How to Open a Restaurant
Owning and operating a restaurant is a dream job for many aspiring entrepreneurs. It’s a dream that may have been put on hold as the pandemic forced restaurants to halt indoor dining or even close their doors permanently. The effects of the coronavirus are still being felt by restaurant owners across the country as the industry struggles to right itself. To weather the crisis, the foodservice landscape has adopted new restaurant trends and diversified revenue streams to meet the present challenge. Many believe that restaurant ownership is still within reach, and we’ve created a restaurant startup checklist to get you started.
How To Start a Restaurant
Starting a restaurant requires some careful planning and is a more manageable feat when broken down into steps. If you’re curious about how to open a restaurant, we’ve created an 11-step guide to navigate you through the process.Click on any of the restaurant opening steps below to learn more:
- Choose a Restaurant Concept and Brand
- Create Your Menu
- Write a Restaurant Business Plan
- Obtain Funding
- Choose a Location and Lease a Commercial Space
- Restaurant Permits and Licenses
- Design Your Layout and Space
- Find an Equipment and Food Supplier
- Hire the Right Staff
- Advertise Your Restaurant
- Host a Soft Opening
1. Choose a Restaurant Concept and Brand
If you’ve been dreaming of opening your own restaurant, you’ve probably thought a great deal about your restaurant concept. Choosing the concept of your business is the fun part of the restaurant planning process, when you get to let your imagination run wild. Your concept should include the type of restaurant you want to open, the style of cuisine you’ll serve, and the service style you’ll use. The interior of your restaurant should also be in line with your concept. Here are some examples of restaurant concepts to spark your creativity:
- A ghost kitchen concept that serves vegan comfort food for delivery only
- A fast casual restaurant that specializes in build-your-own ramen bowls
- A fine dining restaurant with a traditional French menu
Your restaurant brand is more specific and can be thought of as the way you choose to communicate your mission and identity to the public. Your restaurant name, logo, menu design, and merchandise should all present a cohesive image of your brand. The advertising channels you use should also rely heavily on your brand identity to influence the style and method.
If you already have a location in mind for your business, the demographic of the area should be used to shape your concept. If you’re beginning with the concept first, you must choose a location with a demographic that can support it.
2. Create Your Menu
Building out your menu is the next creative step in the process of opening your restaurant. Choosing which menu items to feature should be enjoyable for any food lover, but make your decisions carefully. Your menu will dictate the type of equipment you’ll need, the skills you should look for in your staff, and the type of crowd you hope to attract. For instance, if you envision a dessert menu full of delicate French pastries, you’ll need a pastry chef and the supplies to match. If pizza is your thing, you’ll need dough mixers, proofers, and experienced chefs who know how to handle pizza dough.
Also consider your demographic. If you get a great deal on leasing a space in a college town, your restaurant menu should be tailored to college-age customers. But if you won’t budge on your dream to create an upscale menu, you must choose a location where the median personal income can support higher price points. When you finalize your menu choices, use our guide to menu design and our resource for pricing a menu to create an attractive, profitable menu.
3. Write a Restaurant Business Plan
Starting a restaurant, like any new business, requires a solid business plan. This is the step that may become a stumbling block for those unfamiliar with business plans and how they are written. Restaurant business plans are divided into sections that describe all the aspects of your new business, from your restaurant concept to your financials. The purpose of the plan is to help you flesh out the finer details and summarize your business to potential investors. When you reach out for restaurant loans, the restaurant business plan serves as the proof that your venture will be successful.
Below are the principle components of a restaurant business plan:
- Executive Summary – This is the first section in your business plan, but it’s helpful to write it last and make it a summary of the other sections you’ve already completed.
- Company Overview and Description – Use this section to write a more detailed company overview than what you’ve included in the executive summary.
- Concept and Menu – In this section, describe all the details of your restaurant concept and menu.
- Management and Ownership Structure – Outline your management and ownership structure. It’s helpful to use charts as a visual aid.
- Employees and Staffing Needs – It’s easy to underestimate the number of staff members you need. By putting it down on paper, you’ll have a more realistic vision of how many employees you need to hire to operate your business.
- Marketing and Competitor Analysis – This section of your business plan requires careful research. You’ll need to provide an analysis of the demographics and competition for your chosen location.
- Advertising and Marketing Strategies – Use the marketing analysis you completed in the previous step to choose the right marketing strategies.
- Financial Projection and Summary – When it comes to obtaining funding for your new restaurant, this section is the most important. Use it to provide a sales forecast and break-even analysis.
4. Obtain Restaurant Funding
The next step needed to start your new restaurant is to obtain funding. Most of us don’t have enough capital on hand to cover the cost of opening a restaurant without financial assistance. Securing funding from outside sources will determine if you can make your dream of restaurant ownership a reality.
