When it comes to starting your own business, restaurants aren’t exactly the easiest choice. Luckily, foodie culture has hit its stride, and restaurant sales have been on the rise for several years now. It will be a challenge, but as long as you come to the table fully prepared for success, the odds are in your favor. Here’s everything you need to know about starting a restaurant business. How to open a restaurant. Let's dive into the step-by-step roadmap of opening a restaurant, addressing everything from securing startup funds and choosing the ideal location, to devising a standout menu. 1. Decide what kind of restaurant to open. You’ll want to consider many factors when deciding what type of restaurant to start. Pay attention to your target location and what kinds of restaurants find success there, while also avoiding oversaturated markets. Ultimately, you want your restaurant to fill a need. Your budget is also important to consider. Some types of restaurants require bigger initial investments due to expensive machinery or the space required to execute the idea. Be realistic about what you can afford. Franchise vs. independent restaurant For some prospective restaurant owners, a franchise is the way to go. While you may have less creative control and need to pay fees, franchises already come with built-in brand recognition. On the other hand, independent restaurants allow for full creativity and uniqueness, but require more work in terms of establishing your name. Pros and cons of opening a franchise ProsConsHigher chance of reaching cash flow positive status in a short periodExisting marketing and demandSupport and guidance provided by the franchisor in running and growing the businessHigher startup costs, including franchise feesLimited control over the size of the business and investment decisionsOngoing royalty payments that can impact profits Pros and cons of starting an independent restaurant ProsConsFlexibility to start small and expand with demandFull control over the business, including creative and managerial decisionsAbility to keep all of the profits if the restaurant becomes extremely successfulNeed to handle marketing and generate demandGreater responsibility in developing business strategies and operations Consider these factors to decide whether a franchise or an independent restaurant is the right choice for you. Fast food vs. casual dining vs. fine dining Each type of restaurant—fast food, casual dining, and fine dining—serves a distinct market and has its own unique set of considerations, pros, and cons. It's crucial to understand these differences when deciding what kind of restaurant you want to open. Fine dining Consider opening a restaurant in an area where people enjoy and can afford fine dining. This type of restaurant typically offers high-quality food, a sophisticated ambiance, and a higher price range. Fine dining establishments often come with significant startup costs. Fast food If your restaurant is located in a youth-oriented area (Ex: near a college campus) fast food or casual dining might be a better fit. Fast food restaurants serve food that is ordered and served quickly, targeting customers who prioritize convenience over a fine dining experience. Fast-casual Fast-casual restaurants, like Chipotle or local food trucks, offer a balance between fast service and higher-quality food, compared to traditional fast food chains like McDonald's or Taco Bell. This concept combines the efficiency of fast food with a more casual dining experience. Fast-fine Fast-fine dining is a newer concept that combines the elements of fine dining with more accessible prices and shorter wait times. These restaurants offer creative and elevated dishes, such as gourmet burgers or elevated pizza. Starting a fast-fine dining restaurant is more affordable compared to traditional fine dining establishments, making it a viable option for entrepreneurs with limited investment capital. 2. Create your menu. Your menu is a crucial element of your restaurant, as it will ultimately determine the type of experience you provide for your customers. It's essential to strike a balance between creativity and practicality when devising your menu. Consider incorporating popular dishes and ingredients that appeal to a wide range of tastes. Be creative and offer unique items that set you apart from other restaurants in your area. Keep in mind the cost of ingredients and equipment needed to execute your menu items efficiently. Remember to consider dietary restrictions, such as vegetarian or gluten-free options. 3. Develop a restaurant business plan. Once you’ve nailed down your idea, you’ll need to create a business plan. This step can feel like a lot of work, but it’s necessary. You’ll need to do extensive research regarding your restaurant’s concept and menu, the market for your restaurant, competitors, your management and employee team, marketing, financial projections, location, and more. Here are the main components of most restaurant business plans. Introduce your restaurant brand, which includes your logo, colors, and sign Provide an overview of your restaurant concept Give a sample menu with prices Explain your management and employee plan Lay out your restaurant design Analyze your industry and target market Investigate your competitors Offer an analysis of your location Write out a marketing plan Create financial projections You will rely on this document throughout the creation of your business, and you’re welcome to amend it as time goes on and your goals and projections shift. If you need to raise money from investors for your restaurant or apply for a business loan, your business plan will come in handy. 