How to Start a Restaurant: Opening Your Restaurant

How to Start a Restaurant

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How to Start a Restaurant Business

If you’re looking to start a restaurant business, you’ve come to the right place. Since we’re going to show you exactly how to do it.

We’ll start with key restaurant industry fundamentals like how big the market is, what the key segments are, and how revenues and profits are generated.

Then we’ll discuss keys to not only starting a restaurant business, but succeeding in it!

How Big is the Restaurant Industry?

According to IbisWorld, there are 254,744 restaurants, and the restaurant industry generated $181.0 billion in revenue in the United States alone last year. This represents an annual growth rate of 3.5% over the past 5 years.

What are the Key Segments of the Restaurant Industry?

The Full-Service Restaurants industry is segmented based on the main type of food served. The main segments include Asian, American, Mexican, European and Pizza

What External Factors Affect the Restaurant Industry?

A number of factors affect the performance of the restaurant industry. These drivers include:

  • Consumer spending: Taxes, consumer sentiment, and oil prices are some of the factors that influence the growth of consumer spending. Conversely, when the economy is good, consumers will be more likely to spend money on eating at restaurants.
  • Consumer Confidence Index: During a recession, demand for discounted value products from restaurants increases, driving revenue down.
  • Health Eating Index: Consumers are aware of issues related to weight and obesity, fatty-food intake and food safety issues.
  • Households earning more than $100,000: Full-service restaurants customers are from higher income households. Due to this fact, growth in the number of households earning over $100,000 annually will benefit the industry.


Mobile Strategies for Restaurants

Restaurant Apps from Bizness Apps, Inc.


What are the Key Costs in the Restaurant Industry?

  • Purchases – Purchases comprise the largest cost for industry operators, which include items such as alcohol, food, and other incidentals, like paper towels, cleaning equipment and glassware.
  • Wages – Wages are the next largest expense category for an average operator’s revenue.
  • Rent and utilities – Rent and utilities are also a major expense .
  • Other Expenses – Other costs include those incurred in the normal course of business, such as insurance, accounting and legal costs, licensing fees, stationery and office costs. These costs account for an estimated 6.0% of the average restaurant’s revenue.


What are the Keys to Launching a New Restaurant?

1. Ensure You Have Sufficient Start Up Capital
Always overestimate your capital needs. Opening a restaurant is an expensive venture and requires the following:

  • Enough cash reserve for the first 12 months
  • Initial start up costs (construction, equipment, furniture, etc.)

2. Determine the Best Location
Market research is crucial in deciding the best location and the following should be considered:

  • Accessibility
  • Sufficient parking

3. Have a (Business) Plan
A business plan is the essence of your restaurant, and a poor and unrealistic business plan will not earn you any profits. A good plan will also attract potential investors or banks for financing.

From being greeted at the door to paying the check, first impressions determine repeat customers. Furthermore, with the proliferation of user-review sites like Yelp and Urbanspoon, these platforms will become the gatekeepers to customer acquisition.

5. Establish Quality Control
Ensuring quality and consistency in the kitchen is essential for a successful restaurant. If it’s not good enough, don’t serve it – it could ruin your reputation.

6. Implement a Simple Menu
Long menus lead to confusion for everyone. Start with a simple menu concentrating on quality items done well vs. quantity.This will increase efficiency and there will be less waste and costs.

7. Calculate Food Costs
Determine the appropriate menu prices based on costs and market research. Pricing factors

  • Food costs
  • Portion size
  • Quality of ingredients
  • Competitor pricing

8. Execute a Strategic Marketing Plan
The goal of a restaurant’s marketing plan is to ensure long-term success. Employ an integrated strategy that will reach your target market segments. Utilize marketing, public relations, advertising and sales efforts to gain brand recognition and ultimately drive revenue.

9. Control Inventory and Costs
Profitability analysis and inventory control is an important task of every restaurant owner, which must be carried out regularly in order to prevent theft and reduce unnecessary costs.
It has been shown that the average monthly restaurant loss is about 20%.

10. Keep It Clean and Organized
There’s nothing worse than a dirty restaurant. Make sure all your staff have the right hygiene certificates and set up a thorough cleaning regime. Get to know your local environmental health officer so they can help you with any issues that may arise.

Restaurant Industry Trends



What are the Typical Startup Costs for a New Restaurant?

Average restaurant startup costs vary from a few thousand to a few million. According to a survey, the median cost to open a restaurant is $275,000 or $3,046 per seat. If owning the building is figured into the amount, the median cost is $425,000 or $3,734 per seat.

How Much do Restaurant Operators Make?

A well run restaurant typically make between 5% and 8% profit. While every restaurant is different, typical after tax sales are distributed inline with the graph below:

The Restaurant Industry’s Economic Impact



Restaurant Design Considerations

Restaurant Design: 18 Considerations to Remember from Aaron Allen


Restaurant Design Ideas



Helpful Videos

Top Tips for Starting Up in the Restaurant Industry‬

Restaurant Startup – Creative marketing plans for restaurants

Restaurant Marketing Ideas: Flood Your Restaurant on Mon/Tue/Wed



Additional resources in the Restaurant Industry

For additional information on the restaurant market, consider these industry resources:

 

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How to Start a Restaurant: Opening Your Restaurant
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