Begin by estimating total restaurant startup costs along with the cost needed for daily operations. Use this information to create a budget and forecast the total cost of running your restaurant for the next year.
With your restaurant budget now in hand, compare the total cost to the amount of capital you have on hand to determine how much funding you will need. Remember to include the costs of licenses, equipment, building repairs, and staff salaries. Here are a few ways to secure funding for your new restaurant:
- Traditional Commercial Loan – This type of loan is acquired directly through a bank. You will typically see lower interest rates and access to higher amounts of capital with a traditional commercial loan. However, collateral is required, and you must have a high credit score.
- Business Line of Credit – Similar to a credit card, you can get approved for a maximum credit amount. Interest only accumulates as you use the money, though lending standards are higher, and you may not be able to borrow as much money as you could with other types of loans.
- Small Business Loan – While you can get a small business loan directly from a bank, many banks partner with the U.S. Small Business Administration (SBA). You can receive a small business loan even with borderline credit, and the SBA guidelines are set up to protect both the lender and small business owners. Collateral is required, and it may take some time to get approved.
- Investors – Reach out to your network or sign up for a site like AngelList to find investors for your restaurant.
- Crowdfunding – Sites like Kickstarter, FoodStart, Indigogo, and GoFundMe are great platforms to raise money to cover your startup costs.
For more detailed information, see our restaurant funding and loans guide.
5. Choose a Location and Lease a Commercial Space
When choosing a location for your new restaurant, the following factors are among the most important:
- Visibility and Accessibility – Select a location with good visibility that receives plenty of vehicle and foot traffic. Consider parking availability and ease of access for cars and pedestrians.
- Demographics – The target market of your restaurant should match the demographics of the area.
- Labor Costs – Your labor cost will vary depending on location. In areas where the cost of living is higher, you’ll need to pay a higher wage to attract good employees.
- Local Competition – You can learn a lot by looking at the competing restaurants in your area. The key is to choose a location where similar restaurants are successful, but avoid a neighborhood that is saturated with restaurants that directly compete with your concept.
When it comes to choosing a space, we recommend leasing. It allows you more flexibility if you decide to expand or make other business changes when first starting out.
6. Restaurant Permits and Licenses
To start a new restaurant, you’ll need to obtain several federal, state, and local permits and licenses. It’s helpful to enlist legal counsel when filing for restaurant permits and licenses to make sure you don’t miss a step. These are some of the most important licenses required:
- Business License – All restaurants require a business license to operate in the US. The type of business license you’ll need, the cost of the license, and how often you need to renew varies by state.
- Employee Identification Number – Start the application for an Employee Identification Number (EIN) early in your process, because it can take some time to get approved. You’ll need an EIN to officially hire employees and set up your payroll.
- Foodservice License – To get a foodservice license for your new restaurant, you’ll have to pass an inspection that shows your business meets all food safety regulations.
- Liquor License – If you plan to serve alcohol at your restaurant, you’ll need a liquor license. Alcohol can boost your sales immensely, but the process of obtaining a liquor license can be lengthy and costly.
8. Design Your Layout and Space
There are two components to designing the layout of your new restaurant: your front-of-house space and your back-of-house space. Each space has its own unique requirements. If you need assistance, consider working with an industry expert to create a custom design layout that meets your needs.
Keep these factors in mind when designing your dining room layout:
- Seating Capacity – Local regulations determine the seating capacity of your dining room. You must meet requirements for square footage per customer based on the size of your space and the number of exits.
- Dining Room Furniture – Choose restaurant seating that aligns with your concept. Consider seating capacity and comfort level when choosing the style and shape of your restaurant furniture.
- Ambiance and Decor – You can enhance your restaurant’s ambiance through the use of decor and lighting.
- Cleanability – Flooring and wall fixtures should be made of materials that are easy to clean and disinfect. Carpeting is not the best choice for a dining room because it absorbs odors and spills. Fabric window treatments and drapes also absorb smells and are costly to clean regularly.
When designing your kitchen layout, consider the flow of service and allocate sufficient space for the following tasks:
- Warewashing – The warewashing area should be easily accessible for servers entering the kitchen with dirty dishes. This area will house dish machines, compartment sinks, and drying racks.
- Dry and Cold Storage – Dry and cold storage areas should be close to the receiving area so that shipments can be put away quickly. These spaces will require shelving and organization.
- Food Preparation – This is the space where the kitchen staff will perform all food prepping tasks. You’ll need space for work surfaces and food prepping tools.
- Meal Cooking – The majority of cooking tasks are performed in this space. You’ll need room for heavy equipment like range tops, deep fryers, and flat top grills.
