How to open a restaurant – a 9-step guide

Restaurant startup: have you got what it takes?

There are plenty of challenges in the restaurant industry today. Jamie Oliver’s chains, including Jamie’s Italian and Barbecoa, collapsed recently, leading Sky News to ask whether Britain’s “losing its appetite” for casual dining.

But there are plenty of success stories too. Mexican street food chain Wahaca, co-founded by MasterChef winner Thomasina Miers in 2007, now has 25 locations across the UK. And Franco Manca has popularised sourdough pizza across the country, growing from a small pizzeria in Brixton to operating nearly 50 branches.

Making a success of your restaurant requires you to be highly motivated yet patient. It’s a good idea to have restaurant experience already, so you know how to source food suppliers, run a kitchen and deal with customers.

You’ll also get to reap the benefits of taking the plunge and going self-employed – being your own boss, working the hours you want, and building something from the ground up.

Keep in mind though that, especially while you’re getting started, you should expect to put in a lot of time and effort (meaning long evenings and working over the weekend).

Here’s our nine-step guide on what to think about before you get started.

How to start a restaurant business – step by step

1. Think about new restaurant ideas

First you want to nail the concept for your restaurant. You might have a specific feel and experience in mind, which you can then build a menu around.

Alternatively you might have the food already and a restaurant is the next step – for example, you’re selling street food at a stall and want to get it in front of more people. In that case, you should decide on the ambience and service you want your restaurant to have.

It’s useful to compare the experience customers get in a casual chain like Nando’s with the fare clientele receive in a Michelin-starred restaurant. Where will yours sit on that scale?

For inspiration, here are some of the BBC’s food and drink trends for 2019:

• Sri Lankan cuisine
• ugly fruit and veg (or rescued food)
• low or no alcohol

2. Explore all your restaurant business opportunities

You’ve got your idea, but have you done your research? There might be opportunities you haven’t come across – or challenges you didn’t spot. Doing your homework can help inform decisions you make about your business, including location, menu and prices.

First, you should carry out proper market research to identify your audience and establish what you need to do to cater to their needs. It’s no good serving up amazing food that no-one will buy. Think about what your ideal customer looks like, then research where they live and work, how much they’d be willing to pay, and what food they already enjoy.

Next, it’s competitor research, where you check out who’s already operating in the space. This is where you might find there’s lots of restaurants in the area that have a similar concept to yours, prompting a rethink. Or, you could find there’s no restaurants with a similar theme, meaning you should dig around and find out why that is – is it because there’s no market for it?

3. Starting your restaurant business

Now you can start building a proper business plan. This should answer a lot of questions before you get started – and help you secure funding.

You can read more about how to write a business plan, but here are some of the most important things to include:

• a summary of your idea and an overview of the rest of your plan
• your research, including audience research and competitor analysis
• the funding you need
• details of your menu and how much you’ll charge customers
• a marketing plan to promote your new restaurant
• overheads
• financial forecasts

When you’re pricing your menu, Start Up Loans suggest that you should aim for “a margin for each dish on your menu of around 65 per cent after the cost of ingredients.”

Your business plan should address your restaurant’s cashflow, taking its break-even point into account. Start Up Loans also say that most restaurants don’t make a profit in the first year – so be prepared for that, too.

Costs involved in running a restaurant business

There’s lots of costs even before customers get a taste of your menu. You need to make sure you’ve put a comprehensive plan in place to address them all.

This isn’t a complete list, but it’s a good springboard to help you work everything out.

• rent for your commercial premises
• hiring employees
• buying furniture and decorating your restaurant
• stocking ingredients and drinks
• buying equipment
• restaurant insurance
• marketing, including printing menus

4. How to choose a restaurant location

Your restaurant’s location is going to play a big part in its success. In fact, it could be the one thing that makes it thrive – or dive.

First, you need somewhere that fits your concept. If it’s high-end, for example, go for somewhere exclusive that will attract the customers you’re after.

There should be good footfall (or passing car traffic). Again, research is key here. Check out the surrounding area and its population, even the kind of businesses that have operated from the premises before. Think about all the related costs, too, like how much utilities will set you back.

You also need to make a decision about whether you’re going to rent a premises or buy it outright.

