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How to Start a Restaurant: 8 Essential Steps for A Successful Grand Opening

Are you planning to start a new restaurant? Whether it’s your first establishment or one of many franchises, there’s a lot that needs to get done before opening day. In this article, we’ll help you stay on track with 8 essential steps for opening a successful new restaurant in your neighborhood. 1. Determine a Restaurant […]

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Are you planning to start a new restaurant? Whether it’s your first establishment or one of many franchises, there’s a lot that needs to get done before opening day.

In this article, we’ll help you stay on track with 8 essential steps for opening a successful new restaurant in your neighborhood.

1. Determine a Restaurant Concept

As with all businesses, it’s important to determine what your brand will be about during the initial planning phase.

For restauranteurs, that means researching and narrowing down a concept that will work well in the location you have in mind.

What type of cuisine will you serve? Is it a casual sit-down or take-out only? And what will make your restaurant unique – the ingredients, menu, atmosphere, friendly staff, or something else entirely?

Ask yourself these types of questions now so you can form a rough idea of your concept. Then, make sure to validate your business idea by checking if it’s been successful in similar areas before.

It’s also a good idea to get opinions on your restaurant concept from established restaurateurs, as well as friends and family.

Finally, before opening a full-blown restaurant location, you may want to consider testing your concept first by running a digital-only ghost kitchen in your target area.

2. Location, Location, Location!

This old real estate adage applies to restaurants, too. 

In fact, location is often the top reason that new restaurants fail – factors like street visibility, parking spots, demographics, and competition can make-or-break your new business.

But the best spots in town won’t come cheap, so it’s important to weigh the pros and cons of a potential location against its annual rent and utility costs.

Here are a few more location-specific factors to consider:

  • What is the total population within a 5-mile radius?
  • What is the average income level and demographic distribution?
  • Is this area growing, stagnant, or declining?
  • Are there highways or main roads nearby?
  • How accessible is the location?
  • What is the crime rate and overall safety of this area?
  • Are there similar competitors in close proximity?
  • Is the location inside a mall or office building, or stand-alone?

While it’s not impossible to overcome a bad location with creative marketing and an exceptional experience, securing a good one will increase your odds of success.

3. Craft Your Business Plan and Menu

Once you’ve got your restaurant concept vetted and potential locations scouted, it’s time to put together a business plan.

Think of the business plan as a detailed recipe for your business. It’s a comprehensive document that you’ll need to present to potential investors and lenders so they can evaluate your business model.

A good restaurant business plan includes:

  • A description of your restaurant concept
  • A detailed profile of yourself and any business partners
  • Research on target areas, including population, income levels, demographics, and competition
  • Startup costs, including rent, equipment, materials, staff, permits, marketing, and more
  • Expected income and expenses, and the point at which you break-even
  • Marketing plans
  • Employee recruitment plans and number of staff required

This is also a great time to craft a basic menu that showcases your restaurant’s uniqueness and brand. 

Having a concrete menu and prices will go a long way to convincing key stakeholders like investors, suppliers, and perhaps most importantly, your chefs, that you know what you’re doing.

4. Apply for Licenses and Permits

It’s not the most exciting part, but it’s absolutely necessary to secure all licenses and permits required in your state to operate a restaurant.

While there’s a myriad of licenses you may need, here are the top ones:

  1. Business License: every business requires one and it’s issued by your state government. If you plan to sell alcohol, you’ll need a federal business license as well.
  2. Employer Identification Number (EIN): this is essentially a tax number issued by the Internal Revenue Service (IRS).
  3. Food Service License: typically issued by the city or county health department, this license shows that your establishment meets all food safety regulations and includes periodic inspections.

We recommend consulting your local small business council and health department to determine all the relevant licenses and permits required in your area.

5. Secure Financing for Startup Costs

Starting a new restaurant comes with a hefty price tag, ranging from $175,000 to $750,000 or more, according to a survey from Restaurant Owner.

The actual costs will vary based on your specific restaurant concept, location, square footage, equipment, and other details.

If you don’t have six figures in cash, you’ll likely need external financing to cover startup costs.

Here are a few common ways to get financing:

Negotiate Equipment Financing

For kitchen appliances, fixtures, and even tools like knives and cutlery, look for favorable financing options from vendors and banks to lower the upfront investment cost.

Consider ordering most of your equipment from the same vendor to negotiate either better prices or a preferred financing package for the whole order.

Vendors like Restaurant Supply offer equipment financing ranging from 12 months to 60 months, possibly reducing thousands of dollars in equipment spend to a few hundred dollars per month in loan payments.

Small Business Loans or Lines of Credit

There are many lenders that can provide a startup business loan, some of which specialize in lending to restaurants.

Lenders will want to review your business plan, personal track record (including credit history), and any assets that you own which can be used as collateral.

Along with your small business loan, you may be eligible to receive a line of credit as well, which provides additional flexibility for meeting day-to-day and unexpected expenses.

And if you’re planning to open a franchise, there are often special lending programs for franchisees from the parent company that you can take advantage of.

Business Partnerships and Investors

If you’re on your own, you may want to consider partnering with a like-minded restaurateur or bring on a financial investor to split the costs of your venture.

Each has its pros and cons, and the decision will affect the future of your business, so make sure to consider more than just the financial consequences.

Partnering with another restaurateur can bring additional culinary insights to your kitchen, but be careful who you choose as strong personalities tend to clash, especially over a hot topic like cooking.

Bringing in an investor may help reduce the financial burden of your restaurant, but will likely require you to concede a significant share of the equity and profits, including control over major business decisions.

6. Attract and Train Restaurant Staff

For a service-based business like a restaurant, employees are the face of the brand and critical to creating a positive customer experience. 

In recent years, however, the impact of COVID-19 and the Great Resignation has left restaurants and retailers struggling to find entry-level workers.

According to Pew Research, around 60% of workers left their jobs in 2021 due to low pay, lack of advancement opportunities, and a general feeling of disrespect at work.

To attract the best talent, you’ll need to create a workplace culture that’s inviting, offers competitive compensation, and makes staff feel valued for their contributions.

This can be challenging in the fast-paced restaurant industry where staff are constantly juggling multiple priorities like taking orders, providing service, and welcoming customers.

To ensure your customers receive a consistent experience, it’s important to properly train new hires and provide regular coaching to help them adapt and thrive in the restaurant business.

7. Host a Private Soft Opening

The tables are set and the menu is ready, but before launching your grand opening, consider hosting a soft opening first for family, friends, and business associates.

A soft opening is a private event that functions as a trial run of your restaurant, so you can iron out any kinks and solicit feedback from friends and family.

That way, you’ll still have time to improve the kitchen process, tweak the menu, and coach your wait staff, before launching your actual grand opening.

8. Leverage Restaurant Technology Systems with Union POS

Printed menus and taking orders by hand are a thing of the past.     

These days, your customers want a seamless digital experience from finding your business online to ordering drinks from their phone or tablet.

Union POS is a comprehensive digital platform for restaurants and bars that can increase your sales by an average of 28% and reduce labor costs by 10%.

This restaurant engagement platform allows customers to order off a digital menu and also streamlines the payment process (powered by Gravity Payments).

Schedule a demo today to see how Union POS can help turn your restaurant dreams into a reality.

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