Starting a restaurant is a daunting (but thrilling) task that requires careful planning. A passion for food and service is also helpful to push you through tedious tasks like writing a business plan and obtaining permits. I’ve seen new restaurants take six to 18 months to open and cost from $200,000 to over $2 million. The costs vary based on your location (cities are pricier) and restaurant style (the fancier your food and service, the higher your costs).
These are the basic steps you’ll follow when opening a restaurant:
1. Research Your Market & Consider Your Options
Your first step to starting a restaurant is market research. I have known many aspiring restaurant owners who skip this step because they think that their dream of serving Scandinavian hot dogs or having a dining room that is a replica of the original Super Mario Brothers video game is such a surefire winner that they don’t need research. Having a vision is great, but your restaurant needs to appeal to more than just you if you want to be profitable.
Market research helps you identify your target customer’s preferences, analyze local competitors, and gauge demand and potential profit. You can hire a professional market research company or do the market research yourself.
If you use a third party, look for one specializing in restaurant market research. They’ll analyze your local competition, organize customer focus groups, and survey your likely customers. Most market research firms will custom-quote you a price based on your restaurant size and the specific services you want. You’ll likely be on target if you budget $15,000 to $35,000. If you don’t have the budget, expand the section below for guidance on performing your own market research.
If you have the budget, getting market research from a reputable agency is worth the cost. It will test your business model while providing more complex research than most restaurant owners are capable of performing. Third-party market research will also save you time writing the market research section of your business plan (which we discuss in step 3).
How to Perform Market Research
If you have more time on your hands than cash, you can perform market research yourself. There are two goals to performing market research—identifying your target customer and assessing your competition. Get a notebook ready because both tasks require a lot of observing and notetaking.
First, visit several local restaurants as a customer. Don’t worry about whether they match your intended restaurant style or cuisine; look for busy ones. Note everything about them—their hours of operation, their prices, the size of their menu, and how they serve their food (at a counter, tableside, takeout). Try some food and drinks. Note the portion size for the price, the flavor profile, and any vendors listed on the menu. Look at their social media channels; are they active? Do they pay for advertising or just post? How regularly?
Observe the customer types you see in the restaurants. Are they mostly families? Young professionals? Groups of friends? Do the customers vary at different meal times (i.e., office workers at lunch and families for dinner)? Strike up a conversation with any staff member that seems friendly. If you’re friendly and conversational, you can typically find out the restaurant’s average check size and what days/meal times they are busiest.
Next, sit down with your notes and look for patterns. Is there a lot of one type of restaurant? Do you see the same type of customer at multiple restaurants? Are there any gaps in the market your restaurant could fill?
Organize your observations into measurable data sets if you can, such as the percentage of customers you noticed that fall into specific age groups, the number of customers you counted at lunch and dinner services, or the spread of menu prices. Putting this information into a spreadsheet program will give you data to create charts and graphs when you write your business plan later.
Consider Your Options
Most aspiring restaurant owners I know need to take a moment here to consider what the market research is telling them. Nearly always, your market research will reveal more questions than you initially considered when you were dreaming of serving your grandmother’s ragu to grateful customers.
If you find that your market research has made the idea of opening a restaurant seem complicated, don’t be discouraged. That really is a sign that you did a good job on your research. It is normal for your market research to force you to ask some questions and refine your restaurant plan.
Ask yourself two questions:
- Are you looking in the right location?
- Should you consider opening a franchise instead?
If you’re really in love with your restaurant idea, but don’t see your target customer in your first location, expand your search. Sometimes finding the perfect fit of restaurant and customer means considering a new neighborhood or even a different town.
Many restaurant operators know from the beginning that they plan to open a franchise. But if you haven’t previously considered opening a restaurant franchise, many more aspiring restaurant owners do consider it now. If you are new to the restaurant industry, a franchise is a good way to start since a franchisor typically offers a lot of support for researching your market and learning how to run your restaurant business.
