Opening a Restaurant
Learn the benefits of implementing technology software into your business to make every shift run like clockwork.
Are You Ready For The Challenge?
Firstly, you need to be passionate about your business. If you are not passionate about coffee, don’t get into the coffee business. There are many days when you will question why you chose this route, and you will need this passion to be able to fall back on. Are you prepared to work harder and longer than you ever have before? During your first few years of operation you will invariably find yourself working sixteen hours per day, six or seven days per week. Are you a multitasker? Few industries have as many moving parts.
As a restaurateur you will have to wear many different hats. It is not just about serving great food; you will need to understand marketing, HR, finance, the law, etc. Finally, don’t forget that the nature of the industry means that you will be providing entertainment for people on their time off, so you will find yourself working while your friends are not.
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Franchise Or Not?
This is probably the number one question that we get asked by people thinking of entering the food business. Are you better off taking a franchise in an already proven concept or should you develop your own concept?
An Instant Business A restaurant franchise offers you an instant business. You don’t have to worry about the name, the décor, the menu or the marketing, It’s all done for you. Support A restaurant franchise comes with support from the head office. If you have questions or concerns you can always ask them. This can be very helpful for new restaurant owners who don’t always know what to do when they encounter certain problems. Better Buying Power Restaurant franchises have bigger buying power. Food and other inventory can often be purchased far cheaper than your local independent restaurant. Name Recognition Name recognition is a huge benefit of a restaurant franchise. You don’t have to worry about the advertising and marketing cost of building brand awareness.
Money, or the lack thereof, is often a major drawback of buying a restaurant franchise. Many of the bigger restaurant chains require you to have significant assets, before they will consider letting you buy into their company. In order to maintain a certain quality of customer service, as well as continuity at each location, franchises have many rules and regulations that must be followed. Everything from the seating plan of the dining room, to the colour of the bathrooms can be subject to specific rules. Make sure you are okay with all the rules beforehand.
Lack Of Independence
Unfortunately, you will have to give up a lot of control if you choose to franchise. You have no say in the menu, the décor or the signage of your restaurant. You may find yourself resenting the restrictions placed upon you. Royalties On top of the upfront franchise fee, you are also expected to pay royalties. This covers the advertising, training, and other support the restaurant corporation gives you throughout the year. Franchise royalties are usually between 3% and 8% of turnover.
When you come to sell, the franchisor will have the right to vet any potential new franchisees.
Limited Growth Potential
If you develop your own concept, perhaps it could one day be franchised itself. This is where the real money is in the industry. Can you take an idea and not just build one location, but perhaps dozens or even more and become a franchisor yourself. Essentially, deciding to either buy a restaurant franchise or create an independent restaurant will depend on your wallet, your experience, the time that you can commit and your personality. If you are comfortable working with a team and being told what and how to do something, a franchise may be the right move for you. However, if you are starting your own restaurant to get away from people telling you what to do, an independent is probably a better choice for you. Admittedly, we are a little biased, but if you are confident that you have a good idea then you could get it up and going for less money than taking on a franchise. What’s more, it will be all yours.
How To Decide On A Concept
What is going to be your Unique Selling Point (USP)? Remember, niche concepts work best in bigger markets. Avoid gimmicks and theme restaurants. Analysts say that most people often only visit theme restaurants once and don’t come back. They have a kind of “been there done that” attitude to these establishments. See what’s hot in other markets for inspiration. Be first to market. Explore these two great resources for a little bit of inspiration:
Springwise and its network of spotters scan the globe for smart new business ideas.
One’s To Watch is a monthly review of some of the hottest restaurant trends from US based Quick Service Magazine.
Take a look at what the big chain restaurants do, particularly because they spend a fortune on expensive market research and then implement it. If you are just at the idea stage, why not take a grand tour. This is the fun part. If you are thinking about opening up a BBQ Restaurant, take a trip to the southern states of America. Rent a car and drive around, see the best and get ideas, collect sample menus and memorabilia and take lots of photos. Maybe even twin your new restaurant with one that you meet on your travels.
9/10 Salaried restaurant
employees started as hourly
How To Decide On A Location
Location, location, location – it can make or break a restaurant. Finding the perfect location is a time consuming and tedious process, but it’s essential that you give it all the attention it deserves. Do not rush this decision, it is one of the most important ones that you will make. Wait until you have several prospective properties and then weigh your options carefully. Remember, once you sign the lease and open your restaurant, the one thing that is almost impossible to change, is your location. You need to consider the following factors when choosing a location:
- Visibility and passing traffic (Foot and car) – Parking
- Potential for outdoor seating
- Refurbishment required
- Freehold or leasehold
- Complementary businesses located close by
To Buy Or To Lease A Location?
A key decision is whether to buy or rent property. For the new restaurant owner, the investment necessary to buy a property may be the deciding factor in this question. Buying a location is a major – and typically a long term – commitment, usually reserved for someone who has significant available capital.
