A Guide to Opening a Restaurant
- Introduction: Putting Ideas to Work
- Creating a Restaurant Plan and Concept
- Niche Restaurant Markets
- Food Concepts and Themes
- Family-Style Restaurants
- Casual-Dining Restaurant
- Ethnic Restaurants
- Creating a Personalized Restaurant Niche
- Restaurant Responsibilities
- Choosing a Location
- Choosing a Restaurant Name
- Location Names
- Location Themes
- Personal Names
- Play on Words and Unique Concepts
- Trademark Names
- Developing a Restaurant Menu
- Choosing a Menu Type
- Choosing Menu Cycles
- Embrace the Art of Developing Menus
- Pricing Menu Dishes
- Designing a Restaurant Menu
- Creating a Business Plan
- Obtaining Restaurant Business Funding
- Location, Location, Location
- Building Layout
- Designing a Restaurant
- Music and Ambiance
- Heating and Ventilation
- Restaurant Decor
- Walls and Ceilings
- HACCP Plans
- Restaurant Licenses
- Business Licenses
- Food Handlers’ Permits
- Liquor Licenses
- Hiring Employees
- Employee Positions
- Chefs and Cooks
- Generating Marketing and Buzz
- Promotional Giveaways
- Good Press
- Social Media Marketing
- Google Listings
A Guide to Opening a Restaurant
- Restaurant Plan and Concept
- Restaurant Markets
- Food Concepts and Themes
- Personalized Restaurant Niche
- Restaurant Responsibilities
- Restaurant Name
- Restaurant Menu
- Creating a Business Plan
- Business Funding
- Designing a Restaurant
- Restaurant Decor
- Restaurant Licenses
- Hiring Employees
- Employee Positions
- Marketing and Buzz
Introduction: Putting Ideas to Work
Many people have long-term dreams of opening a restaurant. Opening a restaurant takes great dedication, excellent work ethics, financing, a market for growing capital, a superb location and the ability adapt to changing lifestyles and shifting demographics. While studies show that the future looks increasingly bright for many food service industries, there are never any guaranteed successes in any types of business.
Most businesses that fail within the first year directly relate to lack of planning and poor management. To succeed in the food-service industry, owners and employees must be dedicated to working hard, streamlining practices and developing rapport with customers.
Creating a Restaurant Plan and Concept
There are many types of restaurant concepts on today’s market. Modern society is embracing more contemporary, hip styles of food that attracts younger groups of customers. There are several different food-service business categories that restaurateurs can consider when developing restaurant plans and concepts.
- Generation Y – This generation encompasses people born between 1980 and 2000. A diverse generation, this group is a prime target for eclectic foods, fast food and quick-service items. They generally make up approximately 25% of visits to burger franchises and 12% of pizza restaurants.
- Generation X – This group applies to people born between 1965 and 1980. Generally known for stronger family values, they have better financial stability than their parents and opt for quick-service restaurants, such as all-you-eat salad buffets and bars. They enjoy atmospheres that are more comfortable and focus on money driven values.
- Baby Boomers – Baby boomers are born between 1946 and 1964, which makes up the largest portion of the U.S. population. Having professional careers, this generation regularly visits upscale restaurants and tends to freely spend money. As this generation becomes grandparents, they are looking for family-friendly dining that is upscale and still offers formal dining experiences.
- Empty Nesters – Consisting of people ranging between their 50s and 64, empty nesters are defined as people that do not have children living at home. This age group has the highest levels of income per-capita and enjoys visiting upscale restaurants that have superb service and excellent food. Restaurants that offer sophisticated ambience and elegant surroundings greatly appeal to empty nesters.
- Seniors – Seniors, age 65 and older, are often on fixed incomes, which makes affordable, family-style restaurants more attractive. Early-bird specials, senior menus that offer small portions and lower prices are more attractive to this growing age group.
Niche Restaurant Markets
Restaurants generally have three major classifications:
- Quick-Service – Quick-service, or fast food restaurants, are often associated with hamburgers and French fries, but many quick-service establishments are branching out to include hot dogs, pizza, ethnic foods, seafood, sandwiches and chicken.
- Midscale – In between quick-service and upscale restaurants, these restaurants offer full meals but provide a good value. Full-service options include having customers place and receive orders at their sit-down tables, while limited-service restaurants offer meal ordering at counters and then food is delivered to tables. Some limited-service restaurants also offer buffets and salad bars.
- Upscale – Focusing on full-table services promote high quality cuisine, excellent ambience and are generally able to charge high meal prices.
Food Concepts and Themes
Selecting a food concept can be a significant challenge. Restaurateurs need to research the current local markets, trends and even consider offering surveys to locals about what type of restaurants are appealing. By embracing a food concept, this allows restaurateurs to structure their business operations around themes and concepts, especially when preparing business plans, which are discussed later.
Quick-service seafood restaurants offer limited choices, which generally consist of fried food. Restaurants that offer more midscale to upscale offerings have a wider seafood selection, which includes baked, grilled and broiled options. Seafood is seasonal and quality widely varies. Restaurants need to shop for the freshest, most affordable quality seafood. When restaurant distributors offer subpar food quality it guarantees that customers be unhappy.
