8 Steps on How to Start a Small Restaurant

Start a small restaurant with steps covering concept, planning, location, menus, costs, funding, permits, and staffing. Build a stronger food business with practical guidance for launch, operations, marketing, and future growth.

By Douglas Wade, Attorney

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Table of Contents

Introduction

1. Type of Restaurant

2. Make a Business Plan

3. Location

4. Create a menu plan

5. Costs

6. Investment in Your Restaurant

7. Licenses and Permits

8. Employ Skilled Personnel

You’ve opened! What Now?

Introduction

It takes an enormous effort to own a restaurant. It is a commercial endeavor that requires a number of key “ingredients.” These may include perseverance and grit. Proficiency in professional business values, marketing acumen, and culinary skills can’t be ignored.

You can start carrying out your vision if you’re equipped. Let’s get started if you’re searching for clear & detailed guidance on how to open a restaurant.

1. Type of Restaurant

Coming up with ideas and selecting a concept is the initial step. It must spark your entrepreneurial spirit. Do you like farm-to-table-based pop-up eatery? Are you thinking of a vegan food truck? Maybe you’re determined to serve only comforting breakfast meals.

Take into account the following considerations while choosing a restaurant type:

Which kind of service would you like to provide?
What does your intended audience look like?
What makes your brand special?

A. Think About Inexpensive Restaurant Start-Up Concepts

You should also think about your financial resources at this ideation stage. If you have little money to start with, you might consider thinking about some of the subsequent restaurant models, although there are plenty of alternatives to fund your establishment (continue reading to find out more on this).

B. Launch a Home-Based Catering Company

It’s more probable that you’ll run your business out of your house and cook in a professional kitchen. You can accomplish that with home-based catering, too. Catering may be a more cost-effective choice than starting a restaurant. Initial expenditures can be between $10k & $50k.

C. Launch a Ghost Restaurant/Kitchen

It is a commercial kitchen that has been rented. Customers receive food deliveries via third-party delivery services. This may be among the least expensive methods of owning a restaurant. There is no dining area or pub to pay for, but you will be renting your kitchen.

Startup expenses associated with a ghost kitchen are anticipated to be from $10,000 to $50,000, as reported by Entrepreneur Magazine. In certain places, local providers provide choices for less than $10,000.

D. Food Truck

A food truck requires a substantial time and financial commitment. Total cost ranges between $40k & $250k. You will need to buy your vehicle, equip it with the required tools, & obtain the required permits.

You might be able to lower your initial expenses even further if you purchase old equipment and/or a truck. Because you can utilize a tablet-based POS (point of sale) system and have significantly lower labor and utility costs, the operating costs may also be lower.

2. Make a Business Plan

Owning a restaurant requires careful planning. You’ve decided on a business concept. It is time to create a plan for carrying it out. Consider the business plan as a basic outline. It outlines every significant aspect of your foodservice enterprise. Ultimately, you will use the business plan for “pitching” possible investors. Market research is essential before owning a restaurant.

A suggested “marketing mix” should be included in your business plan because investors will probably want to see it. This is done to determine how outbound & inbound marketing strategies and paid media will help you attract new clients and retain existing ones. The marketing plan has to be comprehensive. It must include successful tactics like branding, email advertising, social media promotion, & SEO.

3. Location

What is an essential component in the profitability of restaurants? Location. Your particular target audience may be drawn in by your location. Visibility is vital. A busy area with lots of foot traffic might give you new customers.

Take into account the kind of food you’re offering. Also, the way it might be popular where you are. For instance, a high-end brick building near boutiques might be the ideal location for gourmet Italian. However, a relaxed food truck setting would be a better fit for deli sandwiches & small nibbles. Additionally, consider leasing versus purchasing a physical space. Your expenses and earnings may be immediately impacted by this.

4. Create a menu plan

You may start the creative and somewhat technical process of developing your menu items once you have the company concept and plan in place. When planning your recipes, you may wish to think about employing seasonal, high-quality items while also considering related expenses and rival prices. Remember to design a fantastic drink menu as well. Drinks account for a significant portion of revenue at many restaurants.

A specific plan that examines the development & implementation of different kinds of food and beverage menus may be included. Visual design, cost analysis, and resource use are important.

5. Costs

The costs associated with owning a restaurant can vary significantly. You ought to understand what goes into extra restaurant expenses. It will help you organize your budget and determine where to go overboard and where to cut expenditures. It is part of selecting a restaurant location and creating an economical menu. These are the highest costs you shall encounter.

A. Remodeling or Enhancing Restaurants

It’s not unusual to invest in updating your business property when you rent, in contrast to a residential lease, when renters are expected to keep the space exactly as they got it. You might need to add a bar or alter the kitchen’s dimensions. Landlords may offer a “tenant improvement fund” to help with some of these expenses. The specifics will vary depending on your lease. Be clear about what you need before you agree. Additionally, you are usually liable for all expenses if it’s an asset you own!

B. Equipment for Restaurants

Typically, your restaurant space does not come with ovens, fridges, stand mixers, frying machines, or commercial washers. It is likely that you will be in charge of buying or renting this equipment. A business kitchen rental can be an exception, as it might include some pre-installed equipment. You might be able to locate some of this gear at an auction or reseller when the time comes to purchase.

When all the requirements are met to open a restaurant, leasing can result in short-term financial savings. Additionally, smaller restaurant operators who might prefer to “test the waters” without shelling out a huge sum of money to buy a batch of stoves or dishwashers are drawn to leasing.

C. Technology and Supplies

Customers will need enough space to sit/dine in a full-service restaurant. Chairs, tables, and barstools are the basic requirements. They are required for both inside and outdoor areas. Additionally, server terminals and a host stand might be required. There will be expenses for things like menus, silverware, glasses, plates, linens, towels, etc. Tech like your payroll and point-of-sale systems should have a budget as well.

