How to start a restaurant business
Follow these simple steps to start a restaurant
The most important steps to follow when starting a restaurant are:
People now eat out more often, and for a wider range of occasions. This has led to significant growth within the restaurant sector, particularly over the past two years.
However, it’s also important to note that there are significant challenges within the sector. The eating out landscape has evolved significantly over the past decade, with chains taking market share and growing the market through aggressive rollout and by offering more choice, better quality, and more consistency to customers.
There is also more crossover between market segments. The food to go sector has grown and is available 24/7, whilst dine in chains are increasingly offering take away options. At the same time, advances in technology have led to more visibility for smaller providers, as well as providing help to drive the popularity of delivery services such as Deliveroo and Uber Eats.
In addition to an increasingly competitive backdrop, and the challenging outlook for consumer spending, there are also stringent requirements to start a restaurant and growing cost pressures.
Still keen? Before you start, think about what it takes to start a restaurant.
To run a restaurant business successfully, you need to be more than just a good cook. You need to have a good understanding of all aspects of the industry and what is required to succeed within it.
It may be worth considering seeing if you can get a Start Up Loan (external partner site, link opens in a new tab) to help you with financing, and mentoring to start this business idea. You'll also need to think about registering your business, either as a sole trader or as a company - if a company, then Smarta Formations (external partner site, link opens in a new tab) are an organisation that can help you set up.
So, if you’ve never worked in a restaurant before, it’s definitely advisable to get some experience of different roles in the sector before taking the plunge and opening your own restaurant.
Steve Cox, owner of London restaurant Prego, supports this view: “Work in one first and get experience, both back and front of house. Wash the pots. I’m a chef by trade and I came through the mill and nobody can pull the wool over my eyes.”
You should be under no illusions about the lifestyle that comes with running your own restaurant. If you think you’re going to escape the 9 to 5 of the rat race, think again!
To succeed in the restaurant industry, you will need to work incredibly hard. For at least the first two to three years, you can expect to put the holidays on hold and work longer and harder than ever before. You’ll have to make sacrifices but, ultimately, these should pay off when you start reaping the rewards of running your own restaurant business.
Most importantly, you’ll need to be passionate about your restaurant idea and be driven to make it succeed!
1. Restaurant ideas
First thing’s first, you need to consider what sort of restaurant you want to open. Restaurant ideas can be broken into three parts:
–Restaurant types (i.e. what food will you serve? Do you want to serve a specific type of cuisine? Will you specialise in just one area?)
–Restaurant atmosphere types (Are you looking to open a high-end, fine dining establishment or something more casual?)
–Restaurant service types (self-service, counter service or waiter service?)
Be careful to consider all three elements to come up with your complete restaurant concept. We asked Thom Elliot of Pizza Pilgrims, for his advice on starting a restaurant. The top three priorities for starting a restaurant are:
- Product – not just the food, but also the atmosphere and service
- People – both servers and customers
- Property – where your restaurant is located
To help you decide exactly what your overall ‘product’ or restaurant idea should be, you should consider:
Your restaurant’s target audience
Who are your potential customers? Where do they live and work? How much can they afford to spend?
“People tend to go with what they enjoy, rather than what there are the right resources for. Too many people say ‘I know what I like’, when it’s rather more a question of marketing and the quality of your product.” Ian McKerracher, National Restaurant Association.
Once you’ve decided on an initial restaurant concept, it’s important to undertake market research to identify if there is a demand for this type of restaurant and if your target audience are interested in the restaurant idea.
After all, it doesn’t matter how good your idea is, if don’t have the audience, you won’t have the customers, and it’s unlikely you’ll receive a return on your investment.
Your restaurant competitors
As well as looking at your target audience, when you’re carrying out market research, you should also look at your competitors.
How are your direct competitors performing? How much do they charge? Where do they advertise? If you want to ensure that your restaurant succeeds, you’ll need to be able to compete with the other restaurants around you and offer something that’s either different to, or better than, what they offer.