This type of restaurant gears towards midscale and upscale markets. Midscale steakhouses are generally more family-friendly and feature a casual environment that offers good value meals. Midscale restaurant themes include Western designs and comfortable environments.
Upscale steakhouses serve larger, better quality steak cuts and offer a more formal atmosphere. They charge higher prices and their furnishings and decor feature high-end designs. Guests are given more privacy and they cater to adult patrons.
Family-style restaurants gear towards serving families and charge reasonable prices. They also cater to seniors by offering early bird specials and smaller portions. Their service is between quick-service and full-service restaurants and their menus offer wide selections to appeal to children’s finicky food choices to seniors’ traditional, hearty preferences.
Family-style decor is comfortable, featuring common artwork, muted color tones, booths, wide chairs, highchairs and booster seats.
These types of restaurants appeal to wide audiences, from seniors, baby boomers and Generation X to Generation Y. They offer an assortment of food items, from standard appetizers, salads and main dishes to desserts. These types of restaurants offer comfortable atmospheres with midrange prices. Many restaurant themes revolve around theme menus and decor.
Ethnic restaurants continue to enjoy a growing share of the restaurant market. Ethnic eateries range from quick-service to more upscale restaurants that offer a wide assortment of menu items. The most popular ethnic restaurants are Mexican, Chinese and Italian. Additionally, other popular restaurants include Thai, Indian, English, Caribbean, Japanese, German, French, Mediterranean, Korean and Vietnamese. In larger metropolitan areas, unique, diverse ethnic cuisines thrive, such as Ethiopian and Pilipino foods.
There are two different types of pizzeria business plans. A to-go restaurant offers a specialized menu, limited seating and self-service. A full-service pizzeria may also feature other Italian dishes, such as ravioli, spaghetti, lasagna, salads and select desserts. It is important to hire a good pizza cook that specializes in making homemade pizza, uses top-quality ingredients and preparation methods. A cook that exercises these basic rules will regularly see customers returning, which helps continually generate profits.
Delis generally experience higher-than-average profit margins. Their menus are easy to change, which gives them the opportunity to rapidly adapt to current tastes and health trends. Delis have also answered the demand for workplace catering and delivery, adding side dishes, desserts, breads, soups, cheeses, relishes, hot entrees, exclusive menus, smoked fish and much more.
Studies show that more than 400 billion cups of coffee are consumed annually. Espresso bars and coffeehouses are ideal for early morning cups of coffee, quick lunches, meeting with friends, having private business meetings or even a simple late afternoon cup of espresso.
Coffeehouses that have the most success are near heavy foot traffic areas and serve approximately 500 customers daily. The benefit of having a coffeehouse is high profit margins. Coffee is essentially 95-percent water, but coffeehouses also serve a wide variety of espresso-based drinks, such as lattes and cappuccinos, as well as teas, fruit juices, bottled water, pastries, desserts and sell coffees by the pound.
Contemporary bakeries offer a wide assortment of baked goods, including scones, cakes, bagels and coffee. Some upscale bakeries even offer full dining menus, which include hot entrees, sandwiches, wine and beer. When developing a unique bakery concept, restaurateurs should differentiate themselves from other bakeries in town, helping make them stand out from the crowd.
Creating a Personalized Restaurant Niche
Before potential restaurateurs begin developing a restaurant plan, it is important to determine what restaurant segment is most lucrative based on the location and food service industry of choice.
Restaurateurs need to be honest and consider the following questions:
- Do they prefer to rise early or stay up late? This will help determine what type of food industry, such as a bakery or late night eatery, best fits with individual schedules.
- What type of specialized knowledge and skills are necessary? It is important for restaurateurs to determine if they will personally be involved in the day-to-day business operations or if they will hire a dedicated restaurant manager.
- Do restaurateurs have a passion for certain cuisines? It is best to integrate something restaurateurs are passionate about, as it helps make business fun and motivating.
- Are they willing to take on additional responsibilities, such as serving alcoholic beverages and associated liabilities? While these are legal liabilities, they also substantially increase profits.
- A Salt & Battery – This New York British fish and chip shop has a catchy name with signature seafood dishes.
- Brew’d Awakening Cofeehaus – Located in Lowell, Massachusetts, this signature coffee shop offers a host of traditional drinks.
- Mustard’s Last Stand – Taking a unique tongue-in-cheek look at the hot dog stand, this delightful Florida restaurant is popular for reinventing the classic hot dog.
- For Heavens Cakes – Specializing in making special occasion cakes, this bakery crew also competed on Food Network’s “Cupcake Wars” in 2010.
- Thaitanic – Focusing on exotic Thai cuisine, this restaurant has two Washington, D.C. locations.
- Lord of the Fries – This storefront of fries focuses on selling international sauces, ranging from Aussie, Belgian, Thai, Indian, African and many more.
- Tequila Mockingbird – “Home of the Famous Margarita,” this Maryland restaurant has more than 100 varieties of tequila.
- Latte Da Coffee Shop – This coffee shop was named by a contest winner that was the recipient of a $25 gift certificate. This proved to be an exceptionally creative and engaging way to generate community buzz and interaction.
- Cafe Lox Stock & Bagels – This bagel shop has the bagel market cornered, offering classic, sweet and savory eats.
- Espresso Yourself Music Café – Hot espresso includes local entertainment, such as musicians and daily music events.