If you’re considering opening a restaurant franchise, it is a good idea to look beyond the big names like McDonald’s and The Melting Pot. Big names tend to require high dollar investments, and your market may already be saturated with them. In 2023, these are some fast-growing restaurant franchise concepts you may want to consider:
What it is: A full-service sports bar and restaurant with Louisiana-style cuisine
What it is: A quick service chicken concept that is expanding quickly
What it is: A quick service Mexican Fusion burrito spot
Best for: Full-service aspirants who can access $1.3 million to $4 million for an initial investment
Best for: Restaurant owners that want to expand beyond on-site sales to catering and online ordering
Best for: Restaurant owners on a budget; the initial franchise fee is only $35,000
Why We Picked It: Slim Chickens enters 2023 with new deals and plans for expansion
Why We Picked It: Bubbakoo's Burritos Opens 100th Location
2. Choose a Name & Restaurant Concept
Unless you have opted to open a franchise (in which case, you can skip to the next step), your market research will inform your restaurant concept.
What is a restaurant concept? A restaurant “concept” is a combination of your restaurant’s service style, cuisine, and target customer. The restaurant concept is a concise way to communicate your business type to your investors, business partners, staff, and— ultimately—customers. It should be as easy to say as “an upscale full-service vegan restaurant” or “a family-friendly Mexican takeout.”
You can construct a restaurant concept easily by answering a few questions:
- Who is your target customer? Target restaurant customers can be summed up in a couple of words. Think of what word you would put in front of the word “clientele.” A French bistro appeals to an upscale clientele, a wine bar to a singles clientele, a pub to a casual clientele, and a buffet to a family-friendly clientele. Who is coming to your restaurant, and how would you describe them in a word or two?
- What is your service style? There are two major service types: full-service and quick service. Full-service always means that most customers dine in, are served tableside by staff, and pay at the end of their meal. Quick service means customers place their orders at a register and pay before their food is prepared. Quick service spots may be counter-service, buffet, or take-away only. If a restaurant offers both quick and full-service options, they tend to still be categorized as full-service.
- What is your cuisine? This is the easy one. What type of food will you serve? Burgers? Pizza? Tacos?
Now, take all of these words and put them in the order that flows the best. Combine that with your restaurant name, and you have the header for your restaurant business plan.
If you haven’t settled on a name yet, use our restaurant name generator to help brainstorm ideas.
Design a Menu That Fits Your Concept
The final step to solidifying your restaurant concept is designing your menu. Menu design can mean two things: the layout and color scheme of your physical menus or simply the composition of the dishes on your menu. Right now, we’re talking about the second one—your menu composition. This doesn’t need to be your final menu. It is just about getting your ideas written down so you can identify potential holes in your menu and, more importantly, sell potential business partners, investors, and staff on your restaurant idea.
Write down all of your dishes and dish categories on a sheet of paper. You want to see everything laid out. Pencil in proposed prices. This is just a rough sketch. You are not committed to charging $10 for your stuffed poblano burger; just go with your gut and see what it looks like. If you see any obvious holes in your menu—like if you have 14 entrees but only two appetizers—balance it out. This is the fun part. Refine, refine, refine. Get feedback from friends, family, or even strangers in your target customer demographic. Then, refine some more.
3. Write a Business Plan
A restaurant business plan is a summary of your restaurant’s business structure, projected sales, and development budget. Your business plan also introduces prospective investors to your management team, restaurant concept, and menu. A strong restaurant business plan includes design details and market research to show banks, investors, or business partners the viability of your restaurant idea.
If you’re collaborating with a chef or have a general manager to work with, you should ask for their input on your business plan. You may also want to have an accountant look over your profit and loss projections to ensure your calculations are accurate. If you need help to get started, email yourself a copy of our restaurant business plan template below.
Just like customers, potential investors eat with their eyes first. Make sure your restaurant business plan looks sharp. Include mouthwatering photos of your food and enticing images (or mock-ups) of your interior design if you have them. Action shots of you and your team cooking or serving will also make you look like seasoned professionals.
4. Secure Financing
This is where your business plan comes into play. Most restaurant owners raise the funds they need through a mix of personal investment, business loans, equipment loans, and individual investors. Crowdfunding and lines of credit can help with smaller amounts of money.