The advantage to leasing is that it provides you with an opportunity to launch on a smaller budget. It may also offer an easier exit strategy if things don’t work out. The major advantage to owning a location is that you will not have to worry about a rent hike. In addition, as an owner you do not have to work within the parameters as set by a landlord, giving you more freedom to do what you want with your property.
The final consideration when buying any real estate is the projected value of the property. Will the price of the property appreciate or depreciate in the coming years? While the goal of most restaurant owners is to build a successful eatery, in the past the acquisition of prime real estate made ownership very rewarding.
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Renting A Restaurant
Before renting a location, it is critical that you consult the property experts. A chartered surveyor will be able to advise you on the best sort of deal to suit your business needs and a solicitor will be able to advise you on legal points arising from the lease and the legal agreement between you and the landlord. Do not sign anything unless you completely understand it and agree with it. Here are some of the things you will need to think about:
Not only what it will be when the lease begins, but how much it could go up by.
The Length Of The Lease
How long do you want to commit yourself to renting the premises. Remember that unless your landlord agrees that you can give up your lease or transfer it to someone else, you will have to pay rent for the whole period of the lease, even if your income dries up. Leases typically have agreements of between 1 and 25 years. Don’t lock yourself into a long lease, at least not the first few years that you are in business. If your restaurant fails you don’t want to be locked into years of rent.
Protection When The Lease Ends
Will you have the right to renew the lease when it comes to an end?
How easily could you give up renting if you no longer need your premises or run into financial difficulties? Will you be able to transfer the premises to someone else? Will the landlord allow you to give up? Do you have the opportunity to ‘break’ (end the lease) at certain intervals? This would allow you to choose whether or not to continue renting the property.
The landlord may ask you for a financial guarantee, or may ask you to provide a guarantee for anyone who takes over your lease. If things go wrong, a personal guarantee could mean significant financial implications that may affect your personal life.
You must take into account restrictions imposed by the local authority that may affect your business e.g. delivery or loading times, rubbish disposal, parking, noise, lighting etc. Also, does the premises have an existing license to sell alcohol?
Is he or she someone you want to have a working relationship with?
The History Of The Property
Find out the history of the property and whether any other businesses have failed there and why. Was the property a restaurant before? Ask neighboring tenants for their input, will the space work for a restaurant. Is there suitable ventilation, services, power etc? Finally before renting a property, make sure you can get planning permission to make any changes you need to the property.
Designing Your Restaurant
If you have the budget, use an interior designer. Make sure they have experience designing restaurants and have a portfolio of their work to show you. Emphasize to your interior designer the need to adhere to your budget and that your restaurant should run smoothly and look good.
Create a design that facilitates the movement of your employees in and out of the kitchen. This will help create seamless service. Also, can you incorporate an open plan kitchen? The public likes to see who is preparing their meals. This design also brings chefs out of the kitchen.
Don’t just design a kitchen that works at the busy times. Make sure you can operate the kitchen just as efficiently when you are quiet and require less staff.
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Designing The Menu
What Dishes Should You Offer And What Should You Skip?
The ideal restaurant menu offers a balance of unique dishes and old favourites. It also has the right food cost to maintain profits and can be easily reproduced in the kitchen during a busy dinner rush.
Avoid Food Fads On Your Restaurant Menu
You need to balance high and low food costs to for a reasonable profit margin. Unless you plan to get a Michelin Star, ensure your dishes are easy to prepare. Any menu items that have over fussy presentations can potentially bog down the kitchen staff during a lunch or dinner rush.
Items On A Restaurant Menu Should Be Versatile
Cross utilization of menu items keeps food spoilage down and allows you to use ingredients in more than one dish.
Update Your Menu Periodically And Remove Items That Are Not Selling
Food cost, selling price and popularity of each menu item should be assessed regularly. This will help you to determine what items need to be removed or updated.
Costs Of Setting Up A Restaurant
What are the costs involved in setting up a restaurant? There is no cast iron answer to this question, as each restaurant operation is different. Here are some of the most common start-up costs associated with developing a new restaurant:
- Obtaining a lease and professional fees
- Premises refit
- Kitchen fit-out, ovens, refrigeration, etc.
- Staff recruitment and uniforms
- Furniture, crockery, table cloths, flowers, pictures, etc.
- Initial stock of food
- Launch marketing fund
- Working capital
Equipment & Fit Out
Buying the kitchen equipment and fitting out your restaurant will probably be your biggest expense when starting up a restaurant. Look into buying second hand equipment. You may find that another entrepreneur’s misfortune will contribute to your success.
Recently failed restaurants probably left the owners needing money to bail them out of debt. One way that these entrepreneurs recover finances is to dump their equipment quickly, often for far less than they paid for it.
Use this opportunity to get the equipment you need, and only what you need, at a fraction of the price. Look in the newspaper and online on classified ad sites to find where these sell-offs are happening.
