The restaurant industry is, without a doubt, a very profitable sector to enter if done correctly. Since you've already decided that you want to open a restaurant, the next step is to create a how-to-start restaurant checklist to ensure that you don't forget anything. Here are some things to keep in mind when starting a restaurant. #TWN
Do you want to open a restaurant?
The National Restaurant Association estimated at the start of 2020 that there were over 1 million restaurant businesses in the United States, employing roughly 15.6 million people, with annual sales of $899 billion. As the COVID-19 pandemic has progressed, it is estimated that 100,000 restaurants have permanently closed their doors.
That's why, now more than ever, new restaurant owners must carefully consider all of the factors that go into opening a successful restaurant.
The restaurant industry is a dynamic, creative, and fast-paced environment in which to work and grow a business. It's also tough to make money in the restaurant industry, and there's a lot of competition. The average monthly revenue for a new restaurant that is less than 12 months old is $111,860.70, according to exclusive Toast data. A restaurant's average profit margin is typically between 3-5 percent.
We've put together a comprehensive step-by-step guide on how to open a restaurant to help you get started, which includes:
For a leased building, the average restaurant startup cost is $275,000, or $3,046 per seat. If you want to own the building, raise the price to $425,000, or $3,734 per seat.
The answer is yes! A foreigner can open a restaurant in the United States; however, the foreigner must keep several factors in mind when opening a restaurant in the United States.
Restaurants are profitable, but their profit margins are low. Profitability is determined by a variety of factors, including the size and type of restaurant, as well as economic factors. A new restaurant takes an average of two years to turn a profit.
Let's get into it!
When it comes to choosing where to eat, diners have a plethora of options. There are nearly 1 million restaurant businesses in the United States, and that doesn't include virtual concepts or ghost kitchens, as we mentioned earlier. To stand out from the crowd and get butts in seats, choose a concept that is unique in your market and intrigues diners in your area.
Do you want to be known for using locally sourced ingredients? Do you want to be known for allowing customers to customize their pizzas? Do you want to be known as the best seafood restaurant in town? Put pen to paper and write down everything you want to be known for, whatever your dream is.
Spend some time crafting your restaurant's mission and core values while you're at it to fully encapsulate who you are and what you stand for as a restaurant brand. Next, create a distinct restaurant logo and design an aesthetic for your space, marketing materials, takeout containers, and any other elements involved in the dining experience. Laying this groundwork will greatly assist you when making larger business decisions, such as your menu.
Doing a dry run as a pop-up restaurant or food truck is a good way to see if your restaurant concept will stick. This way, you'll have solid proof of concept, a loyal customer base, and the ability to persuade investors that your idea is one worth investing in.
You'll need to create a detailed outline of your intended concept or restaurant idea as you work on your restaurant business plan. It can also be referred to as your restaurant's vision. It brings us to the second step...
You won't be able to open your dream restaurant unless you have a detailed, well-thought-out business plan. Your business plan is a blueprint that details your overall vision for your new venture. It describes in detail how the new company will take shape and function once the doors open.
You'll use your restaurant business plan to guide you and your team in the early stages and to obtain restaurant capital from potential investors.
Here are some of the key components of a successful restaurant business plan:
If this is your first time developing a restaurant business plan that accurately communicates your vision, mission, and goals to investors, it's worth enlisting the assistance of a trusted advisor or restaurant mentor to ensure you're putting your best foot forward.
It is not cheap to open a restaurant! Whether you're franchising, partnering, or going it alone, opening a restaurant requires a significant investment. For those new restaurateurs who are starting a restaurant with no money, there are several options for restaurant business loans. Here are a few examples:
Negotiate a loan for kitchen equipment and restaurant technology with your bank or provider, which can be one of the most expensive costs. To offset the initial cost of the technology, many point-of-sale providers, such as Toast, offer 0% financing.
Working capital loans assist in covering operating costs when your restaurant's expenses exceed its income. Budget for six to twelve months of operating expenses until you reach the break-even point.
If you are approved for a business line of credit, you will be given a maximum credit limit but will only be required to pay for what you use. The line of credit, like a credit card, is constantly rotating. As you pay off your balance, you'll have more credit to use for future purchases.
Small business association loans, term loans, merchant cash advances, and equity are some of the other types of restaurant business loans.
Consider commercial banks, credit unions, and even your point-of-sale and payment-processing partners when looking for restaurant financing.
Whether you want to open a new location, invest in new restaurant equipment, or simply manage cash flow in the coming months, you'll need a steady source of funding to make your dreams a reality.
It's crucial to pick the right location for your restaurant. You'll need to look into the demographics, market, and competition in your area, as well as the size, visibility, and history of the restaurant space. You could also become a ghost kitchen to avoid being tied to a specific location.
If you want your restaurant to have a physical location, you can either buy or lease restaurant space, or you can build it from the ground up. Here are some additional criteria to consider when deciding whether or not a restaurant location is right for you:
Naturally, your restaurant's location and layout should help to bring your restaurant concept to life. You might need your own dedicated building if you want to open an elegant steakhouse. A food truck could be useful for serving sandwiches or tacos to beachgoers.
