If you dream of turning your love for food into a successful business, you're in the right place. This guide is your roadmap for how to successfully start your new restaurant. It covers everything from creating a delicious menu to obtaining the required permits.
These steps can turn your dream restaurant into a reality, satisfying your love for both food and success. Be thorough and follow each step before your restaurant's grand opening.
1. Tackle the Basics: Concept & Brand, Structure & EIN
Concept & Brand
Concept: Your restaurant's concept is one of the most basic elements for success. It includes your restaurant’s:
- Type: Full-service or fast-casual
- Cuisine: Italian, Spanish, Japanese, Fusion
- Service style: Table-service or pick-up-at-acounter service
- Ambiance: Fine dining, family friendly, diner-feel, etc.
Brand: Your restaurant's brand should reflect your mission, identity, and how you'll tell your story. Your brand should be clearly visible in all your advertising actions, from your name and logo to your menu and merchandise. If you haven’t already read our Complete Guide to Restaurant Marketing, jump to the section on branding for a step-by-step process you need to follow.
Determine Your Restaurant's Business Structure
|Sole Proprietorship||A simple structure where the owner manages all aspects of the business and there is no legal distinction between the owner and the business.||Easy to set up; Owner has complete control.||Owner's personal assets are at risk; Responsible for all debts and liabilities.|
|Partnership||A business in which two or more individuals share management and profits. It can be a General or a Limited Partnership.||More resources in terms of capital, skills, and business contacts; Suitable for multiple owners.||Partners are personally responsible for debts and liabilities; Potential for conflicts in management.|
|Limited Liability Company (LLC)||A hybrid structure combining elements of a corporation and a partnership, offering liability protection and tax benefits.||Liability protection for members; Tax benefits; Flexible management structure.||More complex to set up; Subject to more regulations compared to a sole proprietorship or partnership.|
|Corporation||A separate legal entity offering maximum personal liability protection. Can be a C Corporation or an S Corporation.||Personal liability protection; Suitable for raising capital; Good for larger businesses.||Complex to set up; Subject to many regulatory requirements; Possible double taxation for C Corporations.|
|Cooperative||A business owned and operated for the benefit of its members, with profits distributed among them.||Community-oriented; Profits distributed among members.||Not common for restaurants; Requires cooperation among members.|
Register Your Restaurant and Acquire an EIN
Getting a federal tax ID, called an Employer Identification Number (EIN), is a required step for your restaurant.
You'll need it if you hire employees or set up as a corporation or partnership. Think of it like a Social Security number (SSN) for your business. It's used to declare your income tax, employment tax, self-employment tax, and sales tax. Get your EIN on the IRS website online.
2. Choose Your Restaurant's Location Wisely
Selecting the appropriate location can bring in the right customers and boost your business, while a bad spot creates problems.
Research the Best Spot for Your New Restaurant
If you haven’t already read our full guide on restaurant location, jump to the section on the top 10 Essentials. There you’ll note the importance of visibility, accessibility, and demographics when choosing your restaurant’s location.
It should match your target customers and provide easy access for both vehicles and pedestrians. Consider how your restaurant's concept fits your chosen location. For instance, a family-style restaurant may not thrive in a college or business district.
Monitor labor costs (or Cost of Labor), as they can vary based on the area's cost of living.
Labor costs encompass wages, salaries, benefits, and payroll taxes for all employees involved in the restaurant's operations. To find out how labor costs are used to calculate your restaurant’s Prime Cost, jump to the section here on labor cost calculation examples for restaurants.
Additionally, research the competition to understand the market better. Google “restaurants near me” and spy on each of your closest competitors. Can you offer something different that will grab market share away from them? If your local competitors are too big to compete against, consider another area where your restaurant is more likely to success over the long term.
Lastly, instead of buying the commercial space, cosider leasing it instead, as it offer more flexibility when starting your new restaurant venture.
Obtain the Right Permits for Your Preferred Location
Getting the right permits and licenses is a must for starting a restaurant. This includes health department permits, like a food service license that suits your restaurant type and location. You’ll find the full list of restaurant permits in our guide.
Opening a new restaurant goes beyond getting licenses and permits. Whether you're opening your first eatery, or expanding your food truck into a full-service restaurant, you'll know what to do by the time you're read this.
WHAT YOU'LL LEARN...
