How to open a restaurant – Complete Guide | Startup-Costs | Marketing

How to open a restaurant- Starting a new restaurant can be a fun occupation for someone with a keen aptitude and passion for cooking and craft. Those are the two ingredients of a business plan that can outline making a successful restaurant/cafe business. My family has been in this business for little over 70 years now, and I have experienced every single fortune and failure that comes with it. In your quest to begin in the big bad world of the culinary business, you have to shift your focus from thinking of this endeavor  as a hobby and start looking at it as something that you can subsist on.

In this definitive guide on How to open a restaurant, there will be three main sections that each is equally important.We can call these three the pillars of the foundation of the restaurant plan which is beneficial for a small restaurant as well as 500 seater. Without any of these three,you will certainly fail and the foundation will come crumbling down.

Note:This restaurant success guide is extremely long,but also concise and to the point.

1.Restaurant Startup Part 1 – Initial finance,Government Licenses

2.Restaurant Startup Part 2 – Tips to remember before starting up

3.Restaurant Marketing part 1-15 ways of marketing checklist

4.Restaurant Marketing part 2 – Flyers

5.How much money can your restaurant make

6.Restaurant business pitfalls and disadvantages

How to open a restaurant

How to open a Restaurant – startup Part 1

Before we can go any further, here is a look at 3 extremely important attributes or prerequisites you need to acquire before you begin to build your dream.

1. Initial Finance

The starting point of any small business is funding, so make sure you have anywhere between $15,000 to $25,000 before you begin. This amount does not include rent/purchase of premises, electricity or wages. This is just for bare inventory and infrastructure, display racks, furnishings, ovens, electrical appliances, basic seating and other incidental miscellaneous costs. There is always a chance that this initial expense will escalate, so be prepared for the worst. What you need is easy and liberal access to funds

2.Licenses

This is something that  you don’t have much control over. If you are in North America, you would have to deal with more stringent rules as compared to Asia and commonwealth countries where local municipal authorities rule the roost. Some of the licenses that you would need to acquire are:

1.License/NOC from the Fire department

2.NOC from the landlord/landowner

3.Health License

4.Restaurant/sweet shop/café /eating house

5.Shops and Establishment license

6.FDA license

7.VAT/Sales tax number

8.Manufacture and food processing license (MPFA)

Depending on your country, these licenses would slightly change to a certain extent.

3.Location/Premises scouting

Even after you arranged your finances, you need to search for a premise that preferably has most of the licenses required to run an eatery. If not, your job got harder, and you will have to simultaneously search for a place that fits the requirements needed by the local licensing authority. Finding a place that has a great location and area are crucial to your future. One of the biggest capital investments that you would make is the lease on your premise. It’s a huge expense, probably the biggest one time investment. Its said that if you already have your own place, then you can turn profit from day one itself, otherwise it can take even a few years.  Make sure you select a spot that is preferably on a busy main road and has a large residential population.

Turning a profit

Once you got through the hard part of arranging finance, procuring licenses and finding a nicely located space for your restaurant, its time to start thinking of a business plan strategy. In order to get customers coming in and start turning a profit, here are a three important  things you need to begin to start working on:

1.Display

This refers to your signboard display as well as the facade and window. For a sweet shop to call out to the hoards of people outside, this is your calling card. What you put in your display showcase is what will entice people to walk in. Branding your image and logo on the signboard,on the menus and almost everywhere else reflects what your establishment stands for. It’s a preview of what can be expected when a patron enters.

2.Marketing

Selling yourself is something every business needs in order to get the cash flowing. Without this, the influx of walk-in customers would dry up. Besides marketing your product, you need to market yourself as the brand ambassador of your sweet shop, your name should be as popular as your product. Use social media as a new form of marketing in 2018, it’s a fast way of reaching young people.

3.Home chef and the real world

As a last note, without demoting anyone or crashing early dreams,I want to add a word of caution to realization to everyone reading this. Many of you maybe fantastic cooks at home, and probably even run a successful home business of selling cakes and desserts, but when it comes to the big stage, there are risks and failures. It’s a totally different ballgame when you step into the real world. Responsibilities increase ten fold and things might not end up so sweet. Make sure you are absolutely ready to work 12 hour days, burn your fingers and risk losing money before making your final decision.

