Do you want to open a small restaurant from scratch successfully? If YES, here’s a complete guide for starting a restaurant business with NO money / experience.
Okay, so we have provided you an in-depth sample restaurant business plan template. We also took it further by analyzing and drafting a sample restaurant marketing plan backed up by actionable guerrilla marketing ideas for restaurants. In this article, we will be considering all the requirements for starting a restaurant business. So put on your entrepreneurial hat and let’s proceed.
Table of Content
- Restaurant Industry Overview
- Market Research and Feasibility
- Restaurant Name ideas
- Restaurant Licenses and Permits
- Cost of Starting a Restaurant
- Restaurant Marketing ideas
Whether you are a foodie or not, truth is that as humans food is one essential thing that just must not be toiled with. It is no wonder that plenty die of starvation where there is nothing to eat to replenish lost strength. As such, the restaurant business all over the globe is one business that generates huge income annually and can comfortably stand the test of time if well managed.
Any business person who gets involved in the food industry is sure to get good returns on investment if the business is well positioned.
Why Open a Restaurant Business?
One good thing about the restaurant business is that an owner has the sole right to determine the price they want to sell their menu irrespective of what others around them might – especially if they are good with the delicacies they whip up. There is no contesting the fact that food is one of the basic needs of people. It is for that reason that a myriad of people do all it takes to eat when they are hungry and Restaurants are such places that is designed to address such needs.
There are various kinds of restaurants all over the world. Here are a few examples; we have fast food restaurants, there is the intercontinental restaurants, local restaurants, family style cafeterias, casual dining restaurants, and fast casual restaurants, amongst others. These cafes are designed to meet various needs of different tribes, creeds and races.
In most cases, it is the community where the restaurant is to be situated that certainly determines the style of restaurant service to be offered. For example; if one decides to start a restaurant business around a construction site; choosing an intercontinental style of restaurant or a family style restaurant might just be the best option.
Restaurants might not be entirely easy to start, but it is a straight – forward business that can generate huge and steady profits if well managed; people often think the restaurant industry is a safe industry to invest in. This is so because people are expected to eat every day.
What Does It Take to Open a Restaurant Successfully?
If you are considering starting a restaurant business, all you would need is some capital to purchase or lease / rent a suitable facility, the required equipment, and furniture. You would also need some additional capital to purchase the required ingredients, pay your employees at least for the first 3 months, and also to pay your utility bills. These expenses are called “working capital.”
The fact that the required amount needed to start a restaurant business especially when you choose to start a small or moderate restaurant is no on the hire side, loads of entrepreneur who are interested in the business can come into the industry at any time they desire; the entry barriers are quite affordable and there are various types of restaurant that one can choose to start.
Conversely, some might want to start a local restaurant, casual dining restaurant or even a fast food style restaurant irrespective of where they are located. However, if you choose to start a restaurant in a city that hosts thousands of international tourists and migrants, then starting an intercontinental restaurant will be your best options.
Over and above, it pays an individual to acquire culinary skills, as well as undertake a thorough and exhaustive feasibility studies before choosing the style of restaurant to start, the location to set up the business and the pricing system to adopt for the business.
Starting a Restaurant Business from Scratch With NO Money – A Complete Guide
- Restaurant Industry Overview
Statistics shows that within a period of a year that is from the fall of 2011 to the fall of 2012, about 4,500 restaurants opened in the United States of America despite the fact that several restaurant closed shops within the said period and about 9,000 restaurants struggled to make profits.
It is also important to note that about 80% of new restaurants are likely going to fail within their first five years of operation. This is so because when there are economic downturn, purchasing power drops; people will often cut back on their spending for eating out and they will rather prefer to cook more at home.
- Interesting Statistics About the Restaurant Industry
The restaurant industry rakes in over $709.2 billion annually in the United States with about 3.8% sales increase in nominal terms and 1.5% industry sales increase in real (inflation-adjusted) terms. Food and drinks sales of the restaurant industry in the United States reached an all – time high; 659.31 billion U.S. dollars in 2013 – far higher than the 42.8 billion recorded in 1970.
This figure was projected to rise again in 2014 to more than 680 billion. With well over 600 thousand restaurants employing approximately 13 million people in the United States, the industry caters to a variety of customer demands regarding price, food quality, dining experience and menu options, among many other things.
From recent statistics, well over 1 million restaurant locations are in the United States and they generated an estimate of $1.9 billion sales on a typical day. The restaurant industry is a major player in the employment of labor; the industry is responsible for employing over 14 million people per time. As a matter of fact, the restaurant industry is the employer of about 10% of the overall workforce in the United States of America.