- The Couch Tomato Café – This pizza shop is cozy and comfortable, fitting right into the first floor of an apartment building.
- Sufficient Grounds Café – Serving hot and cold drinks, including salads, wraps and sandwiches, this clever café includes their bustling menu with “Thanks a Latte!”
- Pita Pan – Producing fleeting images of Tinkerbelle’s fairy dust, Pita Pan focuses on selling wraps, salads, burgers, pizza, pita sandwiches and drinks to New Yorkers.
- Purchasing and Budgeting – Menus are an essential tool that helps determines quantities and food costs. This will also dictate how much menu items need to be priced at to turn profits.
- Equipment and Supplies – Menus also determines what types of commercial supplies and kitchen equipment is necessary. For example, a steakhouse will require steak knives, while a fast food restaurant may require several fryers.
- Training and Staff – The menu also determine the level of expertise for training staff, including if a head cook or experienced chef is needed to execute menus. If hiring a head chef, consider having him/her help develop a menu that is simple and easy to execute. If wine and alcohol are served with the menu, the wait staff should have experience with providing recommendations to customers about specific pairings.
- Restaurant Marketing – The menu is also part of a marketing campaign and design strategy, which is discussed later in this informative restaurant guide.
- A La Carte Menu – This menu is ideal for both fast food and full service restaurants. A la carte menus allow starters, main courses and desserts to be ordered at separate fixed prices. The main drawback for restaurants is that these types of menus can make orders somewhat unpredictable, driving up operational costs.
- Table d’Hote Menu – This type of menu is a fixed price or set menu. It includes a set combination of courses, such as a starter, main course and dessert, which feature a fixed price. Some restaurants offer two or three different selections for the main course, which is very common among European fine dining restaurants. This type of menu allows restaurants to avoid high food expenses and helps to limit what customers can order. However, these types of menus are limited and do not always accommodate people with special diet requirements or those that prefer substitutions.
- Mixed Menu – This is the most common type of restaurant menu. It includes items that are offered a la carte and as a package. These mixed menus also include pasta entrees, salads, full-course fixed price menus, promotions and weekly specials.
- Static Menu – A static menu highlights the same daily menu offerings. This may include some menu additions that feature daily, weekly or seasonal specials, but generally, the menu stays the same. The advantage to these types of menus is that restaurants can predict order trends. The downside is that customers may grow weary of the same menu. This is why menu inserts are an excellent addition to traditional static menus.
- Cycle Menu – Menus that regularly change over periodic intervals are cycle menus. These include menus that change or rotate on a daily, weekly, monthly or seasonal basis. This allows restaurants to take advantage of fresh, local ingredients. Cycle menus do have some disadvantages. When introduced, staff need retraining and orders can be unpredictable. However, many restaurants have succeeded in offering combination menus that include static a la carte menus that feature daily table d’hote menus with cyclic weekly changes.
- Concept and Operational Type – If a restaurateur’s goal is to run a quick casual restaurant, the menu items must focus on speed. This includes considering pre-made items and whether foods are easy to hold in refrigeration or warmer units.
- Chef’s Expertise – For upscale dining restaurants, head chefs will likely develop the menus. They should create a menu that they can execute and that equally matches their expertise, whether it is vegetarian, seafood or Italian cuisine.
- Budgets and Ingredients – Menus should reflect optimization for food costs and quantities. Instead of having one dish that uses an expensive ingredient, opt for including the ingredient in several dishes, or considering using everyday local ingredients and embracing a farm-to-table theme. This helps to reduce food costs. Additionally, restaurant owners can also purchase items in bulk quantities.
- Target Market and Demographics – Design a menu that targets local markets. If the area supports seniors, avoid exotic dishes.
- Competition – Study the competition and visit nearby restaurants that are exploring similar restaurant concepts.
- Likes and Dislikes – Always remember that just because the restaurant owner or chef dislikes an ingredient, does not necessarily mean that diners do. Keep options open and remember that ultimately the customer is always right.
- Look at the average income of the target customer market;
- Always consider the direct food costs, which will fluctuate based on economic trends;
- Include indirect costs such as labor, rent or mortgage costs; and
- Consider the level of service the restaurant offers.
- Always keep menu space clean and simple, avoiding any overcrowding;
- Neatly arrange items in a strategic marketing format;
- Include inserts for daily or weekly specials;
- If using graphics or photos, always use high quality designs, as subpar pixilated images are unprofessional; and
- Spell check and grammar are vital when proofreading menus.
- A description of the area’s restaurant market;
- A menu with detailed pricing;
- Financial information;
- Data on Startup capital, which includes amounts and specific sources
- Long-term income and expense forecasts;
- Marketing plans;
- Employee hiring, training and retention programs;
- Detailed outlines and plans about addressing restaurateurs’ everyday challenges; and
- Include an emergency exit strategy.
- Personal Resources – Business owners can turn to their own personal resources for restaurant startup costs. This includes real estate equity, savings accounts, selling recreational equipment, cashing out retirement accounts for penalties, selling vehicles, leveraging collections or other investments, selling assets or using them as collateral for loans, using personal lines of credit, etc.
- Friends and Family – Personal arrangements with friends and family can often be tricky. Always have an attorney help draw up legal documents and make sure they are in writing to help avoid any business or personal risks.
