How to Start a Restaurant Business – An Effective Business Plan

how to start a restaurant business

You really need to have a successful business plan in place if you want to start a business -any business for that matter. Opening a restaurant is no different than starting an IT business. Since more and more restaurants are popping up in the cities every other week, you really have to be passionate and skillful enough to run them. Today, we will give out essential tips to start a restaurant business and create an effective business plan.

Is Opening A Restaurant A Good Idea?

A Restaurant is a very common business venture that gives you the freedom and flexibility to establish it stylishly and uniquely. The food industry is massive and there are more numbers of cuisines than you can ever count. Opening a niche-based restaurant can be an excellent choice, provided the menu piques the interest of the customers. However, unlike all uncommon businesses, like IT, clothing, manufacturing etc. opening a restaurant and making it successful is not easy – it is definitely a hard and expensive process. There are rules to be followed, and permits and licenses to be obtained.

You will have to sit down and plan every aspect from the scratch, including marketing and creative ways to beat the competition. While starting it can be exciting, you will need to invest serious time and money. You know why? It is because as per records, 60% of the restaurants fail in the first year.

What is the Reason behind the Failures?

Lack of planning is the biggest reason for restaurant failure. Like how you spend an entire day in preparation before you invite guests for dinner, serving food to your customers would also require the same level of dedication, if not more.

From utensils and cookware to the menu and serving dishes, and even your staff selection, the restaurant business plan will determine the success and failure of your start-up.

Also, lack of marketing and adding creativity are the other two reasons why restaurants fail. Even your prices and designing the menu can greatly affect your show.

However, there are ways to reduce the risk and build up the chances. We have compiled a few handy tips, noted from successful restaurateurs that will help you begin the journey with surety.

Work in a Restaurant

Many successful hoteliers have remarked that the best way to know what goes into a restaurant business is being a part of a restaurant and gain considerable experience. This risk of failure narrows down a lot when you are already aware of the process. However, we advise you to join an eatery that is similar to what you want to open.

Working in a restaurant will teach you serving food, menu development, designing a menu to pique curiosity, restaurant interior, pricing, payroll, cooking process, inventory management, vendors for wholesale grocery and other important elements of a restaurant business.

You will learn the fundamentals of entrepreneurship, leadership, and marketing management – the first few steps to becoming an owner.

Develop the Right Intentions

You have to love what you do. You have to know from your heart that restaurant is the right path for you. You have to love the idea of cooking and serving elaborate meals, you have to love the idea of working late nights – cleaning and stacking, and preparing dishes – to make ends meet. The sacrifices are aplenty and you need to brace-up for it.

You cannot consider the idea of opening a restaurant and running it as a passion, and not just an income generating business venture.

You will have to keep thinking, planning and brainstorming, and figure out how your restaurant will look like, what will you serve, what will be the key selling point, the furniture, and the ambiance.

The answers to these questions can be determined by figuring out the environment you want to work in. You can build a posh restaurant either for the VIPs or for the middle-class people with average income. The varieties and concepts are unfathomable; all you need is the intention and zeal to pursue it.

An Epic Business Plan is Inevitable

Make a business plant on which you can rely on blindly. Yes, that’s how your business plan should be – rock solid and steady. You would need a detailed business plan that will chart out branches for each element. Begin with a lean plan in the beginning. The lean plan will keep the process simplified. You have to visit your business plan regularly to make sure you are on the right track.

A great business plan will measure your progress, help you mitigate risks and allow you to figure out how to move forward.

Your business plan should include the following things:

  • Current market research
  • Information on your target audience
  • Comprehensive analysis of your competitors
  • Marketing plan blueprint
  • Budget
  • Financial help and projection
  • Growth Projection
  • Industry trends, such as popular menu, pricing, taste preference etc.

Since this is the era of digitalization, you have to put in a lot of effort into your marketing plan so to keep customers streaming in through your doors. Some of the great marketing and promotional tips we can think of include:

  • Free food samples
  • Community events participation
  • 50% discount on first order
  • Social media marketing
  • Blog creation
  • Seasonal offer
  • Membership in the local business association

Know and Understand Your Customers

Who do you want coming to your restaurant? Who do you want to taste your menu? You should know you’re ‘who’ for sure. For example, your customers can be teenagers, families, college students, couples, senior citizens or bachelors. Knowing your customers, i.e. your target market will not only help you create a great menu but it will also make your hunt for the perfect location simpler.

Your customers will also help you determine your restaurant theme, décor and atmosphere, and serving process. For instance, if you want to open your restaurant for couples, you will need to start an upscale, quiet restaurant with dim ambiance. However, this kind of restaurant many not suit over-excited teenagers and quick grabbers, like bachelors and office goers.

Your Food Concept and Serving Style Will Speak a Lot

When creating your business plan, the very first thing that you must decide is what type of service would you like to offer? There are several types of eateries; however, serving style is typically divided into 3 – fast-food, mid-scale, and upscale. You obviously know the kind of menu that fast food jaunts have. The mid-scale restaurants offer meals at value prices and include full course meals. Up-scale restaurants offer full-service meals, including buffets with high-class ambiance and highly priced menu.

You will also have to decide whether you want to specialize in breakfast and brunch, lunch or after 5-dinner and drink. You can also start the kind of restaurant that is open throughout the day.

Apart from the restaurant type, you have to figure out your menu concept and narrow your choice of food. You can serve a particular cuisine, such as Indian, Malay, Thai or Chinese or Vegan or Seafood. Your serving style and target customer will determine your concept.

Location is Very Very Important

Positioning your restaurant is extremely crucial for your business. It is important that you find a location that sees a continuous stream of traffic, which has parking convenience and which is in the proximity of offices and other businesses (if you are planning lunch). You have to make sure your location goes with your target customer.

For instance, a family restaurant should ideally be located near homes, apartments, and condos, whereas a snack and fast-food joints, will be immensely popular near colleges and schools. Also, if you are planning to open a nightclub, keep it away from the posh residential locality and retirement homes.

Your monthly budget in par with your profit should also be considered while planning on the location.

Get Your Funds On Time

You can talk to restaurant owners to get an idea about how many funds you would require to start your business. There are several ways you can raise the capital for your business, including liquidating assets, using assets as collateral for the loan, government programs, or becoming a partner with a family or friend.

You have to manage cash flow superbly. You would need funds for three pools of money. One, is the one time cost, such as equipment, cookware, gear, furniture etc.; second, the restaurant expenses, such as rent, groceries, salary, ingredients; and third, your bills such as fuel, electricity, marketing, phone, and internet.

Make sure you have enough funds to support the three pools for at least six months. Only after six months, you will able to break even.

Become a Marketing Guru

Whether you know the ABCD of marketing or not, you have to use all possible means and tools to promote and market your business all through your business tenure. There is no fixed time limit for marketing; it is a continuous, evolving process. Use social media to your best, participate in local fair, host food for NGOs, and use the newspaper for local ads.

Your restaurant business will become a hit if you are the rightful owner. Trade associations are a great place to get restaurant business-oriented advice. Moreover, don’t forget to hire an attorney to walk you through the legal obligations.

If you have any doubt about your restaurant, do ask in comments. Our expert team will get back to you.