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How to start a restaurant – What you need to know

Everyone who thought about starting his own restaurant business, probably, mentally went over those areas in which he would be interested in doing business, and those that would generate income. According to polls, most often “at the intersection” is the restaurant business. Many people want to open their own cafe, bar or, if finances and ambitions allow, a gourmet restaurant. The niche of public catering is still not saturated, therefore, there is a place for bold undertakings and fresh ideas.

The restaurant business is one of the most recouped, meaning that it will take about a year to cover expenses. But the risks in the gastronomic business are great – approximately every third restaurant “burns out” within 12 months after opening.

What is happening here in 2019?

In 2019, it seems like nobody has been feeding illusions about the restaurant business as a profitable and dust-free occupation for a long time. But still, many startups, dreaming of starting a restaurant business, want to “change their lives” with the help of some business that seems attractive and easy to do (for this, by the way, you do not always need to open your own business). And if you’re “not strangling, not killing” this dream, I will try to arm them with information important for the restaurant business.

Starting a Restaurant Business – Where to begin?

Beginning restaurateurs who want to take the matter seriously, are primarily concerned about the business plan and the search for investments. But in fact, the most important thing is to think over your product: develop an attractive idea and sincerely love your guests. The concept and location are also important – two whales on which half of success is based.

Of course, in the preparation process, it is useful to use SWOT analysis, study the market, and observe other players. For example, if there was a restaurant in the place that you plan to use for a gastro-startup, you need to carefully study its history: how long it lasted, why it closed. And also analyze competitors in the immediate environment.

By the way, the unique concept is not always justified. It takes a lot of money to develop it, and sometimes it’s easier to copy the idea to get a successful business model. But in this case, you should not count on big profits, because the pioneer projects with the original concept have probably already skimmed the cream. And to open an institution with a concept that already once shot, but at another time, in another place, in a different socio-cultural environment, and count on the same success, is quite presumptuous.

Another option for beginners is to buy a franchise, in which the entrepreneur gets a ready-made, working and time-tested business model.

Take note of the Financial Conditions

The economics of starting a restaurant business depends on the selected format: calculation of food cost (cost of dishes) and other costs. It seems that the products are cheap, and the dishes in restaurants are expensive, however, the average profitability of institutions is from 10-30%. At the same time, the average food cost is at the level of 25-40% of the cost of the dish, and the more expensive the restaurant place, the lower this percentage will be.

The difference between the cost of dishes on the menu and the “base price” ensures the institution: rent, employee salary, marketing, household expenses, repair costs, the purchase of dishes, taxes and other costs.

To estimate the approximate monthly profit of an institution in advance, calculate the turnover based on the estimated average bill, turnover, and a number of seats, and then subtract all monthly costs, both fixed and variable from the day of starting a restaurant business till date.

A stream project always implies a lower wrap, and if traffic decreases, it will inevitably need to increase the price in order to stay afloat. For fast-food establishments, high traffic is simply necessary. Best of all, it is provided due to two things – a strong brand and passable location.

In addition, you will need to debug the procurement system, find suppliers and convince them of favorable conditions for you. And also organize production processes and create conditions for maintaining quality standards. In these matters, you cannot do without a good restaurant automation system. Many startups save on this product, consider and plan “on the knee”, and then do not get all the necessary analytics to make decisions.

Get legal and stay legal

A piece of good advice about how to start a restaurant business include obtaining all permissions necessary for the sale of food; obtain permission for liquor if necessary. Plan and go through a security check before opening. Obtain a federal tax identification number and accurately report all sales and employee salaries, including advice.


Components of Success

Good luck for a startup is to appear in the right place at the right time and with the right concept. Much here also depends on the season. When it is possible to catch a “hype”, it is better to use it. Turned up a successful location? Do not miss your chance.

If the founder of a restaurant startup directly depends on suppliers and uses seasonal products, he should definitely consider that their prices in summer or autumn will be lower. And at this time, you can open your own food project with a better economy, which will give odds for several months ahead.

It is most difficult to start work in the summer or in January. Most conveniently – in February, to gain momentum by the summer. Or in August-September to come prepared for the winter season.

Remember that a lot depends on the people. For example, a good manager with an attentive attitude and ability to inspire people can “take out” even a weak project with an unsuccessful location and low traffic.

Are you ready to start a restaurant business?

Having analyzed all the components of a future project, you need to evaluate the investment budget. If the calculations coincide with your capabilities – feel free to start.

If expectations were too high, then you need to revise the business model for cost optimization. Think about it: are you ready to find more investment in the project? Could it be easier to create a more economical option?

When starting a project, experts’ advice laying up to 10% of the total amount for unforeseen expenses, this will allow you not to close due to an error in the calculations, without even waiting for the launch.

You need to understand the permissible lease rate, as well as what other costs you can take on and in what volume and which ones not. Lay in the budget also all possible increases in payments, form a long-term forecast for this line of expenses for four to five years based on data from past years.

It should be noted that “single” cafes cannot afford the purchase of products at the same prices as restaurants open on a franchise. It is more difficult for them to formulate, implement and maintain standards, the quality of cooking. On the other hand, self-discovery can be cheaper and more profitable to operate, since you do not need to pay royalties and other regular contributions. That is, ceteris paribus, your business is preferable, but in a crisis, these advantages are not always easy to realize.

So, starting a restaurant business cannot be called light and “dusty”. Even if it is possible to clearly and quickly create the right concept, find a successful – passing – place, correctly calculate the economy, assemble a “dream team”, no one is immune from the risk of losing. But, the one who does not take risks, in this case, does not have dinner at his own establishment.