4. Obtain funding for your restaurant. There are many options when it comes to finding money to start your restaurant. Whether you want to borrow from a bank, fund the restaurant yourself, or seek out investors, it’s important to explore all of your options before deciding on a funding method. Bootstrapping Bootstrapping is a startup funding method that doesn't involve external investors or credit. It aims to self-fund, starting with a small amount of initial "seed money" from personal savings or a friend/family. The business quickly generates revenue and reinvests it for growth. The benefits of bootstrapping include avoiding debt and maintaining control and equity. However, seed money is limited, resulting in a small initial operation. Business term loans Business term loans are a traditional type of commercial loan where a lender provides a lump sum of cash up front, which is then repaid over a set period (the term) with a fixed or variable interest rate. These loans are incredibly flexible and can be used for various purposes, including working capital, business expansion, or purchasing equipment. However, they typically require a solid credit history and demonstrated ability to repay. SBA loans The Small Business Administration (SBA) doesn't lend money directly to small business owners. Instead, it sets guidelines and partners with lenders, community development organizations, and micro-lending institutions to provide these loans. SBA loans are renowned for having some of the best rates and terms available, making them a desirable option for many small businesses. They can be used for most business purposes, including long-term fixed assets and operating capital. However, the process for applying and qualifying can be lengthy and complex. Equipment financing One of the most significant upfront expenses for restaurant owners tends to be kitchen equipment, from pizza ovens to industrial refrigerators and POS systems. Many business owners use equipment financing to pay for these expensive pieces of equipment so they can maintain their restaurant’s cash flow. Crowdfunding Crowdfunding, a funding method where you accept small contributions from many people (like Kickstarter and Indiegogo), is similar to bootstrapping. It allows you to maintain control over your business and avoid debt. This funding is popular with startups selling physical products, as they can offer the product as a reward. Restaurants typically don't use crowdfunding, but it's possible. If you have a decent following or people who support your idea, crowdfunding might work for you. Finding an angel investor Startups often struggle to secure funding initially. Traditional banks typically require a couple of years in business before considering a loan, while investors demand proof of viability. This is where angel investors step in. They fund early-stage startups, even if they're risky because they believe in the idea and the people behind it. While accepting their money means giving up ownership, it doesn't need to be repaid if the business fails. However, angel investors may push for rapid growth. Learn more about the pros and cons of angel investors here. 5. Choose a location. The most important factor when it comes to location is making sure that there’s a market for the type of restaurant you want to open in the place where you want to open it. However, that’s not the only factor. Central vs. off-the-beaten-path Typically, building a restaurant in a central, highly trafficked location means more business for you but also far higher rent prices. You may only be able to afford a location that’s a little off the beaten path. This location doesn’t mean you can’t succeed, but it does mean you’ll want to choose wisely. Consider whether this location is in a quieter area that’s easy to get to or a place that’s truly out of the way for most people. Don’t forget that hungry patrons value convenience heavily. Parking You might be tempted to snag a prime spot in a downtown area, but if parking is a hassle, that central location could actually hurt you. Consider first whether there’s any space for you to build parking into your restaurant’s design. Some restaurant types can get away with little to no parking—for example, food trucks, windows, and restaurants located at or very close to public transportation—but for the most part, no parking is a no-go. Again, this goes back to convenience. Size You need to make sure that the size of the lot or building you’re considering is appropriate for the business you want to open. The more involved your food, the bigger your kitchen will need to be. If you’re serving alcohol, you’ll need space for a bar. The equipment you’ll need is very important to keep in mind, as restaurant equipment can eat up more square footage than you’d think. Clientele You’ll need to consider the type of people who frequent the area you