- Restaurant Licenses and Permits: Open Your Restaurant Legally
- How to Start a Restaurant Successfully
- Restaurant Leasing: Guide to Find & Negotiate the Perfect Space
- Transitioning from Food Truck to Restaurant
- Soft Opening for New Restaurants: Step-by-Step Guide
- Restaurant Location: 10 Ways to Find Your Perfect Restaurant Spot
- 10 Things to Know Before Franchising a Restaurant
3. Startup Costs for New Restaurants
Starting a restaurant involves careful financial planning. Your startup costs cover factors such as leasing, designing your space, and getting permits and licenses. Knowing how to start a restaurant financially will help determine long-term success.
Look into Financing for Your Establishment
Securing funding is a necessary step when starting a restaurant. Estimate your costs, create a budget, and compare it to your available resources:
Business Loans: Commercial loans, credit lines, and small business loans
Private Investors: Partners or profit-sharing backers
SBA Loans: From the Small Business Administration, offering competitive rates
Term Loans: Banks, credit unions, or online lenders provide lump sums with fixed monthly payments
Business Line of Credit: Ideal for short-term expenses, includes a revolving credit line
Working Capital Loans: Cover operation costs
Startup Business Loans: Available for new businesses with flexible eligibility
Crowdfunding: Use platforms like GoFundMe and Kickstarter for public support with potential rewards
If you haven’t read the Complete Guide to Secure Restaurant Financing, you’ll want to jump to the 14 Top Restaurant Business Loans.
4. Design and Equipment Needed when Starting Your Restaurant
Designing your establishment's layout is a major element of learning how to start a restaurant.
- Seating: Follow local requirements for capacity based on space size.
- Furniture: Choose furniture that matches your concept and is comfortable.
- Ambiance: Use decor, greenery, and lighting for the right atmosphere.
- Cleanliness: Opt for easy-to-clean wall fixtures and flooring, avoiding odor-absorbing fabrics.
- Food Preparation: Design a workspace with surfaces and supplies.
- Cooking: Allocate space for grills, fryers, ranges, and other equipment.
- Service Area: Set up a window with heat lamps for efficient meal pickup.
- Warewashing: Include sinks, dishwashers, and racks. Storage: Place shelves near the receiving area for easy item storage.
Lease or Purchase Your Equipment
Starting a restaurant requires tables, chairs, and barstools for seating, along with a host stand and server stations. You'll also need tableware like plates, silverware, glassware, linens, towels, menus, and technology like POS and payroll systems.
Investing in kitchen equipment can cost around $100,000, depending on your needs. You can choose equipment leasing with lower upfront costs and monthly fees or equipment loans featuring large down payments, fast funding, low-interest rates, and fixed monthly payments.
Select equipment based on your menu items, like a brick oven, pan racks, and pizza ingredients for pizzerias.
Look into a Point-of-Sale (POS) System
A restaurant POS system helps with tasks like order processing, payments, and tip reconciliation. It also provides valuable reports for restaurant improvement.
5. Build Your First Menu and Price it Correctly
Your menu should align with your restaurant's concept, target audience, and budget.
Menu pricing is vital to the success of your restaurant. Ensure you know how food costs affect your gross operating profit and how your food cost percentage per menu item.
Also remember that there are two key menu pricing methods. Consider each one first before picking one. Finally, once you’ve calculated your menu prices, compare them against similar meals from your local competitors. This will ensure that you stay competitive.
Menu Pricing Method 1
|Understand Ideal Food Cost||Ideal food cost is generally 25%-35% of operating expenses. Calculate the cost of raw ingredients for each dish.|
|Set Menu Price||Use the calculated ingredient cost and desired food cost percentage to set the menu price. Consider additional costs like preparation, service, and overheads.||Price = Ingredient Cost / Desired Food Cost Percentage|
|Determine Actual Food Cost||Consider starting inventory, new purchases, and ending inventory to calculate the actual food cost.||Starting Inventory + New Purchases – Ending Inventory = Actual Food Cost|
|Compare Food Cost Percentage||Compare your food cost percentage, ideally between 28%-32%, to industry standards for performance insights.|
Menu Pricing Method 2
|Choose Gross Profit Margin||Decide the profit margin you want for a menu item, using industry data to set a realistic profit.|
|Calculate COGS||Calculate the Cost of Goods Sold (COGS), which is the raw ingredient cost.||Chicken Caesar Salad ingredients cost $4.|
|Set Menu Price||If aiming for a specific gross profit margin, adjust the menu price accordingly.||Aiming for a 65% profit margin, proposed price is $12.||Gross Profit Margin = (Menu Price - COGS) / Menu Price|
6. Hire Employees to Help Start Your New Restaurant
When learning how to start a restaurant, building the right team is important. Hire for positions like servers, chefs, and bartenders. If you haven’t yet read our comprehensive guide on Hiring Restaurant Staff, jump to the part “Determine Which Staff You Need in Your Restaurant”. You’ll also find our Five Favourite Sources to Find Restaurant Staff.
