Almost half of all adults have worked in food service at some point on their life. Of that group, about half of them have said at one time that they would like to open their own restaurant. But owning a restaurant isn’t as simple as starting other types of businesses. Here’s what it takes…
1. A killer food concept
While “eclectic” restaurants can be successful, they usually aren’t. People like to know what they’re getting themselves into when they enter your restaurant.
Choosing a food concept will help you plan a complimentary menu. For example, let’s say you have a line of awesome barbeque sauce recipes. You’ll definitely want some slow-cooked ribs, brisket, and pulled pork and chicken sandwiches on your menu, because that’s what people expect from a barbeque joint. However, you should also feel free to experiment or add some non-traditional dishes, but try and stick close to the concept.
You can also choose a niche within your concept. If you want to open a pizza restaurant, there are several ways pizza can be baked, like wood-fired or brick oven.
2. Build a clever ambiance
We may be content to eat a bowl of cereal over the sink at home, but eating out is an experience. We expect a bit of showmanship when we’re handing over our hard-earned money to a business. It’s not necessary to stage a full theater production or hire jugglers and sword-swallowers (although some restaurants do and those options can be fun), but you need to create an atmosphere that makes dining a pleasant experience.
Whatever you choose for an ambiance, stick with it. If you mix too many elements, people won’t feel comfortable. Your décor, lighting, and music all have to compliment your menu. For example, a neighborhood bar with TVs playing sports games, beers on tap and wing specials wouldn’t hang Monet prints on the walls and play classical music.
3. A profitable location
All locations aren’t equal. In fact, location plays a huge part in your success. A bad restaurant can limp along in a good location, but an excellent restaurant will fail in a bad spot. Some entrepreneurs will say they don’t need a good location because they’re building a “destination restaurant,” but that is almost always a mistake. Unless you’re Gordon Ramsey or Bobby Flay, people aren’t going to go out of their way to find you.
What makes a great location? Accessibility, mostly. The easier it is for people to get to you, the more likely they will come. Often this accessibility costs a premium, but it’s worth it.
4. An understanding of your costs
Likely you’ll do this through a well-crafted business plan. Even if you don’t plan out everything in advance (an employee tardiness policy can wait), you must understand your costs and budget.
Talk to other restaurant owners. Find out what they pay for food costs, insurance, marketing, utilities, etc. Get a baseline by comparing your restaurant to one that’s a similar size. This way you’ll know when you’re getting a fair deal on the services you buy.
It’s imperative you know how much your food costs. Typically, restaurants have to charge three times the cost of their food in order to make a sustainable profit. You need to know what each plate costs so you can mark it properly on your menu. Fortunately the restaurant industry has developed an impressive infrastructure, so getting your ingredients at reasonable prices is possible anywhere.
Finally, your budget should include at least six months working capital to keep your restaurant open; twelve months is preferred. When it doubt, overestimate your expenses. Most businesses don’t make money during their first year, so be prepared to keep yourself afloat for a while.
5. A sound marketing strategy
It’s impossible to appeal to everyone, so you shouldn’t try. Even if you serve mass-appeal American food, there’s going to be someone who doesn’t like it or doesn’t have the capacity to be your customer (a single mother of four may love bar food, but she probably doesn’t have much late-night free time).
You should have a good idea of who your market would be. Reduce this into “buyer personas:” fictional characters that represent different types of customers. You might have “Max,” a single working professional who picks up lunch often, or “Sally,” a health-conscious senior who likes to eat early. List anything you know about these people. Are they vegetarians? Do they come in for the sauces? Is wine important?
Once you know who you want to reach, you’ll quickly think of ways to get your message to those people.
6. The proper paperwork
Unlike other businesses, restaurants deal with a lot of red tape. There’s more government oversight because you’re serving food. Once your restaurant opens, you want to spend your days making sure your guests have wonderful experiences and more people flow through the doors, so get these done before you open.
- Establish a corporation or LLC to protect yourself from liability.
- Ensure you comply with zoning laws before you put money into a property or lease.
- File for any necessary licenses or permits (business license, tax license, resale license, food service operator’s license, alcohol license, music copyright license, etc.)
- File for a health permit, which will require an inspection. Make sure you thoroughly understand the health code before you start buying appliances and fixtures. You don’t want to find out at the inspection that your $2,000 oven isn’t acceptable because it’s no commercial grade.
- Buy an insurance package.
- Hire an accountant who will take care of all the proper tax and employee-related paperwork.
7. Quality staff
A business is only as good as the people who run it. Your staff is going to be interfacing with your customers, vendors and partners. They are going to be handling food. It’s important that your staff is supportive of your business and your goals.
Large restaurants need an executive chef who manages the menu, orders from supplies and ensures the food is delivered timely and safely. He or she will need to oversee your cooks and kitchen staff. You may also need a front-of-the-house manager who directs your servers, bussers, and hosts/hostesses (often the manager functions as a host).
Most importantly, you need people you can trust. This is where you’ll develop your skills as a hiring manager. Restaurants often have slim margins. There’s only so much money you can make on a slice of pizza or a hamburger, so you need honest people who leave your money alone and don’t give out more freebies than you allow.
Have you ever dreamed of opening a restaurant?