This article is for informational purposes only and does not constitute legal, accounting, or tax advice. The information contained herein is subject to change and may vary from time to time in your region. For specific advice applicable to your business, please contact a professional.
A checklist for starting a restaurant
Here are 10 steps you should take before you open a restaurant:
1. Define your restaurant concept
Your restaurant concept should be woven into every aspect of your business, from the food itself to your style of customer service. The concept should also be reflected in the name of your restaurant, the design of your collateral, and your decor.
2. Create a business plan for your restaurant
Your business plan should lay out the foundation of your operations. Be sure to include an executive summary, company description, industry analysis, geographic analysis, target market analysis, food safety plan, sample menu, marketing plan, management strategy, and financial plan.
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3. Research funding options for your restaurant
Assess how much it will cost to open your restaurant, as well as operational costs, to determine how to fund your restaurant. There are a number of options to consider, from taking on an investor to applying for a small business loan. Be sure to calculate your break-even point and create a financial analysis as well, to get a better understanding of your predictive cash flow.
4. Obtain licences and permits needed to open a restaurant
Aside from the standard business licences and permits needed to open up a shop, there are other licences you need to get if you run a restaurant, from a liquor licence to food handler’s permits that may vary from province to province. Be sure to do your research on food safety regulations and create a list of standards you have to adhere to.
5. Register your business
You need to register your business to receive your Goods and Services Tax (GST) number or business number, which you need to file taxes. (You can sign up for one here.) You might think about trademarking your restaurant’s name, too (to stop people from copying you and capitalizing on your restaurant’s success).
6. Select the right location
A restaurant’s location can make or break it. Visibility and foot traffic are two important factors to consider during the selection process for a commercial space. You also want to evaluate the size and interior shape to decide if it is the best fit for your restaurant floor plan.
7. Order restaurant equipment
Restaurant equipment can get pricey, so you want to be strategic when selecting what to buy or lease. List out everything that you absolutely need — which depends on your menu — versus what you want, from kitchen equipment to decor for the dining room. You can save money by buying some gently used items. Make decisions based on your budget and your financial analysis.
8. Hire the right staff
Schedule the staff you need to run your front of house and back of house efficiently. Then get to hiring. While you’re doing that, you should also decide if you want to process payroll yourself or use payroll software. Just keep in mind that restaurant payroll can get quite complex, especially with varying province/federal/local laws and regulations around wages and tips.
9. Create a menu
Your menu is the centrepiece of your restaurant and should reflect your concept and brand. But it’s also a marketing tool that can help entice new customers to try your restaurant. Your descriptions should be concise but appeal to your audience.
10. Create a marketing plan
Before you open a restaurant, it’s important to develop a marketing plan that drives awareness, brings in new customers, and creates a loyal following. Marketing tactics you could use include everything from social media to hosting a soft opening that drives hype.
Restaurant industry segments
Recognising where a restaurant fits in the industry can help you understand the competitive landscape and better strategise your entry into the market and your food costs when opening a restaurant. Establishments can be loosely broken down into various segments, from your basic fast-food joint to a prestigious three-star Michelin dining experience:
Fast food restaurants, also called quick service restaurants (QSRs), specialise in quick preparation and casual service. Seating is limited since most customers order at the register and take their food to go.
Fast-casual establishments mirror fast food service since they do not often provide sit-down service, but they typically offer freshly prepared food with wholesome quality. As a result, their food prices tend to be higher than QSRs. Another differentiator from QSRs is that fast-casual places often provide non-disposable utensils and plates.
Casual dining offers a full-service, sit-down experience for customers at an affordable price. With a relaxed ambience, consumers can come in, sit down, and enjoy a meal without breaking the bank.
Family dining follows a similar format to casual dining, but most establishments don’t serve alcohol. Family dining usually offers breakfast, lunch, and dinner options, making them open for more hours.
Fine dining restaurants provide customers with an elegant and upscale dining experience. While these restaurants have higher price points, customers are paying for top-quality food and the best service the industry can provide.
An overview of restaurant safety and food handling
Before diving into the steps of starting a restaurant, it’s important to understand the restaurant industry as a whole. Restaurant safety and food handling protocols are top priorities for the industry, so you should understand the ins and outs before you open a restaurant.
To keep guests safe and prevent food-borne illnesses, the restaurant industry is heavily regulated. Several federal agencies play a crucial role in the industry, some of which include:
- Canadian Food Inspection Agency (CFIA)
- Health Canada
- Agriculture and Agri-Food Canada (AAFC)
Food safety laws and requirements can vary depending on where you decide to open a restaurant. If you are considering multiple locations, each restaurant could have a different set of compliance obligations. Be sure to check out your local laws and requirements, in addition to keeping up with federal agency recommendations and new educational resources published by these agencies.
There are several inspections a restaurant may be subject to in order to verify restaurant safety and operational compliance. An initial restaurant inspection may cover a variety of food safety protocols and grade a restaurant’s ability in food handling, food storage, employee hygiene, and operational excellence. Subsequent inspections throughout the year are normal, so you’ll want to come up with best practices for food safety and restaurant sanitation.
By familiarizing themselves with regulations, obtaining specific industry-related licences, and adhering to basic food safety procedures, restaurant owners can keep their reputation intact and customers out of harm’s way.
