Establishing a restaurant is an exciting venture and one of the most rewarding businesses we know. A passion for food, commitment to customer service and a secret recipe or two will get you in the door. But restaurants are dynamic businesses with many moving parts. Potential restaurant owners need to consider everything from creating a new menu, to obtaining licenses, to figuring out the right kind of real estate to invest in. Be prepared to set your restaurant up for success with these 5 tips to make sure you’re covering the basics prior to opening your doors.
Drafting a Business Plan—Start the process off right with a well-crafted business plan with lots of specifics about how you intend to make your vision into a reality. These plans should map out how your business will operate the moment you open, providing a roadmap for your team and investors. The essential elements of a noteworthy business plan include: an executive summary, a company overview, a competitive analysis, a financial analysis, an operations plan, and a marketing campaign.
Pro Tip: Write the executive summary last. This way you have a clear picture of what is really contained in your plan and how to most effectively describe your business’s outlook.
Generating Capital—It’s no secret that opening a restaurant can be an expensive venture that requires large amounts of capital to sustain. However, this fact shouldn’t deter you from opening an establishment because several sources of funding can help you finance your operation in its entirety.
Working Capital Loans—These loans cover the everyday operations of your business. They don’t buy long-term assets but are instead used to pay for short-term needs for your restaurant. Budget about 12 months of operational costs to determine the loan amount you need to request.
Lines of Credit—Your financial institution can issue you lines of credit that work a bit like a credit card. The more you pay your balance, the more credit you’ll have access to for upcoming expenses. This option tends to carry lower interest rates than credit cards and can be a great alternative for qualifying companies.
Equipment Loans—Many banks have specific loans that let you finance 100% of the cost of new or used equipment. For your restaurant, that may mean funding the cost of several ovens or refrigerators. Compare rates before deciding on an equipment loan. Traditional banks offer favorable interest rates and terms, but online lenders may be able to provide better financing options if you need to purchase your equipment quickly or if your credit is less than stellar.
Additional Sources—There are other sources of funding outside the typical banking route. You may consider raising capital by crowdsourcing or by seeking angel investment. Do your research and talk with a financial advisor to weigh the benefits and risks of alternative funding.
Designing the Menu—The restaurant business can be a tough industry with stiff competition. As a new restaurant owner, your competition exists both within and outside your culinary category. How do good restaurants differentiate themselves? As a new establishment, you may want to price your menu items slightly lower than your competition to attract patrons. Conversely, you could also price your menu items higher than your competition, convincing restaurant goers your quality is better. As for taste, ask yourself how you can differentiate flavor profiles from competitors. Are there unique sauces you can create? Is there a special spice mix that your chef can design? It may be tempting to construct a menu that’s like other successful restaurants, but that might not be enough to draw in new patrons.
Picking the Restaurant Location—In real estate they say it’s all about location and restaurants are a prime example. Choosing the right location is just as important as creating a menu, sometimes even more so. To be successful in picking a restaurant location, you’ll need to determine the profile of your ideal customer, the community environment, and the size of the building. Also, the restaurant building should match the menu you’re creating. A high-end French restaurant needs a different “look” to the location than a classic American hamburger joint.
Securing Licenses and Permits—It takes time and dedication to secure the important permits and licenses needed to open a restaurant. You’ll want to get a head start because it may take months to get the licenses you need. Be sure to carefully research the specific state laws and costs associated with these licenses.
Opening a restaurant is a creative and exciting process. If you do your research and plan carefully, you will have the ability to spend less time doing paperwork and more time focused on developing the innovative elements of your establishment.
About Restaurant Magic:
Restaurant Magic Software has been providing advanced software solutions to the restaurant and hospitality industry for over 20 years. The robust Management Suite, the flagship product, is a powerful and flexible application that takes advantage of the latest technology trends to offer premier processing and analytics. With advanced forecasting, predictive scheduling and mobile technologies, Restaurant Magic has something for every problem. To learn more about Restaurant Magic Software and its products, call us at 1(800) 933-4711 or visit the website at RestaurantMagic.com.