Starting a diner can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful diner.
Importantly, a critical step in starting a diner is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Open a Diner:
- Choose the Name for Your Diner
- Develop Your Diner Business Plan
- Choose the Legal Structure for Your Diner
- Secure Startup Funding for Your Diner (If Needed)
- Secure a Location for Your Business
- Register Your Diner with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Diner
- Buy or Lease the Right Diner Equipment
- Develop Your Diner Marketing Materials
- Purchase and Setup the Software Needed to Run Your Diner
- Open for Business
1. Choose the Name for Your Diner
The first step to starting a diner is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your diner:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your diner.
2. Develop Your Diner Business Plan
One of the most important steps in starting your own restaurant is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your diner.
- Company Overview – this section tells the reader about the history of your diner and what type of diner you operate. For example, are you a family diner, breakfast diner or a 24-hour diner.
- Industry Analysis – here you will document key information about the diner industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target market is and its demographics. For example, how old are they? Where do they live? What do they find important when choosing diners or restaurants like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your food business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your diner? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your diner make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
3. Choose the Legal Structure for Your Diner
Next you need to choose a legal structure for your diner and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the diner and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small business owners. It is an agreement between two or more people who want to open a diner together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a diner include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a diner is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your diner, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
4. Secure Startup Funding for Your Diner (If Needed)
In developing your diner business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a diner to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a diner that they believe has high potential for growth.
5. Secure a Location for Your Business
When looking for a location for your diner, there are a few things you’ll want to take into account. You’ll need to find a space that is large enough to accommodate your kitchen, dining room, and staff. You’ll also want to find a space that is in a convenient location, with plenty of parking and good visibility. Finally, you’ll need to make sure it is in a well-populated and/or well-trafficked area to ensure you have a substantial amount of customers.
6. Register Your Diner with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
7. Open a Business Bank Account
It is important to establish a bank account in your diner’s name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
8. Get a Business Credit Card
You should get a business credit card for your diner to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing a small business loan and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
The licenses and permits that are necessary to open a diner vary by state. To find out what licenses and permits are necessary in your state, you can contact your local government office, Small Business Administration office, or the National Restaurant Association.
Some licenses and permits that diners need may need include:
- Food Service Establishment Permit
- Health Permits
- Business License (some areas require a license to operate a restaurant, while others only require a business permit)
- Building Permit (to obtain approval for the construction or remodeling of a restaurant)
- Land Use Permit (if you want to operate your diner on land that was not previously zoned as commercial, this permit will allow you to do so)
- Equipment Permit (to obtain approval for operating equipment such as grills and stoves)
- Refrigeration and food handling licenses
- Fire inspection and fire safety equipment certification
10. Get Business Insurance for Your Diner
Business insurance policies that you should consider for your diner include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
11. Buy or Lease the Right Diner Equipment
A diner requires a wide range of equipment in order to function, including the following items:
- Large refrigerators and freezers for storing food and dairy products
- Ovens, grills and/or stovetops
- Worktop space for food preparation, cleaning and storage of equipment
- Sinks and wash stations for hand-washing and basic food preparation tasks
- Cash register and POS system
- Safe for storing valuable items and money
- First aid kit and fire extinguishers
You will also need tables, countertops and seating for your guests.
12. Develop Your Diner Marketing Materials
Marketing materials will be required to attract and retain customers to your diner.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your diner. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional diner website provides potential customers with information about the products and/or services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your diner.
13. Purchase and Setup the Software Needed to Run Your Diner
There are a few software programs that you will need in order to run a diner. The first is a point-of-sale (POS) system. This system will allow you to track your sales. You will also need a cash register for guest’s checks. Finally, you will need a kitchen management system to help you manage your orders and inventory.
14. Open for Business
You are now ready to open your diner. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Open a Diner FAQs
Is it hard to open a diner?
If you put in the hard work and stay focused on your goals, you can make your diner a success. There are a few things you can do to make it easier:
- Research your local competition and find a niche that you can fill.
- Make sure you have a great location that's easy to find and accessible.
- Create a strong branding strategy and make sure your restaurant looks appealing from the outside.
- Have a great menu with something for everyone.
- Train your staff well and keep them motivated.
- Offer good customer service and make sure your guests feel welcome.
How can I start a diner with no experience?
There are a few things you can do to get started in the restaurant industry with no prior experience.
First, research the industry and learn about the different types of restaurants and their operations. This will help you understand the basics of what it takes to run a restaurant. You can also attend industry events and meetups to network with restaurateurs and learn from their experiences.
Additionally, consider taking some courses in restaurant management to gain more knowledge about the industry. With some planning and preparation, you can start a successful restaurant business with no prior experience.
How much does it cost to start a diner?
The costs to start a diner vary widely. It includes the cost of leasing a space, designing and building it out. It can be done for less money if you are willing to do the construction yourself. It also includes the cost of supplies, equipment, salaries and licenses and permits.
What are the ongoing expenses for a diner?
The ongoing expenses for a diner include items such as food costs, labor costs, and rent.
Food cost generally represents the largest ongoing expense for a diner, and fluctuates with market price. Restaurants should conduct monthly inventories to ensure that food prices remain within budget.
Labor costs may also fluctuate dramatically depending on the size of the restaurant and its operating model. For example, if a restaurant is open 24 hours and has a second shift, the labor cost will be higher.
Rent is also an important factor in maintaining costs. Typically, rent accounts for about 20% of the expenses associated with running a restaurant.
Is owning a diner profitable?
Yes, owning a diner is profitable. The success of a diner depends on a number of factors, including location, menu, and competition. However, if done correctly, a diner can be a lucrative investment.
Diners can be a good investment because they tend to have a loyal customer base and low overhead costs, since they don't need as much staff or as large of a kitchen as full-service restaurants. This can translate into healthy profit margins for investors.
Why do diners fail?
Many owners underestimate the amount of money they need to start and maintain a diner. Additionally, many owners fail to accurately calculate operating expenses and underestimate their monthly overhead.
Another factor that can contribute to a diner's failure is unrealistic expectations of guests' willingness to pay higher prices for certain menu items, such as gourmet hamburgers or fresh seafood.