Starting your own business takes effort because there are many moving parts. Figuring out what you’ll need ahead of time can make the process easier. Here’s everything you need to know before getting into the restaurant business.
1. What Paperwork You Need
You’ll need to file the appropriate legal paperwork before opening a business. Federal and state requirements vary depending on your business type and location, so you must research the exact ones you need. For instance, restaurants in New York must apply for a state certificate online to get a liquor license.
In addition to food safety licenses and operational permits, you’ll need financial paperwork. The Internal Revenue Service (IRS) requires new businesses to submit tax documents from the owner and staff. For example, you need to apply for an employer identification number (EIN) because it essentially tells the government you’re in business.
Since processing can have a lengthy turnaround time, you should complete everything as far in advance as you can. After you submit the essentials, carefully consider which additional certificates you want. While you don’t need to serve alcohol or play live music, doing so could draw new customers.
2. Who Your Customers Are
Customers are necessary to run a restaurant. Your two main goals should be to get them in and keep them coming back. To do this, you must determine your target demographic. Who will see your restaurant and want to try it out?
Part of determining who you want to attract means considering their budgets. As many salaries stagnate, inflation climbs and the cost of living rises. According to one survey, around 96% of people say they plan to adjust their purchases in the future in response to all these high prices. While the survey didn’t specify how much they’ll change their budgets or what they’ll cut, it’s likely that fewer people will dine out.
Try to identify what your audience is comfortable spending. You can look at businesses similar to the one you want to create and check their menu prices to get an idea of what your guests can afford.
3. Which Services You’ll Offer
Lots of restaurants provide alternative services to appeal to customers. For example, many offered online ordering during the pandemic because their in-person traffic was down. Businesses across the nation tested various new methods for years, so you have the advantage of knowing which ones are the most beneficial.
Consider providing curbside pickup, online ordering or delivery. It may be a lot to take on initially, but it could give you a competitive edge. Also, many customers might expect it because they adapted to the convenience of pandemic-era business.
4. What Staff You’ll Have
In 2022, many restaurants in the United States had to reduce their operating hours because they couldn’t find enough employees. The pandemic, supply chain delays and poor working conditions created the perfect storm for a labor shortage.
Having a small staff to start is all right, even though adapting to it might take some time. As long as they’re reliable and you’re fine picking up some extra work, things should flow smoothly. Plus, you can always keep job posts up and hire more workers after opening.
You can determine which roles are essential to maximize the bang for your buck. For example, you may not need a general manager if you have relevant experience or education. Cooks, dishwashers and waitstaff are the most important. You can hold off on hiring a hostess or runners if you need.
5. Where You’ll Do Business
Where will you open your new restaurant? Location is a critical factor for any new operation. More people will visit you if your building is visible from the street and easy to get to. Plus, you can get a lot of walk-in business from foot traffic in the right spot.
Keep in mind that the type of food you serve affects where you should open. Your business will be much more reliable if you have less competition and appeal to the tastes of locals. Research which other nearby companies sell food to see what area is best.
Typically, people are more likely to visit a restaurant the closer they live to it. Consider your target customer and see if you can set up shop near them. Would you have to build, or can you rent a space? Thinking carefully about all these factors can help you succeed.
6. What Your Hours of Operation Are
Many businesses operate from 9 a.m. to 5 p.m. throughout the week, but you need to be different — you’ll get more customers if you’re still open after they get off work. Many restaurants serve meals for a short time during lunch and dinner hours.
You could stay open for the entire day, but you’d have to pay more for labor and utilities. Still, it could be worth it to stay open in an area with a lot of foot traffic because you’d get consistent business. Staying open when others aren’t can also give you a competitive edge.
7. What Your Budget Is
How will you fund your new business venture? You need equipment to start. Then, you must pay for utilities, ingredients and salaries to stay open. Budgeting well can ensure long-term success. You can get a loan, try crowdfunding or apply for a government assistance program.
Although restaurants average over $1 million of revenue annually, their operating profit hovers at around 5% of that total. You can increase that percentage if you save where you can. For example, you could have a smaller menu to lower ingredient costs.
Get Ready to Start Your Business
Opening a restaurant can come with challenges, but you’ll do fine if you prepare yourself. Once you get all your financial and legal paperwork out of the way, you can focus on making your dream a reality. It may take some time, but being able to serve customers in your very own business will make it worth the effort.