If there are already a huge number of Indian restaurants in the area, for example, are you planning to enter a saturated market? If this is the case, it could prove incredibly difficult to attract customers, unless the other offerings are incredibly poor quality.
On the other hand, if there are no restaurant ideas like yours in the area, ask yourself why. It could just be that no one has had the foresight to open this type of restaurant yet. But equally, it could be because it simply won’t work.
It’s well worth visiting your direct competitors so that you can see first hand what they’re offering in terms of quality, pricing, and service.
With this information on audience and competitors in mind, you can then develop your restaurant ideas. Types of restaurants available in the UK today include cuisines from around the world, but perhaps the Italian restaurant concepts near you are larger chain restaurants and there’s room for a smaller ‘bistro’ option. Perhaps there’s appetite for a high end British fine dining restaurant in your neighbourhood. An innovative restaurant idea might be a dessert-specific restaurant – or perhaps you’d like to run one of the many themed restaurants in the UK, such as the tropical-themed Rainforest Cafe.
2. Restaurant menu concepts
Wondering how to create a restaurant menu? Once you’ve decided on the type of restaurant you want to open, you’ll need to think about the menu. After all, at the heart of any successful restaurant is its menu.
Bear in mind that your overall ideas for a small restaurant will impact everything from the type of restaurant service you go for right down to your restaurant menu concepts – design and choice – and you’ll need to think of the associated costs.
When writing your menu, it’s important to understand the link between your kitchen and your menu. The size of your kitchen will have a direct impact on the size and style of menu you are able to offer, with a smaller kitchen limiting the variety of dishes you can include on your menu.
3. Restaurant names
This is one of the most fun steps of the process – naming your restaurant.
Your restaurant’s name will become part of your identity so it’s important to select one that means something to you and your target customers, and that reflects the brand you’re hoping to create.
Your restaurant name might reflect the theme or location of your restaurant, or it might simply be a play on words. But how do you go about coming up with a business name?
What are good restaurant names?
A great restaurant name will find a way to link the food, location, and ambience. It should:
- Leave a lasting impression on customers
- Be memorable
- Be easy to pronounce and/or spell
- Reflect the concept of the restaurant
Oh, and it’s also advisable to avoid existing, well-known and trademarked names. Even if your family name is McDonald, you really shouldn’t be calling your restaurant that or anything that sounds similar unless you want to give the impression that you’re trying to imitate your competitors.
Choosing a restaurant name
Your restaurant name should not only describe what you do and reflect the concept of your establishment, but it should also help you to stand out in a competitive marketplace.
When trying to come up with a business name, consider the following:
- What makes you special or unique? What are your USPs?
- Take inspiration from your surroundings. Is there a particular building, street, or landmark that can be used in your name?
- Keep it short and simple
- Is it already in use?
- Test it out – do people like it? Do they find it memorable?
- Is it scalable?
Restaurant name ideas
Whilst you want your restaurant name to be unique, there’s no harm in looking around for inspiration. Look at the restaurants around you and research restaurants with a similar concept to yours online. There are also plenty of lists of restaurant name ideas available, which can provide a great starting point.
4. Restaurant design ideas
Although good food and great customer service are crucial for bringing customers back to your restaurant, your branding and brand development are just as important.
Your branding covers everything from your logo and signage, through to your website, menus, and the interior design used within your restaurant.
The importance of creating a welcoming ambiance in your restaurant should not be underestimated – you want your customers to feel comfortable and enjoy their meals.
The design of your restaurant will act as the backdrop to your customers’ overall dining experience, setting the mood and general feel of the meal. So think about the mood you’re trying to create and the experience you want your customers to have.
Points to consider include:
- Seating capacity
- Problem areas
- Heating and ventilation
- Restroom facilities
You can find a variety of restaurant design ideas and restaurant design inspiration on platforms such as Pinterest.