- Service – The service area should be right next to the cooking area so that prepared meals can be passed to servers quickly. A staging area with heat lamps keeps meals hot until they can be picked up.
7. Find an Equipment and Food Supplier
Before you can open your new restaurant, your kitchen must be outfitted with the right equipment. There are some types of equipment that every restaurant needs, like refrigeration units and cooking equipment. Depending on your menu, you might also need specialized equipment like pizza deck ovens or pasta cookers. The size and layout of your kitchen will affect some of your choices, like whether to choose narrow-depth equipment or to double stack units to save space.
Buying your restaurant equipment online provides many benefits. While you’re juggling the other steps of opening your new restaurant, the ability to shop online, research features, and compare prices on your own time alleviates some of the stress. Look for an online supplier that specializes in commercial restaurant equipment with wholesale prices and fast shipping. Leasing equipment is an option that can save you money and free up capital for other items in your budget.
You’ll also need to find a supplier for food, disposables, and all the items you’ll reorder on a regular basis. Working with a supplier that offers membership discounts and free shipping saves you money when you order bulk supplies.
9. Hire the Right Staff
The hiring stage of opening your new restaurant provides the opportunity to build a great work culture from the very start. Putting thought into your employee benefits, training program, and incentives is important when considering the work/life balance of your future staff. Your employee retention will be more successful if you make these factors a priority. Start by hiring your management team so they can help carry out your mission and hiring goals.
Make a list of all the restaurant positions you’ll need to fill in order to operate your restaurant on a daily basis. Consider how many days you’ll be open during the week and how many shifts you’ll run each day for the front- and back-of-house.
Your staff requirements will vary based on the unique needs of your new restaurant, but these are some of the most common positions:
- Management Team – General manager, kitchen manager, front-of-house manager
- Kitchen Staff – Head chef, sous chefs, prep cooks, line cooks, dishwashers
- Front-of-House Staff – Servers, hosts, food runners, bussers
- Bar Staff – Bartenders, barbacks, cocktail servers
You may also need to hire employees like marketing experts, PR specialists, and accountants.
To prepare for the interview process, see our guide on restaurant interview questions, so you can identify the most fitting candidates for your restaurant.
10. Advertise Your Restaurant
If you’re starting a new restaurant, you have to get the word out and attract your future customers. Advertising provides basic information about your restaurant so that prospective customers know where you’re located and what type of cuisine you’re serving. Successful advertising should also build excitement around your brand. Below are some tips to market your restaurant:
- Build a Website – Your restaurant website should be easy to navigate, and the design should represent your brand. Include basic information about your restaurant, including your address, phone number, hours, and menu. Though you can hire a professional to create your website, you can make one with user-friendly website hosting platforms, like Wix, Squarespace, or WordPress.
- Create a Yelp, TripAdvisor, Google My Business, and OpenTable Account – Registering with these sites makes it easy for potential guests to find your restaurant information. Guests can also leave reviews after visiting, which increases your authority and appeal, especially if you have a high rating and positive feedback.
- Use Social Media – Today, a social media presence is an absolute must for restaurants. Create Facebook, Twitter, and Instagram accounts to share news, photos, and tidbits about your restaurant. TikTok might be an appropriate social media option for your restaurant if your target demographic uses the platform regularly.
- Offer Promotions to New Guests – Offer a promotion for first-time guests. A free beverage, dessert, or discount on their first bill is an enticing way to attract customers.
- Host a Grand Opening – Create buzz around your new restaurant by hosting a grand opening. Other special events like wine tastings, live music, or cooking classes are another great way to attract attention.
11. Host a Soft Opening
You’ve heard the old saying, “Practice makes perfect.” The same goes for restaurant openings. A soft opening is a practice run to help you prepare for the real grand opening of your new restaurant. Invite a limited number of guests to attend your soft opening, usually the friends and family of your staff. This strategy allows you to work out any kinks in your service. Here are a few popular soft opening ideas:
- Trial Menu – Offer a sample menu with a limited number of options. It reduces stress on new staff and encourages customers to come back to see the full menu reveal.
- Limited Schedule – Consider operating under a limited schedule for the first few days you are open.
- Sneak Peek Event – Host a “sneak peek” happy hour with select menu items and signature drinks.
- Friends and Family Night – Invite friends and family to your soft opening for a fun, stress-free way to prepare for grand opening.
- Neighboring Homes and Businesses – Gain local fans and build community pride by offering a soft opening invite to neighboring homes and businesses.
Despite the challenges of the last year, the restaurant industry will always be an important part of our economy and culture. As food service trends continue to diversify, space opens up for extraordinary new eateries to step in and take advantage of new consumer interests. Use our restaurant opening guide to help with the successful execution of your unique restaurant concept.