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By: rkapur
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Opening A Restaurant: The Ultimate How-To Guide

Opening a restaurant can be a very profitable venture if you have the right skills and knowledge.

Why?

People are always going out for dinner, whether to have a good time with loved ones, celebrate a big win, or grab a quick bite in the middle of the day.

In 2021 alone, according to the National Restaurant Association, the restaurant industry reported $799 billion in sales, mid-pandemic. With the economies opening up again, this number will likely go up.

Yet, like any other business, starting a restaurant is a huge undertaking that involves plenty of planning, research, and financing.

This guide provides some key points to help you set up your restaurant.

A Quick Start for Opening a Restaurant: Checklist

Call them the tools of the trade; these items are a must-have when starting your own restaurant. They include:

  • Having a concept
  • Writing a business plan
  • Having enough capital
  • Choosing the best location
  • Getting the correct permits and licenses
  • Design your restaurant menu
  • Creating a marketing plan
  • Staffing your restaurant
  • Buying utensils and other equipment

As you read on, we will discuss in-depth how these items fit into setting up a restaurant and how you can obtain them.

How to Open a Restaurant: A Step-By-Step Guide to Starting a Restaurant

The following steps to opening a restaurant will guide you in this entrepreneur adventure.

Market research

One of the first things you’ll need to do before opening a restaurant business is to research your competition.

It gives you a better understanding of the market—what types of restaurants are doing well and where there may be opportunities for you to fill a niche.

To start, make a list of all the restaurants in your area that serve the same type of food you plan to offer.

Visit each restaurant (and check out their website) and take note of a few things:

  • What is their overall concept?
  • What type of menu do they offer?
  • How does their pricing compare to your proposed pricing?
  • What is their customer service like?
  • Do they have any unique selling points?

Using this information, narrow down your list to three or five restaurants that you think will be your biggest competitors.

Once you’ve done that, it’s time to dig a little deeper.

Start by calling each restaurant and asking for their most recent monthly sales. If they’re not willing to disclose that information, try to find out how busy they are during peak times.

You can also review their social media accounts to see their target market and the marketing campaigns they’ve found most successful.

In addition to speaking with and researching the restaurants, you should also look into any awards or accolades they may have received. This can give you a better idea of the caliber of restaurant you’ll be up against.

By understanding your competition, you’ll be in a much better position to create a restaurant concept that stands out and has a chance at success.

Define the concept of your restaurant

When starting a restaurant, a well-defined concept is crucial.

A good concept covers three key areas:

The cuisine

Think about the type of cuisine you want to serve. For example, do you want to focus on Italian or Mexican food? Or do you want to serve a variety of different cuisines?

The atmosphere

Once you have an idea about the type of food you want to serve, you can start thinking about the atmosphere you want to create.

For instance, do you want a casual atmosphere with paper napkins and plastic silverware, or do you want a more formal atmosphere with linen napkins and china plates?

Branding

The fundamental steps to restaurant branding are:

  • Choosing a name
  • Defining the brand colors
  • Designing a logo
  • Determining your core values and mission.

If you need help designing a logo, look up graphic designers on low-cost freelance job boards like Upwork, Freelancer, and the likes.

Also, remember that you should always represent your brand identity at all points of interaction with the customer, from the decor to the menu design and advertising channels you choose to use.

Your target market

It’s essential to outline your target market from the get-go.

Why?

Because the more specific you are with your target market, the greater the relationship you can cultivate with them. It’s about your restaurant’s success.

Do your research. What kind of food do they like? What types of restaurants do they frequent, and why?

Meeting the needs of your target market will translate to numerous referrals and unwavering customer loyalty.

Determine your Unique Selling Proposition

Your unique selling proposition (USP) is what makes your restaurant stand out from the rest.

It will attract customers to your restaurant and keep them coming back. It sets it apart from the competition.

Think about what makes your restaurant special.

Do you have a signature dish? Do you only use organic ingredients sourced locally? Do you have a relaxed or upscale atmosphere?

Whatever it is, make sure your USP is clear and prominently featured on your website and all marketing materials.

Your USP will be the foundation of your marketing efforts, so take time to get it right.

Once you have a well-defined concept and unique selling proposition, the next step is to create a business plan.

A restaurant business plan will help you determine the cost of opening your restaurant and set up a budget for ongoing expenses.

Write a restaurant business plan

A restaurant business plan is necessary for opening any type of company, but it’s downright crucial for a restaurant.

Without it, you won’t have a roadmap to follow, and you could end up making some costly mistakes.

Your business plan should include everything from the restaurant concept and menu to the marketing strategy and financial projections.

Be careful not to over-estimate how much money you can make or how quickly your restaurant will become successful, though.

One of the most critical aspects of your business plan is your financial projections.