Building the right team sets up your restaurant for long-term success. The number of employees needed depends on your restaurant's type. A full-service restaurant might require 10 to 40 employees, including managers, chefs, servers, and bartenders.
Smaller places, like food trucks or cafés, need fewer staff. Roles range from kitchen staff like cooks to front-of-house positions like hosts. Here’s a recap on the typical staffing needs according to restaurant type:
|Restaurant Type||Front-of-House Staffing||Back-of-House Staffing|
Aim for 1 serving staff member per 12 tables|
|Consider 4 kitchen staff members per 50 customers per hour|
Recommended: 1 serving staff per 5-6 tables|
Recommended: 1 host for seating arrangements
|Consider 4 kitchen staff members per 50-60 customers per hour|
|Fine dining restaurant with a bar||
Aim for 1 serving staff per 4 tables|
Recommended: 1 host per 30-40 guests
Recommended: 1 bartender per 30-40 guests
|Recommended: 6 kitchen staff members per 50-60 customers per hour|
Remember that building the best work ethic in your restaurant starts with great management skills from your part. If you’ll be delegating management roles to different people, ensure they know what it takes to master restaurant management.
When it comes to training and supporting your staff to get them to stay rather than jumping ship, there’s a lot to consider. Restaurant staff managing is one of the biggest challenges facing restaurant owners like you, so know how to deal with them.
7. Marketing Before Opening Your New restaurant
Restaurant marketing involves promoting your food service concept to the public to build your brand and engage your customer base. It encompasses various actions across multiple channels.
A restaurant marketing strategy consists of organized campaigns. It begins with identifying your target market, aligning their values with your brand, and creating buyer personas to understand your common customers better.
If you haven’t already checkout out our complete list of tips on restaurant marketing, here’s a recap on the best marketing channels to promote your restaurant:
|Marketing Channel||Details||Goal||Audience||Posting Frequency||Paid Ads||Pro Tips|
|Website||Essential pages: Address, Phone Number, Hours, Social Media Links, Menu, Online Ordering Link (if applicable), Contact details, and Directions.|
|Additional Features: Reviews page, Photo gallery, Blog, FAQ section.||Blog: Share stories, recipes, promotions, and interesting information about your restaurant’s food and recipes.|
|E-Newsletters||Email marketing to engage customers, promote specials, and build loyalty. Collect email addresses through Website forms, Online orders, Wi-Fi registrations, and Online reservations.||Build customer loyalty and promote specials.||Email subscribers||N/A||Encourage sign-ups for newsletters on various platforms.|
|Showcase your restaurant’s brand, hospitality, and overall culture through visual storytelling.||Visual storytelling to give guests a preview of dining experience.||Up to 1 billion monthly active users.||3-5 times per week.||Instagram Ads||Enable “geotagging” and use Instagram stories, livestreams, and reels.|
|Build a community for your customers by encouraging page visits and comments.||Community building and customer engagement.||Up to 2.89 billion monthly active users.||1-3 times a day.||Facebook Ads||End posts with a question or challenge to encourage interaction.|
|Quickly share news and updates, interact with your customers, and comment on industry happenings.||Customer interaction and sharing updates.||Up to 330 million monthly active users.||Up to 5 times per day.||Twitter Ads||Respond to every customer mention, tag, comment, complaint, and criticism.|
|TikTok||Tell your brand story and connect with new audiences.||Brand storytelling and audience connection.||Up to 1 billion monthly active users.||1 or 2 times a week minimum.||TikTok Ads||Encourage user-generated content, partner with influencers, use popular sounds, and tie viral trends back to your restaurant.|
The most exciting part of learning how to start a restaurant is opening your doors to the public. Many start with a soft opening, inviting select guests to test operations and give valuable feedback. Next is the grand opening, which is your chance to make a big impression, attract a larger crowd, and start your restaurant's journey.
Before your grand opening, host a soft opening with a small guest list to try your menu and service. This is your chance to gain feedback and word-of-mouth recommendations. You also want to use limited schedules and trial menus to ease new staff into work. This way, you can make necessary improvements before the grand opening.
