In the last decade, the way we eat out has changed dramatically, with independent cafés and restaurants sprouting up around every corner and food stalls thriving in several UK towns.
As an entrepreneur considering launching a restaurant, it is critical to examine the time, money, regulations, and dedication required to launch a food business. Many of these factors, however, are frequently overlooked.
Many food businesses that begin as an idea and soon expand into a brick and mortar location without enough preparation suffer challenges in the future, such as cash flow issues and even liquidation.
It’s disheartening for any company owner to see their hard work go to waste, so get professional assistance and invest in time to properly set up your business to increase your chances of running a successful and lucrative restaurant.
Here are 11 ingredients for a profitable restaurant start-up, from Bobby Kalar, managing director of Yu Energy.
1. Deciding on a concept
You may have have an idea in mind or are still brainstorming, but deciding what type of restaurant you want to offer, your target audience, and its unique selling feature are all crucial considerations when developing a restaurant concept.
Dev Biswal, owner of The Ambrette restaurants in Kent and Sussex, explains why it is important to decide on your restaurant’s ‘voice’.
‘The voice of your restaurant, which encompasses its values and aims, will differentiate it from the competition; it’s your USP.
‘It’s essential that entrepreneurs establish their restaurant’s character early in the process and then ensure that this ‘voice’ is present in the dishes, the menus, the marketing and that it is conveyed by the staff.
‘At our restaurant we design our menus with the aim of challenging perceptions and educating diners about the food in front of them.
For example, our recent detox tasting menu showcased the nutritional benefits of spices such as cinnamon and nutmeg and I took the time to explain this to diners in the hope that they leave my restaurant knowing how to boost their well-being using these store cupboard ingredients.’
2. Market research: Competitor analysis
Having a business idea is great, but without adequate research, you could build a restaurant that your target market would not be interested in, and there is no assurance that you will earn a return on your investment.
Regardless of industry, anyone with a company idea should research their competition, clients, finance sources, and viability as a firm before committing hard work and time into an idea that may already be out there or isn’t viable.
Primary research conducted with clients in your area can be significantly more accurate than obtaining secondary information since, while data can be useful, it may not apply to your specific concept.
For example, a poll conducted in Manchester on the amount of individuals who would visit a new gourmet burger restaurant may provide drastically different results from an identical study conducted in Birmingham. As a result, it is beneficial to undertake your own, genuine research on possible new clients in your area.
3. Business plan
Company plans are critical for establishing your business model, clarifying direction, recruiting finance and team members, and serving as a document to which you can turn to day-to-day management of your restaurant.
Many entrepreneurs are intimidated by the prospect of developing a business plan to support their idea; nevertheless, there are numerous tools available to assist you write a business plan.
Furthermore, a business plan does not have to be overly large; it is acceptable to create only a few pages if it includes everything you, your staff, and your investors would need to know about your concept, finances, and market.
4. Funding a restaurant start-up
Finding finance to launch your food business might be challenging. According to a 2012 research by the Federation of Small Enterprises (FSB), 42% of small businesses who asked for a loan were denied.
Since then, there has been an increase in the number of successful startup funding efforts, such as The Prince’s Trust, Funding Circle, and greater government incentives for small enterprises.
Rob Martyniak, co-owner of Meatcure, discusses the financial hurdles that entrepreneurs encounter when starting a restaurant.
‘One of the main challenges you’ll face when opening a restaurant is the financials to fund your business. The financial investment is often why so many great ideas never become a reality.
An entrepreneur is simply someone willing to take the steps to crafting their dreams when others aren’t, or are, intimidated by the financial commitment. However the financial injection you put into your business idea doesn’t need to be excessive.
‘At Meatcure we build, design and create everything in-house ourselves. We have invested time into learning our craft independently, from installing the toilets, building the bar to creating the perfect patty and brioche marriage.’
Finding the ideal location for your business can be difficult because it depends on a variety of factors, including where you want your restaurant to be, the type of building you want your restaurant to be in, where your customers are most likely to be based, and how much money you have to buy or rent.
Choosing a property based on your business concept and ethics is a prudent way to ensure that your restaurant will meet both your personal goals and the expectations of your consumers.
If your company is committed to energy conservation, look for a location with a high EPC rating or that is entirely powered by renewable energy.
If the goal of your food business is to provide quick, healthy, and conveniently available lunchtime meals to employees, it makes sense to locate in a city centre where your target market is likely to be.
According to a recent study conducted by the Federation of Small Businesses, utilities were the second leading driver of growing business expenditures in 2015, with labour taking first place (FSB).
Running costs, including electricity and gas, are one of the most significant expenses for new restaurants, so selecting the right supplier is critical.
Because there are so many utility suppliers, it can be difficult for businesses to grasp what they require from their source.
Because of their current client base and relatively strong beginning deals, the ‘Big Six’ are a popular choice for most. However, while the ‘Big Six’ are popular, they frequently fall short in terms of customer service and dependability.
