A Complete Guide to Starting a Restaurant in 2021

Fact-checked

Do you dream about starting your own restaurant where you can show off your cooking talent? There is a way to start your business, even if you’re new to the industry.

This article will guide you through the restaurant startup checklist that will help you and provide you with insights into all the food and safety regulations you need to know about. So, if you want to learn how to start a restaurant, read on!

How to Start a Restaurant in 10 Steps

Starting your restaurant even if you have some expertise in the matter is no easy feat. It requires detailed planning. That’s why we prepared a breakdown of the ten steps every entrepreneur needs to follow in order to create the restaurant of their dreams. The steps to opening a restaurant listed below will guide you in the process:

Come up with a concept

Choosing the concept for your restaurant is the fun part. Be as imaginative and creative as you like. Once you’ve got a few good ideas, come up with a concept. When opening a restaurant think of the concept as a guideline that will help you with the following steps.

If you want your restaurant to be a success, you need to stand out. Create a brand that represents who you are. The name, menu, and logo (it has to reflect the restaurant’s cuisine and personality) are the three essential things that will help you create a memorable brand.

Target demographics

Finding out who is your target audience is an absolute must. You will also need to choose a location with a demographic that fits your concept.

Write a business plan 

When calculating the cost to open a restaurant, you’ll probably find out that you need a considerable amount of money. So, the next step is to check funding options. Begin by assessing your restaurant startup costs and operational costs in order to determine how to fund the restaurant. From applying for business loans to crowdfunding, the options are many if you are willing to use funding as a way to secure your new restaurant.

Furthermore, you need to show potential investors that your vision for the restaurant is a well-thought-out decision, supported by a solid business plan. But how to start a restaurant business plan that will help you “wow” potential investors? Your business plan should be structured and it should showcase your ideas to your advantage. For that reason, we’ve outlined what you should include in your business plan:

  • Executive summary – the first section of the plan – is an overview of the whole business plan – our advice – leave this section for last then, with all the information in hand, you’ll make a characteristic executive summary.
  • Company overview and description – a detailed overview of what is included in the executive summary.
  • Concept and menu – where you’ll outline in detail your concept and what the menu will consist of because even investors want to know what they’ll be eating in your restaurant.
  • Competitive analysis – include how close your business is to your competitors’ restaurants and how your restaurant differs from the crowd.
  • Marketing strategy – providing an analysis of the demographics and a concise description of your target market in your restaurant business plan is a crucial step.

Get the necessary licenses and permits

Aside from the standard licenses and permits needed to open a restaurant, you will need to obtain certain state and federal permits and licenses. Keep in mind, the licenses and permits will vary from state to state, so check what permits you’ll need in your state. For instance, if your restaurant is a fine-dining restaurant, you’ll need to obtain a liquor license, and while alcohol can bring your sales up, you’ll need to first go through the trouble of acquiring the permit.

Choose the location

Choosing the right location is everything! Look for a place that has plenty of parking space but at the same time room for foot traffic. Aside from having plenty of outdoor space, the restaurant needs to be located far enough from competitors. However, with a little bit of research and possibly a consultation with someone already established in the restaurant industry, you’ll find the perfect location.

Register your business

The Internal Revenue Service (IRS) requires businesses to file taxes. For that reason, when starting a restaurant business, you need to register your business with the IRS to receive your EIN (Employer Identification Number) that will allow you to file taxes. If, by any chance, you work without complying with the tax law and the IRS finds out, be prepared to suffer the consequences.

Design the space and layout

Choosing the correct layout is an integral step when you decide to build your own restaurant. The guests want a welcoming cozy atmosphere where they’ll feel comfortable and will be able to enjoy their dining experience. Depending on your vision, you need to think about the decor, furniture, and other details.

Order the equipment

Equip the establishment with the tools you’ll absolutely need, from kitchen equipment to interior decor. Make sure the equipment you order fits your concept and menu perfectly. You likely won’t have enough finances to buy everything brand new. But you can get your hands on gently used items in the beginning. One area you should not skimp on includes gadgets that will make your job easier, like the POS (point of sale) system. The POS system will allow you to track sales, cash flow, and food inventory effortlessly.