What Opportunities Exist in the Restaurant Industry?
As regard the restaurant industry, many analysts consider the industry to be in a mature stage. Which is why startup restaurants usually do all they can to different themselves and create their own market and well established brands look for ways to expand their brands and exploit international markets.
In as much as restaurants come in different types and size, you can classify chain restaurants into fast food restaurant, fast-casual restaurant, casual dining restaurant, and family dining restaurant.
Fast food restaurants, as the name implies, specialize in serving food they can prepare and serve quickly. Fast food restaurants usually do not have enough table space for serving clients. The menu are usually priced on the lower end compared to what is obtainable in other types of restaurants.
What Type of Restaurant Model is the Most Profitable?
The casual dining restaurants are designed to have a relaxed and casual ambiance with a lot of seating space on – like fast food restaurants. Casual dining restaurant are known to offer full table service and may also have a wine menu or full bar service. When it comes to pricing, casual dining restaurant’s menu is moderately priced. On the average, you could spend up to $20 for dinner in a casual dining restaurant and an average of $15 for lunch.
Another type of restaurant is the fast-casual restaurants. They are regarded as hybrid of fast food and casual dining restaurants. Fast-casual restaurants are known to offer minimal table service on – like casual dining restaurants. The available menu for fast – casual is limited and they are moderately priced.
On the average, you could spend an average of $15 in a fast – casual restaurant. It is important to note that fast-casual restaurants still have room for growth compared to fast food restaurants.
The last type of restaurant in the restaurant industry is the family dining restaurants. The family dining restaurant offer full table service designed especially for families or group of people. It is rare to see a family dining restaurant selling alcohol. They are known to be open all round the clock.
The restaurant industry is still growing despite the fact that there are many players in the industry; the idea is that once a start – up restaurant is well positioned and offers quality menu, then they just need to do little to stay in business.
If you are contemplating to start your own restaurant business in the United States, you should ensure that you carry out a thorough market survey and feasibility studies. If you get some key factors wrong before starting your own restaurant, then you are likely going to struggle to stay afloat.
On the average, people go into the restaurant business because they know that food is one of the top human needs and people will do all they can to eat at least for a day. It is a good pointer that the restaurant industry will continue to be relevant as long as human exist.
Starting a Restaurant Business With NO Money – Market feasibility and Research
- Demographics and Psychographics
As far as food is concerned, there are no defined demography that needs it. Every human needs food. It means that everybody i.e. the old, the young, children and teenagers et al, all have need of food and they are all potential customers of the restaurant industry. In essence, the target market for restaurant cum food business cuts across people of all walks of life, since everybody needs food to survive.
Well it is important to note that various restaurants most often design their restaurant business to service specific demography and this reflects in their choice of location and the type of restaurant that they choose to operate. For example, a restaurant can choose to start an intercontinental restaurant and also to locate their restaurant in highbrow area of town.
In order to stay focused on the kind of business brand they intend building, most restaurant would usually define certain groups of people as their target demography and it could fall under any of the category listed below;
- Working class
- International Tourists
- Top Executives
- The Diplomatic Community
- Corporate Organizations
List of Niche Ideas within the Restaurant Industry
It depends on how you want to look at it; there are different criteria you can use to classify restaurants. These are some of the niche ideas you should consider if you want to start your own restaurant business;
- Fast food restaurants
- Casual dining restaurants
- Family dining restaurants
- Fine dining restaurants
- Fast – casual restaurants
- Intercontinental restaurants
- Local / Ethnic restaurants
- Cafeteria style restaurants
- Vegetarian restaurants
- Buffet restaurants
The Level of Competition in the Restaurant Industry
You can hardly drive through a street without finding a handful of restaurants or more. This goes to show that there are loads of players in the restaurant industry. The reason for this cannot be far – fetched; food business is indeed serious business.
Gaining a competitive edge requires a detailed analysis of the demographics of the surrounding area and the nature of existing competitors. And even if you are successful at first, new competitors could enter your market at any time to steal your clients. Don’t hesitate to adopt successful strategies from your competitors, but understand that directly competing with an entrenched rival is a bad idea for a beginning restaurateur.
The restaurant industry is highly competitive with respect to price, value and promotions, service, location, and food quality. There are a substantial number of restaurant operations that compete with us for customer traffic, some of which have significantly greater resources to aggressively market to consumers, which could result in our concepts losing market share
Consumers are highly focused on value and if other restaurants are able to promote and deliver a higher degree of value, our guest traffic levels may suffer, impacting revenues. In addition, with improving product offerings at quick-service restaurants and grocery stores, coupled with the present state of the economy, consumers may choose to trade down to these alternatives, which could also negatively affect revenues.