One thing to note is that, when designing your restaurant, you never have as much space as you think you do! Even the most spacious restaurants quickly fill up once you start factoring essentials such as commercial kitchens, walk-in refrigerators, bars, toilet facilities and waiting areas, not to mention tables and seating!
Restaurant website design
In today’s increasingly digitally-focussed world, it’s vital that you give your restaurant a great online presence. And that starts with a website.
Your website will not only allow people to find you when they’re looking for places to eat online, but it will also give your guests the opportunity to get to know your menu, style, interiors, and services, before they even step through your door.
With this in mind, it’s important that you invest the time, money, and resources to design and build your website properly – if your potential customers don’t like what they see, they probably won’t even bother visiting you.
For a professional, high performance, and visually pleasing site, it’s well worth hiring a professional to take care of things. However, if you’re designing the site yourself, there are a number of WordPress restaurant themes that will help!
Tips for your restaurant website:
- Always keep your target audience in mind
- Keep it simple and easy to use
- Use neutral background colours and a simple colour scheme
- Don’t use a splash page
- Consider multiple devices
- Avoid PDF menus
- Good quality photos are essential!
- Integrate social platforms
Restaurant menu design
It goes without saying that one of the most important parts of a restaurant’s branding is its menu. After all, your menu design is a reflection of your restaurant as a whole, and it’s often one of the things that potential customers will look at before deciding to come and dine with you.
A well written, simple restaurant menu design should be descriptive and easy to read, with an uncluttered layout. It should also complement the theme of your restaurant.
Here are our top tips for designing your restaurant menu:
- Check out the competition
- Ensure your font is easy to read
- Break your dishes down into clearly identified sections
- Highlight special or popular dishes
- Pay close attention to your dish descriptions, explain what dishes are in an eloquent way that really sells them (but is also accurate!)
As a general rule, we’d advise avoiding:
- Clip art – why not try Shutterstock instead?
- Too much technical jargon
- Itemised menus
- Too many disclaimers – you want to tell your customers what you can do for them, rather than pointing out all the things you can’t!
- Difficult to read fonts
- Laminating your menu
- Making your dish descriptions too long
Before you print your menus, ask a sample of your audience to read it and provide honest, constructive feedback. This can help you to spot errors, inconsistencies or any other issues that you might have overlooked.
5. The restaurant business plan
The next stage in the process is putting together your restaurant business plan.
This stage is important for two reasons:
- It will help you to identify any potential problems or gaps in your plans
- It will help you to secure financing if required
A business plan plays an essential role in structuring your business model, forcing you to outline a clear direction for your restaurant as well as a financial plan and forecast.
Many entrepreneurs find the process of creating a business plan to be somewhat daunting, and that’s understandable. But the good news is, there are plenty of resources available to help. Startups has a whole section on business plans here.
As a general guide, here’s what you need in a restaurant business plan:
- Executive summary – a brief overview of your restaurant and the information included in the plan.
- Your concept – details about your restaurant concept, covering the food you’ll be serving, the inspiration behind the concept, an overview of your serving style (will it be counter service or table service?), and your USPs.
- The market – discuss the market conditions, both locally and on an industry level. Provide details about your competitors and how you will sit within the market.
- Target market – who’s going to eat in your restaurant? How old are they, where do they live, what’s their income? Explain who your target audience is and how your concept will appeal to them.
- A sample menu – including prices, presented as a finished document as per your chosen restaurant menu design.
- Design – include some visuals that explain the design of your restaurant. Of course, your premises won’t be set up at this stage and you might not have even put pen to paper to draw up the design, but you can include mood boards that show images related to the design and feel of your restaurant.
- Location – although you probably won’t have identified a specific premises for your restaurant at this stage, highlight potential areas and localities and explain why they would provide a good location for your business. Also explain what you’re looking for in terms of square footage, visibility, parking and access, etc. (see section 6)
- Management team – include a brief overview of yourself and the team you have hired so far. Highlight your relevant skills, qualifications, and experience. (see section 9)
- Marketing – provide a comprehensive marketing plan explaining how you are going to market your restaurant both pre- and post-launch. (see section 10)
- Business model and business structure – this short section should explain the type of business you’ve set up and why.