Hire the staff

The food service industry strongly relies on the human element, from customers to staff. That’s why hiring adequate staff is one of the crucial steps to opening a restaurant. Your restaurant’s image and success depend to a great extent on the people you choose to be a part of your restaurant, so choose wisely. Your employees are your biggest asset. When hiring them, think of how many restaurant positions you’ll need to fill and make a list of requirements for each position in the process.

Create a menu

Creating a unique menu is a great way to attract new customers. If you’re a food lover, you’ll enjoy choosing which of the dishes will make the cut. While compiling the final menu, you need to think about your brand and your restaurant’s image, as well.

Come up with a marketing plan

Last but not least on our restaurant opening checklist is the marketing aspect. Coming up with a good marketing plan will bring in more customers and makes your brand more recognizable. From advertising your brand on social media to hosting a soft opening, try and find a marketing strategy that will work best.

Did you know: Restaurateurs tend to take additional risks when the business takes off in the right direction. However good your restaurant is doing, do not hurry because reckless moves can cost you your business. 

Types of Food Restaurants Offer

From a fine dining restaurant to a drive-through, the range of different types of restaurants is growing by the minute. While each restaurant is unique in its own way, here are the main five types of restaurants:

  • Fast-food

When your mind wanders off to those greasy cheeseburgers and crispy fries all packed up in paper take-away boxes, you’re thinking of fast-food or quick service restaurants (QSRs). They provide self-service, making it best for busy customers that don’t feel like waiting to be served. Running a fast-food restaurant, you provide cheaper food prices, making the restaurant accessible for almost everyone.

  • Fast-casual

Many people don’t have the finances to visit a fancy restaurant and can’t take the time to enjoy a four-course meal. At the same time, they are also tired of eating unhealthy take-away food. That’s why the hybrid of dining and fast food has become very popular. So, perhaps you should consider the fast-casual type when opening your own restaurant. The main difference between a fast-food and a fast-casual restaurant is in the way the food is prepared. This particular type offers freshly prepared food, but it is a bit pricier than regular QSRs.

  • Dining

    • Fine

Fine dining restaurants offer high-class service and the food is prepared by a professional chef. People tend to visit this type of establishment for special occasions such as birthdays, weddings, and anniversaries because the prices are pretty steep.

    • Family

When you decide on opening your own restaurant, a family dining restaurant may be your best choice. Family dining, as the name implies, is a place where people can enjoy a meal with their families. These establishments serve breakfast, lunch, and dinner, which requires for them to be open for more hours a day.

    • Casual

Casual dining resembles family dining but it offers an even more affordable sit-down eating experience which makes it more attractive to customers. They can simply sit down to eat their meal without breaking the bank and enjoy the cozy atmosphere.

Did you know: Fine dining was invented after the French Revolution. After the monarchy was abolished, many chefs remained jobless, deciding to open their own restaurants where they served food at a fixed price. 

Key Takeaways

The most common types of food restaurants are fast food, fast-casual, fine dining, family dining, and casual dining,
You need to register your business with the IRS to file taxes.
Coming up with a marketing strategy will bring you new customers willing to try what you have to offer.
Creating a business plan where you’ll present your idea of what the restaurant will be like is a must.

How Much Does it Cost to Open a Restaurant?

Launching a business in the food industry comes with a lot of one-time and ongoing expenses.