Here’s what you need to know to nail your soft opening:
|Five Steps for a Soft Opening|
|STEP 1: Build an Invitation List||
Consider various invitee options:
Determine your guest list wisely to maximize the benefits of your soft opening and lay a foundation for future success.
|STEP 2: Decide How Many Days You’ll Run Your Soft Opening||
Choose between single-day events or multiple days, depending on factors like budget and timelines. Practicing and testing during the soft opening increases the chances of success when the official opening takes place.
|STEP 3: Create a Menu or Plan for Your Soft Opening||
Decide between a full or limited menu based on your goals. A limited menu is recommended for testing and feedback, while a full menu gauges the true dining experience.
|STEP 4: Do You Charge for a Soft Opening?||
Charging a fee creates value but may deter guests, while offering a free opening attracts a larger audience but comes with financial challenges. The choice depends on your goals, target audience, and resources.
|STEP 5: Determine Pricing Details||
Consider three pricing options:
Pricing decisions should consider the desired impact on customers, cost implications, and the goal of building customer loyalty and goodwill.
9. Get Your ISO Certification
Opening is just the beginning of understanding how to start a restaurant. You need to consistently meet the highest standards of quality and service. Determine which dishes and promotions attract customers, and use feedback to make improvements when necessary. Obtain your ISO certification to boost your reputation and showcase your dedication to providing great dining experiences.
Here is what a new restaurant owner needs to know about getting an ISO certification:
What is an ISO Certificate? An ISO 22000 certification indicates that a restaurant has implemented a Food Safety Management System (FSMS). It demonstrates the restaurant's commitment to reducing food hazards and illnesses and ensuring quality service.
Why Do You Need One? Having an ISO 22000 certification showcases the restaurant’s commitment to quality service and food safety. It helps in building customer trust and confidence in the restaurant’s food handling and safety practices.
Where to Get One? ISO certifications are provided by external certification bodies. You can apply for ISO 22000 certification through recognized certification bodies such as the International Organization for Standardization. Here is the link to their official website for more information: ISO - International Organization for Standardization
Fee Payable: The cost of ISO 22000 certification can vary depending on several factors, including the size of the restaurant, the complexity of the processes, and the certification body chosen. It is advisable to contact the certification body directly for an accurate quote.
When to Apply? It is beneficial to apply for ISO 22000 certification as early as possible in the restaurant’s operation to ensure that food safety practices are implemented from the start. However, restaurants can apply for certification at any stage of their operation.
What Else Should They Know Before Applying? Before applying, restaurant owners should familiarize themselves with the requirements of the ISO 22000 standard and assess the current state of their FSMS. They should be prepared to demonstrate compliance with the standard and show ongoing commitment to food safety. Regular audits and assessments will be conducted to ensure continued compliance.
Benefits: In addition to building customer trust, ISO 22000 certification can also help in understanding and effectively implementing FSMS, reducing the risk of food hazards and illnesses, and potentially improving the overall efficiency and profitability of the restaurant.
FREE Resources for Restaurant Owners
Concept & Branding: Develop a clear restaurant concept, choosing type, cuisine, service style, and ambiance; and ensure your brand consistently communicates your mission and story.
Business Structure: Consider factors like control, liability, and regulations to decide between structures like Sole Proprietorship, Partnership, LLC, Corporation, or Cooperative.
Register & EIN: Register your restaurant and obtain an Employer Identification Number (EIN) for tax and hiring purposes.
Choose Location: Research visibility, accessibility, demographics, and competition to select a prime location and ensure it aligns with your restaurant's concept.
Financial Planning: Outline all startup costs, including permits, lease, and equipment. Investigate various financing options like business loans, private investors, SBA loans, and crowdfunding.
Design & Equipment: Prioritize the ambiance, layout, and decor to enhance the dining experience. Invest in essential equipment, especially a Point-of-Sale (POS) system.
Menu & Pricing: Create a menu that aligns with your brand and target audience. Use established methods to ensure competitive pricing while maintaining profitability.
Hiring & Training: Recruit for key positions like chefs, servers, and bartenders. Prioritize training and invest in management skills to ensure staff retention and effective service.
Marketing & Promotion: Build a comprehensive marketing strategy across multiple channels like websites, social media platforms, and email newsletters to engage and grow your customer base.
Quality Assurance: Consistently meet high quality and service standards. Consider obtaining ISO 22000 certification to enhance reputation and showcase dedication to food safety.