Investors should also know that running an independent restaurant is different from managing or operating a restaurant chain, which invites additional complications like incentive alignment, bureaucracies, growth strategy, and operational guidelines.
List of Well – known Restaurant Brands in the United States of America
- French Laundry in Yountville, California
- Le Bernardin in New York
- Joel Robuchon at the Mansion in Las Vegas
- Saison in San Francisco
- The Willows Inn in Lummi Island, Washington
- Urasawa in Beverly Hills, California
- Blue Hill at Stone Barns
- Minibar in Washington, D.C.
- é by José Andrés in Las Vegas
- Manresa in Los Gatos, California
- Restaurant Nicholas
- Restaurant August
- Frasca Food and Wine
- Restaurant Guy Savoy
- La Belle Vie
- Yum! Brands
- Chipotle Mexican Grill
When starting a restaurant business, you just have to get your economic analysis right if your intention of building the business is to generate profits, grow the business and perhaps expand the business beyond one location to other locations within the United States and other cities in the world.
When conducting economic analysis for your restaurant business, you just have to critically examine these key factors; place, product, pricing, and promotion. As a matter of fact, you would have to continue to review these key factors at regular interval while running your restaurant business. As a restaurant owner, you just have to have a proper grasp of you competitive landscape.
Restaurant owners should also know that running their own single restaurant (an independent restaurant) is different from managing or operating a restaurant chain or franchise. Managing or operating a restaurant chain or franchise attracts additional impediments like incentive alliance, bureaucracies, growth strategy, and operational guidelines et al.
It is important to note that food cost is one of the most important factors contributing to the overall cost of a restaurant business and should be considered as a major factor when carrying out your economic analysis.
- Starting a Restaurant from Scratch or Buying a Restaurant Franchise
It is common to see some of the leading global restaurant brand is different countries of the world. This was achieved because some of the leading restaurants decided to venture into selling their franchise and at the same time operating a chain of restaurants. No doubt, the franchise model has indeed help restaurants to successfully expand both locally and globally at a very fast pace.
If you are considering starting a restaurant business, then you have the options of either buying a restaurant franchise from an existing restaurant brand or starting your own restaurant from the scratch. There are advantages for starting your own restaurant from the scratch and of course there are disadvantages. So also there are advantages for buying a restaurant franchise and there disadvantages as well.
All you need to do is to look at what is available before you and then you will be able to make a good business decision as regard choosing whether to start your own restaurant from the scratch or buy an existing franchise.
Part of the factors that can influence your decision when it comes to choosing between start your own restaurants from the scratch or buying a franchise is the type of restaurant business model that you want to build, your business goal and vision, your finance, the competition available within the location your intending starting your restaurant business, and available market et al.
- Possible Threats and Challenges You Will Face When Starting a Restaurant Business
The threats and challenges that is likely going to confront a start – up restaurant is the fact that they compete with already established restaurants and also other restaurant that are likely going to be launched in same location. You would have to go all out to compete for the available market in the location you choose to set – up your own restaurant.
Other threats and challenges are economic downturn which usually affect purchasing powers and also unfavorable government policies. This is especially when it comes to the importation of our raw ingredients that can’t be found / cultivated in the United States. If the government of the United States of America places embargo on importation of major food ingredients, it would definitely affect the restaurant business.
Writing a Business Plan for your Restaurant Business
No matter the type of business or size of business you intend starting, it is a wise decision to first write a good business plan before taking actions. The truth is that, in order to successfully run a restaurant business, you would need to have a good business plan in place.
A Business plan is the blue print that is needed to successfully run a business; with a workable business plan in place, you will reduce the trial and error approach of doing business. You will be able to manage your business with purpose and perhaps precisions; you will know what to do per time and how to handle challenges and growth.
So if you want to start your own restaurant business, you are required to write a detailed restaurant business plan that can pass reality test when subjected to it; you should work with the facts, figures and other indices in the industry as it applies to the location you intend starting your restaurant.
The whole idea of writing a business plan is not just for the sake of having a business document in place; but a detail guide on how to effectively run your business from the scratch. Here is a sample restaurant business plan template to help you get started.
Your business plan should outline and cover strategies on how you intend to manage your restaurant business. The rule of thumb in writing a business plan is to try as much as possible to be realistic and never to over project when putting figures on income and profits et al. As a matter of fact, it is safer to underestimate when writing a business plan so that you won’t be so disappointed when reality sets in.
These are the key areas that should be covered in your business plan; Executive summary and Company’s descriptions: you are expected to write about the concept of your business, descriptions of your company, your company’s vision statement, mission statement and where your company will be located.