Also can you get free equipment or equipment on loan from your suppliers? Grab and Go Fridges from your cold beverage supplier, barista machines from your coffee bean supplier. Remember though, free equipment is often incorporated into the long term cost of your purchases.
When writing a Business Plan, trying to convince anyone – either a bank manager or venture capitalist – to lend you the money to embark on your scheme is going to take more than a hazy idea sketched on the back of a pub napkin. You need to be prepared, with a business plan, a presentation of your idea of how the business will work, and a realistic breakdown of costs. Only then will any investor take you seriously. The business plan should include:
- Start-up costs
- Fixed and variable operating costs (Rent is fixed, Staff costs are variable)
- Forecasted number of covers and average spend.
- Analysis of the likely gross profit on food and wine
- Analysis of your likely break-even point
- A marketing and sales plan
- A plan of source of funding
- A budgeted monthly Profit & Loss and forecasted cashflow analysis.
A business plan is also vital in securing enterprise grants, investments and loans, which you will need when starting your business. Compiling your business plan can seem like the most difficult and the least exciting part of starting a new business, but it really is the most important.
There are numerous trade associations for the food service industry. Most offer plenty
of free advice and publish relevant trade magazines as well as great award ceremonies every year. These organisations can be very useful for new restaurants and managers for networking, advice and support.
Check out the following:
The National Restaurant Association
The NRA is a restaurant industry business association in the United States, representing more than 380,000 restaurant locations.
American Hotel & Lodging Association
The American Hotel & Lodging Association (AH&LA) is the sole national association representing all segments of the 1.8 million-employee U.S. lodging industry, including hotel owners, REITs, chains, franchisees, management companies, independent properties, state hotel associations, and industry suppliers.
National Coffee Association
Whether your company is a roaster or importer, retailer or wholesaler/distributor, a company that provides services to the coffee industry or one that grows coffee or exports it to the United States, your NCA membership will give you all the information you need to stay on the competitive edge.
Restaurants Canada is a national, not-for-profit association representing Canada’s
diverse and dynamic restaurant and foodservice industry. With more than one million employees; 80,000 locations; and 18 million customers a day in the country, the restaurant industry is the number one source of first jobs for young people in Canada. Specialty
The SCAA has been at the forefront of developing and promoting specialty coffee and
is committed to meeting the challenges of a rapidly changing industry by setting and maintaining standards, expanding our professional certification programs, conducting industry-specific research, and providing even more opportunities to connect, exchange, and work together so the industry continues to thrive.
Slow Food USA
Slow Food USA is part of the global Slow Food network of over 100,000 members in
more than 150 countries. Through a vast volunteer network of local chapters, youth
and food communities, Slow Food links the pleasures of the table with a commitment
to protect the community, culture, knowledge and environment that make this pleasure possible.
Don’t forget your provincial associations.
While not having the reach of a national association, there are multiple benefits to joining your local association, not to mention the level of understanding they will have for how businesses operate in your area and how best they can help. An example of this is the ORHMA in Ontario, Canada but you can easily locate your nearest organisation online if they are not already known to you.
Ontario Restaurant, Hotel & Motel Association
www.orhma.com | 1(800) 668-8906
ORHMA is dedicated to fostering a positive business climate for Ontario’s hospitality industry, while providing value-added services to its members. The Ontario Restaurant Hotel & Motel Association (ORHMA) is the largest provincial hospitality association in Canada. With over 4,000 members, representing more than 11,000 establishments
across the province.
The Best Industry Trade Shows
There are numerous National and Regional exhibitions and trade shows for restaurant owners and managers. A great way to meet potential suppliers, partners and check
out the competition, trade shows are also an important networking and education opportunity. Check out some of the following, and remember that times and locations may vary.
National Restaurant Association
The National Restaurant Association runs an annual restaurant and hospitality industry trade show in Chicago. This Grand Daddy of them all takes over virtually the entire city for a week every year in May.
International Restaurant And Foodservice Show
This is a must-attend event for anyone involved in the restaurant, foodservice or hospitality industry. This show provides a chance to network with independent restaurant owners, QSR and quick serve establishment operators, caterers, bakers, chefs, and other from across all segments and concepts (bars, nightclubs, hospitals, hotels and commercial foodservice operations).
Louisiana Foodservice & Hospitality Expo
The EXPO is a must for restaurant owners, managers, buyers, hotel food and beverage directors and many others. It’s the only place in Louisiana to gain valuable industry knowledge and shop hundreds of companies under one roof.
The Restaurants Canada Show
The Restaurants Canada Show attracts thousands of industry professionals and puts them face to face with exhibitors showcasing all their latest industry products. The show is overflowing with fresh ideas to help promote, grow and manage your business.
Fast Causal Summit
This exclusive event has been created specifically for C-level executives, VPs, and Directors of restaurant operators in the fast casual and QSR segments.
Mobile Innovation Summit
An event for retail and restaurant leaders who are tasked with leveraging mobile and digital channels to build their brands, increase sales and improve customer engagement, experience and loyalty.