11 Steps on How to Start a Small Restaurant

Starting a new restaurant can be time-consuming and even stressful. From defining a brand to deciding on a menu and finding a chef, there are various tasks to take care of. Follow these eleven steps on how to start a small restaurant.

How to Start a Small Restaurant

Many aspiring entrepreneurs consider owning and operating a small restaurant the pinnacle of their careers. While the pandemic has made indoor dining more difficult and impacted many restaurants’ supply chains and staff availability, restaurant owners have persevered.

Over the last few years, we have watched small restaurant owners develop new strategies to cope with an adverse situations. For example, some restaurants focused on takeout, and others built new structures outside where patrons could gather.

As we continue to learn more about the pandemic and cope with it, restaurant ownership is still within reach and a rewarding goal for interested entrepreneurs. If you are considering opening a new restaurant or just beginning the process, this article will be a helpful guide for your culinary journey.

Starting a new restaurant can be time-consuming and even stressful. From defining a brand to deciding on a menu and finding a chef, there are various tasks to take care of. However, if the new restaurant owner plans carefully, delegates responsibility effectively, and works hard, the process grows more manageable. Let’s break this process into concise steps.

1) Select a Concept and Define a Brand

Many entrepreneurs begin this process with a defined concept and go from there. Why? Choosing the overall concept is one of the most enjoyable and imaginative aspects of starting a small restaurant. But what is meant by the concept?

Restaurant Concept

The restaurant concept includes a few key traits:

Restaurant type
Style of food offered
Style of service
Interior decoration and design, and exterior if applicable

Examples of unique concepts are as follows:

A fast-casual vegan diner

A ghost kitchen that serves delivery gourmet ramen bowls

An upscale, sophisticated French bistro

A healthy organic burger joint

Restaurant Brand

A brand is defined more distinctly than a concept and can be summarized as the way in which the restaurant communicates its identity and mission to the public. The name of the small eatery, the logo, the menu and interior/exterior design, and any available merchandise must all come together to illustrate the restaurant’s image.

For example, a restaurant called “Greens” that focuses on build-your-own organic salads will probably have a fresh, clean look emphasizing healthy living. Perhaps the logo is a head of lettuce, the menu is simple and well-organized, and the interior features white and green coloring and photos of people hiking, biking, and farming fresh produce.

“Greens” also sells t-shirts adorned with their logo and vintage baseball caps—customers love the merchandise almost as much as the salads.

Advertising

All restaurants use advertising channels for marketing their brand. However, the advertising channels depend on the restaurant’s brand identity and target demographic. So, if “Greens” is geared toward younger generations and priced affordably for them, perhaps the organic salad bar advertises mainly on social media channels. When college students and those in the 21-28 age range see the videos and TikTok “Greens” posts, they flock to the hip eatery for salads and merchandise.

Target Demographic

When thinking of the concept, many entrepreneurs already have an idea for the location of their small restaurant. The restaurant’s target demographic can originate from that area. Put simply, if “Greens” is to be located near two colleges and a university, its target market is college students and possibly graduate students.

Some entrepreneurs lead with a concept but are not yet sure of the location. This means they must choose a location with a clear demographic that will ideally support the business. For example, if “Greens” branches out with a new location, the owner must consider what neighborhood or area will support a salad bar. Perhaps the ideal location would be near a gym or shopping plaza.

2) Come up with an Intriguing Menu

One of the most important aspects of any restaurant is the menu. An excellent menu inspires the chef, delights the patrons, and creates a buzz around the new eatery.

Practical Decisions

New restaurant owners will enjoy the creativity in creating a menu, but they should also carefully and rationally make decisions. For example, if the restaurant owner loves Indian dishes and wants to put some on the menu, but the cook has no experience with Indian cuisine, the owner must make a practical decision: either hire a new chef, or switch the type of cuisine.

