Starting a restaurant isn’t a job for the fainthearted. Although they’re among the most popular businesses for first-time entrepreneurs, success doesn’t come easily.
New entrepreneurs should immerse themselves in everything they can find about how to open a successful restaurant. The nice thing about failure is there’s no need to experience it firsthand — people can learn from the mistakes of others.
Developing an Overall Concept
Every restaurant needs a concept, from a cozy morning coffee spot to fine dining establishments. Developing the right one means examining several factors, including owner preferences. However, there’s also a symbiotic relationship between various elements. The most engaging theme restaurant ever won’t fly in the wrong location.
For example, fans of the hit TV show “Bar Rescue” no doubt remember the pirate episode fondly. These restaurateurs had a fun, kitschy and party-like concept built around the aforementioned theme that might have gone swimmingly in Disney’s Magic Kingdom. Unfortunately, it wasn’t properly suited for a downtown corporate location flooded with high-rise office suites.
When designing a restaurant concept, keep the following elements in mind.
Location largely determines the target market. Ask the following questions:
- What other restaurants are nearby?: Does this small-town location have five or six steakhouses? If so, another one will be up against stiff competition. What does the area need that it doesn’t already have? The restaurant doesn’t have to be the only Thai game in town but should differentiate itself from the competition.
- What other businesses are nearby?: People often dine out for workday lunches, on their way home from the office or to somewhere else. What’s the local scene? Is the restaurant within a lively arts district or surrounded by sober accounting offices?
- Who is the target market?: People don’t like to travel far for a single meal. What are the demographics in the desired location and what kind of concept would best fit the overall vibe?
2. Hours of Operation
A restaurant’s hours of operation also depend upon its concept. There aren’t many breakfast-and-lunch joints open past 3 pm. Likewise, a sports bar that closes at 8:00 pm risks angering patrons who miss part of the game.
Ever since the pandemic, restaurants in some locations have had abbreviated hours. Staying open for shorter periods can save overhead, but it also leaves valuable real estate sitting vacant for hours. Will staying open longer increase the profit margin? Run the numbers.
3. Requisite Licenses
All restaurants need specific licenses, like the following:
- Business license
- Certificate of occupancy
- Food handlers permit
- Facility health permit
- Employee health permit
However, they might need others, depending on the concept. For example, restaurants that serve alcohol must obtain the requisite liquor license.
Setting the Right Prices
Restaurateurs go into business to make money, which largely depends on correctly pricing menu items. Fortunately, there are technological tools today that make the job easier. For example, online calculators price meals by recipe, helping owners decide what to charge.
Many restaurants make up to 25% of their revenue from liquor sales and many go far beyond that. The labor costs for mixing drinks are far lower than running the kitchen and markups can be steep, yet people still fork over their cash. A signature cocktail or two could be one ticket to greater profitability.
Hiring the Right People
Finding the right people is a critical detail that makes many people starting a restaurant stumble. After all, the federal minimum wage for tipped employees still stands at a dismal $2.13, although many states have raised that number. Nevertheless, the industry has a 70% turnover rate, which isn’t good for building repeat business.
However, those with an easier time retaining staff remember a few critical details. First and foremost is avoiding assigning miscellaneous extra tasks to tipped employees. Why? It cuts into their pay. Every minute a bartender is helping with dishes instead of mixing cosmopolitans and daiquiris, they aren’t earning tips — they’re only getting their hourly wage. Either adjust their base pay or keep them in front of customers.
Furthermore, keep in mind that employees are human, too. One reason the industry’s turnover rate is so high is many people quit instead of missing important life events like their child’s graduation or grandchild’s birth. Does the concept require the restaurant to stay open 24/7? If so, owners must ensure adequate staffing so all employees can take time off when necessary without scrambling to find someone to cover their shifts.
Installing the Right Equipment
What equipment a restaurant needs depends largely on its cuisine. A brick oven pizza shop needs a brick oven. However, every successful eatery needs one bit of technology that every successful eatery needs — a reliable POS system.
A POS or point-of-sale system should feature 24/7 customer service — especially as the restaurant gets up and running. It should be customizable for individual menus and preferably include handheld devices that help serving staff get each order accurate every time.
Marketing the Location
A restaurant might have the best food in the world, but no one will come if they don’t know it exists. That’s where marketing comes in.
It’s easy to spend a small fortune on marketing. However, new restaurateurs have to balance this need against other costs. What are some inexpensive advertising channels to try? Consider the following:
- Social media: Share pictures of menu items on popular platforms like Twitter and TikTok. Ask family and friends to “like” and “share” posts.
- Blogging: Restaurants should have a web presence. Sharing the occasional article about the health benefits of a favorite ingredient or a sneak preview of the new seasonal menu can attract interest.
- Sponsor a charity event: Is there a race or park cleanup going down nearby? Signing up to provide food for the event attracts local interest in the menu.
- Partner with another local business: Restaurants that partner with local media firms and newspapers can build mutually supportive relationships. For example, some restaurants have business cards on their tables, or feature a media company’s name on their placemats or menus.
- Press releases: Owners can also write press releases about upcoming restaurant events to attract public interest.
Cover All Bases When Starting a Restaurant
Starting a restaurant is the dream of countless entrepreneurs. Unfortunately, many such eateries fail within their first few years when their owners overlook critical details in the planning phase.
Keep the above critical details in mind when starting a restaurant. The right business model charts the path to success.