5. Setting up your restaurant

This is where you can have fun with your concept. You should think about branding and how that extends to different aspects of your restaurant, from your menu to the decor and your website.

Your menu should be perfectly presented, as it’s the first ‘taste’ your customers will get of your food. It should be easy to read, with short but enticing descriptions of your meals. Separate it into specific sections (on a basic level, starters, mains and desserts), flavoured with your restaurant’s theme.

The right equipment is essential, too – and kitting out your restaurant will be one of the biggest expenses when getting your business off the ground. You need to buy the small things (cutlery) and the large (fridges, freezers and dishwashers). You might want to tie some of this stuff, like your crockery, in with your theme.

6. Get the right insurance for your restaurant

It’s important to think about a restaurant insurance policy that suits the unique needs of your business. Here are some key covers:

• public liability insurance – this protects you if someone is injured or their property is damaged because of your business
• employers’ liability insurance – this is usually a legal requirement if you have staff. It protects you if an employee gets ill or injured as a result of working for you
• business contents insurance – this helps you continue trading if the things you keep on your business premises are lost, stolen or damaged
• business buildings insurance – this can cover your premises if it’s damaged or destroyed, but if you rent, check with your landlord to see what’s already covered

7. Get up to speed with food business legalities

There are lots of regulations that restaurants need to follow, so it’s a good idea to get up to speed before you open.

The Food Standards Agency is a good source of information on what you need to do before you start trading.

First, you should register your food business with your local authority at least 28 days before opening.

It’s a legal requirement to have a Food Hygiene Certificate and it gives your customers clear information about your hygiene standards. The Food Standards Agency say that all business should be able to achieve the highest rating of five, so this is what you should aim for.

And remember, don’t let your standards slip, as Environmental Health Officers can make unannounced visits.

There’s a range of other regulations to get to grips with, too, covering things like storage, labelling and food preparation areas. Make sure you do your reading so you comply (and get professional help if you need it).

Some customers may have severe allergies, so you should state any risks on your menu. Read our article for more information on food labelling regulations and the importance of adhering to these.

And finally, it’s likely that you’ll need licences and permits, for things like selling alcohol and playing music. And if you’re building your own premises or making alterations, you might need a building permit and planning permission.

8. Running your restaurant business

You’re ready to launch an amazing restaurant with great food, but you still need to work hard to convince customers to walk through the door. Here are some restaurant marketing ideas:

• a launch party, inviting local restaurant critics and the press
• partnerships with other local businesses
• a loyalty scheme (like the free meal at Nando’s after you’ve collected enough stamps)
• go big on social media (are there any local influencers who can help promote your restaurant?)
• a monthly email newsletter, highlighting specials from the menu and giving customers recipe ideas to try at home

Be sure to set up a proper, professional website. People check menus online before deciding to eat somewhere. Your website can also list your location, contact details and have a table booking system.

Customer reviews are incredibly important, with more and more people deciding where to eat based on a quick Google search. This means it’s good to get to grips with Search Engine Optimisation – and more importantly, make sure your customer service is impeccable. Even if someone does leave a bad review, the way you respond can still leave a positive impression.

Potential customers are likely to search for reviews from previous customers when deciding whether or not to dine at your restaurant. If you get your reviews via a third party tool like Feefo, it’s a good idea to run the URL through a URL shortening app like Rebrandly.

Doing this will give you a better idea of who’s clicking on your reviews and who isn’t, which can help you plan marketing campaigns to promote your latest offers.

Giving great customer service relies on hiring great employees. Start Up Loans say that staff should account for no more than 50 per cent of your total costs. You’ll need a chef, a manager and waiting staff, depending on the size of your business. The most important thing is that you hire brilliant representatives of your brand – they should be positive and friendly, even when customers aren’t.

9. Future proofing your restaurant

When your business is booming, it’s an idea to think about what comes next. While it might seem early to start thinking about future opportunities, perhaps you could start a takeaway business alongside your main restaurant or look into franchising?

Read more about takeaway restaurant insurance.

More small business guides and resources

• Business Name Generator
• Guide to Making Tax Digital for small businesses
• How to register as self-employed with HMRC
• Why do I need business insurance?

Wherever you decide to take your restaurant, why not let us know how you get on in the comments below.