Everything you need to know about how to open a restaurant
If you’re a foodie or just love the hospitality industry, opening up a restaurant is an extremely rewarding process, but it’s also just as exhausting.
It takes a lot of work, but with expert planning, you’ll be well on your way to setting up a successful restaurant business.
If you’re not sure how to open a restaurant, then you’ve come to the right place. Our guide will give you a low down on the 8 major steps involved in setting up a restaurant, from practical advice on how to conduct market research to drafting up a business plan.
1. Conducting market research before opening a restaurant
The first step in our guide on how to open a restaurant is to conduct market research. This enables you to assess the level of demand and whether there is an opportunity for your business to thrive in your chosen location.
This research also gives you an idea as to what will be the most effective marketing strategy to reel in new customers.
Market research for a restaurant should always kick off with in-depth research into hot industry trends and consumer habits. The goal is to help you understand what issues restaurant owners are facing and to identify the most promising market segments.
What you should know about the restaurant industry:
- What's the current state of the sector: is it in growth or decline? Why?
- What restaurant concepts are fashionable and which ones are struggling?
- What are the main challenges faced by restaurateurs today?
- Who is more successful: independent restaurants or chains?
When it comes to consumer habits, you should also consider:
- On average, how many times a year do people visit restaurants?
- What are the peak and off-peak periods?
- How long do customers generally take for lunch or dinner?
- What is the average spend per table?
- What percentage of the turnover is generated on-site vs. takeaway?
- What percentage of the turnover is made on food and drinks respectively?
Make sure you have access to different reports such as this 2019 report from Deloitte on UK casual dining market or this website with the national statistics for restaurants in the US.
Analysis of the competition in your desired area
You will also have to familiarize yourself with the existing eateries in the area you wish to open a restaurant. You’ll need to ask yourself:
- How many competitors are already present?
- Where are they located?
- What type of cuisine do they offer?
- Are they independents or chains?
- What prices do they charge?
- What is their capacity?
- How many people do they employ?
- What is their turnover?
- What is their occupancy rate?
Once you’ve gathered this data, you will be able to assess whether the market is large enough to support the arrival of a new restaurant.
2. Choosing the right concept when opening a restaurant
Once you have carried out your market research, the next stage in our guide on how to open a restaurant is for you to consider what type of restaurant you want to open.
There are many different types of restaurants you could open, including:
Bistros
A bistro is a small restaurant that serves simple plates such as salmon and braised meat. Bistros are mainly targeted towards diners on the look-out for an affordable, familiar meal with a glass of wine or beer to accompany it.
Bistros generally have a relaxed atmosphere, with waiting staff offering a fairly quick and casual service.
Fine dining restaurants
If you value attention to detail and exceptional service, opening a fine dining restaurant may be the right choice for you.
Typically more expensive than bistro food, fine dining menus often consist of several courses (sometimes including wine pairing) of high-quality, elaborate dishes. It's common for many fine dining restaurants to use locally sourced produce to prepare their dishes.
Waiting staff are often equipped with knowledge about wine, food and fine dining etiquette that extends far beyond what is expected of those working within casual cuisine, making for a truly exceptional dining experience.
Specialty restaurants
Are you a fiend for a particular type of cuisine, such as dumplings or pizza? If so, you could consider opening a restaurant with a menu that focuses on that food group.
From pasta places to bao bars, the modern restaurant scene is buzzing with menus designed to satisfy the cravings of diners on the lookout for their favourite dishes.
Fast food restaurants
A fast food restaurant is one that serves cheap, mass-produced food very quickly from a counter or drive-through.
Often offering a fixed menu of dishes including burgers, chips and fried chicken, much of the food is usually pre-cooked. Although some fast food restaurants offer a sit-in service, a majority a customers choose to order their food to takeaway.
Buffets
Buffet-style restaurants enable customers to choose from a range of different dishes typically presented on a long table. For a fixed (and often quite reasonable) rate, customers can customised their plates with the food of their choosing.
Buffets can also advertise an all-you-can-eat offer, meaning customers can enjoy several plates of food if they so wish.
In determining your concept, you’ll also need to think about:
- The type of customers you plan to target
- Whether you’d prefer to set affordable or high-end prices
- What atmosphere you want to set for your restaurant
You can also decide to join an already established chain of restaurants. This will make your job easier as the concept is already defined by the chain and you will also benefit from having dedicated customers from the outset, but you’ll have less autonomy.
In any case, the most important thing will be to succeed in setting out a unique identity for your restaurant, so that you can stand out from your local competitors.
3. Scoping out the perfect location for your restaurant
Once you've made your decision about the type of restaurant you're going to open, you need to consider its location. This is a key part of opening a restaurant, as it will directly influence whether your business succeeds or fails.
It’s essential to choose a location that gets plenty of passersby on foot or in cars, so it can be easily seen by those driving or walking by. You also need to make sure the restaurant is easily accessible.