How to open a restaurant

How to open a restaurant- Startup Part 2

Reading a lot of views in the major search engines made me wonder-have these columnists ever run a restaurant even for a day? How are they talking about something they have never done or experienced.Most of the “restaurant consultants” writing these articles, have at the most worked in the industry,but almost none have ever run a successful eatery,hence their knowledge is limited.Very few people have the insight on how to open a restaurant and fewer  take the time to share it.

Owning restaurants since the past 70 years,my family has learnt every trick of the trade needed to keep a good thing going.There probably is some truth when people say the industry is extremely hard to survive in.Others go on to say that 90% of new restaurants close after the first year.Living in a big metropolis,id say that number is probably closer to 50%.That is for every two that opened,one closed,which could probably give the divorce rate in our country a run for its money.

Starting a new restaurant is a bold move,and there is no secret to success.However there are a few things you can do before getting started.

1.Embrace the pitfalls that come along with the business.We have compiled a list of pitfalls associated with the restaurant business.These include lack of skilled staff,long work schedule and time to get your name our into the market as a serious dining option.

2.An alternative approach to a quick understanding of trends and terminology of the industry is creatively prepared by us called restaurant analytics.It compares trends with those of a tool provided by Google to help webmasters and their websites.Just goes to show how the virtual and real world businesses mimic each other.

3.Make sure you have a strong financial backing.I would personally recommend opening an eatery only if you’re rich,or your daddy’s rich.If you make good pie at home and you’re friends say its the best they’ve ever eaten,do not take that as a sign that you need to move to the next level and open shop.

4.As far as consultants go,most new restaurant owners hire their services to make menus,help them buy furniture and setup the kitchen.Truth is all the consultant does is arrange to order the kitchen equipment,seating booths etc and keeps a commission on the sale.This excludes the professional fees your’e paying them.You could do it easier by ordering it over the internet.The only reason newbie owners go to consultants is because they’re scared of the chosen path.Its a whole new world for first time restaurateurs and consultants “make it easier” .

5.Test yourself in the kitchen.How well versed are you with cooking on open fires,grills and ovens.How easily and efficiently can you come up with a main course dish in under 5 minutes?Running a restaurant is more about the kitchen and less about the dining hall.What goes on in the kitchen will be your fate,and the success or failure will hinge on what you serve on a plate.Those 15 minutes that a diner spends devouring a meal will be testimonial to make him a regular or one time customer.Regular loyal customers are your anchor,they will keep you from floating away into obscurity.Everyone else is a sprinkling bonus,that will add to your cash register.

 

How to market a restaurant – Part. 1

1.Social media

I admit,this would not have made it to my list 5 years ago.Back in the day when social media didn’t form such an intrinsic part of our lives we relied on traditional modes of marketing our restaurant,but things have changed in a big way since then, and that’s the reason i feel social media websites have the amazing ability to reach a few thousand people in a short span of time.If you plan on reading a post on how to market your restaurant,let this be your priority. No other form of marketing is so powerful,so if you haven’t already,join the bandwagon and make you restaurant presence felt on the biggest social platforms like Facebook, Twitter,G+ and Foursquare.Social media promotion is the marketing strategy of the future and you don’t have a Facebook page in the least you’re missing out on a great opportunity to access a virtually untapped market.

2.Word of mouth

Possibly the most trusted form of marketing that passes like a virus between friends and people who know each other.The sad part is you do not have much control over it but once it goes viral,there is no looking back and once the word is out on the street,you’ll get a stream of customers flowing in.This form of marketing takes much longer to propagate through the grapevine but is the most personal form of marketing between people who know each other,so it has a degree of verification. Mostly, people who have been to your place and loved the food will recommend it to someone else.

3.Signage

Even before your show or glass display,your signage that holds your restaurant name is the first identifier .Its like the first impression when you meet a new person,its naturally the first glance and look you get of someone.It maybe true that all of us do not judge quickly,but its an unconscious decision that links the signage to whats inside.You have to spend alot of money on your signage,maybe a neon signboard or vinyl or polished timber,but it should have the power to draw and amaze any one who passes by and gets  glimpse of it.Its the key to getting new curious walk ins inside.

