Opening a restaurant is no easy feat. It takes time, commitment and capital. As the owner, you will work long hours planning deliveries, reviewing finances and payroll, and forming relationships with customers. Restaurant owners have faced even more responsibilities and challenges due to COVID-19.
Though it’s hard work, owning a restaurant can be incredibly rewarding. Restaurants are where people gather and make memories. When you finally open your doors, you welcome the community to enjoy something that brings people together: food.
Is it time to throw your hat in the restaurant ring? If you want to open a restaurant, there are many things to consider before you move forward. You’ll need a solid business plan, licenses, a location, a menu and employees. Keep reading to learn more about what you need to open a restaurant.
1. Your Restaurant Concept
Before you can open a restaurant, you have to know what type of restaurant it will be. Will you offer seafood? Is your restaurant a steakhouse or pizzeria? Is your establishment fine dining only, or will you provide an all-you-can-eat buffet? In addition to selecting a concept, you have to think about what sets your restaurant apart from other restaurants serving similar foods. What makes your restaurant unique?
Your restaurant concept should include details about your food, theme and customers. You can’t target everyone as a customer. Be specific about who you envision coming to your restaurant.
- Millennials are more interested in quick service and fast food compared to Generation X and Baby Boomers.
- Often, customers in Generation X are more concerned with value and eating out with family.
- Baby Boomers are the largest segment of the population. They can afford to eat at upscale restaurants. However, they may frequent family-style restaurants with their children and grandchildren, too.
Research will help you determine if your concept aligns with your ideal customer. After you conceive a winning concept, the next step is to develop a business plan and menu. Additionally, restaurant owners interested in expanding or franchising should conduct research in each area they plan to open to ensure there is a customer base at each new location.
2. Business Plan
You need more than a love of food to run a restaurant—though a passion for food certainly helps! A thorough business plan will detail your investment, expenses and projected profit. Before opening a restaurant, you need to know if the concept is sustainable. Business plans lay out the estimated costs for a specific period. Additionally, a well-thought-out business plan will show you how much starting capital you need to open the restaurant for the first six months; however, considering capital for the first 12 to 15 months is highly recommended.
How much does it cost to open a restaurant? According to a Restaurant Owner survey, the median startup cost for a restaurant is $375,500 total or $3,586 per seat. Of course, startup costs depend on the size and location of the restaurant. Opening a large, upscale restaurant will cost more than opening a small café or coffee shop.
3. Licenses & Health Codes
One of the requirements to open up a restaurant is to obtain licenses from your city government or local health department. Restaurants must operate up to code, and the local health department will perform unannounced routine inspections. An inspector will review cooking, sanitation and operating procedures. In Taney County, Missouri, restaurant health inspections take place one to three times a year.
Are you planning to serve alcohol? Want to have a wine bar or offer draft beer? You need a liquor license to serve alcohol. Your city government will have the applications.
Potential Permit Costs: $100 to $300
Where will your business be located? There are several factors to consider when choosing a location for your restaurant. It should be accessible to customers. Can people see your restaurant from the highway? Is your signage visible to those visiting a shopping center? Do your customers live or commute near the location? Is parking available? The location says a lot about your business and the customers you want to attract. A commercial real estate broker can help you find available real estate that fits your target market.
Commercial real estate brokers perform demographic research, helping you find a location and back up your business plan. Brokers have extensive knowledge about the markets they serve and available properties. Plus, they are up-to-date on real estate trends, laws and best practices. Instead of looking for real estate by yourself, commercial brokers put their expertise to work and guide you through the process.
Potential Lease Costs: $2,000 to $12,000 a month (at $1.00 to $5.00 per square foot)
Potential Down Payment: 15% to 35% down for purchase
Equipment is one of the largest expenses for new restaurants. Every restaurant needs appliances and a wide array of cooking tools. If you want to save on equipment costs, opt for second-hand equipment or lease equipment instead of buying it outright.
Equipment you may need:
- Appliances: stoves, ovens, refrigerators, freezers and dishwashers
- Cooking tools: pots, pans, cutting boards, knives and other food prep items
- Bar equipment: mixers, shakers, soda fountains, drink coolers and ice machines
- Serving equipment: trays, stands, silverware, napkins and aprons
Potential Equipment Costs: $50,000 to $150,000
6. What’s On Your Menu
What’s on the menu affects the inventory you’ll buy regularly. Restaurants should aim to spend 25 to 30 percent of their profits on food and beverages. Generally, restaurants should not spend more than 35 percent of profits on food costs.
Choose menu items that represent who your customers are. Most restaurants offer a variety of classic dishes and unique dishes, so there’s something for everyone. Many restaurants also offer vegetarian, vegan and gluten-free options. Your menu offerings should be based on the ideal customer you are wanting to attract, as determined in your restaurant concept.
As you create dishes, it is important to keep portions in mind. How many shrimp go into the pasta dish? How much meat is included in the combo? Weigh your inventory and set guidelines for each dish. Standard portions for each dish not only save you money but allow you to accurately time restocks and reduce waste.
Potential Food Costs: 25% to 35% of profits
7. Inside Your Restaurant
Great decor and design add to the dining experience. Customers are more likely to think positively about your restaurant if they enjoy the atmosphere. Be sure to choose furniture and decor that match your theme and will leave a positive impression on your customer base.
If you are remodeling your space, keep in mind that restaurants usually leave 45 to 65 percent of space for the dining area, with kitchen and storage taking up the remaining amount. Restaurants need tables, chairs or booths, and bar stools for the dining area, along with unique decor that sets the vibe.
Potential Decor Costs: $5,000 to $80,000
Technology helps restaurants run efficiently. Restaurants need point-of-sale (POS) systems, which include both hardware and software. POS systems accept payments, run transactions and monitor sales. A POS system makes calculating taxes and taking payments easier for employees.
There are POS systems for specific types of restaurants. Quick-service restaurants take customer orders and payments at the same time. These establishments need a system that relays orders from the counter to the kitchen instantaneously. Full-service restaurants may need more features like the ability to take reservations, split checks, pre-authorize credit cards or let customers pay from the table.
Potential Technology Costs: $1,000
Insurance protects businesses from risk. An employee could fall or hurt themselves in your kitchen. A customer could contract a food-borne illness from your food. Fire, theft and vandalism are also possibilities. Restaurant owners should look for policies that cover liability, property damage, workers’ compensation and liquor liability (if you plan to sell alcohol).
Potential Costs: $2,000 to $10,000+ annually
10. Good Team
A good team will help you go far. Choose experienced individuals for managerial roles and chef roles. Servers are the face of a restaurant, so hiring people with customer service experience and a friendly demeanor is a must. If you can find people who believe in your mission, it will show in the service they provide and the work they do.
- Degreed chefs earn an average of $1,300 to $1,800 weekly
- Cooks make an average of $575 to $650 weekly
- Managers earn an average of $28,000 to $55,000 annually
- Waitstaff make minimum wage plus tips
Are you ready to open a restaurant? Start with a location.
Contact restaurant specialist Rich Crowell at Commercial One Brokers. Crowell has years of restaurant operation experience and is here to help if you want to buy, lease or sell a restaurant in Branson, MO.