Here’s how to start a restaurant (in 6 steps)
If you’ve been dreaming of owning a restaurant—but don’t know where to start—Huckleberry has your back. Here’s how to start a restaurant business.
- Create a business plan for your restaurant
- Plan your kitchen equipment purchases
- Figure out your financial plan
- Get your paperwork in order
- Hire your first employees
- Get the word out about your new restaurant
- A few more tips
First, create a business plan for your restaurant
Take the time to make a game plan for your restaurant. When you’re deciding how to start a restaurant, you need to walk before you can fly, and it’s important to think through your major business decisions before you sign papers or put down any deposits. Here’s what you’ll need to decide before you go forward with your plan:
1. What will the concept of your restaurant be?
To stand out from the competition, you need a clear vision for what your restaurant will look like, sound like, and feel like to your customer. Let’s talk through the main decisions you’ll need to make:
a. First, what will your service style be?
- Fast food or “quick service”
If you want to provide food super quickly (and super cheaply)—and you don’t mind manning a drive-through window—running a fast food restaurant is a great option.
- Fast casual
Chipotle is the classic example of this style of restaurant. Customers tend to believe that fast casual restaurants are a healthier way to eat quickly, so this style of restaurant has surged in popularity over the past decade.
- Fine dining
These restaurants provide the highest quality food and service. There’s very little margin for error, but if you get the food and ambience right, the results can be amazing.
- Casual dining
This style is a mix between fine dining and fast casual. Your customers will expect good food and table service, but they won’t expect the kind of elegance that fine dining restaurants provide.
In this style of restaurant, customers will pay one price for access to an unlimited amount of food from a buffet line.
- Food truck or concession stand
This is one of the most popular ways to start a restaurant, since it typically requires a much smaller financial investment than other concepts. If you’re new to the restaurant business—and have access to a large metropolitan area—running a food truck could be a great choice.
b. What kind of food will you serve?
If you’ve been thinking about starting a restaurant, chances are you’ve already given this question some thought. Maybe you want to serve local seafood and grass-fed steak in an upscale setting? Or maybe you’re known for your killer barbecue skills and are ready to make money off of your expertise? You might also take your food concept from your grandparents’ recipe box or from the cuisine of your home country. The sky truly is the limit.
There’s an important caveat, though: Whichever kind of food you choose to serve, you’ll have better success if it fills a niche in your area. If you make wonderful falafel—but there are already five falafel shops in your area—it’ll be tougher to find your customer base. You’ll need to either sell your food for a better price, make it much tastier than the competition, or adjust the food in some way so that your restaurant is truly unique.
(See? This is why you’re thinking through this now.)
2. What will be on the menu?
Okay, this is where the rubber really meets the road. Before you go further in the process, you need to have a better idea of what will be on the menu. If that sounds like a lengthy process, well...that’s because it is. But knowing what your starting menu will look like can help you make other decisions, such as how many people to hire, what equipment to buy, and what kind of food inventory you’ll need to keep in stock.
Our best advice for menu planning: Keep things simple—especially if it’s your first time opening a restaurant. And don’t be afraid to get rid of menu items that seem too complex, will overload your kitchen staff, or that you won’t be able to charge enough for in your market.
(Need more help? Here’s a good article on how to design a menu for your new restaurant.)
3. What will you name your restaurant?
This part is fun! What will you call your restaurant? You’ll want to pick a name that accurately represents what you’re offering—and you also want to appeal to the people who are most likely to spend money at your restaurant.
How will you choose? Well, you can always start by generating a bunch of possibilities with a business name generator. But you could also find name options the old-fashioned way: Research successful restaurants that you love—especially the ones which serve similar markets or have a food concept you’d like to imitate. What kinds of names do they have? Any patterns? Do they spark any ideas for your business?
After you’ve got a few ideas you like, it’s worth doing a quick Google search to make sure that no one in your area (or state) has thought of your favorite name already—the last thing you want to do is get attached to Grandpa Sal’s Sushi, only to find out that another Grandpa named Sal is selling sushi on the other side of town.
Ultimately, be sure to pick a name that you feel great about. You’re going to be seeing, talking about, and marketing that name for a long time—it’s important to pick the right one.
4. Choose your location
Where will you open your restaurant? This is a major decision—the #1 reason that new restaurants fail is because of poor location. If customers can’t see your restaurant—or if it’s tough for them to find a parking spot—it’ll be difficult to turn a profit.
Here are some of the factors you’ll need to weigh as you look at potential locations:
- Is this location easily accessible and visible? You might serve the best Chinese food in the city—but if customers can’t find your restaurant, you’re going to have a hard time staying in business.
- Do people in my target demographics live close to this location? In order to succeed, your restaurant needs to be pretty close to the people you want to serve.