The cost of starting a restaurant
Most people who consider opening a restaurant want to know, how much does it cost to open a restaurant? It seems like a simple question, but the truth is there’s no one-size-fits-all answer for how much it costs to start a restaurant. Restaurant start-up costs are dependent on various factors, including:
- Size of the restaurant
- Type of restaurant (see above)
- Number of staff
- Restaurant real estate
Starting a restaurant is usually a spendy proposition, and incorrect forecasts and budgeting are a major reason why restaurants fail. Avoid these situations by learning what costs you can expect and how to keep costs low, so you can forecast a realistic budget.
After long hours of computing numbers and hashing out prices, you may realise that you don’t have the capital to front these costs initially. Don’t worry, there are plenty of financing options restaurant owners can consider.
And remember, even if you don’t need a loan to start your business, you may need a loan for future costs you can expect to pay, like purchasing inventory or new equipment, renovations, or hiring.
Taking payments from customers
Understanding the restaurant industry and mapping out restaurant costs are the initial ingredients for success, and now it’s time to focus on taking payments from customers.
Making your first sale is an exciting milestone when you open a restaurant, and it should be a seamless experience that first time, and every time after. To do that, you need to choose a payment processor and point-of-sale (POS) software.
A payment processor handles credit and debit card transactions for your business. You want to look for a payment processor that accepts all major credit cards, has one consistent rate (with no hidden fees), and has quick deposit times.
An intuitive point-of-sale system lets you take payments quickly, and it can also grow with your restaurant (and help it grow). An integrated restaurant point of sale system not only lets you accept all types of payments — including magstripe, EMV chip, and mobile payments — but also can help you run your entire restaurant more efficiently.
A restaurant POS system can help you with:
- Inventory tracking to better forecast ingredients and supplies
- Built-in tipping that substantially increases tip flow
- Automatic tip reconciliation
- Menu adjustments to include modifiers and other requests
- Employee timecards that easily track hours worked
- Data analytics that gives you a better insight to make decisions
- Immediate customer insights and feedback
- Multiple menu management
- Customizable floor plans
- Coursing and effective communication between servers and chefs.
Outdated, slow POS systems can really hurt your sales, so it’s important to invest in capabilities that are quick for your customers, easy to use for your employees, and efficient for your restaurant overall. An integrated POS puts all your information — from sales and inventory to employee timecards — in one view, significantly improving organisation and the ability to make better decisions.
Building a brand for a restaurant
How can you compete with more established restaurants to capture consumers’ attention and build loyalty? You need to build a brand.
Branding your business is an integral part of opening a restaurant, and it can play a major role in your future expansion and growth. Your brand is what distinguishes you from your competition. And it’s what makes your restaurant stand out and can often be the deciding factor for diners in an environment with endless options.
Here’s a crash course to get you started with branding your restaurant:
Start with positioning
Evaluate your restaurant’s product, placement, promotion, and price to determine where your restaurant sits among the competition and to identify your unique selling proposition for your target customers.
Define your concept and location
Your concept and location should play into how you position your restaurant. From the type of food to the interior design and even the staff selection, your concept dictates many of these decisions moving forward. Neighbourhood stereotypes, accessibility, and local competitors are location factors that affect your positioning.
Craft a mission statement
Your mission statement defines what you do, who you are, and why you’re doing it. It should be your restaurant’s north star and decisions should align with it to create a consistent experience.
Be consistent in the details
You communicate your brand through every part of your business. So, to create a clear and memorable brand, you need to look at every detail for consistency. That means looking at the visual elements of your restaurant — your name and logo, menus, decor, uniforms, etc. — and the written elements (or your brand voice) — your website and other marketing channels like social channels — to make sure they support your mission.
Once you’ve established your brand, you need to create awareness of it amongst prospective customers. Here are a few ways to get started:
Hold a soft opening
The exclusivity of a soft opening intrigues a crowd and gets people talking about your restaurant, and building hype is important. Additionally, the soft opening gives your staff a practice run and helps you further hash out menu items and get feedback before anything is solidified. Brainstorm soft opening launch ideas that blow your competition out of the water and give you a leg up when it’s time to open your doors.
Market your restaurant
There are many channels you can use to market a restaurant. Traditional channels like TV tend to be pricey but reach a lot of people. Digital channels like social media, content marketing, and email are often low-cost and do a better job of engaging (and building relationships with) prospective customers. You should test these channels to see what works for you (it may be a mix of both), but regardless of the media, you should use your brand visuals and voice in all your marketing.
Build a loyal following
Loyalty programs in which you reward customers for repeat visits can be a powerful tool. It can turn a first-time customer into a regular customer, into a brand advocate. And advocates have huge value to your business because they can tell their friends about your restaurant.
Restaurant trends to watch
Restaurant owners are responsible for staying ahead of trends in the restaurant industry, but that doesn’t just entail the latest food fads. Technology helps restaurants provide the ultimate customer experience and is becoming a more prominent part of the industry. Here are a few emerging restaurant trends to take into consideration.
Immediate customer feedback
Incorporating feedback into the dining experience allows customers to rate their experience through their digital receipt, which gives your restaurant the real-time data needed for continuous improvement. Feedback is one of several customer engagement features that allow restaurant owners to get a better understanding of what their customers want.
Accepting mobile wallets
Mobile wallets like Apple Pay have become increasingly popular and are shaping the future of payments. Some of the key benefits of accepting mobile wallets include increased security, speed, and convenience.
To reach a wider customer base, many restaurants have begun exploring food delivery services. This taps into an entirely new market potential for your restaurant and can help your restaurant stay competitive with others using the services.
As the restaurant industry continues to explore automation, there’s a spike in interest in tableside contact-free ordering. The QR codes allow diners to scan to order food and drinks as well as pay for their meal without interacting with a server.