- Partners – There is great truth in the saying “strength in numbers.” Many restaurant owners team up with partners for business ventures, which helps minimize the amount of necessary financial resources each person has to contribute. If opting for a partner venture, always have an attorney draw up a partnership agreement that defines obligations, responsibilities and buyout options.
- Government Programs – The government offers several Small Business Administration (SBA) programs. These programs specifically gear towards minorities, women and veterans. Many local, state and federal programs help support small businesses with affordable loan programs.
- Sales Volume – Will the location contribute to long-term sales volume?
- Potential Customers – Restaurant owners need to determine if customers can easily access the restaurant. Also, is plentiful parking available?
- Rent-Paying Capacity – It is important to complete a sales-and-profit projection for the first year of a restaurant, which allows restaurant owners to approximate the amount of revenue they anticipate generating. This allows them to determine how much rent they can afford to pay.
- Restrictive Ordinances – Some commercial areas have restrictive ordinances that limit truck delivery hours. Confirm information with local city authorities before renting or purchasing a building.
- Traffic Density – Restaurant owners need to analyze the traffic density. This includes considering the amount of foot traffic during business hours, as every person that passes by is a potential customer.
- Proximity to Nearby Businesses – Research any neighboring businesses, as their locale and sales’ volumes may or may not have a positive or negative impact on restaurants.
- Site History – Always research the site’s history. Who was the previous owner or tenants and why are they no longer there? Was the site a string of several unsuccessful restaurants? If so, why were they unsuccessful?
- Lease Terms – Generally, it is best to lease a building until restaurant owners have ideas if their new startups will be successful in particular locations. When reviewing leases, always understand the fine print and details. An ideal location may have unacceptable lease terms, including not allowing remodeling, that do not meet restaurants’ necessary requirements.
- Future Development – Consider checking with local city and/or county planning departments to see if any future zoning changes or plans may be enacted that could affect businesses. This may include road construction, closures or new building construction.
- Dining Area – The dining area should be well decorated and comfortable. Approximately 40 to 50-percent of customers arrive in pairs, with 30-percent arriving in parties of three and 20-percent in groups of four or more. A solid investment is to purchase tables that seat two, as these are easy to group together, without sacrificing valuable floor space.
- Production Area – A fatal flaw for many restaurants is not paying attention to maximizing flow and efficiency in the production area. The production area requires ample space for receiving, storing, preparing, cooking, baking and washing dishes. This area also requires room for production aisles, employee facilities and trash storage.
- Dinnerware – Dinnerware should reflect the presentation of the food. High-end restaurants should select fine china that features decorative rims. Casual restaurants generally select strong ceramic china dinnerware. Off-white or white are optimal color choices and do not interfere with food presentations. Some ethnic-style restaurants prefer to experiment with brighter fiesta colors for a more dramatic appearance.
- Tabletop Items – Additional tabletop decor should include vases, candelabras, glassware, flatware and table linens.
- Wooden Floors – These add a delightful glow to dining areas, reflecting light and lending a special charm.
- Tile and Stone Floors – Reflecting light, these add a rustic appeal to restaurants.
- Carpet – Difficult to maintain and keep clean, carpet can muffle sounds, which is beneficial to restaurants that have difficulty maintaining acoustics.
- Hiring – Always have a thorough screening process for applicants. Make sure each applicant understands the job description, including what duties are expected of him/her. Restaurant owners should complete background checks to confirm that applicants do not have a criminal history or embezzling charges.
- Job Descriptions – Detailed job descriptions leave little room for employees to guess about their job duties.
- Understand Child Labor and Wage-and Hour Laws – Each state has a Department of Labor website that provides detailed information including the minimum age of workers, tip eligibility and tasks for teenagers.
- Tip Reporting – The Internal Revenue Service (IRS) is very specific about how all tips are required for reporting on year-end taxes. Restaurant owners should either contact the IRS or check with tax professionals for more information.
- Training – Whether an experienced or inexperienced employee joins the team, all staff need training. This helps build confident, happy and loyal employees, ultimately reducing turnover rates. For additional information, the National Restaurant Association can help restaurant owners create custom employee training programs.
- How do you handle drunken customers?
- How can you tell if someone has had too much to drink?
- How do you deal with unhappy customers?
- How do you handle a busy bar?
- Are you TIPS certified?
- If you have a problem with another staff member, what do you do?
- Business Journals
- Industry and Trade Publications
- Local Newspapers
- Internet Blogs and Journals
- Regional Magazines
- Local Television Stations
- Local Radio Stations
- Hosting Events – Consider hosting events such as concerts, fundraisers, competitions, community or school events, cooking classes, parties and food tasting.
- Donate to Charities – Consider donating food to local charities, charitable events and campaigns. Not only does the food go to a good cause, it also gives the community the ability to sample delicious menu options.
- Publicity Stunt – Consider holding a community cook-off and advertise that the winning dish is to be a featured item on the restaurant menu.
- Marketing Frequency – Repeat customers provide restaurants with nearly one-third of their profits. To help increase this market share, offer loyalty programs, bounce backs, encourage them to bring their friends and entice them to try new menus, making them feel special. Avoid offering general discounts, which can actually hurt overall profits.