- What are labor costs like in this location? Be realistic about your hiring budget. If most food service employees in your desired area earn twice as much as you’re willing to pay, you won’t have much luck finding quality employees.
- What’s the competition like in this area? Your subs may be incredible, but if your sandwich shop is on the same block as three other established sandwich shops, you’re going to have an uphill battle to attract customers.
- Can I afford this location? The big question. If the perfect spot destroys your financial plan, it’s not actually the perfect spot. Move along until you find the right balance between attributes and affordability.
Next, plan your kitchen equipment purchases
After you’ve picked a location, you’ll need to outfit the kitchen with all of the tools and equipment to make the food on your starting menu. Choosing and purchasing equipment to start a restaurant might seem like a daunting task, but you can make it easier by starting with a brainstorming session. Begin by making a big list of all the equipment you can think of that you might need.
That list could look something like this:
- Deep Fryer
- Coffee brewer
- Food processors
- Prep tables
- Chef knives
- Cutting boards
Your list will probably be significantly longer, but you get the idea. In any case, after you’ve made your master list of kitchen equipment, you’re ready for stage two—separate your big list into two smaller lists: Need to Have and Wish List. Maybe you definitely need a griddle, but but can do without a food processor? Or maybe the location you chose already has a working oven?
Keep your actual menu items in mind and be pragmatic with your choices. Resist the urge to buy something just to have it on hand. (You can always purchase more equipment later!)
Figure out your financial plan
Here’s where you really need to do your research. Financial margins in the food business can be razor-thin, and you need to be realistic about what it will take to be profitable. The average cost to start a restaurant varies by location, but here are a few questions you’ll need to answer.
- How much will it cost to get the doors open? How much can you spend on a location? What will you spend on equipment and upgrades? What will you spend on inventory before the restaurant even opens? (For some in-the-trenches advice, read this expert answer.)
- How much will your menu cost to produce? It’s easy to say that you’ll only serve premium sweet potato fries, but you should take a look at the price tag before you commit.
- How much will it cost to keep your restaurant running? You’ll need to make some projections about overhead and labor. This means figuring out your projected prime cost and how much it will cost to run the restaurant on a daily basis.
- What is your projected revenue? You’ll need to make an estimate of how much your restaurant will sell during the first 12 months of operation. Be realistic. Remember that it will take a while to find customers. (This is a good moment to figure out how much capital you’ll need to fund your restaurant while it accumulates a customer base.)
Once you’ve figured out all of these numbers, you should have a pretty good idea of what your finances look like and how much money you’ll need to get your restaurant off the ground.
Get your paperwork in order
Now that you’ve made some high-level decisions, it’s time to take the steps to make things official.
1. Register your business name with the state
Once you’ve picked your name, you’ll need to register it with state and local authorities, pick a business organization type, and fill out some paperwork to establish your business.
2. Apply for your EIN
You’ll need an Employer Identification Number to identify your business for tax purposes. Luckily, it’s free and easy to get one. Get your EIN number here.
3. Get the necessary permits
We’ll admit—this can be tedious. But in order to operate your restaurant legally, you’ll need to make sure all this paperwork is in order before your first day in business. (We’ll include links for the State of California, but if you live in another state it’s pretty simple to Google the appropriate forms.)
- Health Permit
You’ll get this from your county’s local health department. (Find your local health department contact information at the CalGold website.)
- A Seller’s Permit
Every restaurant in California needs one. You can register for it online at Ca.gov’s dedicated website.
- A Food Safety Certification
If you live in California, you’ll need at least one employee to pass the Food Safety Manager Certification test. (Since it’s your restaurant, you’re probably the best bet to get certified!)
- Food handler permits
Anyone who handles food at your restaurant will need one (so, probably everyone), and you’ll need to keep records verifying that you’re in compliance. You can find more information about this requirement at Servsafe.
- An alcohol license, if applicable
If you’re serving any kind of alcoholic drinks, you’ll need to grab a permit. You can find information on how that works at the CA Department of Alcoholic Beverage Control.
- A sign permit
Some areas require you to get a permit before putting up signage for your company. If you hire a sign company to do the job, they’ll normally take care of this for you. The process can take longer than you think, so get on it as soon as you secure your location.
- Fire department and occupancy permits
Depending on where you are, you might need to get permits from your local fire and police departments. These will affirm that you’re allowed to have large groups of people in your restaurant and that there are sufficient escape routes in case of an emergency.
4. Insure your restaurant
A lot of first-time restaurant owners put off buying insurance until the very last second—but don’t let that be you. You need solid business insurance (and you’ll get a better deal if you allow yourself time to shop around).
Here’s a quick overview of the most important coverages you’ll need to operate your restaurant:
This coverage protects your employees if they get injured or sick from working at your restaurant. Workers’ comp is required in just about every state, and there are usually serious consequences if you don’t purchase it for your restaurant. (You can get a quick estimate on what you’d pay for workers’ comp at our 60-Second Workers’ Compensation Calculator.)