One-time costs 

  • Lease security deposit/loan down payment – there are two ways to secure the wanted space, either by leasing or buying the place. If you go with leasing, you need to pay a refundable deposit of three to six months’ worth of rent for you to secure the place. And if you decide on buying a restaurant, then you need to make a down payment from 15% to 35% of the estimated price.
  • Business licenses or permits – obtaining licenses/permits is vital. Be aware that the cost varies depending on where you live. The process can cost up to $500 but find out what permits are required and how much they cost in the state you live in.
  • Kitchen appliances – you cannot say you know how to run a restaurant if the place is not equipped with all the adequate tools needed to provide top-quality food. The estimated expense for kitchen equipment is $10,000 – $400,00 depending on your concept.
  • Decor – you need to have a fully furnished restaurant just as you have a fully equipped kitchen. There always will be some changes in the decoration of the place (you’ll need to eventually replace the old furniture and so on) so, at the beginning stick to a budget you are comfortable with. You could spend from $1,000 to $40,000, depending on your budget plan.
  • Payment technology – as part of the restaurant startup costs checklist, it is important to find an easy-to-use payment system that will take payments securely. Also, it would be best if the system keeps track of the inventory and orders so you won’t bother checking every day what supplies you need for the day to come. Point of sale is the best option but keep in mind that you might spend $20,000 for such a system.

Ongoing costs 

  •  Utilities – Even if you set your mind to starting a small restaurant, utility bills will be an ongoing cost. As the owner, you need to keep the water and the electricity always on. As a general rule, they cost around $3.75 per square foot. Thus, the bigger the restaurant, the bigger the utility bills.
  • Staff salaries – If you want to know how to run a restaurant successfully, the first thing to remember is that your employees are your biggest asset! Therefore, make sure they are paid well. Head chefs receive from $1,300 to $1,800 weekly, while prep cooks are paid half as much. Waiters earn the minimum hourly wage and usually keep their tips. But for the restaurant to work smoothly, you also need a manager – expect to pay him approximately $33,000.
  • Marketing – For the business to be a success, an effective marketing strategy is essential. When starting a restaurant business, advertising yourself on social media is usually free and very effective.

Did you know: Restaurant owners often overspend on five things when setting their mind on opening their restaurant – equipment, technology, marketing, remodeling or decorating, and food expenses. 

What You Need to Know About Food and Safety Regulations

What do you need to open a restaurant aside from the steps mentioned above? Before you dive into the waters of starting your restaurant, you need to understand that food safety regulations are a top priority for the food industry. Every restaurant needs to comply with the food handling protocols that are regulated heavily by federal agencies such as the FDA, the FDIS, and the CDC.

  • The Food and Drug Administration (FDA) is responsible for protecting and securing people’s health through the supervision of food safety, dietary supplements, etc.
  • The Centers for Disease Control and Prevention (CDC) is the link between foodborne illnesses and food safety systems.
  • The Food Safety and Inspection Services (FSIS) ensure that the supply of meat and eggs is safe and rightly packed.

Food safety regulations vary from state to state so make sure to check the restaurant state guidelines for keeping up to date with the regulations in your state.

Is Opening a Restaurant Worth It?

Starting your own business can be very rewarding. That said, learning how to open a restaurant takes a lot of commitment. But once you set your mind to it, it is worth the struggle. Hopefully, this article has answered some of your questions about how to open the restaurant of your dreams.

FAQ

How do I start a restaurant with no experience?

The most important step you need to take if you’re wondering how to open a restaurant with no experience is to assess the experience and skills you have. Then, create a solid business plan that will cover your concept of the restaurant and the starting costs.

How much money do we need to start a restaurant?

Starting a restaurant is a very ambitious project that can cost a lot. The average cost of opening a restaurant is $275,000 or $3,046 per seat, depending on your concept, location, and staff.

How do I start a restaurant for the first time?

If you are wondering how to start a restaurant for the first time, concentrate first on the concept, business plan, licenses and permits, location, funding, and marketing strategy.

ABOUT AUTHOR

I’m an entrepreneur by profession and an artist by passion. I do business to pay the bills and make music to bring the thrills. Thanks to a bachelor in Business Administration, I'm well-versed in all things business. Owning a construction company certainly helps, too, but it also brings out my love for building and home protection.

Latest from Noel

Small Business Privacy Policy Template [Ultimate Guide for 2021] LLC vs Sole Proprietorship: Differences + Which to Choose EIN Reference Number 101 [Ultimate Guide for 2021] A Complete Guide to Starting a Restaurant in 2021

Leave a Reply

Your email address will not be published. Required fields are marked *