- Host Events – Periodically turn restaurants into hosted events for communities and business gatherings. Offer special services for parties, stand-up comedy events, live music and offer to serve as venues for tastings.
- Take-Out and Delivery – Once restaurants are more established, they may want to consider offering take-out or delivery services. This is easy to market via suggestive selling, flyers, websites, take-out and delivery menus.
- Email – Instead of spending money on direct mail marketing, consider using email-marketing campaigns, which help reduce expenses and are more likely to lead to direct sales.
- Environmentally Friendly – Show patrons that restaurants are committed to being environmentally friendly, which ultimately helps decrease utility costs and improves profits.
- Contests – Have customers sign up for contests, which help restaurants build their databases.
- Social Media Marketing
- Social media is a rapidly growing industry and successful restaurants cannot ignore this vital marketing tool. To help incorporate social media into restaurant marketing plans, consider the following ideas.
- Thinking Like Customers – For restaurants that are considered neighborhood hangouts, their social media posts should revolve around this strategy. For example, they should have a neighborly tone, highlight employee profiles, focus on the chef’s delicious creations, etc.
- Facebook – Featured below are seven significant Facebook marketing tips.
- Cover Image – Feature a delicious photo of a dish and change it regularly to display specials.
- Page Tabs – Use tabs to include photos of food, locations, featured menu items and food deals.
- Photos of Food – Restaurants need to be visual, which is why it is important to regularly update photos of food, as this entices customers to visit restaurants.
- Group Deals and Offers – Facebook is a great marketing tool for enticing patrons to “like” pages and giving group deals via third party apps. These apps are easy to share with friends, which helps further spread advertising endeavors.
- Contests and Sweepstakes – Social promotions generate excitement and give customers a reason to continually visit Facebook sites.
- Geo Targeting Advertisements – Facebook allows restaurants to niche target their advertisements, which is ideal for specific geographic locations.
- Embed Videos – Consider interviewing happy customers, showing food preparation videos or even providing short food demonstration links.
- Instagram Marketing – This photo-sharing platform now integrates with Facebook and allows people to easily post images.
- Trending Hashtags – Relevant hashtags make it easy for people to search for trending items.
- Niche Hashtags – These are more specific and relevant to foods by location.
- Campaign Specific Hashtags – These are excellent for contests or group offers and lets communities follow campaigns by using hashtags.
- Photos of Menu Items – Since Instagram focuses primarily on photos, this marketing site is perfect for snapping pictures of delicious menu items.
- Engage with Menus – Ask customers to upload photos of their favorite menu items, which help sbuild images on the Instagram platform.
- Employee Appreciation – Snap photos of staff working to create unusual menu items. Post staff appreciation notes on Instagram feeds and let customers know what an awesome work environment the restaurant generates and how they truly appreciate their staff
- Photo Contests – Set up a photo contest and allows customers to take photos of menu items and offer a $15 gift card to the contest winner.
- Twitter Marketing – An exceptionally popular platform for marketing restaurants, Twitter allows 140 characters of tweet delights.
- Menu Link – Twitter allows links so to further engage customers include a menu link.
- Food Images – Twitter does allow sharing photos, which can help drive traffic to restaurants.
- Group Offers – To help group offers instantly go viral simply advertise a free appetizer or scoop of ice cream on Twitter.
- Hashtags – Popular on Twitter, include hashtags in updates and have them correspond with ones on Instagram for better success rates.
- Time Tweets – The best time for restaurants to send Tweets is right before breakfast, lunch and dinner. Use hashtags for meal times, such as #lunch or #dinner to make these more effective.
- Promoted Tweets – Also consider using tactics to promote specials, such as #Dinner #Daily Specials
- Geo-Target Ads – Similar to Facebook, use Twitter to geo-target ads so local followers receive updates.
- Free Tools – This allows restaurants to respond to reviews, upload photos and create Yelp deals.
- Self Service – This simple advertising solution helps restaurants attract more customers. Restaurants can create targeted Yelp ads, remove competitor ads, upgrade their photo slideshows and set their own personalized advertising budgets.
- Full Service – A premium service, this includes a combination of Yelp ads, expert support and business page upgrades. Other features in this platinum package are targeted ads, removal of competitor ads, a call to action button, an upgraded slideshow, optional high-quality video and a dedicated account manager.
Working in a restaurant also means that restaurateurs should be honest with themselves. Are they social or unsocial? If they prefer dealing with the public, they may be better off in positions that allow them to have contact with customer service.
Restaurant owners need to understand that there are certain responsibilities associated with managing a business. This includes not only developing and analyzing menus, ordering food supplies and inventory, managing restaurant personnel and strategically creating and implementing effective marketing campaigns. It is also necessary that restaurant owners ensure that their business operations comply with all local, state and federal regulations, which includes paperwork, taxes and administrative requirements.
Many restaurant owners have prior experience working in a restaurant, trying out several different restaurant jobs, which then give them better ideas of how restaurants run.
Choosing a Location
Before writing a business plan and attempting to obtain financing, restaurateurs should have a general idea of a restaurant’s location. This allows them to research the types of restaurants nearby, creating a niche to avoid oversaturation of certain types of eateries or types of restaurants.