If you’re keen to attract business clientele during their lunch break, setting up in a financial or industrial area of whichever city you’re based is ideal.
If you’re after customers who are looking for a more unique experience, however, then choosing a location with an attractive view (such as a river or rooftop) will make an excellent asset.
Finally, there is also the possibility of taking over an already existing restaurant. This will allow you to benefit from a kitchen and dining room already stocked with the right equipment, as well as a dedicated clientele.
4. Choosing your legal structure
Next up in our guide on how to open a restaurant is how to choose the legal structure of your business. Deciding your restaurant’s legal form is a vital step as it will impact:
- How much your business is taxed
- Your taxation at a personal level
- Your responsibility for the company's debts in the event of bankruptcy
To help you make your choice, you can find more detailed information on the different legal forms available to you on the gov.uk guide for UK business owners and SBA guide for those of you based in the US.
5. Identifying the equipment and staff needed for your restaurant
Once you have chosen the concept of your restaurant, decided on a location and figured out the legal structure of your business, it’s time to think about the equipment and people needed to open the restaurant.
First of all, you will have to set up your premises, in compliance with existing safety regulations. You’ll need to consider the cost of equipment. The ovens, fridges and various other utensils necessary in your kitchen will take up a big part of your investment costs.
The success of a restaurant depends largely on its kitchen, but also on its standard of hospitality and atmosphere, which is why the hiring process for both the kitchen and service staff must be a stringent one.
Finally, as with any business, setting up a restaurant also requires purchasing insurance (to make sure you’re covered in the event of any incidents on the premise) and calling in a chartered accountant to manage the accounting and payroll.
6. Creating a marketing plan for your restaurant
How do you open a restaurant with a good turnover from the start?
You will need an effective marketing plan not only to get your business’s name out there, but to build customer loyalty.
You have many options at your disposal, the important thing here is to identify the most exciting aspects about your business - including your location, concept, food and service.
It’s also important to integrate the use of social media networks such as Facebook, Twitter and Instagram into your marketing strategy. This will also help you track online reviews and gauge how people view your restaurant from the outside.
7. Writing your restaurant's business plan
Once you have completed all the previous steps, you’re ready to start writing the business plan of your restaurant.
A business plan is a document containing a financial forecast (highlighting the financing requirements to start the business and the expected profitability of your project), as well as a written part presenting its strengths and the company's objectives for the coming years.
Your restaurant's business plan is particularly important as it will enable you to check that your business can be profitable.
It's also the document you’ll use to present your project to the bank and potential investors to secure the capital needed to launch - so having a professional and reliable business plan is key.
Our restaurant business plan template could be off great use to you!
How do I write a business plan for my restaurant?
Once all the above steps have been completed, it's time to create the business plan for your restaurant.
A business plan is made up of two main elements:
- A financial forecast that aims to highlight the expected profitability of your business and the initial financing requirement.
- A written part that presents your business model, team, business strategy and medium term objectives.
If you’re not used to writing business plans, or if you want to save time, an excellent solution is to use an online business plan software like the one we offer.
Using specialized software to make a restaurant business plan has several advantages:
- You are guided through the writing process by detailed instructions and examples for each part of the plan
- You can look at already written business plan templates
- You can easily make your financial forecast by letting the software take care of the calculations for you
- You get a professional document, formatted and ready to be sent to your banker.
Interested in learning more? You can try our software for free by signing up to The Business Plan Shop today.
8. Securing funding to open your restaurant
After writing your business plan, the final step in knowing how to open a restaurant is to secure the financing needed to launch the business.
To open a restaurant in the states, RestaurantOwner.com estimates that an initial investment of around $375,000 is required. The exact budget will depend on the size and location of your place.
To raise the necessary amount of money to launch the business, you’ll need to consider the different financing options available to you.
First of all, it is ideal to have the founders’ equity to build up the company's own equity. This is the money that you and your potential partners can contribute to the project in the form of share capital or a contribution to a director loan (or shareholder loan).
If you do not have sufficient founders' equity, opening a restaurant will be undoubtedly more complicated - but not impossible (see our guide to opening a restaurant with no money).
To finance the remaining sum after you injected equity into the deal, you can turn to the banks to try to obtain a professional loan to finance part of the development work, equipment, or delivery vehicles.
You could also try launching a crowdfunding campaign. Owner Gary Usher successfully opened his dream restaurant, Burnt Truffle, in November 2015 after 891 people pledged £103,915 to bring it to life. He offered all backers free Sunday lunches once Burnt Truffle opened its doors.
We hope that this guide helped you better understand how to open a restaurant. If you’d like more advice on any of the points mentioned above or any other element related to the creation or takeover of a restaurant, please don’t hesitate to get in touch.
Also on The Business Plan Shop
- How to do market research for a restaurant?
- How to create a financial forecast for a restaurant?
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