- More people are eating out at restaurants, creating more profitable opportunities for business owners.
- Understanding the ins and outs of the restaurant industry is key to building a business that can stand out among the competition.
- Focus on giving customers an optimal experience at your restaurant to create a loyal customer base.
- This article is for anyone considering starting a restaurant.
Foodie entrepreneurs often dream of starting a restaurant and turning their passion for cuisine into profit. Of course, you know you’ll need to choose an appropriate space, create an appealing menu for your target customers, hire the right staff and promote your new restaurant before opening your doors to the community. However, there are many steps to take before diving in.
Starting a restaurant will give you a full plate of responsibilities, so before you open an eatery, you’ll want to ensure you’re prepared for every step. We talked to industry veterans who shared tips for navigating the business and launching a successful restaurant.
How to start a restaurant
If you believe starting a business in the restaurant space is right for you, consider the following tips to help you get started.
1. Do your homework before starting a restaurant.
In any industry, doing your due diligence before starting up is critical for success. This is especially true for the restaurant business, where simply knowing good food isn’t enough.
Joe Erickson, vice president of RestaurantOwner.com, said thousands of independent restaurants fail every year because owners are not prepared or aware of what needs to be done.
“Thoroughly research the financial metrics of a profitable restaurant, the systems successful restaurant owners use to promote consistency and predictability and the type of culture that will attract the best workers,” Erickson said. “[Potential owners] need to understand the challenges of restaurant ownership before spending their life’s savings.”
Even if you’ve worked in a restaurant, there are still many legal, managerial and marketing lessons to learn. For example, many would-be restaurateurs overlook local licensing and health regulations. Michele Stumpe, a Georgia-based attorney specializing in alcohol licensing and hospitality litigation, stressed the importance of knowing local and state business regulations in your restaurant’s location, especially since state and even county laws can vary.
Stumpe advises aspiring restaurateurs planning a launch to factor in the time permitting and inspection processes will take.
Before you can start a restaurant, you’ll need several business licenses and permits. These can include a food service license, building health permit and certificate of occupancy.
2. Get as much restaurant industry experience as you can.
Getting your bearings in the restaurant industry as a first-timer can be challenging. If you don’t have previous experience in the business, it’s essential to partner with or hire someone who does.
When Costanzo Astarita started his Atlanta restaurant Baraonda in December 2000, he and his partner had worked on the food preparation and management sides of the industry. Still, he didn’t know much about commercial leases.
“I wish I had understood how to negotiate them when I started,” Astarita said. “I think that any new restaurateur who is unfamiliar with commercial leases should hire a lawyer who specializes in that field.”
Tony Doyle, owner of Hells Kitchen Hospitality Group, has worked in restaurants since age 12 and opened several successful restaurants. However, he still had a lot to learn when he opened his first establishment.
“There were a lot of things I’d never dealt with before — employees, payroll, taxes, bank account management, etc.,” Doyle said. “You need to get a general knowledge of the working of the business before you start. There are a lot of issues that people don’t see.”
3. Choose the right restaurant location.
Choosing the right business location is crucial. Without a good location, your restaurant is doomed to fail, no matter how great it is otherwise.
In the 30 years she’s been in business, Paola Bottero moved her Manhattan eatery three times before settling on her current location. Marco Pipolo, owner of New York City’s Marcony Ristorante, has learned valuable lessons from each of the five restaurants he’s owned, but one of the most important is that location can make or break your business.
Even with a mobile eatery, location can still present an issue. Daniel Shemtob, co-founder and executive chef at Los Angeles-based TLT Food, recalled a harrowing first day working on The Lime Truck.
“[My co-founder and I] were in the middle of nowhere — we didn’t have propane to cook and the truck wouldn’t start,” said Shemtob, who recalled having to hotwire the truck and wait for someone to come help them.
“Then there are other factors, like traffic,” he added.
A mobile restaurant POS system is a game-changer for a mobile eatery, letting you ring up purchases on the fly, offer fast checkout and stay on top of inventory management.
4. Be adaptable when running your restaurant.
While food quality and service consistency are crucial for success, the restaurant business is far from static.
“I have found over the years that you constantly need to be updating, renovating and evolving with the ever-changing taste of the public to be successful,” Pipolo said.
Shemtob agreed, noting that his menu is constantly changing to allow for newer, more innovative dishes. When you come up with your concept and menu, it should be flexible enough to adapt when your customers ask for something new.
5. Put your customers first to help your restaurant succeed.
Everyone knows a successful restaurant must serve delicious food. Still, many other factors contribute to your venture’s success — and most of them boil down to happy, loyal customers. If there’s one thing Bottero wishes she had known when she started, it’s that building customer loyalty is challenging and takes time, even if your menu is top-notch.
“Customers make the place,” Bottero noted. “You have to earn their trust by making sure they’re taken care of and providing the best service possible. In today’s market, you also can’t succeed without social media. Good food is important, but so is good technology.”
running a gift card program to boost restaurant sales over the holidays, build brand awareness and appeal to new customers.
Pros and cons of starting a restaurant
If you’re thinking about starting a restaurant, consider the advantages and disadvantages to inform your decision and ensure you’re starting your venture with all the facts.
The pros of starting a restaurant include the following:
- People are eating out more often: A Popmenu study found that 58 percent of consumers are dining out more than they did in 2021. About 30 percent of consumers spend an average of $180 per week eating at restaurants. With more people turning to restaurants as a convenient, time-saving and, sometimes, cost-effective option, now could be a great time to start your venture.
- You’re your own boss: While owning a restaurant adds significant responsibilities to your plate (pun intended), it also means you can structure and operate your business however you please. When you embark on your entrepreneurship journey, you determine your restaurant’s hours, the specials you’ll serve weekly and how to decorate your space.
- You serve your community: Owning a restaurant can help you connect with the people in your local community in many ways. If you get pleasure from serving people, you can give your customers a quality dining experience that keeps them coming back. That can put smiles on everyone’s faces.
The cons of restaurant ownership include the following:
- There’s a lot of competition: The restaurant industry is very competitive. The annual growth rate among chain restaurants is expected to increase by 13.5 percent by the end of 2022. Smaller establishments might struggle to keep up with this competition, not to mention competition from other small restaurants.
- Expensive startup costs: On average, the cost of starting a restaurant ranges anywhere from $175,000 to $750,000, depending on the size and type. Either way, starting a restaurant requires a significant upfront investment in your business. Business startup costs include location, materials, staff, restaurant equipment and many more expenses. It might take a while for your business to prove profitable.
- High turnover rate: According to the Bureau of Labor Statistics, the restaurant industry has a turnover rate of 86.3 percent, the highest of all industries. Improving employee turnover at a restaurant can be a challenging feat. Many restaurant workers are teenagers and students looking to make money without committing to long-term positions.
Getting off to a good start
Starting a restaurant can be an enormous venture, but with the proper steps, you can build a profitable business that keeps customers happy.
As you start the process, consider your motivation. Are you looking for another source of income? Do you want your community raving about your new dish? Knowing what’s driving you can help you stay motivated during the long days and nights of working to build a successful business.
Shayna Waltower and Nicole Fallon contributed to the reporting and writing of this article. Some source interviews were conducted for a previous version of this article.