4.flyers

I’ve written an entire post on restaurant marketing using flyers. It continues to be one of the best ways to get a sudden increase in sales and boost earnings in a short period of time whilst the flyer distribution continues. During those few days, you can expect a sharp increase in business and its ideally suited for new eateries as a strategy to break into the market. Flyers generally get more  delivery orders compared to dine in and take away,  and is used primarily by pizzerias, with at least 70% of all business raked in by Pizzerias is through delivery. A good flyer distribution campaign is good for short term gains and can also serve as an excellent advertisement.

5.branding

The one thing that all the big names have in common is recognition.They keep aside millions of dollars every year to make their brand more visible to consumers.Take a queue from them and concentrate on logos,motto’s and mascots.Include your brand identity on every square inch of merchandise from paper towels to tooth picks.A symbol or a logo should be short and snazzy and will be the front of your business. Just one look at that logo should easily let customers equate it with your restaurant. That is the power of a brand image.

6.promotions

Promotions are an ongoing marketing tactic and help to keep the interest alive.It promotes your brand at regular intervals so that your restaurant is always  fresh in peoples minds and also every time a promotion is run,you get a sharp increase in sales during that time.Promotions can be in the form of flyers with discount coupons,online coupon codes,newspaper ads with freebies,simple mobile text messaging with coupon codes or promotional activity through an email campaign.Promotions are used to death mainly by eateries that want to increase business through delivery such as fast food, Chinese and pizza places,but promotions can be used by anyone that want in increase in general interest of their restaurant.

7.Mobile

One of the newer forms of promotion,its one of the quickest and easiest way to get across coupon codes and gimmicks to a list of customers from your POS system.Nowadays you can hire the services of agencies that specialize in this form of mobile marketing.They have huge databases of cellphone numbers which they quick blast with a customized text to a specific number of phones depending on the slot you chose and pay for.The more the texts,the more it costs you.Its a very effective form of marketing to get local customers quickly.

8.email campaign

Part of online marketing, which is often overlooked and given less preference. The secret to most successful email campaigns is building an email list that can target a specified group of prospective customers.The return rate on an email campaign can be extremely profitable and its easier to convert those email recipients into walk ins. Besides being the cheapest and fastest way of exposition and its a source of immediate business.Expect a return rate of atleast 5%-8%.

9.print ads

The best part about print ads is the reach that it can extend to.If a paid print advertisement in a local newspaper can reach a few thousand eyes,that is enough of coverage you can hope to get.The broader the reach,the more expensive that print ad is going to cost you,which is probably the only drawback of marketing your restaurant in this form of media.A leading newspaper or publication in a big city that has a distribution of about 100,000 on  a daily basis will cost you a bomb for 20 words.you will have to get beyond 20 words if you want any sort of response and make your print ad more visible.

10.reviews

A restaurant review that is published in a daily newspaper or food magazine can be your ticket to greatness or an unpleasant paragraph.As a owner/manager ,the trick is to approach the food reviewer before they can come to you anonymously.This totally depends on how good a rapport you have with people in the pr circle or if you know food reviewers on a personal level.It could do wonders if the review could pitch in some kind words about your cuisine and ambiance.Its easier to target online food blogs and their writers and ask them to write you an unbiased review,chances are they will write you a good one,its just the way it works.In the real world how far your social circle extends will be an advantage can get you acquainted with more authoritative figures from the industry.Just like movie reviews,the general public all “believe” reviews and have blind faith in it,especially if the reviewer is renowned.Getting a good review in the beginning will be a godsend, just make sure everything thing is perfect so that you dont get a bad one.

11.display

Its a privilege that all restaurants do not have.A good facade that can be used to display and advertise what the restaurant is all about.Its more of  a reflection of the personality of the eatery that a thousand eyes can notice free of cost.Concealed behind the glass display window can house bakery products,pizza slices,pastries and fast moving bites.This is better than any picture,better than any words,no amount of images and text can replace the real thing.The customer knows for sure what they’re paying for,and what they will get.Its an optimum use of your show space.

 

12.yourself

You, as  manager/owner are the central pivot in the image and exuberance of the establishment.People will associate you with the restaurant and vice versa.The relationship and bond you create with customers will be elemental in the success. Use yourself as a banner to showcase the soul of the place,you are the food,the ambiance and the service all in one.It would be of a great advantage if you have a boisterous and effervescent personality so that the world can see that reflection in the restaurant too.You are the greatest marketing tool , use yourself wisely.

