’t flexible, so there’s little to no room for creativity when it comes to running this business. If your national brand decides to do a complete decor overhaul, you’re going to have to shell out the money for it regardless of your personal preferences. If this is the path you’ve chosen, consider all the pros, cons, and options before you dive in to set yourself up for success on this venture.
How to Open a Restaurant: Writing Your Business Plan
Let’s be honest. When you’re ready to get in the kitchen and delight customers with your delicious recipes, nothing sounds less fun than slowing down all that momentum to sit down and write a research paper.
Spreadsheets? Pie charts? Statistical analysis?
No thanks!
But before you decide to skip this step, just stop and ask yourself:
Would you go about making a brand new and unknown dish without even glancing over a recipe?
In the same way that recipes give you a roadmap to create an excellent dish, your business plan is the recipe you’ll follow to make your restaurant a success.
Ultimately, writing a business plan is about thinking through and answering questions about your future restaurant that force you to contemplate the market you serve, the viability of your overall plan, and challenges you might not have otherwise have thought of.
When done right, this process will help you refine define the next steps involved in opening your restaurant, giving you the highest possible shot at success.
Take a look at the 12 biggest questions you should be answering as part of the business planning process for your future restaurant:
1. What kind of a restaurant do you want to run?
Restaurants come in all shapes and sizes, from food trucks to major franchises. The first step for you is narrowing your interests down to one type of eatery.
Go ahead and write out both a long and a short answer to this question—and then commit the short answer to memory.
This is known as your “elevator pitch,” and it’s something you’ll repeat over and over and over to friends, family, customers, lenders, investors, and just about everyone else.
2. Who is your restaurant for?
This is called your target market—the group of people whom your restaurant is meant to serve.
The more specifically you can answer this question, the better you’ll be able to create a menu, design your environment and overall experience, and build marketing campaigns that meet the needs of your demographic.
Consider creating customer profiles to build a mental picture for yourself and your team members of the individuals you hope to do business with.
When you’re building your profiles, you want to know how many households are in your price point in the area you plan to serve.
Finding a location that has a population that will support your price points—and that isn’t already saturated with similar eateries, will be crucial to your long-term success.
3. Who are your restaurant’s competitors?
Many of the world’s most successful, experienced business owners will tell you not to worry about your competition.
It’s what you do that matters.
This is great advice for when you’re in the thick of running your business. After all, you can’t live your life reacting to everything your competitors do.
But when you’re first starting out, it’s worth at least knowing who your main competitors are and how their restaurants are similar to and different from yours.
Do your research to identify your restaurant’s primary competition. This will save you from creating a business model that too similarly mirrors an already established alternative.
4. Location, location, location
It’s been said a million times, but this is going to be incredibly important in shaping the kind of place you run.
Defining your target market and competitors should already start narrowing down smart and profitable potential locations.
After all, having a high dollar steakhouse in the middle of low-income neighborhood probably won’t stay afloat too long.
At the same time, a taco truck might not fare well in a gated neighborhood full of multi-million dollar mansions. (Wait, who are we kidding? Everyone loves tacos—that business would be brilliant!)
5. What’s your restaurant’s unique value proposition?
Don’t let the fancy terminology scare you. Your “unique value proposition” is essentially just what makes your restaurant different from the competition.
What is it about your menu, service, atmosphere, pricing that will cause your customers to choose you over your competitors?
Potential unique value propositions might include your restaurant location, a unique experience or environment for your patrons, a commitment to sustainable or local food sources, or even offering a new ethnic option to a neighborhood.
An essential part of your unique value is your menu. After you define the items on your menu, and their price points, next you test it. Throw tasting parties, cater a few events, and be open to feedback.
Although your menu will of course change over time, you want to build your business plan around an initial menu that you’re confident in.
6. How will your customers find your restaurant?
Your answer to this question will form the foundation of your restaurant’s marketing strategy:
Will you primarily generate business by word of mouth? Will you pursue paid advertising, and if so through what means? How will your website, social media, or other online presence play into connecting with your customers?
These and other questions will help you define how you’ll turn your target market into a loyal, repeat customer base.
Fortunately, there are lots of great ways to connect with customers that are restaurant-specific. You could invite reviewers and bloggers to write up your menu, hold a big grand opening event, or use popular apps like Yelp or OpenTable to allow customers to find and review your restaurant or even book a reservation online.