You’ll need to estimate your start-up costs, including the cost of opening your restaurant and fitting it with all the necessary equipment.

You should include projected fixed costs, like rent and utilities, and variable costs, like food and labor. In addition to estimating your expenses, you’ll also need to project your sales and profits.

If you’re not sure where to start, this guide gives a detailed process for writing a restaurant’s business plan.

Source capital

Let’s be clear, setting up a restaurant costs a lot. And, you’re more likely to run at a loss for the first few months. It’s perhaps why 60% of restaurants in the USA close within their first year

You’ll spend on leasing or purchasing a space, fitting it with all the necessary equipment, hiring staff, and stocking it with food and supplies.

Then there are the ongoing costs of running the business, like utilities, insurance, and employee salaries.

All of these expenses can add up quickly. So, you’ll need to have a solid plan for how you’re going to finance your restaurant.

No matter what route you choose to finance your restaurant, do your research and be realistic about the costs involved in opening and running a restaurant.

Only spend if it’s necessary. For example, you can cut costs by buying used equipment currently in surplus due to restaurants shutting down over the pandemic.

One option to get funding is seeking out potential investors and pitching them your idea. Then, use projected numbers to show them how profitable your restaurant will be.

#CaminoTip
You can also approach friends and family for funding.

You could also open your restaurant under a franchise. That way, some of the initial costs will be on them.

This list shares the cheapest franchises you can invest in.

But probably your best option is to take out a start-up loan.

At Camino Financial, we don’t let business behind. So we offer loans specifically designed for entrepreneurs like you.

Select a location for your restaurant

Here are a few tips to help you select the best location when opening a restaurant.

Do your research

Look at the population density, average income, and other demographic data. This will give you a better idea of whether or not an area is a good fit for your restaurant concept.

Consider the cost

Make sure you have a realistic budget for your lease or purchase, as well as for renovations and equipment.

Think about traffic

When choosing a location, it’s essential to think about customer traffic.

If your restaurant is in an area with high foot traffic, you’re more likely to get customers.

Consider your competition

Take a look at the other restaurants in the area and see what cuisine they offer.

For example, if you’re opening a pizza restaurant in a neighborhood with several Italian eateries, you may have a tough time succeeding.

However, if there’s a lack of Italian restaurants in the area, you may have a better chance of finding success.

Think about parking

If the area is congested and there’s no parking available, you may lose business.

Make sure the space is right

When touring potential locations, make sure the space is suitable for your restaurant.

Is it the right size?

Will you be able to set up the kitchen and dining area the way you want?

Consider the zoning laws

Before you sign a lease, make sure you check to see if the government zoned the area for restaurants. If it’s not, you may have difficulty opening your business.

Get the licenses and permits needed to open a restaurant

Costs when opening a restaurant vary depending on your location. Generally, opening a restaurant involves:

  • Setting up a business entity
  • Obtaining licenses and permits
  • Hiring staff
  • Purchasing equipment and inventory

One of the most critical steps in opening a restaurant is registering your business with the state. But, first, you’ll need to register with the IRS to get your employer identification number (EIN).

After registering your business, you will need to obtain federal, state, and local licenses and permits.

Every restaurant requires certain licenses. Others may be specific to your type of restaurant.

You can find out more about the specific licenses and permits required for your business by contacting your local government office.

Getting a permit might take a while. You might want to start as early as you can.

Draft your menu

One of the most important decisions you’ll make when opening a restaurant is what to serve.

These guidelines will help you craft the perfect menu.

  • What type of food does your target market like?
  • What’s your price? It shouldn’t be too high to drive customers away or too low to put you out of business.
  • Don’t forget the proper usage of your brand colors and logo.
  • Format it properly. Use whitespace, bold text, and a legible font type and size
  • Keep it short and straightforward.
  • Use creative wording to trigger emotions—words such as traditional, Grandma’s, tender, home-style, etc. Use them as long as they accurately depict the food.

Keep in mind that not every dish has to be a masterpiece. Most diners prefer straightforward dishes. So try to include fewer crowd-pleasing options on your menu.

Finally, don’t forget about beverages. Include a variety of drinks on your menu, from coffee and tea to beer and wine.

Begin hiring

Hiring the right people is the best way to guarantee repeat customers. A recent study by Bain & Company shows that increasing retention of customers by just 5% increases revenue by 25% to 95%.

Impressive, right?

This means that you must make sure your staff is friendly and personable since they will regularly interact with your customers.

Also, you need to look out for prior experience in the industry. And with the numerous restaurant workers furloughed due to the pandemic, you can easily find some.

Finally, you need to make sure that you hire reliable and hardworking people. Things can get chaotic in the kitchen, and you need to make sure that your staff is up for the challenge.

You can use online resources, such as classified ads or job boards, to help connect with potential employees. But, of course, you can rely on consultants or referrals, too.