13.USP

People have all sorts of different versions of the symbols USP,but to me its spells as “unique selling point”.Being unique about  a particular product of type of cuisine,or even particular ambiance can be your USP.Its an effective strategy to market around and publicize.Being unique and different about something always catches peoples attention,and makes them want to come and try the place out for that out of the box experience,whatever you ride yourself on.For example you catch line /phrase could be ‘the biggest bacon burgers in south Texas’, that’s definitely a crowd puller.People will flock there just out of curiosity.Prepare a USP marketing strategy well and see your business take off.

14.product

Similar to having a USP.Circle your marketing efforts around a particular product or a group of similar products. Associate your brand with that product completely,for Mcdonald’s its the burger,KFC-chicken etc.People like to know that there IS something that you specialize in,and not just a jack of all trades that makes everything so-so.Let them know that there is one product that you want to be famous for,and that they should come try it.Since burgers,fries and ribs are done to death, popularizing a new product would give you that edge.

15.website

In the day and age of information technology,your biggest marketing efforts should be focused online.From my first point of social media marketing,email campaigns,online contests and online coupon code promotions,the customer has to have a base where they can collectively come together-your restaurant website. Its the base of your online marketing program . Just like a troupe that sets out to climb Everest, first congregates at the foot of Everest and makes it their base of operations,your website will be the starting point of your initiative.

How to market a restaurant- Part 2 Flyers

Marketing or selling your restaurant will be an integral part of your business boost.After going through the initial phase of getting it off the ground, we need a quick inexpensive burst of walk ins and delivery to get the  fires burning.A relatively cheap and sure shot method of getting some easy sales and building consistent sales is by sending out flyers.Some may argue that flyers do well only for pizzerias and delivery,id say you can put just about anything on a printed jazzy flyer and get the orders coming in.As far as delivery is concerned,yes,you would get lazy customers ordering in,but marketing gimmicks on your flyer inviting in house diners to meal discounts and promos will attract a lot of walk ins.Remember that this flyer has a dual purpose attached to it,one,it will get you immediate orders and increase sales for the next week or so and two,it serves as an excellent advertisement for newly launched restaurants.Its only through a flyer campaign that you can begin to realize how much money a restaurant can make.

The power of the flyer can be summarized in one experience i had three years ago.I started a new pizzeria two blocks away from the much popular and monopolized Domino’s. That outlet of Domino’s was in the area for a good ten years and had a huge following and extensive client base,as there wasn’t a pizzeria for at least 2 miles in any direction. Domino’s had a strong foothold and it would be tough to break into the market that it had created.As my product was as good (or even better) than my competitors,all that was needed was a killer marketing campaign.Just like everyone else in the business,Domino’s sustained itself on a periodic flyer drop once every month.Me and my two most trusted workers would stake out and watch the houses the flyers would be dropped in by the guys from D.Five minutes later, when the coast was clear,we would go to those houses,grab the D flyer and replace it with ours,in one quick movement .we felt like the ravens in Hansel and Gretel that ate the bread crumbs.Our evil flyer campaign paid off,and sales were good.I DO NOT recommend what we did, to others.Keep it clean and don’t follow the breadcrumb tactic that we did.For distribution methods see below.

Design

There are two types of prints available that you can use for your flyer.The two color print that uses the old offset printers are a cheap and viable option for people on a low budget.These are just good enough for colored text and small logos.Complex multicolored images cannot be conceived with this print option and at most you can use this packaging and pizza boxes.The other more commonly used printing option for those flashy colorful flyers use the four color printing that costs thrice  as much.Common sizes for four color flyers are 7″ *9″ and 11.5*13.5.The 7*9 can cost as much as 60% less than the 11.5* 13.5*.Many printers also design the flyers for you in graphic software for an extra charge.It would make sense for you to get the design done through them because the image should be in a certain format and borders and edges have to be done according to a certain specification.It would be senseless trips to and fro if u decide to design it yourself.

