Perhaps it’s time to write up a business plan for yourself if you’ve been wanting to open your own restaurant for years. In order to help you lay the foundation for success, we have compiled a guide on how to get started so that you have all the ingredients necessary to open a restaurant with confidence.
Restaurants can be exciting and time-consuming to start, but they are also one of the most challenging businesses to launch. Around 60% of newly-opened restaurants fail within their first year.
This is not intended to temper your passion. We’re merely saying that if you wish to run a successful restaurant, you will have to put forth a considerable amount of effort and investment.
What makes many restaurants fail?
When it comes to failure, what’s the most important factor? The lack of planning. If you are going to run your own restaurant, you will spend a lot of time setting it up before you serve a single customer. You can make or break your restaurant depending on your choice of kitchen appliances, menus, floor plans, and staff.
We’ve asked a couple of restaurant owners to share some of their tips and tricks for planning, funding, and managing a new restaurant. Lambrine Macejewski is the co-founder of Cocina 214, a contemporary Mexican restaurant in Winter Park, Florida. Kim Strengari owns three successful restaurants in the Philadelphia area, including Stella Blu. Omer Orian, co-founder of Off the Waffle, has three locations—two in Eugene, Oregon and one in Portland. Find out how they managed to succeed.
Restaurant Startup Tips
1. Set the right intentions
Kim Strengari says that if you want to be a successful restaurant owner, you need to love what you do. Even though she knew a restaurant was where her career path should lead, when she first opened her restaurant, she had to work nights cleaning office buildings to make ends meet.
“I wanted the restaurant more than anything else in life, so the sacrifices were endless and I never minded making them,” she says.
You’ll invest a great deal of time and resources into starting a restaurant-so be sure it’s something you are passionate about, not just something you hope will be successful. “It’s harder than you can imagine,” says Omer Orien, “but people do it all the time. It’s not at all dreamy.”
When you’re just starting out, it’s a good idea to figure out what you want your restaurant to look like. Is there an aesthetic you are going for? What furniture will you need to purchase to suit the theme? What layout will you choose for your restaurant? A British furniture company, Trent Furniture, has a great article to help you get started.
Orien says, “A lot of it has to do with figuring out what kind of environment you want to work in, what will make you feel the way you want to feel. It also doesn’t hurt to have people in your life who have an eye for design.” Orien sat down with his co-founders and built a 3-D model to plan the layout of their first location. Ultimately, most of the work to build out the space was done by them.
2. Develop An Effective Business Plan
Business plans aren’t written on cocktail napkins. Your success is based on a comprehensive business plan. To keep the business planning process simple, we suggest starting with a Lean Plan. Plan for growth and measure your progress based on your business plan, which should be a living document.
During the time when he had to move to a new location, Orien said he became more serious about his business plan. Their analysis helped them determine what was feasible and what direction to go in.
In addition to market research, a detailed look at your competitors, a clear plan for marketing, and a realistic financial projection, your business plan should stress market research, competitor analysis, and a thorough examination of your target audience. You can get started by looking at the templates on this page specifically for restaurant planning or by using LivePlan business planning software, which will guide you through the process. Remember to keep an eye on what’s going on in the industry as you consider what you want your restaurant to look like. If you are starting a business, timing is everything.
Your marketing plan should be taken very seriously
A marketing plan is essential to keep new people coming through your doors, as word-of-mouth can only bring in so many customers.
The following ideas might be helpful:
- Give out samples of food at community events
- New customers can take advantage of discounts
- Become a member of the local business association
- Activate social media channels
3. It’s All About the Location
Location is everything when it comes to restaurants. It is critical that you choose a location that will draw crowds, is easily accessible and has the potential to grow. You must also consider your budget when choosing a location.
Taking your time is a smart move since you are seeking the right space. Consider researching whether there are any startup incubators for restaurants where you can join to keep initial costs low and gain mentorship as well. Choosing a location is one of the biggest decisions you’ll face as an owner, regardless of whether you choose to rent space or build from scratch. It’s not necessary to build out a huge space at first.
The first $3000 Orien had to start Off the Waffle was all he had. “It sounds impossible,” he says, “but we found a bunch of hacks to make it work. We found a house that was actually in a commercial zone, so we were able to live and work in the same place.”
It’s a good reminder that you can start small. Orien’s three locations are all dedicated restaurant spaces. “Once you’re $300,000 into a buildout for your location, it’s not like a house that you can just sell. There’s not a lot of retained value, he says. You’re sort of stuck with it.” In other words, it would make sense to test a smaller and cheaper version before making a huge and costly change.
