How to Start a Restaurant

Wondering how to start a restaurant? Our guide includes everything from creating a business plan to taking payment for your first covers.

Table of contents

Intro

Maybe you’ve spent sleepless nights thinking about what your ideal restaurant would be like, from the delicious food and friendly staff to the killer location and exceptional ambience. Or you’ve worked in the restaurant industry for years mastering the numerous intricacies of the business. Perhaps you are a chef yourself and want to truly take charge of a kitchen and have your name above the restaurant door. Or maybe you’re considering testing the water with a pop-up restaurant. Regardless of how you got here, now is the time to take you can take that first step towards starting a restaurant.

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Creating A Restaurant Business Plan

Creating a business plan for your restaurant is vital. It’s particularly important if you want to attract outside investment or need a business loan to get started. It shows lenders and investors that you’ve done your market research and have a strategy in place to cover your costs and make a profit.

If you are in the rare position of not needing any financial backing, a written business plan will still be extremely valuable. It will help you to organise your ideas, follow through on them and retain a clear vision of how to move forward. Your business plan is a detailed document that outlines exactly what your restaurant is all about, what financing you need, how you’ll attract customers and how you’ll grow. It’s the masterplan for your restaurant dream.

A restaurant business plan should include:

  • an executive business summary – a overview and introduction to the restaurant you plan to create, including a ‘mission statement’ that explains why the restaurantit is being created and the overall vision
  • company description – summarising basic facts about what the restaurant will be like, its size, proposed turnover, staffing numbers etc and location
  • market research and industry, geographic and competitor analysis
  • SWOT (strengths, weaknesses, opportunities and threats) analysis
  • menus and supplier information
  • marketing strategy
  • organisation, management and staffing information
  • financial plan – detailed information and breakdowns on costs, profit margins, funding, food cost percentage and break-even analysis.

More detailed advice on this is included in: How to Cook Up a Killer Restaurant Business Plan

Discover answers to six questions commonly asked by people thinking of starting a restaurant. They are:

  • What do I need to know about the restaurant industry?
  • How much does it cost to open a restaurant?
  • What is the best location for a restaurant?
  • How do I manage customer payments?
  • How do I compete with other restaurants?
  • Will my restaurant be a success?

Deep Dive

An Overview of Restaurant Safety and Food Handling - What do I need to know about the restaurant industry?

Before diving into the specifics of opening a restaurant, it’s important to understand the restaurant industry as a whole. Restaurant safety protocols and food handling are top priorities for the industry, so you should understand the ins and outs before you open a restaurant.

To keep customers safe and prevent food-borne illnesses, the restaurant industry is heavily regulated. The key organisation you should be aware of is the Food Standards Agency, which oversees Food Hygiene Rating Schemes (FHRS) in the UK. This is a rating you will have to acquire and maintain throughout the lifespan of your restaurant, so you’ll want to come up with best practices for food safety and restaurant sanitation.

You’ll also need to register as a food business well in advance (28 days) of actually serving any customers. The penalty for failing to register can be a heavy fine or even imprisonment.

By familiarising yourself with regulations, obtaining specific industry-related licenses and adhering to the basic food safety procedures, you can can keep your reputation intact and customers out of harm’s way. You may also want to consult an expert, who can help navigate the various laws and regulations that might apply based on your specific needs.

Restaurant Industry Segments

Recognising where a restaurant fits in the industry can help you understand the competitive landscape and better strategise your entry to market when opening a restaurant.

It’s important to have a solid idea of what your new restaurant will be. Investors and lenders are going to want to know and you’ll need to convince customers too.

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 service of casual food items. Seating is limited since most customers order at the counter and take their food to go.

  • Fast-casual establishments mirror fast food service but offer freshly prepared food with wholesome quality.

  • 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. 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.

How much does it cost to open a restaurant?

Most restaurant owners wonder how much money they need to start a restaurant. There’s no one-size-fits-all answer for this question. Restaurant costs are dependent on various factors including:

  • size of the restaurant
  • type of restaurant (see above)
  • number of staff
  • location
  • amount of premises renovation needed.

Starting a restaurant is usually an expensive 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.

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How to choose a restaurant location

The right location can shape the fortunes of a restaurant, so it makes sense to put plenty of thought into it.

A good location will be attractive to customers. It may have an alluring feature that pulls people in or a nearby attraction that creates footfall. It will be big enough to accommodate your kitchen and the number of tables you need. Crucially, the premises will have the physical ability to house a restaurant and be in an area where local planners will accept one.

Things worthy of consideration include:

  • What’s the local community like and who will be your regular customers? Consider if the restaurant you are planning is likely to appeal to the people on the doorstep. If not, you’ll be missing out on a lot of trade opportunity. You also need to consider if the customers you want to attract will be prepared to travel to the neighbourhood you’re in.

  • What are the transport links and parking like? Ideally you want to capture nearby trade, but you also want to be able to attract and accommodate people from further afield. Consider how people will travel to the restaurant. If it’s close to well used public transport, such as major train station, you may not need to worry about parking, but in many places onsite parking or a very close car park (preferably one that is free to use) is vital.