Distribution

the best and most efficient way to distribute the flyers to potential households is newspaper inserts.Go to the network hub early in the morning where all the vendors congregate to collect their allotted days newspapers.You could possible pay each of them individually per “bundle” or pay the main distributor if there is any.Another way of getting the flyers to homes is by sending out your own staff and making them drop it in each household. There’s no guarantee that this could work well,it depends how sincere your staff are.Some of them simply trash the flyers and take the day off.

Demography

Before getting on your flyer distribution campaign,it would be beneficial if you could take the time and research the neighborhood.Four color printed flyers can be expensive,so we want each and every one to count and bring in orders,rather then landing up in the trash.All the big brands always survey an area before setting up a fast food outlet there,they run checks f the number of people in a particular radius,the economic stand of those families,and the probability that those families will order or dine in.

Success ?

From personal experience i’ve noticed that the success rate of any flyer promotion campaign is in the range of 2% to 4% .that is,for every 100 flyers you distribute,you can expect at least 2 to 4 orders coming in.This could definitely be higher if there isn’t much competition to your niche.I for one had stiff competition with a long standing Domino’s,i doubt many others will share my fate.

 

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How much money can your restaurant make

For those of you who want to open their first restaurant,or are simply just curious to know how much money restaurants make here is a brief insight into the financial working of an everyday eatery.It could be a small cafe less than 20 covers  to a larger level business of more than 100 covers. Lets talk about standalone restaurants and not franchise chains.Their business models are very different.

Since i run a mid sized eatery in big city, in an upmarket neighborhood,with an excellent location, lets keep that the standard.Not because i’m biased,but that is the least you should want to have, to arrive at the figures i do.(took me 3 years to get there)

First ill give you a layout of my numbers, then we can generalise other expenses:

Note that these are average weekday sales figures are  in non holiday months,operating 13 hours a day.

how much money restaurants make monthly,in $ 

 

Sales 32,000
Staff 11,000
Electricity 350
Rent
Overheads & Incidentals 1000
Raw Food Cost 8400
Gross Total 11,250
Gross Total,Yearly 135,000
Other Deductions,yearly 20,000
Net Total,yearly 115,000

 

The biggest advantage for me,i can say selfishly, and a big burden for other restaurant owners is rent.It is a HUGE expense and can be detrimental to the overall running of the establishment.The irony of it is that low rents and leases can be found in quieter neighborhoods away from the main city road,but that would also mean less walk in traffic, and eventually a lower daily collection.

 

I could have easily being paying anywhere from $5000 to $10,000 a month by way of a lease amount for the premises i occupy,owing to its strategic,crowded,  and upmarket tourist locality.

I beleive i am still at one quarter of what i can be earning. My 100k take home can be 4 times more if i work harder, longer and build a more solid customer base.

Additional Sources of income

Besides generating sales off your dining guests, two untapped money makers that i give a lot of attention to is delivery and catering services. Not all mid sized restaurants are equipped enough or should i say see it worthwhile to offer delivery.In months of bad weather, the sales from delivery are sometimes more than what we make from sit down customers.I admit that catering services is the next step,and should not be attempted in the first year itself.It requires a lot of staff,mass production and good management,but the end result is absolutely worth it.You can easily make up to $5000 for a small party catering service,excluding the alcohol,just your food bill.

 

 

Disadvantages and Pitfalls of the restaurant business

1.Extensive work schedule
Far different from any 9 to 5 job or any other day business.The restaurant business involves working a long day,and night.Most well established eateries run through the day,often 10 reasons you don’t want to get into the restaurant business till midnight,which is when they get most of their customers coming for dinner.As an owner you cant look at your watch,as your role in the operations and management includes a long work schedule and erratic hours looking after customer needs.This is part of the hospitality industry and your personal presence is important to build a relationship with your customers,if you hope to make them regulars.

2.Time to kick off the ground
Unlike other businesses that have a single product to sell and concentrate on a marketing plan to popularize and advertise that new product to the general masses and consumers,the hospitality industry works in a very different way.The only trusted marketing tool you have is word of mouth.Its immensely powerful and will slowly start bringing a trickle of customers to your new eatery,provided the word around town is that the food you serve is exceptional and not the run of the mill stuff.Since your marketing options are limited,you can expect the first few months to drag on before the tables start getting filled up.In this initial phase ,you will have to put up with all the recurring costs without getting much reprieve from sales.It can be a little demoralizing at the start of a new business,which is just the opposite of any other venture, as all other businesses have good marketing plans and heavy advertising to get the starting phase the most productive sales wise. Unfortunately you wont have that privilege because industries like law,medicine,financial and hospitality sectors find it unethical and taboo to promote services and products.