4. Make Sure Your Menu is Working
Create your menu as though you were conducting an experiment. It may be worthwhile to host a dinner party featuring your proposed menu so that people can give you their honest feedback.
Don’t limit your invitations to your closest family and friends. Even if you think a dish is delicious, if your customers aren’t willing to pay for it or aren’t interested in its taste, you won’t make any money.
If you ask for feedback, make sure the method you use allows anonymous comments so you can get honest responses. Research your target market. Visit other restaurants to get a sense of appropriate pricing.
—Orien says that when Off the Waffle first launched, there were only two items on the menu: a liege waffle and a glass of milk. He tested a lot of different ideas, including folding the waffle dough and stuffing waffles like a pita pocket. Those approaches didn’t really delight their customers. So they moved on to interesting waffle toppings, and people loved it.
5. Hire the Best Help Possible
To get started, how many people do you need on your staff? Bringing on a manager before opening day is recommended by some restaurant pros, but consider the needs you have first. Are you going to need a dishwasher? How many cooks will you need? Will you have servers? Do not rush the hiring process. You could do a soft opening to see how smoothly everything runs with just a few key positions.
The only employees at Orien’s first restaurant were family members. They grew slowly, but now have 50 employees employed at their three locations. “When we started, we were newbies, so if we hired too quickly, we would have had trouble paying people a salary that would have brought in people with enough skills to make up for our inexperience. He says if he opened the fourth location, it would be a natural progression to hire a manager right off the bat. Because he’s in a better position to coach them, he can do so more effectively.
Provide your employees with training
You will be able to manage your staff better if you have employee training materials available. Create job descriptions, codes of conduct, and employee handbooks to guide your employees. Provide a training guide to help employees become knowledgeable about their roles.
Document recipes for your cooks so every meal is made to perfection. Macejewski says you should provide your employees with all the tools they need to succeed.
Be ready to step in when needed
Having an ego isn’t acceptable as an owner, Strengari says. Owning a restaurant is not as simple as dressing up and posing for customers while asking what they think of the food. It involves doing everything from cleaning to doing the dishes. There will be a time when you’ll need to provide service, from chopping vegetables to seating customers.
Watch your labor costs
The hiring urge is strong among many restaurateurs. It is probably necessary to hire a few employees to make your restaurant successful, but don’t go overboard. You may find paying employees difficult in the beginning, especially when your business isn’t making a lot of money. According to Macejewski, it can be difficult to determine the right number of employees to hire at a company.
“It’s tough to plan for if you are seasonal or have sporadic business, but you don’t want people on the clock if you don’t have the business,” she says. “You can’t afford it.”
6. Securing Funding and Managing Your Cash Flow
Generate startup capital: As with every business, figure out the amount of money you need to start a restaurant.
A total of three money pools will be needed. – The first pool is for one-time costs like equipment (check out this calculator to help figure out how much you’ll need). Second, the restaurant expenses must be covered for six months and third, the personal expenses must be covered for six months. You’ll want to have at least six months of cushion because you’ll probably find that your expenses outpace your revenue for at least that long.
The first six months will be losing money: Restaurants aren’t profitable overnight. The process of marketing your new restaurant, attracting a crowd, and getting people to return takes time. According to some, you should not anticipate making money for the first six months.
Plan for bumps in the road: When you first start out, it is easy to go over budget, so make sure you have some extra funds to cover any unexpected events. When you’re uncertain about how to proceed, consider obtaining a business credit line.
In the event that you encounter a bump, evaluate your data and your processes, says Lambrine Macejewski. As an example, when she opened her restaurant, she realized that food prices were too high. Vendors were contacted and the schedule was changed to two days from five days. By investigating the problem and looking for a solution, she was able to save the money she needed.
Watch your food cost: You’re in the business of making food. However, if your food costs go out of control you’ll lose money. Be sure to track your inventory, prepare food well, avoid waste, and keep your prices competitive.
7. Keep Marketing
You cannot rely on repeat customers, so you must keep up your marketing efforts to prevent your revenue stream from drying up. Maintain a strong social media presence, place an ad in the local paper, take part in the local fair, or organize a small non-profit event at your restaurant to keep your business visible.
Owning a restaurant is one of the best jobs in the world as long as you have the right owner. There is nothing better than making people enjoy the food and atmosphere you create. However, it doesn’t come without a lot of effort.