- Financials – this is a key section and one that you must get right, particularly if you’re seeking investment or funding. Many people employ the services of a professional accountant to help them with this area. Within the financials, you’ll need to include:
Developing your business plan can be a lengthy process, but it’s well worth investing the time and resources to do it properly. As well as allowing you to outline a clear business model, planning aspects such as cashflow, costs, sales, and more, once complete, you’ll be able to refer back to the document to direct the everyday management of your restaurant.
How do you work out your restaurant cashflow?
Well, start by thinking how to price food and cost a menu.
In order to accurately put together your financial projections, you’ll need to price your menu. This requires an understanding of food costs as you need to ensure that you’re making enough profit with your prices, whilst remaining competitive with the restaurants around you.
Of course, the pricing of your menu should also align closely with the types of customers you’re targeting. The average cost of a restaurant meal is currently between £15-£25, depending on the location and the type of restaurant.
Whilst trying to keep your costs down and offer value to your customers, it’s also important that you value your product properly and don’t undersell yourself. Although everyone loves a great deal, many customers actually prefer to eat in more expensive restaurants because of the feeling of class and exclusivity they convey. It’s all about finding the right balance.
Once you’ve worked out how much you think you can make based on the average price of your menu multiplied by the average number of covers (servings) you might be able to generate, you’ll then need to weigh that up against your restaurant start-up costs to determine your restaurant’s break even point.
How much does it cost to start up a restaurant?
Unfortunately, there is no set answer to this question, as start-up costs will vary depending upon a wide variety of factors.
However, there are some basic costs that apply to setting up and running almost any restaurant, including:
- Securing a restaurant lease or buying your premises
- Legal fees and business rates
- Health and Safety certificates
- Public liability insurance
- Premises refit (what will your restaurant layout look like?)
- Kitchen fit
- Kitchen equipment
- Staff recruitment
- Staff uniforms
- Furniture, crockery, tablecloths, flowers, pictures, etc.
- Initial stock of ingredients
- Stock of wines and drinks
- Design including signage and menus
- Marketing including website costs
- Working capital
When you’re putting your business plan together, you’ll need to address all of these costs and ensure that your predictions are accurate and realistic.
Remember, there are also numerous hidden costs involved in setting up a restaurant so make sure you do your research to avoid any nasty surprises further down the line.
You should also ensure that you have sufficient cash in reserve to provide six months working capital to cover your start up period. Many budding restaurateurs take on finance in order to get their business up and running.
Although it is increasingly difficult to secure funding for a restaurant, it certainly isn’t impossible and there are a number of funding sources available, including banks, small business agencies, private investors and even crowdfunding. Vegetarian start-up Not Dogs recently secured £150,000 via our Start-Up Series.
Finding the perfect premises for your new restaurant can be a challenge. After all, there are many factors to consider, including:
- Where do you want the restaurant to be?
- What type of building do you want your restaurant to be in?
- Where are your target customers most likely to be based?
- How much money do you have to purchase or rent your premises?
When it comes to finding premises for your restaurant, location should be one of your top priorities – it can make or break your restaurant.
Searching for the perfect location can be a long and stressful process, but it’s well worth investing your time and energy.
When considering different locations, keep in mind:
- Population base – Are there enough people in the area to support the business? Is it within walking distance of key residential areas? Is it in a prime position to capture passing trade?
- Accessibility – Try to make it easy for people to access your restaurant, thinking about factors such as parking, roads, and public transport.
- Visibility – People need to know your new restaurant is there. Is it visible for passers by?
- Do you want space for outdoor seating?
- What competitors and complementary businesses are close by?
It’s also important to choose a property that fits with your business concept and ethic. For example, if your brand is focussed on energy saving, you should really opt for somewhere that has a high EPC rating, or even one that’s powered completely by renewable energy.
