How to start a restaurant business
Thinking of starting a restaurant? Startups has the essential business guide for you...
- The restaurant industry
- What type of entrepreneur is a restaurant business suited to?
- The rules and regulations of the restaurant industry
- Useful contacts for a restaurant business
- Register your restaurant name with our preferred company formation agent (external site, opens in new tab)
- See if you can get a Start Up Loan to help you start a restaurant business idea (external site, opens in new tab)
The restaurant industry
Walk down any high street in the country and you can be almost certain of finding at least a small selection of restaurants. Not only has eating out become a staple leisure activity for the UK population, but it’s also one of the most popular dream businesses. Individuals who ordinarily wouldn’t have the slightest inclination to run their own business are drawn to the glamour of the restaurant trade, either through a passion for cooking or a love of playing the host.
The reality of running a restaurant is a harsh one however. Make no mistake, it’s extremely hard work. And with so much competition around, if you don’t get the founding principles spot on, you’ll struggle. But if the idea of being surrounded by food, providing excellent service, seeing people enjoy themselves and being at the heart of the community is your idea of heaven, then the restaurant trade could be just right for you.
Research from the British Hospitality Association (BHA) states that, in 2009, there were 27,502 restaurants across the UK, 350 more than in 2008; furthermore, there were 31,000 fast food outlets. Given that many other retail sectors have been ravaged by recession, these figures indicate that the ‘eat out’ industry remains robust and widely popular.
Of the 27,500 restaurants trading in 2009, almost 10,900 (42%), were classed by the BHA as ‘ethnic’ restaurants; this predominantly refers to cuisine from the Middle East, central and South America, Asia and the Indian sub-continent. Indian and Chinese food remains hugely popular; indeed these two cuisines accounted for many new businesses. Furthermore the total UK world foods market was worth £1.7bn in 2013 and is set to hit £2.1bn by 2018, according to Mintel.
So while there are a few words of caution to be taken from these statistics, there’s also the suggestion that it’s a big enough pie for you to have a small slice.
How much does it cost to launch and run a restaurant?
There are some basic costs that will apply to almost any restaurant. Clearly your shopping list will include tables, chairs, cutlery and crockery, kitchen and cooking equipment, toilet facilities and ventilation.
See if you can get a Start Up Loan to help you start a business idea
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For his restaurant, which seats 40 people, Stephane Luiggi, owner of the French Living restaurant in Nottingham spent £5000 on kitchen equipment, some of which was second hand, and £5000 on tables and chairs.
As well as ovens and fridges, your kitchen equipment will include dishwashers, storage units, scales and don’t forget the all-important fly killers. The sky’s the limit in terms of equipment costs. It really depends on the size and scope of your restaurant. One way of saving money is to lease some of the equipment rather than buying. This can free up valuable capital during the early stages which can be better spent on marketing and recruitment.
Property costs will vary greatly according to where you are located, not just in terms of regions, but also the type of property you want. The high street will obviously cost more than a residential area. However, you may need the footfall that a prominent position provides in order to achieve a high enough turnover. All this will have to be weighed up before you make a decision on how much you should spend on property.
Aside from property, staff will be of your biggest fixed cost. If your establishment is open seven days a week, you’ll need more than one chef. The average head chef commands a salary of between £20 and 30,000 , while full time waiting staff salaries will start at around £15,000. Steve Cox warns that staff shortages in this field are critical; at one stage, he even had to advertise in Australia and New Zealand to attract good staff.