Equipment Needs

The menu the restaurant decides on will also influence the type of equipment that will be needed in the kitchen, as well as the employees’ skills. For example, if the concept for “Woody’s Kitchen” is based around artisan wood-fired pizza, there will be a need for expert pizza chefs and wood-fired ovens.

Menu and Demographic

The menu will also greatly inspire what type of customers visit the restaurant. For example, the upscale pizza place “Woody’s” might not appeal to college students searching for a budget pie and a pitcher of beer. However, it may appeal to the more upscale crowd frequents the theater on the other side of town.

The people who live near the restaurant must make enough money to support the higher price points of the artisan pies. However, the pizzas at “Woody’s Kitchen” is more costly to make, based on ingredient and equipment costs.

3) Write a Business Plan

Strong business plans back all new business ventures. Most entrepreneurs are familiar with the process of writing a business plan, but for those who are not: all successful restaurants rely on the foundation of an excellent plan.

Organizing the Plan

Business plans are usually comprised of different sections. Each section describes an aspect of the business and outlines the goals for the restaurant as a whole. Business plans both help owners clarify the details and also work to illustrate the concept for investors. For example, when the owner applies for a loan, the business plan will be examined by possible lenders, who are trying to gauge the business’s potential.

Writing the Plan

Here are the main parts of a business plan for a small restaurant:

Executive Summary: in this initial section, the introduction to the restaurant. The Summary should briefly describe the idea and show its potential for growth and success. Since this is an overview, many entrepreneurs find writing this section last works best.
Overview and Description: Here is the place for a more detailed description of the restaurant, as opposed to the first section.
Ownership and Management: The ownership and management structure should be described here, and many new business owners find charts work well to illustrate concepts.
Concept and Menu: Here, one should detail the restaurant’s concept and how the menu fits into that.
Employees and Staffing: This section includes a realistic estimate of the number of employees needed and types of workers (for example, waiters, busboys, dishwashers, bartenders, etc.)
Marketing and Competition: Here, research is necessary. The goal is to analyze the competing restaurants near your location and consider demographics and target market.
Marketing and Advertising: Building on the previous section, what will the marketing strategies consist of?
Financial Summary, Projections: A critical section for procuring funding from lenders. Include a break-even analysis and a sales forecast in this last step of the plan.

4) Apply for Funding

Obtaining funding for the small new restaurant is next on the list, an essential step in the process. Unfortunately, most entrepreneurs do not have enough capital in their accounts to cover all the opening costs and must therefore apply for financial assistance. Without funding, the new restaurant idea cannot become a reality. But there are many options available for funding for restaurant owners.

Estimating Costs

Coming up with a realistic budget relies on estimating the total costs of starting the restaurant, adding to daily operations costs. Based on this, a budget can be created for the first year of running the company. While the figures will be approximate, ensure the numbers include all costs and are double-checked. A faulty budget can lead to significant problems later on and even bankruptcy.

Estimating Funding

Use the approximate budget you have come up with to determine how much funding to apply for. Compare the restaurant’s costs for the first year to the funds that have already been gathered and come up with a number. Do not forget:

Building repairs
Employee salaries
Permits and licenses
Equipment

Ways to Find Funding

Traditional Commercial Loan – Acquired directly through banks, these loans feature low-interest rates and higher amounts of available funding. Entrepreneurs must have a high credit score, and collateral must be provided.
Small Business Loan – Even with average credit scores, a small business loan can be obtained from a bank or the U.S. Small Business Association (SBA). The SBA enforces distinct guidelines to protect both owners and lenders. New business owners need to provide collateral, and these loans take longer to be approved than commercial loans.
Business Credit Line – New restaurant owners can apply for the maximum credit amount for their business. If approved, interest will accumulate as the money is spent. However, standards for these credit lines are high, and the amount that can be borrowed is lower than some of the other loan options.

Investors – To find willing investors, entrepreneurs can work their networks or sign up for one of the various websites that connect investors to restaurants.