want to start your restaurant in, which includes both their taste in food and their purchasing power. You can have the best food in the world, but if the people in your neighborhood can’t afford it, you’ll never be successful. On the other hand, if you’re serving fast food burgers in a neighborhood that’s hyper-health-conscious and mostly vegetarian and vegan, you’ll struggle. Design The ambiance of your space depends largely on the location you choose. You need to pay attention to detail when browsing potential spaces to rent. If you’re opening a brunch spot or a cafe, natural light is a must, and a patio or outdoor space doesn’t hurt. If fine dining is your thing, you’ll want a space that’s impressive at first glance, whether for its modern features, its historic charm, or its vaulted ceilings. Building code You probably don’t want a space that’s going to involve lots of renovations before you can even get started. Make sure the space you’re looking at is up to code and safe. Also, assess whether or not it’s accessible to people with disabilities. Not only is this the right thing to do, but there are also a number of accessibility guidelines restaurants legally have to meet in order to be ADA-compliant. 6. Licenses and permits for opening a restaurant. The restaurant business is one of the most highly regulated industries, and as such, you’ll need to secure a number of different licenses and permits before you can open your doors. The exact requirements vary by state, and it’s best to get a lawyer involved to make sure you have everything squared away. Some of the more common licensing requirements include: Business licenses - These are issued at the state level. Food handler’s permit - All employees should obtain this. Liquor license - This is only for restaurants serving alcohol. Music license - This gives you permission to play copyrighted music in your establishment. The U.S. Small Business Administration is a great resource for more information on applying for business licenses. 7. Designing your restaurant space. Designing your restaurant space is just as important as crafting your menu. The ambiance and layout of your restaurant can greatly influence your customers' dining experience. Here are some key factors to consider: Dining area layout - Your dining area should be spacious and comfortable. Arrange the tables in a way that makes it easy for customers to move around and for staff to serve. Kitchen design - The kitchen should be designed for efficiency and safety. You'll need enough space for cooking, food preparation, storage, and dishwashing. The layout should facilitate a smooth workflow. Color scheme - Choose a color scheme that matches your restaurant's theme. Different colors can evoke different emotions—for example, reds and yellows are warm and appetizing, while blues and greens are calming. Lighting - Good lighting can set the mood for your restaurant. Consider using a mix of ambient, accent, and task lighting to achieve the desired atmosphere. Furniture - Invest in quality furniture that is durable, comfortable, and fits your restaurant's style. Remember, comfort can significantly enhance a customer's dining experience. Decor - The decor of your restaurant should reflect its concept or theme. This includes art, accessories, and table settings. Music and acoustics - The right music can enhance the ambiance of your space. However, it's also important to consider acoustics. Good acoustics can reduce noise levels and make the dining experience more pleasant. Restrooms - Don't forget about the restrooms. They should be clean, well-stocked, and accessible to all customers. Designing your restaurant space is a great opportunity to express your restaurant's identity and create an environment where customers will enjoy dining. 8. Hiring management and employees for your restaurant. This step is crucial for your restaurant's success. Your team can make or break your startup. Avoid common hiring mistakes like rushing the hiring process, overlooking contract workers, and not accepting support and delegation throughout. Some tips for hiring include: Recruit talented and committed individuals by offering competitive pay and benefits. Don't skimp on compensation or hiring quality. Match industry rates and provide benefits. Identify potential rather than proven success to find valuable contributors without high costs. Offer non-monetary perks like upward mobility, employee incentives, and profit-sharing. Get creative by partnering with local businesses for discounts. Common restaurant staff requirements Running a restaurant requires a diverse set of skills. Depending on your restaurant's size and concept, you may need to hire for several different roles. Here's a quick overview of some common restaurant staff requirements. General manager - The general manager oversees the entire operation of the restaurant. They're responsible for hiring and training staff, ensuring customer satisfaction, and managing the restaurant's finances. Chef/cook - The chef or cook in your restaurant is responsible for preparing meals. They must be skilled in food preparation and knowledgeable about food safety standards. Kitchen staff - This includes various roles such as sous chefs, line cooks, and dishwashers. They assist