If you have previous restaurant industry experience, a loan through the Small Business Administration (SBA) might be a good fit. It is much easier to qualify for an SBA loan if you have relevant experience in the industry in which you are opening a business.
To get a better understanding of what SBA loan type is right for your restaurant, check out our article on SBA loan types.
5. Find a Location
Choosing the right location is the most impactful decision you will make when starting a restaurant. You want to be in a location that lets your target customers easily find you and that supports your business type. For example, quick service restaurants may need drive-thru windows, while full-service restaurants need ample parking. Restaurants can be located in strip malls or high-rises, freestanding buildings, new buildings, and old ones.
In most cases, you will save time and money on renovations if you operate in a space that has previously been a restaurant. The other major aspect to consider is the lease terms. Most restaurants rent their location; owning your restaurant space is rare. Commercial real estate prices can be too high for most new restaurant businesses to afford to buy. So, it is important to ensure that your lease terms are favorable.
I cannot stress this enough; most of the independent restaurants I have personally seen close have closed due to onerous lease terms or a landlord’s refusal to renew a lease. Don’t let this deter you from opening your restaurant; just use it as a reason to be extremely careful. You quite literally cannot use too many resources to get the best lease terms. Hire an experienced attorney to look over any lease agreements and negotiate on your behalf.
If you need help finding a qualified attorney to help you negotiate a favorable lease, search lawyer listings on online legal service sites. In addition to document services, they all typically have a searchable index of attorneys and their specialties.
6. Get Permits & Insurance
To keep moving forward, you’ll need permits to authorize your business to operate and insurance to protect your business. Depending on the style of your restaurant and your location, the types of permits and insurance you need will vary.
Restaurant permits and licenses fall into four categories:
- Health & Safety: These are permits like food handlers certifications and a certificate of occupancy from your local fire safety authority.
- Construction Permits: The scope of your building or renovation plans will determine what type of permits you need here. Some locations even require demolition permits, so be sure to check your local requirements.
- Operational Permits: These types of licenses allow you to sell alcohol, as in a liquor license) or play copyrighted music (as in a music licensing permit).
- Specialty Permits: These could be things like a permit for a valet stand or sidewalk seating.
Permit and licensing requirements vary by state, county, and sometimes by city. Check with your local health department, fire department, and local Secretary of State’s office to get a list of the required restaurant licenses and permits in your area. If you plan to renovate or build a location, you should also check with your local building department to inquire about permits. Some locations require a permit even for demolition, so check first to avoid fines.
If you need a lot of permits due to construction or renovations, look for a local permit expediting service. Expeditors are typically former building inspectors who know the ins and outs of the local permit processes. They can ensure you obtain all the necessary permits and get them as quickly (and cost-effectively) as possible.
All businesses need liability in insurance, but restaurants have additional insurance considerations. Restaurants typically buy separate policies to protect against business-related losses, property damage, data breaches that compromise customer data, and injury to employees. If you staff delivery drivers, you will also need to think about a commercial automotive policy, and if you serve alcohol, a liquor liability policy is a must.
Restaurant-specific insurance policies may bundle some of these insurance coverages together in a blanket policy. Others may itemize each policy separately. The best way to ensure your business is covered is to work with an insurance broker that specializes in business. A broker familiar with restaurant operations is even better. Finding the best-fitting policies for your restaurant can take some time.
7. Design Your Layout
You’re heading steadily toward opening. Now, it’s time to ensure that your space flows the way you need for your business. The best restaurant floorplans allow for the flow of people, products, and information. Your layout will naturally include spaces for your dream kitchen and dining room, but it also needs to include less flashy things like electrical outlets and floor drains.
Most restaurants set aside 40% to 60% of their entire space for the dining room and customer area. Kitchens are usually 30% of the total footprint, with half of that space dedicated to food preparation and the other half devoted to food storage, dishwashing, sanitation, and supply receiving. You’ll also need to lay out exactly where key equipment like refrigerators, dishwashers, cooking ranges, and sinks will be located, as that impacts your electrical and plumbing needs.
