24 April 2023
Whether you envision a cozy cafe or bustling bistro, opening a restaurant requires careful planning, hard work, and dedication. But great challenges can bring rich rewards. And if you’re hungry to turn your culinary dreams into reality, we’ve got the recipe. So let’s fire it up! Read on to learn how to start a restaurant.
Opening a restaurant is no easy task. It’s a complex endeavor that demands unique skills and attributes. If you’re new to the restaurant business, start with self-assessment. Here are some essential qualities that may benefit those seeking to kickstart their epicurean ambitions:
Even with many of these traits, the culinary industry can cut like a knife. Industry experts estimate that one in three restaurants won’t survive their first year. But fear not! Success is possible with careful planning and a willingness to learn and adapt. Let’s start by serving up some numbers.
No two restaurants are alike, and the cost to open a restaurant can vary greatly depending on location, size, type of cuisine, and equipment. According to a survey conducted by RestaurantOwner.com, the average cost to open a restaurant can run between $175,000 and $750,000.
Here’s a breakdown of some of the expenses you may incur when opening a restaurant:
1. Average rent for restaurant space: If you plan to open an upscale bistro with a large dining room, your rent may be much higher than an intimate cafe or take-out pizza parlor. One survey found that the average monthly rent for a restaurant is approximately $6,000, but responses ranged between $3,000 to $8,750, depending on the restaurant location and concept.
2. Average cost of restaurant equipment & supplies: This includes kitchen equipment, furniture, dishes, glassware, and utensils. You also may need to purchase computer systems, point-of-sale software, and security systems. The kitchen equipment alone could range from $50,000 for a small-scale operation to $150,000 for a larger setup. So be sure to research product reviews and compare pricing. You might even want to look into financing options for pricier items.
3. Restaurant licenses & permits cost: A business license may cost you $25 to $7,000, depending on local requirements. A food service license is roughly $100 to $1,000, and a liquor license could cost $300 to $14,000, depending on the regulations for your specific state.
4. Restaurant marketing & advertising: Like many things in the restaurant business, your marketing budget depends on your concept, competition, and overall revenue. But a good rule of thumb is to allocate roughly 3% to 6% of your revenue to marketing.
5. Restaurant food costs: The cost of food should make up around 28% to 40% of a restaurant’s ongoing expenses. Again, prices will vary greatly, but one industry insider estimates food costs could range on average from $5,000 to $25,000 per month.
6. Average labor cost for a restaurant: Paying your staff a competitive wage is critical to maintaining a well-oiled machine. Salaried managers typically earn between $28,000 and $55,000 per year. Your head chef will usually run you $1,300 to $1,800 weekly, and expect to pay $575 to $650 per week for line and prep cooks. Wait staff typically earn minimum wage with tips.
Feeling intimidated yet? Planning a restaurant opening is clearly not for the faint of heart. But if you’re still reading, chances are you may have the tenacity and grit required to succeed. So let’s jump right into your startup to-do list.
1. Define your restaurant concept: This includes the type of restaurant you want to open, the cuisine you'll serve, and the restaurant ambiance you want to create. For example, are you envisioning an artisanal cafe, a vegan fast food, or a jazzy pizza joint? Each type of restaurant will have a different target audience and requires a unique approach to succeed.
2. Conduct restaurant market research: Before opening, research your local competition to determine if there’s adequate demand for your cuisine. This process includes identifying your target audience and understanding their preferences, tastes, and habits. You'll also want to define what makes your restaurant stand out.
3. Create a restaurant business plan: Once you have a clear and viable concept, it's essential to develop a business plan that includes your vision, financial projections, marketing plan, and other vital details. A business plan will help you determine the financial expenses of a restaurant, such as restaurant startup costs, projected revenue and expenses, and restaurant marketing strategies. In addition, a well-crafted restaurant business plan will help secure funding and attract investors.
If this is your first time developing a business plan, don’t stress! We created this free business plan template for small business owners like you.
4. Secure funding: With a business plan, you’re now ready to secure financing for your restaurant. This can include loans from banks, investors, or crowdfunding. Make sure to research your options to determine the best fit for your restaurant.
For a helpful step-by-step guide on how to finance your new restaurant, check out our article.
5. Choose a location: The location of your restaurant is critical to its success. Start by evaluating your restaurant’s style, demographic, and budget. You'll want to choose a site that’s easily accessible and visible to your client base. Be certain to check out zoning regulations and parking availability.
6. Obtain permits and licenses: Before opening your restaurant, you must research and obtain all necessary permits and licenses. This includes a business license, a food service permit, and a liquor license if you plan to serve alcohol. To learn more about business license requirements, click on your state on our state business license portal.