  • How many tables can you accommodate? When you work out your finances, you’ll see how many covers you need to do per sitting to break even and make a profit. It’s important to consider a floor plan for your restaurant before you commit to premises. Is there enough space to accommodate the amount of tables you need once you’ve set aside space for the kitchen and serving areas?

  • Is there an attraction nearby? Depending on the type of restaurant you’re creating you may wish to consider if there’s an attractive view that customers might enjoy or alternatively an external attraction in the area that may lead to footfall (like a stadium or theatre).

  • What was the building previously used for? If it was a restaurant before, you may have the benefit of not needing to apply for change of use planning permission but it may also carry a reputation, which can be good or bad.

  • What competition is nearby? If there’s none, ask yourself why no one else is making a restaurant work here and if there’s a lot, are you confident there’s enough trade? Market research is key.

How can I manage payments?

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 first start a restaurant. Taking payments is a fundamental part of your restaurant’s success and it should be a seamless experience. that first time, and every time after. To do that, That means choosing you need to choose a reliable payments processor and point-of-sale (POS) software.

take-payments-at-restaurant

A payments processor handles credit and debit card transactions for your business. You want to look for a payments processor that accepts all major credit cards, has one consistent rate (with no hidden fees), and quick deposit times. Square Terminal allows seamless tableside payments, prints receipts and can accept tips.

An intuitive point-of-sale system lets you get started taking payments quickly, and it can also grow with your restaurant (and help it grow). An integrated restaurant point of sale not only lets you accept all types of payments — including chip and PIN and Apple Pay — but also it can help you run your entire restaurant more efficiently.

A restaurant POS system, like Square for Restaurants, 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 give you better insight to make decisions
  • Immediate customer insights and feedback

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 started 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 market.

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, location 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 compass 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.

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Market your restaurant. There are many channels you can use to market a restaurant. You can go old-school and hand out flyers or pay for an advert in the local paper. 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. Social media can help small businesses to grow.

You should test these channels to see what works for you but regardless of the media, you should use your brand visuals and voice in all your marketing. Of course, whenever you use any kind of direct marketing tactics (such as email or phone calls) it’s important to abide by the laws that rules which regulate it. Marketing emails can only be sent to customers who have agreed to receive them and they must be able to opt out. Using a marketing system with built in devices to help you fulfil your obligations is one way to ensure you stay compliant.

Build a loyal following. A customer loyalty program, 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 tell their friends about your restaurant.

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.

Tableside tablets: As the restaurant industry continues to explore automation, there’s a spike in interest around tableside ordering tablets. This allows diners to use a tablet to order food and drinks as well as pay for their meal without interacting with a server.

Kitchen Display Systems: Kitchens are high pressure environments where efficiency is key. Restaurants are increasing making use of Kitchen Display Systems) that allow orders to be seen by chefs and improve communication between the kitchen and front-of-house.

Food delivery software: Restaurants have been pushed to innovate and expand into delivery and take-away services. Technologies that allow you to gather orders all in one place, regardless of if they come in person, online, via a call or food delivery app, help ensure top quality services to customers and reduce the risk of oversights and confusion. Square for Restaurants does all this.

Restaurant website: The shift to restaurants more routinely offering take-away, collection and delivery options means websites are now more than just a marketing tool. They need to have simple-to-use functionality that allows customers to order online. Square Online allows restaurants to make the most of this opportunity with no monthly fees or commission.

Will your restaurant be successful?

The million-dollar question every aspiring restaurant owner asks: Will my restaurant be successful?

customers line up outside of Jack's

Opening a restaurant is an intricate process that requires dedication and commitment, and. Questioning your decision to embark on this rigorous journey is completely normal, but lots of people do make a huge success of new restaurants.

Tod Wilson, the owner of the prosperous Mr. Tod’s Pie Factory in New Jersey, America, will be the first to tell you that this process isn’t always easy. Tod was the first winner on Shark Tank (a Dragon’s Den style reality TV show that saw entrepreneurs present their breakthrough business ideas to investors), in 2009,. But he faced much adversity along the way when he was trying to get his business up and running. What advice does Tod offer about success? He stresses the need for resilience.

“Keep fighting. Every time I find myself in a tough position, I think about that. You have to just get up after you get knocked down,” said Tod. “Whether it’s a product recall, not getting an order in, or losing a new hire, you have to be able to bounce back.”

Young Han is the head of community outreach at Philz Coffee and expresses the importance of building a relationship with your customers and keeping quality at the forefront of your mind. It’s easy to lose sight of your customers when your company begins to grow, however, “never forget why you started. Always circle back to that [and] stay true to your core.”

Similarly, the owner of Monday Night Brewing emphasises the first-time experience for a customer. You essentially have one time to get it right and make an impression on a first-time customer. If guests have one bad experience, “odds are they’ll never try it again.”

It’s not just the customers that you need to keep happy either. Owners of successful businesses are usually quick to recognise that their team and staff are fundamental to their success. Employing and retaining a good chef, in particular, is a challenge many restaurants struggle with. In 2021, it was reported that there were difficulties in finding all kinds of hospitality staff. Working on onboarding strategies and other employee wellness initiatives could help set your restaurant apart.

You can find loads more insight and inspiration around setting up a restaurant in our most recent food and beverage focused articles in our business resource centre.