You can sketch your layout with simple pen and paper or use online drawing tools. Many furniture and equipment brands include some rudimentary free tools on their websites. If you use a point of sale (POS) to operate, you can also use the floorplan tools in that system to tinker with your dining room layout until it is perfect.
See our detailed guide to designing a restaurant floorplan for design inspiration and guidelines on how much space to allocate for various needs.
Renovations & Buildout
If you need to renovate your space or are constructing a new space, this is the time to do it. Restaurant renovations are complex, involving electrical, plumbing, ventilation, and gas line work. You’ll also need to adhere to many health, safety, and building codes. So any restaurant buildout (the industry term for kitting out a restaurant space) should include licensed construction professionals—general contractors, electricians, and plumbers.
Buildout can increase the time it takes to open, so be sure about your updates and renovations before you begin. A typical restaurant buildout takes from three months to a year, depending on the complexity of the project. Costs for buildout can run from $250,000 to more than $1 million.
Many leases will stipulate that any work be completed by licensed contractors. They may also require that these technicians list the landlord or property management company as an additional insured on their business insurance before beginning work.
8. Procure FF&E & Starting Inventory
With your floorplan finalized, it’s time to purchase furnishings, fixtures, and equipment (FF&E) and your starting inventory. Your equipment will include any cooking, refrigeration, and sanitation equipment that your space is missing (or that you want to upgrade). Equipment also includes tools like your POS hardware. Most restaurant owners also take this time to make software purchases for things like marketing, payroll management, or employee scheduling.
Furnishings are all your tables and chairs, and any small wares and tableware that you need for serving your customers. Depending on the level of renovations you performed, you could also consider specialty light fixtures and ceiling fans as part of your FF&E.
FF&E are all pieces that you own and that won’t damage the building when removed. So, your cooking range falls under the category of FF&E, but the gas and electrical lines that feed it are part of the building.
In addition to your equipment and software, this is also the time to secure your opening inventory. Since food and beverages are perishable, you don’t want to do this too far from your opening date. Start with the items with the longest shelf life, like bottled beverages and bulk dry goods.
See our guide to restaurant suppliers for advice on finding vendors and opening vendor accounts.
9. Hire & Train Staff
Most restaurants have two major categories of employees: managers and hourly staff. Some very small restaurants operate with hourly supervisors rather than salaried managers. Staff like line cooks, servers, and bartenders generally work part time and are paid hourly.
Even if your restaurant is small, you may need additional managers to supplement the work you do as an owner. Depending on the type of restaurant you have and the role you play in the daily operation, the types of restaurant managers in the front and back of house you need will vary. Typically, managers in the back of house are some type of chef.
Word-of-mouth referrals from other restaurant owners are a great way to find restaurant managers with relevant experience. If you are located in a city with lots of restaurants, using industry-specific job sites like Culinary Agents and Poached Jobs can save you administrative time. In smaller markets with fewer hospitality professionals, a tool like Indeed’s resume search tool can be a great way to scan resumes for relevant experience.
The types of restaurant staff you need will vary based on your restaurant’s style. The fastest way to find restaurant staff is to wallpaper the internet with open positions. Write job descriptions, settle on a salary range, and post your openings on job posting sites and social media channels. Encourage friends and family to share your social media posts as well.
You will get the most relevant applicants if your postings contain a detailed description of each job’s tasks. If the prospect of writing job descriptions for every role on your team sounds exhausting, look at the functions of your restaurant software. Some tools, like the Homebase scheduling app actually contain job description templates for the most common restaurant roles.
One of the major benefits that a new restaurant has over an existing one is the ability to focus on training. The weeks before your restaurant opening will be one of the few times in your restaurant’s lifespan that you are able to bring your entire staff together and get everyone on the same page.
A comprehensive staff training plan should include time to cover:
- Skills training: Show your staff how you would like trays, plates, and glassware to be carried. Teach them your restaurant’s table settings and beverage recipes. Go over daily side work tasks to ensure everyone knows what is expected of them.