Crowdfunding – This relatively new method allows individuals to use websites such as GoFundMe and Kickstarter to raise money from friends, family, and strangers. Ideally, enough funds are raised to finance the venture’s startup costs.

5) Select a Location

Another vital aspect of the startup process for a small restaurant is selecting the location. The surrounding area, and the people who reside within it, will significantly influence patronage and sales. Choosing a location should not be a snap decision. Instead, it should be an informed choice.

Location Factors

Demographics: What is the target market of the small restaurant? This should match up with the area demographics.
Accessibility and Visibility: Consider vehicle traffic, foot traffic, and visibility from the street. Also, think about the amount of available parking and how easily cars and pedestrians can reach the spot.
Labor Costs: These expenses depend on demographics and location. For example, if the new small restaurant is located downtown, where the cost of living is high, then employees must be paid a higher wage. Suppose a restaurant opens and aims to pay its employees less than the standard. In that case, prospective employees with skills and talent will work elsewhere, and the employees that “settle” will probably not be passionate about the business.
Competition: Entrepreneurs should examine the different competing eateries in the area. Why are they successful, and what does location do with that? Are there too many restaurants with a similar concept to your own?

Leasing vs. Buying

Most new restaurant owners choose to lease their first property. This is because a lease is much more flexible than a purchase agreement. New owners often decide to expand based on growth or even change their location. When first starting, a lease’s overall adaptability is vital for a new restaurant owner.

6) Obtain Licenses and Permits

All new restaurant owners must remember to get the appropriate permits and licenses. These documents range from local to federal and forgetting even one of them can bring the business to a halt. For this step, it makes sense to consult with an attorney to ensure that all documents are correctly filed at the right time.

Types of Licenses

Permits can be local, state-wide, or federal. Here are some of the most common and important licenses:

Business License: Every restaurant in the U.S. must have a current business license. The type, cost, and renewal terms vary by state, so check in with state officials and your attorney to ensure this is taken care of. To obtain this license, the business must pass an inspection by food safety regulators. Once the inspection is scheduled, put the date on everyone’s calendar and meet with employees to discuss the license’s importance.
EIN Numbers: Employee Identification Numbers are used to set up payroll and hire new employees. These applications are known to take time, so apply early in the startup process.
Liquor License: Restaurant owners who wish to serve alcohol must have a license. Getting a liquor license can be arduous and expensive, but alcohol is also highly profitable, especially in the right environment.

7) Design the Interior Space

When new owners focus on the restaurant’s interior details, customers notice. A well-designed restaurant can make patrons stay longer, order more food, and enjoy their time that much more. There are two components to the restaurant’s physical space: the dining room, or front-of-the-house, and the kitchen area, or back-of-the-house.

Dining Room Designs

The dining room layout should be uncluttered and straightforward, allowing customers room to move and breathe. Here are some areas to focus on:

Furniture: Reference the restaurant’s overall concept when choosing the appropriate chairs, stools, tables, and other pieces. Also, consider comfort and capacity, and do not forget about aesthetics and the “wow” factor.
Seating: Reference your local and state regulations when developing a seating plan. What is the maximum capacity for the room, and what is the ideal capacity? Requirements are dictated by the number of exits and the size of the building, as well as the allotted square footage per patron.
Décor: Interesting lighting, wall decorations such as paintings and mirrors, and even locally inspired signs and artwork can all up the decorating ante. The type of decorations should align with the restaurant’s concept and brand.
Ease of Cleaning: All restaurants get dirty; it is the nature of the food business. Walls and floors should be easy to clean, and carpeting has become a thing of the past. Also, pay attention to curtains and drapes—they can absorb smells and pick up stains.