You'll likely also need to comply with restaurant health and safety regulations, such as obtaining a health inspection for a new restaurant and following proper food handling procedures. Make sure to research all of the requirements in your area and get the necessary paperwork before opening.
7. Design your restaurant: The design of your restaurant should reflect your brand and concept. Everything should be carefully planned from the layout to the decor, to create your desired ambiance. Be sure to consider the functionality of your space, such as the kitchen layout and placement of tables and chairs.
8. Purchase restaurant equipment and supplies: To operate a restaurant you’ll likely need equipment and supplies such as ovens, refrigerators, tables, chairs, and utensils. To find the best deals, research multiple vendors and used equipment suppliers.
9. Hire restaurant staff: Your staff will play a critical role in the success of your restaurant. Each team member should be carefully vetted for skills and experience, from the chef to the servers. Proper training will ensure that each staff member understands your vision for the restaurant.
We have some tips for hiring employees here.
10. Market your restaurant: Once you have everything in place, it's time to start marketing your restaurant. Use social media platforms such as Instagram, Facebook, and Twitter to create a buzz and attract customers. You also can create a website, and list your restaurant on popular review sites such as Yelp and Google. Don’t underestimate the power of word-of-mouth referrals from friends, family, and colleagues who may be more willing to post a review.
Looking for more information on how to market your restaurant? Check out these helpful guides:
Word of Mouth Marketing: How to Grow Your Business
What are the Do’s and Don’ts of a Small Business Website?
Creating Consistent Facebook Content for Your Business Page
11. Launch your restaurant: Once you've completed the above steps, it's time to launch your restaurant. This includes hosting a soft opening to test your menu and services, and then a grand opening to introduce your fabulous new restaurant to the world.
You can't live on culinary passion alone. Time to make some dough! But how much? Salaries vary greatly, depending on location, size, and your level of success, with estimates ranging anywhere from $24,000 to $155,000 a year.
Your salary also may fluctuate month-to-month and year-to-year. Given startup costs and the inevitable learning curve, expect your first year of operation to be relatively lean. Seasonality also can significantly affect your revenue. So be sure to plan for those slow months. Unexpected equipment failure and staff turnover may also impact the bottom line. Keeping your equipment well-maintained and employees happy can be a boost for your paycheck.
According to the Centers for Disease Control and Prevention, every year, approximately 48 million Americans become sick due to food poisoning. A report from the Center for Science in the Public Interest found that 44% of outbreaks were tied to restaurants. So if you’re one of the unlucky millions impacted, you may have a legal claim.
All new restaurant owners should familiarize themselves with these potential risks and understand their liability. We recommend you consult with a lawyer if you have additional questions on the potential liability of restaurant owners.
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From food poisoning to customer or staff injuries, running a restaurant can be a risky business.
Without proper business insurance coverage for your restaurant, you could be financially responsible for claims or damages arising from a long menu of mishaps. And that could spell disaster for your restaurant.
Running a restaurant involves many responsibilities, and staying organized can be a struggle. The fewer things you have to juggle, the better. And with a business owner’s policy (BOP), there’s no juggling required. A BOP simplifies coverage by combining the following insurance coverage into one package:
Because it packages three different types of insurance, getting BOP coverage can be an efficient way to get a lot of coverage without juggling a pile of separate policies.
If you have employees — part-time or full-time — you’ll likely also need workers’ compensation coverage. Workers’ compensation insurance helps protect your restaurant financially if an employee gets injured or sick while working for you.
Check out this article for more on how workers’ comp can help protect your growing business.
By offering a wide range of insurance options, Simply Business helps small business owners find commercial insurance coverage as unique as the businesses themselves. With a convenient online quote tool that’s available 24 hours a day, 7 days a week, you can have a quote ready in just a few minutes.
There may be no greater accomplishment for a foodie entrepreneur than opening a restaurant. This is your time to showcase your unique culinary skills and creativity to the world. You’ve got the ingredients. Let’s make your epicurean dreams come true!
Born and raised in the fishing port of Gloucester, MA, I grew up listening to the sea stories of local fishermen. My first job was “chum girl” on my dad’s tuna boat, where I spent my formative years covered in fish guts. Since then, I’ve worked as a researcher, blogger, and writer for documentary films. When not at work, you can find me surfing the cold waters of the North Atlantic or searching for warmer waves around the world.
Courtney writes on a number of topics such as risk assessment, starting a small business, and financial resources.
This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry specific professionals who may better understand your business’s needs. Read our full disclaimer
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