- Menu knowledge: Have your management team write detailed guides about each dish, including common allergens. Include the same information for your beverage program.
- Customer service procedures: Your staff should know the answers to common questions customers ask, like parking information, driving directions, and brief biographical information about the chef and owner. Make sure your team knows how you prefer to handle customer complaints.
- Safety procedures: Everyone on your team should know where to find emergency exits and who to contact if an emergency arises. Beyond that, you should also cover basic, daily safety protocols like cash handling, opening and closing the restaurant, and how to safely work in the kitchen and bar areas.
10. Market Your Restaurant
You’ve been subtly marketing your restaurant since you started this process, as curious neighbors and vendors have likely been watching your location become busier with construction, staff arrival, and deliveries. In the month or weeks before you open, you should kick your marketing into high gear. Write a brief press release and announce your opening to local newspapers and news channels.
Buy ads in local papers, and schedule social media posts and ads to find customers where they are. Take the time to also create a user-friendly website with optimized online ordering (if you plan to offer that service).
Don’t forget your location itself. Those curious neighbors who have been watching your construction would love to see an eye-catching grand opening announcement in your front window. As you hang that sign, take a moment now to look back on all your work so far; you’ve made it to your grand opening, and that is something to celebrate.
See our guide to the best restaurant marketing software for ideas, inspiration, and tools for keeping your marketing organized.
Tools for Starting a Restaurant
Starting a restaurant takes a lot of administrative bandwidth. With all the numbers you need to keep in mind, supplies you need to order, and employees you need to pay, it can be impossible to stay on top of everything. Onboarding some smart software and technology partners can lighten your load.
From a restaurant supplier that helps you design a mouthwatering menu to a POS provider that transfers your menu to a POS screen and online ordering site, these are some of our top recommendations when you are opening a new restaurant.
What it does: This all-in-one restaurant POS includes built-in payment processing and a wealth of optional add-on modules for everything from staff training to payroll management.
What it does: Many independent restaurant owners swear by this employee management software. It syncs with your time clock or POS to speed up your payroll processing. It also includes tools for employee benefits and onboarding.
What it does: This mainline supplier is invested in independent restaurants’ success. It connects its customers with business coaching, menu design, and even staff training services.
Cost: From $0 per month for up to two terminals
Cost: From $40 + $6 per employee monthly
Cost: Fees vary by service; Sysco customers receive discounts (up to 60%) from partner providers
Starting a Restaurant Frequently Asked Questions (FAQs)
A well-run restaurant generally earns between 3% and 10% profit (though most fall in the 3% to 5% range). Depending on the restaurant’s price point, that 3% to 10% could be $50,000 to $1 million. You’re unlikely to earn a million dollars in profit your first year in operation, but after years of operation, many of the top-performing independent restaurants in the US see $10 million to $40 million in annual sales; 3% to 10% of that is a substantial sum.
In most US cities, $10,000 is not enough to start a full-blown brick-and-mortar restaurant. That amount of money won’t cover the rent, permits, supply orders, and employee payroll that most restaurants must pay. If your ultimate goal is to start a restaurant, but you only have $10,000, consider starting a smaller-footprint food business. A home-based catering business or a cottage food business can both get started for $10,000. You can grow a customer base with your catering or cottage foods, then build toward opening a restaurant a year or two down the line.
The first step to opening a restaurant is researching your market. If you open the 10th sandwich shop in a neighborhood, you’re unlikely to make the profit you need to stay open. So, really look at what businesses are successful in your area. Consider their menu prices, locations, and service style. Then try to mold your restaurant concept around the customers you see supporting other businesses. Starting with market research ensures that you will open a restaurant that already has a likely customer base. That’s the first step to restaurant success.
Opening a restaurant is thrilling but challenging. So remember to hydrate and celebrate the wins along the way. Restaurants are among the most complex businesses to open, but—in my experience—one of the most rewarding to run. There are a lot of moving pieces to opening a restaurant, but if you stay focused, you can get your restaurant open in six to 12 months. A solid business plan helps you raise the funds you need, and partnering with software providers ensures you have the tools to support the customers and employees of your dreams.