London is foodie heaven. With some of the edgiest and most innovative restaurants in the world – think Dans le Noir in Clerkenwell where visitors dine in pitch black, or the menuless Restaurant Story in the City which serves up tailor made meals to each customer based on their personal preferences. But with so much competition and sky-high rents, opening a restaurant – whether it be your first venture or second or third – doesn’t come without its challenges.
In this guide, we’ll take you through some essential steps to opening a successful restaurant business in the UK’s capital, from navigating late licensing to circumventing the current skills shortage.
London restaurant licencing
As with any UK business, a licence is a prerequisite to opening a restaurant in London. At a minimum, you will need the following:
Food business registration licence – All eating establishments are required to have this licence before they can open their doors. It covers all food-based operations, including preparing, storing and serving food in your premises.
Food business approval – This comes from your local council and is required for any food establishment that serves fish, meat, egg or dairy products. If you already own a restaurant and have acquired this licence, it may not be necessary for you to reapply for your next establishment. Plus, if you only serve vegan food or food makes up only 25% or less of the products you sell (e.g. you’re a bookshop with a small cafe) you also don’t need to get this approval.
Bear in mind that you will need to receive approval for these licences at least 28 days before your restaurant opens.
If you’re aiming to create a whole experience in your restaurant beyond just serving food, you may need to also get your hands on a premises licence.
This is a requirement if you plan on selling alcohol or having live music, hosting dancing and featuring live performances.
Likewise, if you want to keep your restaurant open into the wee hours of the morning, you’ll need to apply for a late hours catering licence. This is issued by your local council and is essential if you want to serve food or drink between 11pm and 5am.
Current skills shortage in London catering
Post-Brexit, London is experiencing a shortage of workers in the catering and waiting industries. Whereas before, restaurants and hotels relied heavily on a foreign European workforce, new Brexit regulation has made this trickier with many EU nationals returning to their home countries or deciding to work in other EU countries.
However, this issue is not only due to Brexit, but also a result of a national lack of interest in entering the catering industry. Many young people wrongly perceive it as poorly paid work, when in reality there are a diverse range of income opportunities in the sector.
To prevent the skills shortage affecting your plans, consider opening a high-volume casual restaurant. These are alway popular with punters not looking to break the bank, and typically require lower skilled staff – making them cheaper to run and easier to find new hires. Having excellent table management, a effective restaurant booking system and QR code menu generators can also keep things moving smoothly and customers happy.
If you have your heart set on a chic, fine-dining restaurant, however, ensure your wages and salaries are high enough to attract top talent. Invest in a top-tier point of sale system and other hardware too, to ensure you can easily accept payments and maintain stellar customer service.
Square for Restaurants POS
View, manage, and sync on-premise, online, and delivery orders across all your POS devices.
Where you choose to locate your restaurant will have a big impact on the cost of renting and the kind of clientele you can expect to receive. So make sure you hone in your budget and target market before deciding on a London borough.
For example, if you’re hoping to attract business types, you will want to set up shop in a location near offices or tube stations. The City of London would be a particularly good option for this. If you’re wanting to pull in tourists, on the other hand, you might prefer to open your premises in Piccadilly Circus or Westminster.
Some of the best – but expensive – areas to open new restaurants include:
The above locations will likely attract high-value customers who are willing to spend a pretty penny for a quality meal and experience.
Cheaper options, meanwhile, include:
Just because the rents are lower in these areas, doesn’t mean you can’t still open a chic and high-end restaurant there. People will willingly travel for a worthwhile dining experience, and these localities are steadily developing and becoming trendier – a lot like Hackney did back in the day.
Restaurant industry stats
The UK has a multi-billion restaurant industry. According to Statista the sector is going to generate a revenue of 35.55 USD by next year. And while the Covid-19 pandemic did leave an impact, with many smaller businesses having to shut their doors for good, trends suggest that the industry is set to make a full recovery by 2024. This has been in part helped by the huge boost in food delivery services.
This spells good news for prospective restaurateurs, especially in the country’s capital where the average resident has a higher expendable income and is more likely to indulge in eating out on a frequent basis.
However, success is not certain when it comes to opening a new London restaurant. Statistics vary widely in terms of profit margins and the time it takes an establishment to start breaking even. The average profit margins – or gross profit – varies between 0-15%, with the average being 2-5%. This means you are inevitably taking a gamble opening an eating establishment in London but if you’ve done your market research and have adequate financing, there’s no reason why your restaurant can’t turn a significant profit.
How much does it cost to set up a restaurant in London?
Accounting for property charges, premises costs, interior renovations, onboarding staff, market research and many other factors, you can expect to spend at least several hundred thousand pounds setting up a restaurant in the capital. Of course, this will vary widely depending on the kind of establishment you intend to run, with many less – and far more – expensive avenues you could go down.
Opening a restaurant in London vs. other UK cities
A lot of people wonder “is it hard to open a restaurant in London”. If this is you, then you may be debating whether to open up your establishment in London or elsewhere in the country. To help you come to a decision, here are some of the pros and cons of setting up a restaurant in London.
Access a large pool of skilled workers - London is a hugely diverse city with people from all walks of life. This means you’re far more likely to find the right staff for your establishment than in a smaller town with a less varied population.
Excellent support from local authorities - London Councils support new and small businesses by giving them access to business advice and affordable premises.
A large and diverse customer base – Being one of major financial and cultural capitals of the world with 6 international airports, there will never be a shortage of potential customers looking for a good meal.
Opportunities for growth – If your first restaurant proves a success, there is no shortage of opportunity to expand and open more locations across the city.
Very competitive environment – With so many other eating establishments densely distributed across the capital, it’s one of the trickiest places to stand out from the crowd.
Expensive rents – Compared to the rest of the UK, London is undoubtedly the most expensive place to start a restaurant business.
Contact our sales team to learn more about how Square could help your business.