D. Ideas for Kitchen Design

The issues with kitchen designs differ from those with front-of-the-house designs. Owners & designers should consider how they might facilitate the smooth operation of food service. Additional elements to consider are:

Washing Area: There ought to be a convenient place for servers to drop trays of soiled dishes when they approach the kitchen. Dishwashers, drying racks, & sinks can all be found in this area.
Food Preparation: Each chef needs a sizable area set aside for food preparation. Clean, transparent surfaces and utensils must always be available for the kitchen crew to use.
Storage: Shelves and freezers should be neatly arranged and designed to facilitate quick searches. Storage may be either dry or cold.
Cooking: Grills, ovens, frying machines, and other heavy machinery will be found in this spacious room, which is intended for the cook and their personnel.
Service: Heat lights are required, and servers should have easy access to the region where they collect food. Since the items are going straight to the clients’ tables, this area also needs to be kept tidy.

6. Investment in Your Restaurant

How can you raise enough money to open a restaurant, given all of those expenses? Now is the right moment to look into more funding possibilities if you already have a business plan with expense forecasts.

A. Secure Grants

Finding a grant that you qualify for may take some effort because many have strict requirements. But if you look around, you might discover a grant for which you are eligible! These monetary contributions are often non-repayable, and even a modest grant of some thousand dollars might help you reach your financing objectives.

B. Get a Business Loan

Small business loans are available from certain credit unions and banks, particularly if you have established a connection with them. Outside finance can be an excellent source of beginning capital as long as you keep a close eye on your spending and avoid taking on too much debt.

The United States Small Business Administration offers 504 loans to certain eateries. Government-sponsored SBA loans are obtained via a “Certified Development Entity.” You can search for local, qualified lenders.

Be aware that the time it takes to get cash might vary from a few days to a few months, regardless of the kind of company loan you select. With the goal of guaranteeing that you get your money when you need it, begin the application process as soon as possible.

C. Invite Private Investors

In exchange for a share of the profits, private investors may fund your small firm. They may be considered “angel investors,” who adopt a hands-off attitude and let you manage the company on your own, or you can invite them on as collaborators to help with some of the workload, as long as they get their cut of the profits.

D. Consider crowdsourcing

Crowdfunding may be a successful alternative source of funds. It’s more possible when you have a group of individuals who are in favor of your restaurant idea. You can raise money from people by pitching your business on various websites. Also, discounted meals & invitations could be given for a soft opening. It will be an added incentive to donate.

7. Licenses and Permits

Licenses and permissions specific to the state and city where your food establishment is located are required. Permits and licenses will also vary depending on the type of restaurant you run and whether you intend to sell alcohol.

Try to get an edge on this procedure because some of the aforementioned can take quite some time to obtain. Sometimes it’s advisable to employ a specialist lawyer who can handle this more taxing task for you because this procedure can be complicated.

Restaurant License Types You May Require

Business license provided by the locality
Employer Identification Number
Foodservice license
Certificate of occupancy
Building certificate
Food handler’s permit
Sales tax license
Liquor license

8. Employ Skilled Personnel

Any restaurant needs a large team of committed professionals with the right education and experience. The complete brigade of the cooking system, which includes the front & back of the house, should be taken into account while hiring.

You must have a comprehensive interview procedure in place. Verify references and determine whether management and chef candidates have finished an approved culinary curriculum. Foster a culture that encourages retention.

You’ve opened! What Now?

You navigated the dense forest of details. You have passed the stages of preparation to reach opening day. Congratulations! What now?

People may underestimate the complexities of owning a restaurant. You now strive to carry out the business plan and continue to get better. You have to continuously assess and modify your business model. This will require a combination of inventiveness and astute business sense. You’ll need to routinely assess how well your menu items are performing, determine your exact profit margin, stay up to date on what rivals are doing, monitor any staffing concerns, and ensure that your customers are having a good time and want to come back.

Today’s restaurant owners generally consider marketing as social media interaction and monitoring reviews, both requested and unwanted. Patrons look for a connection or a feeling of community in addition to enjoying a delicious meal. You can choose to include a social media manager in your advertising and marketing efforts budget.

Even unskilled business owners can easily use website hosting services like WordPress or Wix if they don’t want to spend money on a designer.

Yelp and OpenTable are excellent in promoting your restaurant to the general public. Customers can help spread the news by leaving reviews on Google My Business. There are other useful websites where you can get a high ranking in a number of areas based on reviews from visitors.

Social media is more than just a means of amusement and diversion. These days, it’s a tool that can promote your company to a large audience. New eateries can post front-of-house movies, photos of their food, & information on special offers and discounts.

For instance, Pete’s Brews in San Diego has great bar food, and customers adore their difficult-to-find microbrews. Pete posts a new beer option on Instagram every week along with the statement, “This unusual beer is not going to last long!” Beer lovers and drinkers are drawn in as a result, and many of them stay to eat Pete’s burgers & fries.

You might discover yourself in a sweet spot to grow in the future. It’s never too early to think about your plan, including franchising, for that situation. As a franchisor, you enable others to purchase licenses to use the name of your company and business plan; this enables you to grow into new markets without having to oversee each one.

Have a quick question? We answered nearly 2000 FAQs.

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8 Steps on How to Start a Small Restaurant

Introduction

1. Type of Restaurant

2. Make a Business Plan

3. Location

4. Create a menu plan

5. Costs

6. Investment in Your Restaurant

7. Licenses and Permits

8. Employ Skilled Personnel

You’ve opened! What Now?

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