It's important to remember that your kitchen design and restaurant floor plan will be heavily influenced by your location and available square footage. You'll need a larger footprint and the ability to knock down walls and install proper ventilation if you want to open a high-volume fast-casual Italian concept with an exposed kitchen, for example. Some landlords may refuse to grant you this leniency.
Obtaining all of the required licenses and permits to open a restaurant necessitates a great deal of paperwork and patience.
The licenses and permits you'll need — and the costs to obtain them — will vary depending on your concept and the city or state where you open your restaurant. Some licenses (such as business licenses) are required for every restaurant, while others are dependent on your restaurant concept (i.e., liquor licenses).
You'll almost certainly need the following licenses and permits:
It takes time and money to obtain a license. If you're serious about opening a restaurant, start looking for them as soon as possible.
Plan your restaurant's menu and beverage program with your head chef and bar manager. There are numerous options available depending on the type of restaurant you open.
How can you differentiate your ribs from another local barbecue concept, for example, if you're selling barbecue? What kind of "special sauce" can you come up with? What kind of garnishes are you going to use? Is there any way you could use your menu to promote your business? How do your prices compare to those of other nearby restaurants?
The next step is to set a price for your menu. Cost of goods sold, food costs, sales forecasting, inventory, profit margins, and other restaurant metrics all play a role here.
The truth is that there is a lot that goes into creating a one-of-a-kind, memorable restaurant menu, from meal selection and pricing to design and menu item placement. Sign up for our menu engineering course below for more information on how to create and price a profitable restaurant menu.
Your employees are true extensions of your restaurant and its brand, making them one of the most important factors in the success of your establishment. There are dozens of restaurant positions available, ranging from servers to chefs.
Referrals, job boards, and career sites are all options for finding new restaurant employees. Before COVID-19, the employee turnover rate for restaurants was 73 percent, according to the Bureau of Labor Statistics. Many restaurant employees were laid off or furloughed as a result of the pandemic, and many restaurants discovered that when they were in a position to bring back staff, their former employees wouldn't bite. That's because working in a restaurant isn't a lucrative job for many people. You must make your restaurant a great place to work to attract and retain employees.
Taking down customer orders with a pen and paper will become tiresome — and inefficient — very quickly.
Restaurant guests expect technology in their dining experience, and 95 percent of restaurateurs agree that technology improves business efficiency.
As we learned from the pandemic, restaurant guests don't always want – and won't always be able to eat at your establishment. That is why you should invest in restaurant equipment and technology that allows for an off-premise dining experience that is as enjoyable as your in-house dining experience. New restaurants should strongly consider the following investments:
With this restaurant technology powering your business, you'll find it much easier to increase revenue and establish yourself as a successful restaurant brand.
Opening a restaurant necessitates a well-thought-out restaurant marketing strategy and budget that will entice and engage your target audience. Your restaurant marketing plan should include everything from opening day incentives and weekly specials to social media and email marketing strategies.
A restaurant marketing strategy plans out your daily and weekly marketing activities across all available channels, such as social media, radio, print advertising, and more.
When it comes to restaurant marketing, there is no such thing as one-size-fits-all. The channels where you have the best chance of engaging with your target or ideal customer should be prioritized in your marketing strategy. To get started, download our customizable restaurant marketing plan below.
What's the first item on your restaurant marketing strategy? Promotion of the soft and grand openings of your new restaurant.
You'll want to host both a soft opening and a grand opening to introduce your restaurant to the world once your space and menu are ready to be revealed to the public.
A soft-opening is a casual first night for new restaurants in which friends of the business – friends, and family of the owner, friends, and family of the staff, neighbors to the business, representatives from your distributors and vendors – are invited in for an "unofficial" first shift. A soft-opening is when a new restaurant goes live with meal service for the first time to iron out any major kinks. It will be the first time, outside of training, that restaurant staff will work together as if it were a real shift, so be prepared to provide feedback and make adjustments right away. Friends and family are typically invited to a soft opening because they are more forgiving of mistakes and understand that you are still learning what works.
You don't advertise your restaurant's soft-opening to the general public; it's usually a private event. To build momentum and excitement around your brand, you publicize your restaurant's grand opening.
The first shift – either breakfast, lunch, or dinner – where members of your community can come in for a bite or a drink is referred to as a restaurant grand opening. It's perfectly normal for kinks to be worked out or for mistakes to occur on the fly. During a soft-opening, a restaurant rarely works out all of its issues. It's extremely rare in this industry for a shift to go off without a hitch.
Make sure to photograph the event for social media (and for memories sake). Remember to save and frame your first dollar!
Opening a restaurant is thrilling, and for many people, it is a once-in-a-lifetime opportunity. As you settle into the day-to-day operations of running a restaurant, keep an eye on your profit and loss statement, solicit guest feedback, and take breaks mid-shift to take it all in. You've now joined the most exciting industry on the planet to work in. Cheers.
You also know where to find us if you decide to expand your restaurant business or open multiple locations in the future.