Check-ins are a useful way to spread brand awareness and increase customer loyalty. Deals for repeated check-ins and referral bonuses are just a couple of ways you can bring in customers, both new and old.
In addition, before you open, you’ll want to have a press kit at the ready for any local news sources that show interest, as well as nice photographs of your place to use for online profiles and directories.
7. What resources will your restaurant need?
As the saying goes, it takes money to make money.
What will you need in order to open and run your restaurant? Will you be the head chef, or will you hire someone? What kind of technology will you use for your restaurant’s point of saletransactions? What kinds of kitchen equipment will you need? What are the restaurant zoning rules in your area for commercial real estate? Will you hire a branding agency or build the brand yourself? How many employees will you need?
Take the time now to list out all the one-time and recurring expenses you’re likely to incur as part of your cost of doing business—leaving no stone unturned.
Don’t forget research things like the cost of utilities, pest control, and laundry services to get a realistic picture of your full budget.
If you’ll need other non-monetary expenses (like equipment you already own, or a friend or family member’s business contacts), outline those as well.
8. How will your restaurant make money?
You might have a great idea to offer a cuisine or service that customers will love, but that doesn’t necessarily mean your business idea will actually be profitable.
Your business model determines how your restaurant will generate revenue, cover expenses, and eventually make more money than it spends. Many popular restaurants ultimately fail because of a flaw in their business model, so learn from your predecessors here by taking the time to really flesh out the specifics of how your restaurant will make money.
In addition to the pricing of your menu, you’ll want to think about how you will staff, your insurance and license costs, and tax obligations.
9. How long will it take your restaurant to make a profit?
It’s typical for new restaurants to operate at a loss at the beginning—especially for the first year—as they invest in needed resources, work to acquire customers, and work out the kinks in the business model.
But in the long run, we assume you’ve gone into business to make money off of your tasty menu!
Use a revenue forecast to determine how long it will take to recuperate your initial investment, break even, and run a profitable business.
10. What values will you never compromise in running your restaurant?
When the going gets tough, knowing what you stand for is critical to making the best decision at every turn.
What values are most important to you, both personally and as a business? What are your non-negotiables?
Putting your business’s core values on paper from the outset will help you with everything from making the right vendor choices to how your hours or menu might change when faced with a critical fork in the road.
11. What is your staffing plan for your restaurant?
Little-known fact—great service makes food taste better.
Having a skilled and hardworking staff starts with finding great candidates. Of course, there are the usual means of posting in local papers, job websites, and the classic sign in the window. But finding really quality staff is best achieved through personal connections.
Your head chef, friends, and family will be the place to start looking for stand-up, smart, reliable people. There’s a very good chance that your chef will want to bring people they have worked with in the past that fit into your company’s culture.
Once you find them, you’ll next have to train them.
Good foundational training on the rigid rules of food service and customer service sets an important precedent for their time as part of the face of your company.
Having an engaged management team to support your staff is a recipe for consistently great customer service—and being consistent in service as well as food quality, encourages repeat customers!
12. What’s your endgame for your restaurant?
Are you building a restaurant that you hope to eventually sell, or are you working towards a long-term, sustainable business? Do you dream of starting a small diner you could pass down to your children or grandchildren, a medium-sized local chain, or the future McDonald’s of Thai food?
Knowing where you want to end up, and when, will help to inform many of your business decisions along the way. Take the time now to outline your long-term endgame, as well as the steps you foresee taking to get there.
Starting a Restaurant? Make It Official
Now that you’ve done the big picture planning, it’s time to get down to the meat and potatoes.
When you’re first starting out, you’ll face more paperwork and legal hoops to jump through than at any other point in your business.
We know this part is not the most exciting, but persevere! Taking the time to appropriately establish your new restaurant from the beginning will save you a lot of headache (and potentially even greater consequences) down the line.
Here are the main steps you’ll need to take to get your business legally established with the proper federal, state, and local authorities.
1. Register Your Restaurant’s Official Business Name
If you plan to use a unique name for your business, go ahead and file your “doing business as” name with your state’s agency.
Even if you decide to change your legal structure down the line, filing your DBA early will keep you from losing your clever name idea to a fellow restaurateur.
2. Choose Your Restaurant’s Legal Structure
When you’re ready, the next “official” task on your on your new business to do list is to decide on a business entity for your restaurant.