Or, if your concept is to offer affordable and healthy fast food, you’ll probably need to be based in the city centre where you can reach workers on their lunch break.
How much can you afford to pay for your premises? Costs vary significantly depending on the type of premises you require, where it is, and whether you want a freehold or leasehold premises.
As a general guide, leaseholds are cheaper than freehold premises and will typically cost anywhere between £40,000 up to around £200,000.
Buy or lease?
A key decision when searching for your premises is whether you want to buy or rent a space.
Buying a property is a long-term commitment that requires a significant capital investment. However, once you own your premises, you won’t need to worry about increases in rent or the rules and restrictions that come hand in hand with having a landlord.
What’s more, if property prices in the area you’re buying in increase, you could stand to make a significant profit.
Leasing, on the other hand, gives you the opportunity to launch your restaurant with a much smaller budget. It will also give you a much easier exit strategy if you find that things don’t work out (or if they go so well that you need to move to a larger space!).
7. Restaurant supplies, utilities and catering equipment
Buying equipment and fitting out your restaurant will probably be the biggest expense when starting up your restaurant.
To run an effective and efficient restaurant, it’s vital that you’ve got equipment that you can depend on.
Although it might require a considerable initial spend, investing in good-quality equipment will actually save you money in the long run, keeping maintenance and repairs to a minimum and reducing the risk of you having to close up shop or limit your menu when things break down.
Clearly your shopping list will include tables, chairs, cutlery and crockery, kitchen and cooking equipment, toilet facilities and ventilation.
For his restaurant, which seats 40 people, Stephane Luiggi, owner of the French Living restaurant in Nottingham spent £5,000 on kitchen equipment, some of which was second hand, and £5,000 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.
Second hand equipment
Buying second hand equipment is one way to make savings in this department. And it doesn’t mean that you’ll have to compromise on the quality or performance of your equipment.
With restaurants closing all the time, there are many former restaurant owners looking to sell their kitchen equipment in order to recoup some of their costs. As they’ll want to get rid of their equipment as quickly as possible, they’ll likely be willing to accept much less than what they paid for it. Use this opportunity to get the equipment you need at a significantly discounted price.
Another factor you need to take into account is the utilities involved in running your business. After all, with so much equipment in within the kitchen, as well as lighting and heating in dining areas, it’s not surprising that a busy restaurant can use a significant amount of energy.
In fact, according to a recent study by the Federation of Small Businesses, utilities are the second biggest cause of rising business costs within a restaurant and represent approximately 5% of total expenditure.
With this in mind, it’s important to choose the correct supplier for your business. There are a whole host of utility suppliers out there, with more and more popping up all the time.
When it comes to owning a restaurant, there are understandably a whole host of regulations that must be adhered to and it’s important that you are aware of your restaurant liabilities. Even if you aren’t running the business yourself, the legal responsibility lies with you as the owner, make sure you have all of the information you need.
Take a look at our dedicated guide to restaurant licences and regulations
Remember – many licenses and permits can take a number of weeks, or even months, to be approved. So you should start making the necessary arrangements as soon as possible (usually once you’ve secured your finance).
8. Restaurant recruitment
The hiring and managing of staff is central to the success of your new restaurant – you need to have the right people, in the right roles, for the right price.
In fact, restaurants typically spend a third or more of their revenue on staffing, recruitment, and training. So this is a key expense to consider!
As the owner, you are responsible for all the HR aspects of your business, from hiring your team, through to firing any employees who aren’t performing, and everything in between.
When you’re just starting your own restaurant, recruitment can sometimes be difficult, as you will be competing against established brands for the best staff.
That said, in the current economic and employment climate, there are plenty of highly skilled and qualified individuals actively looking for work, so this shouldn’t pose too much of a problem.
Before you open your venue, you’ll need to hire bar staff and hire waiting staff, as well as kitchen staff and potentially management staff if you don’t plan on running the day-to-day operations yourself.
How to hire a chef
If you want your business to succeed, you’ll need a good chef.