the chef in food preparation and maintaining kitchen cleanliness. Server - Servers interact directly with customers, taking orders, serving food, and handling payments. They should be friendly, attentive, and have excellent communication skills. Bartender - If your restaurant serves alcohol, you'll need a bartender. They should have knowledge of a variety of drinks and excellent customer service skills. Host/hostess - The host or hostess greets customers as they arrive, escorts them to their table, and manages reservations. Busser - Bussers clear tables once customers have finished their meals, making the table ready for the next customers. They often assist servers and host/hostesses with various tasks. Remember, each of these roles plays a crucial part in your restaurant's success. Therefore, it's important to take the time to find the right people for each position. 9. Finding suppliers for your restaurant. A key aspect of running a successful restaurant is having reliable suppliers. From food ingredients to kitchen utensils, the quality of what you purchase impacts the overall experience you offer to your customers. Here are some types of suppliers you'll need, and some tips on where to find them. Types of suppliers you'll need Food and beverage suppliers - These are perhaps the most crucial suppliers for your restaurant. You'll need to secure a steady supply of fresh produce, meat, dairy, baked goods, and beverages. Equipment suppliers - Your kitchen will need professional-grade cooking equipment, utensils, and appliances. This includes ovens, grills, refrigerators, cutlery, pots, and pans. Furniture suppliers - To create a comfortable and inviting environment, you'll need quality furniture. Suppliers can provide tables, chairs, booths, and outdoor seating. Cleaning supplies suppliers - Hygiene is paramount in any restaurant. Suppliers of cleaning products and sanitary equipment are therefore vital. POS system suppliers - A reliable point of sale (POS) system is crucial for managing orders, receipts, inventory, and sales data. Uniform suppliers - If your staff will be wearing uniforms, you'll need a supplier for these as well. The uniforms should be comfortable and stylish, reflecting your brand image. Where to find suppliers Industry trade shows - These events are great opportunities to meet potential suppliers, see their products firsthand, and negotiate deals. Online directories - Websites, such as ThomasNet or Alibaba, list thousands of potential suppliers for all kinds of restaurant needs. Local farmer's markets - If you're committed to serving fresh, local produce, farmer's markets can be an excellent source for suppliers. Wholesale retailers - Stores like Costco or Sam's Club can provide bulk goods at discounted prices. Industry associations - Joining a restaurant association can provide you with access to their list of vetted suppliers. Finding the right suppliers requires time and research. It's important to consider not just the cost, but also the quality of products, reliability, delivery schedules, and communication skills of the supplier. Remember, your suppliers are partners in your business, and their performance can impact your restaurant's success. 10. Launching and marketing your restaurant. Once everything is in place and you’re finally ready to launch your restaurant, it’s time to publicize and spread the word! You’ll probably want to host a big event for the day or weekend your restaurant opens its doors to bring in new customers, but you should start marketing your restaurant and that launch date far in advance. Online presence Digital marketing is huge, and you should have an online presence that includes a website and at least a couple of social media channels. Facebook and Instagram are two of the most popular social media platforms for restaurants. Spread the word Consider offering a taste test to local food writers, bloggers, and influencers so they can spread the word. Also, contest marketing is highly effective and a great way to gain new followers. It can be wise to contract a digital marketing specialist to help you with this project. On-the-ground marketing While social media is important for publicizing your restaurant, on-the-ground marketing within your community is critical. Hang flyers around the neighborhood and inside other local businesses, and ask your friends to tell everyone they know. Offer incentives Spreading the word only goes so far. You have to offer an incentive for people to come and try something new. Host a launch party that’s packed with freebies, like samples, a live DJ, a giveaway, and more. Team up with local artists or artisans to host a pop-up in your restaurant. The more you collaborate, the further your network will spread. Customer loyalty You can also consider implementing a customer loyalty program, so that all of these new people feel compelled to come back to your restaurant. Most casual dining spots go with punch cards, whereas more upscale establishments might consider starting a points system of some sort. Opening a restaurant is an enormous task. However, with proper planning and preparation, it’s possible to make all of your culinary dreams come true. Looking into funding for your restaurant? Learn more about restaurant business loans.