Kitchen Design Ideas

When considering kitchen designs, the concerns are different than in the front-of-the-house. Owners and designers should think about how they can allow food service to flow efficiently. Other factors to include are:

Washing Area: When servers enter the kitchen with trays of dirty dishes, there should be an easily accessible area to set them down. This spot can include sinks, drying racks, and dishwashers.
Food Preparation: Every chef requires a large spot designated for food prepping. The kitchen staff must be able to find clean, clear surfaces and tools here at all times.
Storage: Storage can be either cold or dry, and shelves and refrigerators should be well-organized and made for speedy searches.
Cooking: Another large area designed for the chef and his or her staff, this area will consist of the heaviest machines and equipment: grills, ovens, fryers, and the like.
Service: Servers should easily access the area where they pick up food, and heat lamps are necessary. This area also must be kept clean and orderly since the product is going from here directly to the customers’ tables.

8) Find Suppliers for Food and Equipment

All restaurants depend on their equipment’s strength and efficiency and food’s freshness.

Equipment Checklists

Usually, all restaurants need refrigerators, ovens, and stoves. However, a restaurant’s menu dictates its equipment necessities. For example, the salad-based spot “Greens” might rely primarily on refrigeration, cutting boards, and pans for sizzling toppings like croutons and bacon. However, “Woody’s Kitchen” specializes in high-quality pizza pies, and requires wood pizza ovens and pasta cookers for its famed meatball ravioli.

The kitchen’s size and layout also impact equipment choices, and new owners should also decide on new or used equipment before shopping around.

Buying Equipment Online

Many new restaurant owners decide that equipment is best bought online. Although online shopping can still be time-consuming, it eliminates the chore of visiting physical stores. Instead, owners and other staff members, such as chefs, can shop online, research, read reviews, and find the best prices and sales. In addition, many online suppliers focus on commercial restaurant equipment. Some even provide rapid shipping and feature wholesale prices.

Leasing Equipment

Another popular option for acquiring equipment is leasing it. Leasing can save money in the short term, which is helpful when checking all the boxes to start a restaurant. In addition, leasing is popular with owners of smaller restaurants who may want to “test the waters” before spending an exorbitant amount on a batch of ovens or dishwashers.

Finding a Food Supplier

Every successful restaurant locks down a food supplier with an excellent reputation. However, sometimes multiple suppliers are needed. For example, Ray’s BBQ Place in Texas might source all their meat from local farms. But for disposables and other bulk supplies, Ray’s uses a different supplier that offers free shipping and discounts for repeat business.

9) Hire Motivated Employees

Passionate, capable staff are the backbone of a restaurant. They seamlessly transition from the front-of-the-house to the back, interacting with customers, serving excellent cuisine, and dealing with problems as they arise. Therefore, the hiring stage is an incredibly important time and provides a chance for owners to create an excellent, hardworking culture.

Hiring Checklist

Managers and owners have different hiring strategies based on prior work experience. However, here are a few tips on the hiring process:

Figure out what will be offered regarding training, benefits, and other incentives before hiring.
Hire managers first and share the restaurant’s goals, challenges, and overall mission—then have managers help hire employees.
Have a running list of the positions that need to be filled so you can check them off. Calculate based on hours open and the number of shifts per week for servers, kitchen staff, and other employees.
Hire based on restaurant experience, motivation, passion, and enthusiasm.

Team Members

Different restaurants need to dictate specific positions, but here is a list of the main staff positions at every restaurant:

Kitchen Staff – Head chef, sous chefs, line cooks, prep cooks, and dishwashers.

Management Team – Front-of-the-house manager, general manager, manager of the kitchen.

Bar Staff – Cocktail waiters/waitresses, barbacks, bartenders.

Front-of-House Staff – Bussers, servers, hosts, food-runners.

Employees – PR experts, accountants, marketing and advertising team (if needed).

10) Advertise and Market the New Restaurant

Three of the most important aspects of starting any new business venture are spreading the word, creating a buzz, and bringing in customers. These ideas are even more essential in the restaurant world because the business can quickly bust if new customers do not visit and old customers do not return.