Acquire the right equipment for your restaurant

Before you spend on any piece of equipment, do a comparison shop to find the best deal. You can also go for used equipment if getting new ones is out of your budget.

There are a few things to keep in mind when shopping for restaurant equipment:

  • Consider the type of cuisine you’ll be serving to determine the kind of equipment you’ll need.
  • Take your budget into account. You don’t want to overspend on equipment, but you also don’t want to skimp and end up with subpar products.
  • Think about what kind of atmosphere you want to create in your restaurant. This will help you choose the right furniture and décor.

Now that you know what to keep in mind, let’s take a look at some of the essential pieces of equipment you’ll need for your restaurant:

  • Commercial oven
  • Kitchen sink
  • Commercial refrigerator
  • Kitchen tables and chairs
  • Commercial dishwasher

Depending on the type of food you serve, you might need more equipment.

#DidYouKnow
You can take advantage of to pay for everything you need.

Craft a marketing plan

Without an effective marketing plan in place, your restaurant may not be able to attract enough customers to stay afloat.

It should include discounts, specials, launch plans, social media campaigns, and other ways you will bring people in the door.

As for social media campaigns, ensure that you only use platforms that are synonymous with your target audience.

Be creative and think outside the box to develop ideas that bring people in the door. And most importantly, be sure to track your results so you can see what’s working and what needs improvement.

Opening your restaurant

Now you’re ready!

You will launch your restaurant in two stages: the soft opening and the grand opening.

A soft opening is a trial period where you invite friends, family, and other close contacts to dine at your restaurant, just like a standard shift.

This allows you to work out any kinks in the system before opening it to the general public. Allow feedback on areas to improve on.

The grand opening is when you officially open your doors to customers.

How Much Does It Cost to Open a Restaurant?

While you can expect to spend anything from $60,000 to $2 million, the average cost to open a restaurant falls around $425,000.

As a restaurant owner, there are a lot of variables to take into account, from location, size, type of cuisine, and so on.

One of the main costs of opening a restaurant is the build-out or renovation of the space. This includes necessary equipment, seating, and décor. The build-out cost will depend on the size and location of the space.

Another high cost is creating a unique menu that is appealing to customers. In addition to the cost of ingredients, there is also labor cost.

Many other costs contribute to opening a restaurant, such as marketing, permits, and insurance. Still, each business is unique and will have its distinct expenses.

If you need a full breakdown of all the costs needed to start a restaurant, this article has provided a complete guide.

You can quickly get a solopreneur loan or a small business loan to finance your new restaurant.

What Licenses and Permits Do You Need to Open a Restaurant?

To operate a restaurant within the law, you’ll need several permits and licenses.

Here is a list of some of the ones needed to open a restaurant:

  • Business License. You will need to obtain it from your restaurant’s city or county.
  • Health Permit. All restaurants must have a valid one. You can get this permit from the local health department.
  • Food Handler’s Permit. All employees who handle food must have this permit. Obtain it from the local health department.
  • Liquor License. If you plan to serve alcohol at your restaurant, you must apply for this license from your state liquor control board or commission.
  • Zoning Permit. You may need to obtain a zoning permit from your local municipality. You need it to ensure that your restaurant meets the zoning regulations for your area.
  • Sign Permit. If you plan to have a sign outside your restaurant, you will need to apply for a sign permit from your local municipality.
  • Business Tax Certificate. All businesses in the United States must obtain a business tax certificate. You can get it from the local tax authority.

There may be other licenses and permits required in your area, so it is important to research carefully.

Contact your local municipality or Chamber of Commerce for more information.

Get Approved For A Restaurant Loan Today

Types of Profitable Restaurants You Can Open

There are all sorts of restaurants in the United States, but some are more profitable than others.

Here is a breakdown of the most profitable types of restaurants to open and how to go about opening them:

Delivery only restaurants

This type of restaurant cuts down on rent, labor, maintenance, and space. It’s a new form of a restaurant that picked up primarily due to the pandemic.

To keep in mind: Before you open a delivery-only restaurant, work out who will be doing deliveries. You can have your dispatch rider or outsource the service to a reputable delivery company.

Then, drum up some business through social media campaigns, word-of-mouth referrals, and other marketing strategies.

You’ll need a commercial kitchen.

#CaminoTip
If you want to save up on costs, you can work from a ghost kitchen.

a group having dinner at a restaurant

Casual Dining Restaurants

Casual dining restaurants are a mix between fast food and fine dining.

They usually have a more relaxed atmosphere than fine dining restaurants, but the food is generally of better quality than you would find at a fast-food restaurant.

They have a relaxed atmosphere with made-to-order food.

To start a casual dining restaurant, you’ll need a commercial kitchen, dining room, and seating area.

However, keep it simple—don’t over-complicate your menu or your decor.