The structure you choose will impact how you file state and federal business taxes, the roles of different team members, and how you can be held liable in the event that someone files a legal claim against your business.
Because of the long-term and potentially weighty impact of your chosen business structure, it’s a good idea to consult a business attorney to help you make this choice.
Even so, we’ll give you a quick primer here into the various business structures you can choose from.
Sole Proprietorship
This is the most basic form of business structure, in which you alone own the company and are responsible for any liabilities associated with it.
If you plan to have a food truck, pop up, or any very small operation and won’t be taking on fixed assets or hiring any employees, a sole proprietorshipmight be the perfect structure for you. And the best news? You don’t have to take any formal action to form a sole proprietorship!
If you’ll be operating under your own name, you can just jump right into business. And if you have a clever idea for a business name, your “doing business as” filing (from above) will be all you need.
Partnership
This structure defines a single business in which two or more individuals are owners.
There are a few different partnership structures you can choose from, including a general partnership, limited partnership, or a joint venture.
Most experienced entrepreneurs don’t recommend partnerships as a business structure because they don’t offer much protection from liability.
It’s also important to keep in mind that a partnership is much like a marriage, in that you will work closely with and be both financially and legally tied to your business partner for a long time.
Make sure you choose a business partner that you can work well with for the long haul, and put clear terms and expectations in writing from the beginning detailing the roles and responsibilities of each party.
Corporation
A corporation is a more complex business structure usually reserved for larger companies, or those in particularly high-liability industries looking for a little extra insulation.
Most attorneys tend to put restaurants in this high-liability category, so that along with the number of employees you’ll need to hire suggests that a corporation structure is most likely to be recommended.
That said, keep in mind that establishing a corporation requires having a board of directors as well as officers, and has more complicated tax filing requirements.
So consult your attorney, but also be prepared that the process might be a bit complex.
S-Corporation
Structured very similarly to a regular C-corporation, S-Corporations stand out because they’re taxed at the individual business owner level, rather than being taxed corporately.
If you think you may need the structure of a corporation but don’t want to mess with complicated dividend filings, an S-Corp might be a great middle ground for you.
Limited Liability Company (LLC)
Offering the liability protections of a corporation along with the flexibility and tax simplicity of a sole proprietorship or partnership, the
limited liability company (LLC)
is a “best of both worlds” business structure that has grown significantly in popularity over recent years.
Entrepreneurs who opt for an LLC structure can choose between a single-officer LLC, a partnership LLC, or a limited-liability corporation.
Again, choosing a structure for your business is one area where your smartest bet is to consult an attorney for individual advice. It’s an important decision that will have long-term impacts on how you do business, so do your research and make sure that you fully understand the implications of whatever structure you choose.
3. Get a Tax Identification Number for Your Restaurant
Think of it like a social security number for your business.
If you plan to retain employees (think wait staff, hosts and hostesses, cooking staff and even dishwashers)—and especially if your business is established as a corporation or partnership—you’ll need this number to keep things on the up and up.
To obtain an employer identification number, apply online at the IRS website.
4. Register Your Restaurant for State and Local Taxes
In addition to federal business taxes, most U.S. states and territories will require you to pay income and employment taxes for your business. Certain states have additional fiscal requirements, like state-mandated workers’ compensation and unemployment insurance.
Registration, requirements, and filing procedures vary widely from state to state, so check out the business tax information specific to where you live.
5. Secure Permits, Licenses, and Insurance for Your Restaurant
The FDA updates the Food Code every four years, but the details of what is required, strongly encouraged, and just optional will vary from state to state, and even between counties.
This section is very useful, but not comprehensive, so be sure to check in with your local health department to make sure all of your bases are covered.
It’s a good idea to keep a master calendar with reminders for all of your renewal and payment due dates. You don’t want to walk into work one day to find anything has expired!
6. Your Restaurant Will Need Food and Health Codes Licenses
Every operation, big or small, requires some kind of official approval stating you are safely handling the food and beverage you serve, even if it’s free.
The names of these will vary by establishment, but they all certify that you are safely handling, storing, and serving food. And don’t think that having a food cart or even a booth at a festival gets you out of this: they thought of those, too.
Included in this, but with its own special set of permits and rules will be serving alcohol. This covers not only safely serving alcohol but also includes training for dealing with customers that have perhaps overindulged. Read our complete guide for getting a liquor license in every state.