Other key components that should not be missing in your restaurant business plan are product offering, SWOT analysis, competitive analysis, marketing and sales analysis / strategies, pricing, costing and financial projection, publicity and advertising strategy, expansion and growth strategies, budget and start – up capital generation et al.
Choosing an Ideal Location for Your Restaurant
The fact that there are different types of restaurant scattered across the United States does not mean that restaurant business can thrive in every location. Before choosing a location for your restaurant, ensure that you conduct a thorough feasibility studies.
There is possibility of you coming across a restaurant that just closed shop in the location you want to start your restaurant can’t be ruled out. This is why it is very important to gather as much facts and figures before choosing a location to set – up your restaurant. These are some of the factors that you should consider before choosing a location for your restaurant:
- The demography of the location
- The purchasing power of the residence of the location
- Accessibility of the location
- The numbers of restaurant in the location
- The local laws and regulations in the community / state
- Traffic, parking and security et al
Technical & Manpower Details for Starting a Restaurant Business
When it comes to operating a restaurant, it is important to ensure that you acquire brand new equipment. As a matter of fact, kitchen utensils and equipment are affordable. Some of the kitchen utensils and equipment that you would need to launch your restaurant are;
- Gas Cooker
- Microwave Oven
- Deep Freezer
- Bread Toaster
- Steam Cooker
- Pots, Pans
- restaurant furniture
- sound system
- flat screen TVs
- POS machines, and bar equipment (optional).
- You would also need accounting software, CRM software, payroll software et al.
If you have the required finance, it is to your advantage to acquire a property or lease a facility to be used for you restaurant; it usually gives you the freedom to design the facility the way you want to it to be. But if you are low on cash, then you don’t have any option other than to rent a facility for your restaurant.
As regard employees, there are certain roles that must be occupied before you can effectively and successfully run a restaurant business. You would need to employ a Chef / Cook, Restaurant Manager, Sales and Marketing Officer, Waiter and Waitress, Cashiers, Security Officers, and Cleaners. On the average, you would need a minimum of 10 – 15 employees.
- The Production Process Involved With Running a Restaurant Business
Usually in a restaurant, raw foods and cooking ingredients are purchased; they are cooked / prepared in the kitchen (different delicacies) and then served / sold to customers as requested. It is a simple process it is all about cooking and serving.
Starting a Restaurant from Scratch – The Marketing Plan
- Creating Brand awareness and Corporate Identity for your Restaurant
Statistics has it that restaurant chains in the U.S. spend about 3% of their revenues on marketing and publicity. They engage mainstream marketing channels like radio, TV, and print media. In recent time, most business including the restaurant industry relies on the internet and social media platforms to increase sales, promote their corporate identity and increase their brand awareness as well. If you have the money, you can as well sponsor events it will definitely boost your brand awareness.
For example, McDonald’s was part of the sponsors of the 2012 Olympics and that singular act gave them leverage in the industry; little wonder they are still the leading brand in the restaurant industry. It might not come cheap, but the truth remains that advertising keeps a brand name fresh in the minds of the public (existing customers and potential customers as well).
Restaurant business just like any other business in the food industry requires media hype to get people to buy into the brand. Here are the platforms you can leverage on to create brand awareness of your restaurant and to promote your corporate identity in the market place;
- Place adverts on national TV stations, Radio Stations and Newspapers / Magazines
- Run your own special TV program
- Sponsor relevant community programs
- Leverage on the internet and social media platforms like; Instagram, Facebook , Badoo, YouTube, Twitter et al
- Install your Bill Boards on strategic locations
- Engage in road show from time to time
- Distribute your fliers and handbills to targeted areas from time to time
- Send out introductory letters to multinationals, embassies, and Diaspora organizations and networks in and around your location
Tips for Running a Restaurant Business Successfully
Running a restaurant business involves itemizing the menus and drinks you want to sell for the day, purchase raw food and food ingredients, prepare the foods, package the foods and snacks, arrange your restaurant and then welcome your customers. After the day’s sales, the books will be balanced, the restaurant facility, plates, pots, and pans and every other stuffs will be washed and kept in the appropriate place.
It is important to state that the success of any business lies in the commitment and dedication of the employees. So if you intend running a successful restaurant, then you must ensure that you carry every member of your team along. You should create time for meetings; a time where goals, processes and issues will be reviewed et al.
Over and above, hard work and dedication is one of the traits that you need to run your business. Even if you adhered to all the factors that has been stated in this read, and yet do not have dedicated and a hard working team, then all that we have said here would be tantamount to naught. Therefore, you have got to build a smart and tenacious team, so as to hit success in the restaurant trade.