Choosing a Restaurant Name
Restaurants have several options for selecting names. This is a time for restaurateurs to be creative, paying homage to historic locations, reflecting themes that play on words or add personal touches to restaurants.
Several renowned restaurants feature names after their locations. Thomas Keller’s “The French Laundry” features a name derived from the building that formerly housed a French steam laundry nearly two centuries ago. Consider choosing historic names that have positive connotations instead of negative ones, such as brothels or death sites.
Many exotic restaurants choose names based on menus or themes. For example, Chinese restaurants generally want to convey to customers the type of Asian cuisine they serve, so popular names may include “Fortune Fountain,” “The New Great Wall” or “Jade Palace.”
While “Wendy’s” is a chain restaurant, former founder Dave Thomas named the restaurant after his daughter. Many restaurant owners may also pay homage to their grandparents, cultural roots or parents when naming restaurants.
Play on Words and Unique Concepts
Several restaurants have embraced the unique concepts of playing on words and incorporating them into restaurant themes. Highlighted below are clever examples.
Unless a restaurateur is opening a chain restaurant, it is best to steer clear of adopting any restaurant trademark names, as this avoids any potential legal liabilities.
Developing a Restaurant Menu
A restaurant menu is extremely important, especially before writing a business plan. A restaurant menu allows restaurateurs to help define the following business aspects:
Choosing a Menu Type
There are many different types of menus. It is best if restaurants focus on selecting one type of menu.
Choosing Menu Cycles
Once restaurants determine what type of menu best represents their style of restaurant, it is important to determine menu cycles.
Embrace the Art of Developing Menus
When developing a menu, there are two main creation techniques.
Pricing Menu Dishes
When opening a restaurant, pricing menu items can be trial and error. Pricing items too low can make diners think the ingredients are lower quality and pricing dishes too high makes menus difficult to sell. When pricing dishes, consider the following helpful tips:
Successful restaurants are able to find a healthy balance between profitability and affordability. Restaurants that successfully achieve this balance are able to maximize their profits and attract return customers.
Designing a Restaurant Menu
A little known marketing fact is that the menu is the most significant form of restaurant advertising. A well-designed, immaculately written menu includes flawless descriptions that intrigue customers and wet their taste buds with curiosity. When designing a menu, restaurateurs should consider the following:
Creating a Business Plan
The most essential component to obtaining financing is writing an effective business plan. A business plan should focus on the following concepts:
Obtaining Restaurant Business Funding
Before potential restaurant owners begin working with real estate agents or Realtors(R) to locate restaurant properties, they need to look at the amount of funding they require. The amount of money each restaurant needs for startup costs greatly varies. Some restaurants opt for new equipment, while others shop for second-hand or used equipment to decrease startup expenses.
When opening a restaurant there are three essential financing points to consider: inventory, marketing and necessary operating capital. The latter is the required amount of cash on hand to help pay employees. This also includes decorating costs, equipment, dishes, utensils, etc., These funds are needed until the restaurant begins to generate cash flow.
Business funding is separate from financing a restaurant’s location. There are several business resources that restaurateurs can consider turning to for liquid cash funds or short-term loans.
Studies show that nearly 80-percent of restaurant owners’ use their own savings to help fund their ventures. Approximately one-third receives some money from close friends or family or opts to charge costs to their personal credit cards. Another 20-percent choose to have business partners to help offset startup costs.
Those restaurants that obtained traditional bank financing were able to do so through personal property or personal guarantees, such as putting up the equity in their homes as collateral. Most banks simply will not provide financing for restaurants with today’s volatile economy and market.
Other startup restaurants may be able to lease expensive equipment and then place additional expenses on zero-percent credit cards or obtain loans from the aforementioned sources.
Location, Location, Location
As always, the saying, “Location, Location, Location” has significant truth. A good location can launch a restaurant, while a poor location can break a restaurant before it even opens. The cost of a restaurant building or monthly rent can greatly vary and not all restaurants require high profile retail locations. Important factors to consider when shopping for a restaurant location include the following:
It is also important to check with local and county officials to see if any building remodel permits must be obtained for upgrades, remodels, plumbing, heating or ventilation systems. All these costs must be considered when leasing or purchasing a restaurant building.
Having an excellent layout is essential to any restaurants’ success. When previewing potential restaurant sites, it is important to account for the buildings’ layout. Restaurants typically need a large dining area, kitchen space, a small office and storage space. Most restaurants allow up to 45 to 65-percent for dining area space. Approximately 35-percent of the total building space accounts for the kitchen and prep area. The remainder of the building is dedicated to cold storage, regular storage and an office space.
Designing a Restaurant
When designing a restaurant, it is important to balance ambience with appropriate seating capacity. This means restaurants can entertain enough customers to turn a profit, without having so many customers that the atmosphere is uncomfortable and uninviting.
There are also areas within restaurants that are unappealing to customers, such as tables near the front entrance, kitchen entrance and near restrooms. Tables in the middle of dining areas are also not alluring to patrons. To help disguise some problem areas, consider using disguises, such as tall plants, screens between tables or wood partitions.
Another excellent option is to relocate busing or waiting stations and have staff study views from each seat in the dining room. This helps make sure the dining area always has an appealing view from each seat.