Choosing an independent utility provider is proven to be a popular and prudent decision for many start-up firms, who benefit from unrivalled customer service given by flexible suppliers, typically at a far lower price than leading electricity and gas giants.
Restaurant owners are increasingly saying that finding a provider who offers flexible energy contracts tailored to their specific needs is more important to them than remaining with a well-known firm since it is easier not to switch.
Utility bills are no exception. Apathy is the enemy of any successful business. If an owner does not obtain the deal they deserve from the outset, they are setting themselves up for problems later on. From the start, they must communicate with their feet and take charge of their own energy.
7. Equipment installation and maintenance
To run an efficient restaurant business, you need reliable equipment. Investing in high-quality equipment from the outset will keep maintenance and repairs to a minimal in the long run.
Many restaurants overlook the importance of selecting the best supplier to service their appliances. Charlotte’s Group owner Alex Wrethman elaborates on this subject.
‘The biggest challenge for someone opening a restaurant has to be building a list of contacts and suppliers that are invaluable to your business. For someone who isn’t already in the restaurant industry, it can be difficult to build a network you can work with and trust.
‘The relationship you have with your suppliers is most important; knowing that you are only a phone call away from a reliable electrician or food supplier is valuable for any restaurant.
‘When choosing suppliers, customer service should be your main deciding factor. Being able to put a name to a face is such an important part of having reputable suppliers for your business. Knowing your restaurant is cared for by your suppliers is something that is priceless to any business.’
8. Regulations and licenses
There are several licenses that you may require to start your restaurant business. These include:
- PRS for Music license: If you, or anyone else, plays music for customers, visitors or staff, you need legal permission from the relevant copyright owners. This license can be obtained from PRS For Music.
- Alcohol license: An on-license must be granted for an establishment to sell alcohol that must be consumed at point of sale. This license can be obtained through your local government website.
- Food hygiene certificate: This certificate proves that you are aware of and operate under the appropriate food hygiene and health and safety regulations.
- Public liability insurance: This protects you if your customers suffer personal injury or property damage because of your business. Public Liability Insurance covers legal expenses or compensation claims and is essential for businesses that interact regularly with customers.
- Building permit: If you intend to construct your premises or add to your existing structures, you will require a construction permit.
- Food premises approval – If your restaurant handles meat, fish, egg or dairy products, you must be inspected and approved by your local council. You can apply for this license through the government website.
Working as a team is essential in the hospitality industry. Restaurants frequently spend a third or more of their income on staffing, recruitment, and training, thus it is critical to consider these costs when considering launching a restaurant.
Recruitment can be a challenging aspect of starting your own business because you are competing for the top employees with larger, more reputable firms.
This issue, however, may be handled by making sure your job descriptions are clear and reflect the fact that you are a recently launched restaurant. Applicants are typically drawn to the idea of rapid expansion while working for a start-up, so explaining your vision as a small business to potential employees might be useful.
When it comes to promoting your brand, you are competing with other restaurants in the same way that you are competing for workers. It might be tough to stand out as a new firm without the reputation and authority that your competitors already have.
It’s critical to remember that you’re communicating to an eager audience as a small, fledgling food business! A quarter of individuals (26%) said they were more likely to shop at local, small companies than five years ago in a recent survey conducted ahead of Small Business Saturday.
This rising figure demonstrates that people are eager to patronise independent enterprises, including restaurants: by communicating the passion and ethic of your brand through your marketing materials, you can entice them to visit you.
11. Go digital
Some notable advancements in software and systems geared to optimise the operation of hospitality enterprises, including some expressly for restaurants, have occurred in recent years (of all types – from fast food establishments to formal dining).
A solid EPoS system should assist you in managing all elements of your restaurant, and the data gathered should provide you with a valuable picture of how your business is operating. Reservations, taking and assigning orders, inventory management (stock levels and usage to reduce waste), ordering management, staff scheduling and performance, tracking labour costs, taking payments, customer engagement and marketing, kitchen management, and business analytics and reporting are typical elements of POS software.
There are a good variety of EPoS suppliers to pick from in the market, and as previously noted, some are hospitality specialists, personalising their product by restaurant type.
EPOS Systems for Restaurants
Ordered alphabetically.Because development is still ongoing, search for a supplier who regularly updates its software and hardware settings. One of the most recent developments is from JeM, which employs artificial intelligence (AI) to estimate sales based on trend research.
Once you’ve completed these eleven steps, you can focus on what you know best: the food.
List of useful resources on starting a restaurant
- Starting up a restaurant: The considerations
- Menu tips 1: How to write great menu descriptions
- Menu tips 2: What to consider when writing a menu
- Kitchen equipment: A ‘Top 20 checklist’ of the essentials for a modern commercial kitchen
- Wholesale food suppliers: Some useful tips on choosing the right suppliers for your type of restaurant
- Restaurant franchises: A selection of UK franchise opportunities. Not all of them are strictly restaurants (does ‘Wendy’s’ really count as a restaurant?) but there are more typical restaurant style businesses available (e.g. Cafe Rouge, Bella Italia etc.)