A skilled and strategic advertising campaign can efficiently get the word out about the new business. Advertising shares the restaurant’s basic information, such as location and menu, ideally enticing would-be customers to visit. The goal of advertising is to create anticipation and excitement about the new brand, encouraging patrons to try it and, ideally, return.

Here are some tips regarding advertising the new eatery:

Create a Website – The restaurant’s website should be simple and easy to understand. Include the restaurant’s address, hours, menu, and other contact information, such as an email address and phone number, as well as social media handles. For those who do not want to budget for a designer, website hosting platforms such as WordPress or Wix is easy to use, even for inexperienced business owners.

Open Accounts Online – Sites like Yelp and OpenTable do one thing well: they put your restaurant in front of the public. On Google My Business, patrons can leave reviews, which can help spread the word. TripAdvisor is another helpful website where guests’ reviews can earn you a high rating in various categories.

Use Promotions – How does this sound: first-time guests receive a free dessert? Owners can experiment with the terms, but discounts are a surefire way to bring in customers. Everyone wants to feel as though they have gotten a deal!

Post on Social Media – Social media is not simply a source of entertainment and distraction. These days, it is a tool capable of advertising your business to the masses. For example, new restaurants can share videos of the front-of-the-house, food pictures, and discounts and deals opportunities. For example, Pete’s Brews in Colorado serves excellent bar fare, and people love their hard-to-find microbrews. Each week, Pete’s shares a new beer selection on Instagram with the caption: “This rare beer won’t last long!” This brings in beer drinkers and enthusiasts, many of whom stay to enjoy one of Pete’s burgers and fries.

From Facebook to Twitter, a social media outlet is perfect for every business and target demographic. So while “Green’s” uses TikTok to attract the college crowd, “Woody’s” relies on Facebook to get their message across to an older clientele.

Throw a Grand Opening – Put those signs and banners up inside and out, and advertise the first night of business. But do not stop there: special events scheduled on a weekly or monthly basis can also drum up business. From beer tastings to live concerts to cooking classes, there is a wide range of ideas to choose from.

11) Throw a “Soft” Opening

So many restaurants have “soft” openings because they are part of an effective business strategy. Just as rehearsals help actors hone their craft, soft openings simulate opening night without all the pressure. In addition, these practice runs can help managers, owners, and chefs figure out if there are any problems to deal with and how they can be solved.

For a soft opening, there is no reason to pack the place to capacity, either; invite a set number of guests. Many times, owners decide to invite friends and family to the soft opening, which reduces more of the pressure and makes for an enjoyable, celebratory evening.

Popular Strategies for Soft Openings

Happy Hour Event – Host a happy hour with specific menu items, special cocktails, and beer and wine offerings.

Sample Menu Night – Offer a trial menu and let the chef focus on only a few items. This strategy encourages patrons to return to try other things, reducing the kitchen staff’s stress.

Reduced Schedule – Operate under a limited schedule for the first few days, and spend the extra time checking to ensure everything is going smoothly and the guests are satisfied. Then, increase the company’s hours.

Neighboring Businesses Night – Invite neighbors to a soft opening, make friends and hopefully find fans of your cuisine and atmosphere.

Friends and Family – From the chef and kitchen staff to the bussers, invite a friend or family member for every employee. You’ll have a blast, and they will spread the word to their friends if the experience is enjoyable.

A Small Restaurant: Humble Beginnings and Delicious Accomplishments

New restaurants emerge every day, from “Green’s” fresh salads to “Woody’s” artisan pies. However, many do not have the knowledge, skills, or experience to produce staying power. Yet, as restaurant trends multiply, opportunities for new eateries present themselves for entrepreneurs with creative ideas, rational plans, and strategic goals.

We wish you luck with the start of your new restaurant. Hopefully, this article paves the way for hard work, passion, and success for your new dining venture.

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