This article is part of our Restaurant Business Startup Guide—a curated list of articles to help you plan, start, and grow your restaurant business!
If you’ve wanted to start a restaurant for years, it might be time to sit down and draw up a plan to open your own business. To help you create a recipe for success, we’ve put together a how-to-get-started guide to make sure you have all the ingredients you need to open your restaurant with confidence.
While starting a restaurant is exciting, it’s also time-consuming and one of the toughest businesses to successfully launch. In fact, 60 percent of restaurants fail in the first year.
We’re not telling you this to temper your passion. We’re merely pointing out that if you want a successful restaurant, you’ll need to invest some serious time and money.
Why do many restaurants fail?
What’s the biggest reason for failure? Lack of planning. Before you ever make dinner for a customer, you’ll spend a lot of time figuring out every detail of your restaurant. From kitchen appliances and menus to floors plans and staff selections, the planning stage will make or break your restaurant.
To help you plan, fund, and manage your new restaurant, we’ve asked a couple of owners to share their trade secrets. Kim Strengari owns three successful restaurants in the Philadelphia region, including Stella Blu, and Lambrine Macejewski is the co-founder of Cocina 214, a contemporary Mexican restaurant in Winter Park, Florida. Omer Orian, co-founder of Off the Waffle, has three locations—two in Eugene, Oregon and one in Portland. Below are their tips for success.
Tips for starting a successful restaurant
1. Have the right intentions
If you want to make it as a restaurant owner, you have to love what you do, Kim Strengari says. While she knew a restaurant was the right path for her, she had to work nights cleaning office buildings to make ends meet when she first opened her restaurant.
“I wanted the restaurant more than anything else in life, so the sacrifices were endless and I never minded making them,” she says.
To be successful, you’ll invest a lot of time and money—so make sure that starting a restaurant is your passion, not just a business venture you hope will make money. “It’s harder than you can imagine,” says Omer Orien, “but people do it all the time. It’s not at all dreamy.”
In these early days, it’s also a good idea to figure out what you want your restaurant to look like. What will be your restaurant’s aesthetic? What furniture will you need to purchase to fit the theme? How will you lay your restaurant out? Trent Furniture, a British furniture company, has a great article on the topic to help you get started.
Orien says, “A lot of it has to do with figuring out what kind of environment you want to work in, what will make you feel the way you want to feel. It also doesn’t hurt to have people in your life who have an eye for design.” Orien sat down with his co-founders and built a 3-D model to plan the layout of their first location. And ultimately, they did most of the work to build out the space themselves.
2. Have a solid business plan in place
You can’t scratch a business plan out on a cocktail napkin. You need a detailed business plan that charts the course for your success. That said, we suggest beginning with a Lean Plan that keeps the business planning process simple. Think of your business plan as a living document that you return to regularly to help you plan for growth and measure your progress.
Orien says that he really got serious about his business plan when it was time to grow and expand to a new location. It helped them figure out what was feasible and figure out how to move forward.
Your business plan should include market research, a comprehensive look at your competitors, information on your target audience, an outline of your marketing plan, and a solid financial and budgeting projection. To get you started, check out these templates specifically for restaurant planning, or check out LivePlan business planning software, that will walk you through the process. As you think about what you want your restaurant to look like, don’t forget to keep an eye on industry trends. As with any startup, timing is key.
Pay special attention to your marketing plan
You can only rely on word of mouth to bring in so many customers, so you’ll need a marketing plan in place to keep new people streaming through your doors.
Here are a few ideas:
- Participate in community events and give out food samples
- Offer discounts to new customers
- Join the local business association
- Utilize social media channels
3. Location, location, location
With a restaurant, location is everything. You need a spot that draws crowds, is easily accessible, and has the potential for growth. Of course, you need a location that fits within your budget too.
It makes sense to take your time, as you’re looking for the right space. You might also want to do some research to find out of there are any startup incubator spaces for restaurants that you can join to keep initial costs low and that might come with mentorship opportunities. Whether you decide to rent space or build from scratch, selecting a location is one of the biggest decisions you’ll make as an owner. But you don’t have to do a huge build out at first.
When Orien was ready to launch Off the Waffle, he says he only had $3,000 to get the business started. “It sounds impossible,” he says, “but we found a bunch of hacks to make it work. We found a house that was actually in a commercial zone, so we were able to live and work in the same place.”
Orien’s three locations are all dedicated restaurant spaces, but it’s a good reminder to start small. “Once you’re $300,000 into a buildout for your location, it’s not like a house that you can just sell. There’s not a lot of retained value, he says. You’re sort of stuck with it.” So it makes sense to think it all through and test a smaller scale version before taking a huge and expensive leap.