The type of restaurant you are opening and the type of food you plan to serve will influence which type of chef you hire. Depending on the size of your restaurant and the layout of your kitchen, you might need to employ anything from two to 10 chefs.
Over the last few years, aggressive rollouts by branded restaurants have resulted in a skills shortage for chefs. As a result, a supply shortfall exists and the cost of finding good chefs is increasing.
Find out more about hiring a chef here.
Recruitment agencies for restaurants
You don’t have to deal with the entire recruitment process alone. Many entrepreneurs turn to recruitment agencies to help them advertise their roles and hire the best staff. There are a number of recruitment agencies in the market who specialise in recruitment for restaurants.
9. Restaurant marketing
There are many different ways to market your new restaurant, from traditional advertising and promotions, through to social media and PR.
Before you launch your restaurant, you’ll need a comprehensive marketing plan in place, outlining exactly who your target market is, and how you’re going to reach them.
When putting together your marketing plan, you’ll need to consider:
- Who are you targeting?
- What’s your budget?
- Which tools and tactics will provide the best results?
- How much will they cost?
- How will you monitor and evaluate results?
Launching your business
When you launch your business, it’s important to get as many people through the door as possible in the early days. Planning a launch event is a great way to do this. Build into your marketing plan a launch night, where you will invite local influencers and journalists to join you for a free evening.
Of course, this will require a budget as you’ll be paying for the food and drink, along with staff wages etc, but if it gets people to come and dine and talk about how great the evening was, it’s a great way to secure free advertising and PR.
What’s more, developing a good relationship with the local press with prove beneficial going forward, as they will be more willing to promote your business as you grow.
Restaurant promotion ideas
Everyone knows that customers love free stuff (and who can blame them?), so from time to time, it’s worth running special promotions such as buy one get one free or a free wine or desert with every meal.
To get the optimum ROI on your promotions, make sure you take diners’ email details so that you can keep in touch with them and send further promotions in the future.
Advertising for your restaurant can take many different forms, including:
Advertising isn’t a one size fits all marketing tool – you need to consider who you’re trying to reach and how you can use advertising platforms to reach them. Of course, you’ll also need to take your budget into account.
10. Exit plan
When you’re in the early stages of starting up your own restaurant, it’s unlikely that you’ll be dwelling on how to sell or franchise your business once the time comes. But it’s always worth being aware of your options and having an end goal in the back of your mind.
Selling a restaurant tends to be slightly more complex than selling a business in general, so it’s important that you’ve got a carefully thought out exit plan in place.
How to sell your restaurant business
If you decide to sell your restaurant, you should aim to start the process at least six months before your preferred date of sale.
Before you start the selling process, you should address the following issues:
- Presentation – does the restaurant look appealing to potential buyers? Is everything up to date and working properly? Keep in mind that anyone considering buying your restaurant will probably visit your establishment as a regular client, so make sure everything is up to scratch before you start marketing your business.
- Finances – ensure your financial system is up to date and accurate. Potential buyers will want to see detailed records of your income, expenses, profit and loss, and more.
- Asking price – when it comes to setting your asking price, ensure that it is realistic and inline with market conditions. It’s often worth seeking a professional advice.
- Lease – If you lease either your premises or any of your equipment, you’ll need to look into the terms and conditions of your agreements. Will your buyer be able to take over your current lease agreements?
You can find out more about selling your restaurant business here.
Franchising your restaurant
Franchising is essentially selling the instructions to clone your restaurant, so that others can open and operate a restaurant exactly like yours.
The franchise model has proven to be successful for many growing brands – McDonalds is a prime example of an incredibly successful franchise.
What’s in it for you?
If you franchise your restaurant out, you’ll get the benefit of multiple locations, meaning enhanced brand recognition and revenue.
This can be a great way to generate growth, without having to take on the significant financial costs and effort needed to expand on your own. After all, your franchisees will be taking on the majority of the investment, whilst you will only be responsible for providing support and direction.
Find out more about franchising your restaurant here.