This policy protects your restaurant if someone ever sues you for injury or property damage. (An expensive lawsuit can put a restaurant out of business, so this one is pretty important to have.)
Property insurance protects your building (and the stuff inside your building).
This policy protects your business if you ever over-serve an inebriated customer who goes on to cause damage to someone or something else. Many states require this coverage before they’ll issue your restaurant a liquor license.
This is a package of useful coverages to protect your restaurant in a wide variety of situations. It includes coverages like spoilage insurance and food contamination insurance.
Hire your first employees
First off, if you’re going to have employees, you need to have workers’ compensation insurance to operate legally. The traditional process of getting workers’ comp can take a long time, so don’t procrastinate. (You can also get workers’ comp online in about five minutes.)
Once you’re legal, start the hiring process. This will require gathering some paperwork. You can get a general overview of what you’ll need from the Small Business Administration, but don’t forget to check your state guidelines, too. (Live in California? Here’s how to hire your first employee in California.)
Meanwhile, if you’re new to the restaurant business, you can find more information here about what kind of jobs you’ll need to hire for.
Then think carefully about who to hire. It’s tempting to stretch the budget by finding the cheapest possible labor, but that’s actually a bad place to cut costs. Instead, strongly consider hiring the most experienced people you can afford, even if it means tweaking your financial plan a bit. The quality of your team can make or break your restaurant, especially when it first opens. (Imagine your beautiful new restaurant with a string of 1-star Facebook reviews.)
After you’ve hired your team, you’ll need to give them the training they need and make sure each employee has a Food Handler Certificate. Be sure to leave enough time for team members to get comfortable with their jobs before you open the doors—you want your first customers to have a great experience at your restaurant.
Get the word out about your new restaurant
Okay, you’ve done a lot of planning—but you’re not quite done yet! Now, it’s time to think about how you’ll get your first customers. Your options are almost endless, too—they’re really only limited by your creativity and resources.
Here are a few of the most common ways to advertise your restaurant:
- Build a website
This one is a no-brainer. As soon as you’ve picked a business name, reserve your URL and then use a website service (such as Weebly or Squarespace) to create a clean, attractive website. Don’t forget to upload your menu. (Seriously, don’t forget. It’s what customers are looking for.)
- Get listed on Google and Yelp
Sign your restaurant up with Google My Business and make sure your Yelp profile is ready to go. (If a hungry customer can’t find you online, they’ll usually go to another restaurant.)
- Put your restaurant on social media
While you’re checking off online tasks, make sure to get your social media profiles up and running. Make sure all your social media profiles have a clear link to your website (and keep your contact information and opening hours up to date as your business evolves).
- Buy online geo-targeted ads
There’s a bit of a learning curve to this strategy—so make sure you educate yourself—but if you use Facebook and Google ads effectively, they can be a cost-effective way to increase your traffic.
- Start a loyalty program
Get an enthusiastic new customer? Make sure they come back by offering them some tempting incentives to return. Loyalty programs don’t have to be complicated, either—a simple business-card sized visit tracker works well and fits in their wallet.
- Partner with delivery services and online reservation services
- Distribute brochures and door hangers
It might sound old-fashioned, but putting out flyers or door-hangers in the communities closest to your new restaurant can be a great way to increase your name recognition and get more traffic.
- Get good word-of-mouth
This one takes time—but it’s worth it. Happy customers talk. And when they do, they tend to create more happy customers. So one of the best things you can do to advertise your restaurant is to be consistently excellent at what you do.
Any more tips for running a successful restaurant?
Absolutely. If you want to succeed in the restaurant business, you’ll need to know what’s going on in the industry. So if you haven’t already done the research, now is the time to look around to see what kind of resources are available to owners of small restaurants.
To get you started, here are a few suggestions:
- Restaurant Business Magazine is the industry’s major periodical, but there are many others you should check out—especially after you figure out your niche and finalize your business plan. (For instance, QSR is specifically for quick service restaurants—and it’s free to subscribe.)
- The restaurant owners subreddit is a lively hub of valuable information and conversation. (And if Reddit isn’t your thing, there’s always plenty happening on Facebook at the Restaurant Owners Forum.)
- Consider going to a convention or restaurant owners’ conference. Try the National Restaurant Association Show—or click here for a handy list of other conferences.
Finally, don’t forget to take care of yourself. Running a restaurant can take a lot of time, energy, and mental resources—and it’s important to establish some boundaries. To get a head start in thinking this through, be sure to check out these ways to say sane as an entrepreneur.
Hey, that’s it. We hope it was helpful. Remember, you can get business insurance for your new restaurant in about five minutes—it’s super easy and completely online.