You’ll also need to file for a business license and zoning permit.

Fast Casual Restaurants

Fast-casual restaurants are a step up from fast food in terms of quality and price.

They mix fast-food and casual restaurants and typically offer made-to-order items with fresh ingredients.

For opening: you’ll need a commercial kitchen, dining room, and seating area. You’ll also need to file for a business license and zoning permit.

Fine Dining Restaurants

Fine dining restaurants are the opposite of fast-food restaurants. They serve high-end cuisine and have a more formal atmosphere.

Nonetheless, it costs a lot to set up.

To open a fine dining restaurant, you’ll have to be ready to spend more than you would for other types of restaurants.

You should get a commercial kitchen, dining room, and seating area.

In a fine dining restaurant, customers often find it challenging to get a reservation, and the food can sometimes be too fancy for some people’s taste.

So, create an online platform to make booking reservations easier and mix up fancy cuisines with locally sourced recipes.

Food Trucks

Food trucks are a popular type of restaurant, especially in urban areas. A study by Food Truck Empire shows that food truck owners make up to $150,000 per annum. This is due to the reduced rent, staff, and menu expenses.

Additionally, they are pretty easy to set up, compared to other restaurants.

Before starting: Before purchasing a food truck, decide on your menu. That way, you’ll buy a food truck that’s fitted with the necessary pieces of equipment.

Since a food truck has limited space, your food choices should allow for creativity.

You’ll also need to file for a business license and a zoning permit for the location you wish to use.

Starting a food truck can cost around $100,000. Learn more about food truck costs.

Pizzerias

Pizzerias are a staple of the restaurant industry and are always in high demand. They offer pizza, pasta, and other Italian cuisines.

An average pizzeria pulls in roughly $450,000 in a year. However, it all depends on your location and other expenses such as rent.

To open a pizzeria, you’ll need to develop a unique recipe that would set you apart from the many other pizzerias.

You’ll also need to decide on your shop service style: sit-down, delivery, or take-out. Of course, take-out is the cheapest option.

Cafes

Cafes typically serve coffee, tea, pastries, and light meals. They often have a relaxed atmosphere.

For opening a Cafe: To open a cafe, pay a visit to the other cafes in your vicinity for comparison. You’ll want your customers to feel relaxed when they step into your cafe.

Hence, pay close attention to the design of the sitting area, and optimize for space.

Fast food restaurants

Fast food restaurants are quick, convenient, and usually inexpensive.

In 2018 alone, fast food restaurants pooled profits totaling $256 billion.

How to start: Fast food restaurants often have a terrible reputation for being unhealthy and low-quality. So, work with your staff to uphold the highest quality standards.

Since most sales are low cost, you will need to locate your restaurant in an area with high foot traffic to make a high sales volume, which translates into great profit.

Bars

These are the most profitable restaurants, with profits estimated to be around $300,000 in a year.

This is because the profit margin on alcohol—which features majorly in bars—is usually significant. Therefore, people tend to spend a lot on it.

Before setting up your bar, you must have a liquor license. The cost varies per state. Also, it’s advisable to combine 45% beer, 40% liquor, 5% wine, and 10% mixer when you order your alcohol.

Aliquor liability insurance is crucial, as someone can sue you for millions of dollars for injuries caused in the bar.

It’s Time to Open Your Restaurant

Although setting up a restaurant may be a daunting task, following the steps outlined above will make it very easy.

If you’re struggling to find the capital needed to open a restaurant, you can apply for a solopreneur loan. We designed it to assist underfunded business owners.

At Camino Financial, we have the mission to help all business owners get the capital they need to start or open a business. Many of your clients are from the restaurant industry, so we know how to help you.

Get Approved For A Restaurant Loan Today

FAQs

How much do restaurant owners make?

Typically, restaurant owners earn between $24,000 to $155,000 per annum. But, of course, this figure depends on the size and location of your restaurant and how many years you’ve been in business.

How to run a restaurant?

The best way to run a restaurant is to hire dependable employees in every office who will take your business like theirs. Your workers must have excellent customer service because that keeps the customers coming back.

What type of business is a restaurant?

Traditionally, the food and beverage industry classifies restaurants as service-related businesses, which falls in the hospitality industry.

How much money do I need to open a restaurant?

The cost ranges from $60,000 to $2 million. However, on average, it costs $425,000.

Is it profitable to open a restaurant?

Yes, it is. Average profits range from $50,000 to $200,000 per year. So in no time, you will recoup your start-up capital.

What is the first step to opening a restaurant?

The very first step is identifying the concept for your restaurant. Once you have a clear vision of the type of eatery you want to open, it’s time to consider the cost.

How do I start a small restaurant?

Starting a new business typically starts with developing your concept, writing a business plan, choosing a location, and investing in equipment.

Check if you
qualify for a loan

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