Music and Ambiance
Successful restaurants need a tone that requires just the right amount of music, artwork and decor. It is best to avoid repetitive CDs. Casual dining establishments may be able to use non-commercial radio channels. Live entertainment can be expensive, but does add a unique ambience for upscale establishments. Music groups can draw crowds for special events or on weekends. It is best to make sure the acoustics do not interfere with patrons’ conversation, or this can be unappealing.
Heating and Ventilation
A restaurant’s heating and ventilation system is very important. Patrons are put-off by too many smells. This includes smoky oil and abundant heat output. Commercial ranges require proper ventilation, including fans and hoods. Air conditioning is also necessary, as during the summer, patrons will leave if restaurants are uncomfortably warm and hot. Poor air conditioning and ventilation can ultimately cost restaurants valuable revenue resources in lost sales.
Restaurant staff should regularly check bathrooms at the start of each shift, but more often if the restaurant is busy. Someone should be assigned to refill all toilet paper and paper towel products and promptly remove trash.
Just as important as the flow of a restaurant is decor. Poor outdated decor can immediately turn patrons off and prevent them from entering an establishment. When customers eat in restaurants, they are looking for experiences that are not easy to replicate at home. They desire an atmosphere that is enjoyable and fun.
Restaurants should install lighting fixtures that match their personal design concepts. Bright lighting is uninviting and does not create a romantic ambiance. It is best to opt for soft lighting that helps create a level of comfort, privacy and intimacy. Brighter lighting may be more effective for casual atmospheres, such as coffee shops or fast food dining.
When restaurants are choosing their decor, it is important to select tabletop supplies that match their decor schemes. This includes the following items that should correspond with menu options and match food themes.
Walls and Ceilings
Restaurant walls should reflect appetizing colors. Many studies show that the following colors help to stimulate the appetite: red, green and brown. Additionally, purple, blue and black are to be avoided. White is sterile and unappealing, turning off patrons. Walls that feature wood molding with coordinating paint colors, such as forest green or maroon, help to contribute to an intimate, relaxed atmosphere. In general, the industrial look, which compromises wood, metal and plastic, creates a sterile, cold environment but also offers a very contemporary, modern appearance that is eclectic and generates buzz.
Walls are empty canvases, just waiting for artwork. Restaurants can display local artists’ work or any type of artwork that highlights their restaurants’ themes. Walls are ideal for merchandising sauces, t-shirts, specialized brands and telling the history of restaurants, etc. If ceilings are too high, consider creating the illusion of lower spaces by hanging fabrics to bring ceilings down to a more comfortable height level.
The Hazard Analysis Critical Control Points (HACCP) is a proactive system for food safety. This system helps to prevent food poisoning and restaurants are required to use this system as part of their daily procedures. This involves regularly checking and recording the temperatures of both hot and cold foods every two hours. New restaurants should develop their own custom HACCP plans that tailor to their menus.
There are three main types of flooring options for restaurants to consider:
For restaurants that have abundant natural light, adding plants and flowers adds a calming natural element for customers. Greenery is charming, while flowers can add abundant color and pleasant scents. When using live plants, staff needs to regularly care for them to make sure they remain in healthy condition.
Adding water elements, such as indoor pools and waterfalls, are also soothing elements to restaurants’ atmospheres. Many studies show that the sounds of running water help to relax patrons, relieving everyday stresses.
There are several different business-related licenses restaurants need before opening their doors to the public.
Before opening a restaurant, a business license is required. A business license legally grants restaurant owners the right to operate a restaurant within a specific jurisdiction or building address.
Furthermore, the Small Business Administration states that if the restaurant is involved in transporting interstate plants or animal products, they may also require a federal business license. Local, county or state agencies may also require licensing or charge additional annual fees or percentages of total sales to help maintain license status.
Food Handlers’ Permits
This legal requirement is a permit. A food service establishment is required to have a permit that ensures that restaurants meet all government safety regulations related to food sanitation, protection, preparation and food storage. Employees must obtain individual food handlers’ permits and successfully complete food safety certifications. Each area has different requirements, but some cities or counties may require a tax permit, health permit, building permit, signage alarm or zoning permit in addition to the food handlers’ permit.
State authorities require restaurants to obtain a liquor or alcoholic beverage license. Additionally, many city or county governments also have special liquor licensing requirements that are in addition to state requirements. The type of license restaurants apply for depends on the type of liquor they plan on selling. While restaurants are required to have a license to sell liquor, if they wish to partake in local festivals, they will need to obtain special licenses to serve liquor at community events.
Unbeknownst to many restaurant owners, a license is required to play music from copyrighted CDs, including for karaoke.
In general, the length of time it takes to obtain the aforementioned licenses varies from state-to-state, county-to-county and from city-to-city.
A significant challenge for most restaurants is hiring staff. Restaurant owners need to focus on hiring and retaining qualified employees that help make the restaurant experience pleasant for patrons.
To help achieve this goal, restaurant owners need to develop a comprehensive Human Resources program that includes formal job descriptions that clearly outline job expectations, duties and responsibilities. These descriptions should also list any required credentials and special skills, such as an immaculate driving record, ability to make deliveries, etc.
The next step is to establish a pay scale. Restaurant owners will need to research other nearby restaurant pay scales based on the type of restaurant they are opening. Minimum and maximum wage earnings are established for each job. More qualified job applicants will receive higher pay benefits.