3.Subjective verdict
Most supermarket and store fast moving products will either be branded good or bad by the general public and consumers.This judgement is based on a set predefined list of common factors like price,quality,size and appearance.The product that is introduced into the market either succeeds or fails after which it is withdrawn due to popular verdict.In this business,you often have to deal with fussy and difficult customers.Each diners palette and tastes differ.Some will praise the dish,while others will find something lacking in it.Its very hard to please everyone.This can get frustrating at times.

4.Licenses
It  is one of the few that requires as many as 10-15 licenses and clearances from various authorities before starting out.Procuring these licenses is difficult from various government departments,not to mention time consuming.You would have to wait a few months only for approval of your licenses.Approval is subject to the various norms being satisfied which again is a matter of you fulfilling all the necessary conditions.Juggling between all the departments is a time consuming and painful process,which includes all documents and paperwork to be in order.Then there’s the probable chance that your license might be rejected,and your entire restaurant business plan falls through.

5.Skilled Labour
Hospitality is an industry which required a varied skilled set of workers,each with a different level of knowledge and practical experience. Its all a hands -on job,different from a corporate employee who has theoretical knowledge and knows that procedure.Everyone in the chain starting out from the delivery boys and dishwashers to middle level cooks and chefs,each job is physically specialized,a far cry from a desk job.Kitchens are one of the harshest working environments,and finding suitable staff and paying them competitive wages.

6.Unpredictable costs
Your biggest bill of the month,understandably will be your food supply bill.The ironic part about this is that the rates for most raw goods vary on a daily basis.During festival and holiday season they shoot up and is very unpredictable.Meat,fish and exotic vegetables take up the bulk of your bill.These erratic shifts in prices that change everyday make it difficult to account and allocate funds for everyday purchases,through which some suppliers give cash discounts if their bills are cleared on a daily basis without taking any credit.

7.Ransom
One of the nastiest experiences you could have is your main cook or chef walking out on you when your business starts to get off the ground and you begin getting a regular stream of customers.Some chefs use this opportunity to their advantage.Through personal experience i have been in this situation. Once the chef sees that the business depends a lot on his services,he might ask for a raise in the salary,and if you don’t agree,then he’ll threaten to quit.Its one of the more unpleasant phases of your business,and i hope you never have the chance of being part of it.Not everyone might get a chef that has a personality like that,but i did.

8.Pilferage
One of the hardest things to stop or avoid in this business is pilferage of foodstuff and drinks.Most food stuff is bought by weight and its hard to portion perfectly.There is always a chance of some of it going unaccounted for,either for personal consumption or in a worst case might be sold when you’re not around.This almost makes it mandatory for you to be present throughout the day or otherwise hire a capable and honest manager to oversee operations when you aren’t around.

9.Spoilage
A Huge difference between other retail and the restaurant business is that other businesses don’t have to deal with a shelf life of 2 days.Most food stuff can last our of the cold storage for little more than 24 hours after which it is unsuitable for consumption.Some kitchens thaw a smaller quantity of meat/fish in a day,this increases the time the goods sit in the freezer.This alters the texture to an extent for meat and TOTALLY changes the structure and sucks the moisture out from seafood. That’s the difference between frozen food and fresh produce.Spoilage can be a big spoiler to your party,it can eat into your profits if you don’t have brisk business and a steady stream of walk in customers.

10.Competition
In any industry there are a set of competitors that vied for a certain group of people to buy their product.There are millions of products spread over thousands of sectors or retail groups.As far as food goes,there are only a handful of cuisines or lines of cooking that you can hope to earn a steady revenue from.The tried and tested Italian,deli sandwiches,pizzas,steaks, Chinese,Thai,Indian etc.The narrower the niche you choose,the less your competition is,but your walk in customers also will be lesser for that type of cuisine.Getting past your competitors that have selling that same type of food for many years will take take a long time to compete with.IT takes time to establish yourself as a goof food place in your niche cuisine,and only then will people give you a chance compared to your competitor that they were going to for so many years.

 

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