4. Test your menu
Approach building your menu like an experiment. Consider having a dinner party featuring your proposed menu where you ask people for their honest feedback.
But don’t just invite your closest friends and family members. You might love the taste of a certain dish, but if customers won’t pay for it or aren’t keen on its taste, you won’t make money. When you ask for feedback, consider using a method that allows anonymous comments so that you get people’s honest reactions. Do your market research. Visit other restaurants to get a sense of appropriate pricing.
Orien says that when Off the Waffle first launched, there were only two items on the menu: a liege waffle and a glass of milk. He tested a lot of different ideas, including folding ingredients into the waffle dough and stuffing waffles like a pita pocket. Those approaches didn’t really delight their customers. So they moved on to interesting waffle toppings, and people loved it.
5. Hire essential help
How many people do you need on staff to get started? Some restaurant pros advocate for bringing on a manager prior to opening day, but think through your biggest needs. Do you need a dishwasher? How many cooks? What about servers? Take your time as you hire staff. Consider doing a soft opening so you can see how smoothly things run with just a few essential positions.
When Orien launched his first restaurant, the only employees were family. They scaled up slowly, but now they have around 50 employees working at their three locations. “When we started, we were newbies, so if we hired too quickly, we would have had trouble paying people a salary that would have brought in people with enough skills to make up for our inexperience. Over time, we learned how to do all the roles.” But now, he says if he opened a fourth location, it would be a natural progression to hire a manager right off the bat. He’s in a better position to be able to train them well.
Invest in training your employees
To better manage your staff, make sure you have employee training materials ready. Create job descriptions, codes of conduct, and an employee handbook. Create a training guide so employees are well prepared for their respective positions. Document recipes for your cooks so every meal is made to perfection. In other words, give your employees all of the necessary tools to succeed, Macejewski says.
Be willing to fill in where needed
As the owner, you can’t have an ego, Strengari says. If your idea of owning a restaurant is walking around in a pretty dress and makeup and asking customers what they think of the food, you’ll be in for a surprise. You have to be willing to do every job. From chopping vegetables to seating customers, you’ll have to fill in from time to time.
Watch your labor costs
A lot of restaurateurs have the urge to hire, hire, hire. While you will probably need to hire some staff to make your restaurant a success, don’t go overboard. Paying employees can be daunting, especially in the first few months when you’re not making a lot of money. It’s not always easy to figure out how many staff to hire the right amount of staff, Macejewski says.
“It’s tough to plan for if you are seasonal or have sporadic business, but you don’t want people on the clock if you don’t have the business,” she says. “You can’t afford it.”
6. Secure funding and manage your cash flow
Generate startup capital: As with every business, make sure you know how much money you need to get your restaurant off the ground.
You’ll need three pools of money. The first pool is for one-time costs like equipment (check out this calculator to help you figure out startup costs). The second pool is to cover the restaurant expenses for at least six months, and the third pool is to cover your personal bills for at least six months. You’ll want to have at least six months of cushion because you’ll probably find that your expenses outpace your revenue for at least that long.
Plan to lose money for the first six months: Restaurants aren’t profitable overnight. It takes time to market your new place, attract a crowd, and get people to come back for more. Some say you shouldn’t plan on making money for at least the first six months.
Plan for bumps in the road: It’s easy to go over budget when you’re first starting out, so make sure that you have some additional money to cover the unexpected. If you’re not sure about how to do this, consider a business line of credit.
When you do hit a bump, evaluate the numbers and your processes, Lambrine Macejewski says. For example, when she first opened her restaurant, she realized her food costs were too high. She called her vendors and switched from a five-day delivery schedule to a two-day schedule. She saved the money she needed by investigating the problem and looking for a solution.
Watch your food cost: You’re in the business of making food, but if your food costs are out of line you’ll end up losing money. Make sure you keep track of your inventory, prepare food well, avoid waste, and keep prices competitive.
7. Keep marketing
You can’t depend on repeat customers, so you’ll need to keep your marketing efforts up to make sure your revenue stream doesn’t thin out. Establish a strong social media presence, try an ad in your local paper, participate in the local fair, or host a small non-profit get together at your restaurant to keep marketing your business.
Share your restaurant startup advice with us!
For the right owner, there’s nothing better than running a restaurant. You get to create an atmosphere and cuisine that people will love, but it comes with a lot of hard work.
Reach out to us on Twitter and share what you’ve learned through starting a restaurant, or let us know what else you think it takes. We’d love to hear from you!