All prospective employees should complete a legal job application, which includes submitting a detailed resume, signing the resume, attaching a sworn statement that the applicant can be fired if he/she is dishonest or lies about his/her background information and that the attached application is true. The application and resume are checked for accuracies and inaccuracies to weed out potentially dishonest applicants.
Tips to help restaurant owners hire excellent personnel include the following:
There are many employee positions that help make a restaurant a success. Some employee roles are well defined, but when a new restaurant opens, employees’ duties may cross over. Restaurant owners should focus on hiring employees that are flexible team players and are willing to help make new restaurants a success.
Generally, payroll costs, including restaurant owners’ salaries should equal approximately 24 to 35-percent of total gross sales.
The most important role in the restaurant is the manager. An excellent candidate will have prior restaurant management experience, have experience working with suppliers, local buying sources and have the ability to work with budgets. Managers should have proven leadership skills and the ability to supervise personnel.
Depending upon the location, experienced managers generally make from $35,000 to $55,000 a year, including a percentage of the restaurants’ sales. If it is not possible to offer a higher salary, restaurant managers can consider a profit-sharing arrangement to help motivate managers to help build a successful restaurant. Restaurant owners should hire a manager approximately one month before opening to have him/her help set up the restaurant and interview additional employees.
Chefs and Cooks
Most restaurants need three cooks. At a minimum one that is part-time and two that are full-time. Chefs and cooks work shifts and depending upon the restaurants’ hours, these can range from 10AM to 4PM or 4PM to closing. Generally, one lead cook arrives early to begin prepping soups and breads. One full-time cook works days and then the other full-time cook works evenings. The part-time cook can assist during peak hours, including busy weekends or as a line cook during slower times. Cooking schools offer excellent leads for potential employees. To help restaurants develop long-term patrons, it is essential that restaurant owners focus on hiring superb cooks and chefs.
Varying from location-to-location, salaries for chefs and cooks vary. Chefs generally work under a profit sharing plan and can earn $1,300 to $1,800 a week. Cooks with experience are paid $575 to $650 weekly. Part-time cooks are paid on an hourly basis.
Servers interact the most with customers, which means they are responsible for making a favorable impression with patrons. There are two main times the day for restaurants: busy and slow. Restaurant managers should schedule servers accordingly.
Most servers rely on earning their income from tips, as they usually receive minimum wage. Hiring experienced waiters is beneficial, as they require minimal training and present positive images of restaurants to customers.
A good bartender can be like gold to a restaurant. A bartender is responsible for helping the staff create and deliver drinks. Bartender responsibilities include a variety of tasks, including ordering liquor and beer, changing beer gas, ordering non-alcoholic drinks, stocking liquor shelves and beer coolers and creating drink specials and promotions.
A bartender should have experience because it is a very specific job. Bartenders are also sales people, but they should never be pushy. Since restaurants that offer full bars also feature full dinner service, the bartenders should be well versed and educated in the menu, daily specials and be able to recommend several dishes.
There are many questions that restaurant owners and managers should consider asking bartender candidates.
By asking these questions, restaurants can help reduce and eliminate their liabilities and hire professional bartenders that are profitable assets.
Generating Marketing and Buzz
One of the first steps to cohesive marketing is reviewing all marketing materials. Do menus, signs, advertisements, table tents, etc., all relay an accurate message and branding that helps potential customers recognize the restaurant name and brand?
A great way for startup restaurants to generate buzz is to give away gift certificates for promotional events. This may include having a booth at farmers’ markets, community events, contacting local radio stations and speaking to promotions managers, donating coupons for door prizes at professional meetings, offering gift certificates as raffle prizes for nonprofit organizations, sponsoring local teams, joining discount coupon books and frequent dining clubs, researching menu promotions and even holding contests.
To help increase startup restaurant exposure, restaurant owners can explore several traditional advertising avenues.
Additional out-of-the-box advertising methods include:
Having a restaurant website is vital so restaurants can pop up in search engine results. A restaurant website should list a home page about the restaurant, the menu, specials, catering, if available, contact information and hours. Remember to make the address and phone number easily visible by placing it in the header of the website and use the restaurant’s logo and brand to help customers clearly identify if they have landed on the correct website.
In today’s world, more people search online for restaurants. It is important that all restaurants add their contact information to Google Places to help increase their search engine results, which helps increase their website traffic. Google Places also allows restaurant owners’ to include photos, videos, select custom categories, upload coupons, highlight specials, pinpoint maps, add hours and additional information. Google Places upload information is available here.
Urbanspoon is the leading online restaurant site that compiles reviews from diners, bloggers and professional food critics. It is available online and via applications for the Windows Phone, iPhone and Android. They provide restaurant ratings and information throughout Canada, Ireland, Australia, New Zealand and the United States. Restaurants are easy to add to their lengthy directory by submitting their in
Yelp helps business owners respond to reviews, measure visitor activity on their pages and convert visitors into customers. They offer several different service levels, including the following:
Starting a restaurant takes perseverance, hard work and dedication. Taking significant time it will not happen overnight. If a current restaurant is purchased, a new restaurant may be able to open in its place in as few as 30 days. However, if a restaurateur is starting a new venture, it may take several months to complete permitting and licensing alone.