Opening a Restaurant: The Keys to Success
What are the keys to opening a restaurant that will become a booming success? We’re here to walk you through the process.
Opening a restaurant can be a fantastic and rewarding business choice. The restaurant business has long been a mainstay in countries and cultures all over the world, and running a successful dining establishment is a rewarding venture in a multitude of different ways, from social to economic. In the United States in 2016, over 195 million people were estimated to have visited sit-down dining establishments, and 216 million got fast-food. And that’s out of a national population of 323 million. That year, the industry’s total estimated sales hit 766 billion dollars, and it’s only grown over the past couple years. It’s a trend that isn’t just limited to the Western world: people are choosing to go out to eat more and more often, but the popularity of the restaurant industry has also made it more competitive.
If you’ve been thinking of opening a restaurant, read on for information on the industry and the steps you’ll need to take to ensure your establishment’s success. Above all, don’t forget that you’ll need a solid business plan to begin marketing your idea to investors and partners, so be sure to check out our free business plan templates to help you get started.
What Kind of Restaurant Should You Open?
This category of restaurant is also known as a Limited-Service Restaurant or LSR. Coffeehouses either independent or franchised, McDonalds, Chick-Fill-A, Pret, and other such establishments fit into this category; they’re places that are meant to be quick, easy, and relatively budget-friendly, often selling pre-made dishes and catering to customers who may either want to eat in quickly or take their meal to-go. Fast-food doesn’t need to be fries and a burger, either — pizza, foreign cuisines, and chicken are also popular choices for LSRs.
You’ll probably have noticed that fast-food places don’t tend to employ waiters, per se. LSRs usually function thanks to counter-employees and kitchen staff, and a standardized menu between locations, if there are several.
Mid-Scale restaurants cover a host of different cuisines and establishments, from neo-bistrots to brunch buffets to your neighborhood’s mom-n-pop Italian place. Mid-scale restaurants can be sit-in dining establishments with wait staff, but they can also offer take-out services and/or a scheme similar to LSRs where you order at the counter. They’re the middle ground between Fast-Food and Upscale, offering a more tailored experience than the former, and better value than the latter.
Upscale restaurants, as the name implies, are fancier than their counterparts and tend to have a far more studied and complex menu and concept. While they aren’t exactly known for their value (and can indeed be quite expensive), upscale restaurants offer full table service, professional wait staff, and tend to be known for the fine dining options they offer. Monikers of quality are important in upscale dining, such as Michelin stars or recommendations by prestigious guides and travel and/or food and dining publications.
While you consider opening a restaurant and what kind of restaurant that should be, be sure to keep in mind what your target demographic prefers in terms of eating habits. Millennials in particular (born between 1980 and 2000) are fond not only of takeout, but delivery options, and a number of services all over the world (Seamless, Uber Eats, Deliveroo, Foodora, and many more) have capitalized on the prevalence of restaurants in large cities and this generation’s love of delivery and takeout. As the most ethnically diverse generation yet, Millennials like variety in their dining options — they engage with a large variety of different cuisines and love fusions and novel dining concepts. But don’t worry, certain foods will always be popular: a third of their restaurant visits are still to burger and pizza places.
Members of Generation X, born between 1965 and 1980, are more family-oriented and tend to favor Mid-Scale restaurants that are kid-friendly and don’t necessarily offer too many surprises on their plates. This consumer group is interested in getting decent bang for their buck when they go out to eat, and doing so in a welcoming atmosphere that’s family-friendly.
Baby-boomers, as one might expect, are the group with the most disposable income and who are therefore the most likely to be found in upscale establishments for dinner, but like their Gen-X children, are also fans of family-oriented establishments, especially as more and more of them become grandparents.
Creating Your Unique Value Proposition
The importance of location is indisputable in many areas of life, and it’s no different in opening a restaurant. Your location is essential for several reasons: first of all, it will be a deciding factor in how much business you get. Highly-frequented areas will not only bring foot traffic, but will make you more accessible to delivery applications that may also help to expand your restaurant’s reach and income. Whether you’re thinking of opening a restaurant in a cosmopolitan city or a small town, keep in mind that accessibility will make or break your restaurant. Second of all, your location will, to a certain extent, determine your competition. Opening a pizza parlor on a block where similar establishments already exist will be a risk; you’ll need to be sure that you’re proposing something different, or else you’ll want to consider opening your establishment in a place where competition isn’t as stiff or you’re filling a real hole in the market. Finally, it’ll also be a determining factor in one of your major business costs. While opening a restaurant in a chic neighborhood may be an expensive but altogether logical option for a neo-bistro, for example, a fried chicken place may or may not enjoy such popularity among residents, depending on the socio-economic demographics of the neighborhood. Determining not only your competition, but your local demand and buying power, is essential in helping you choose the best location for opening a restaurant.
Just as important as your location is your concept. Are you opening a Mid-Scale French-Asian fusion restaurant, or have you spent the past few years dreaming of a quaint coffee house with a couple small tables in the window? Any dining establishment, regardless of its quality, has a theme, or a concept. Choose your theme while keeping in mind the market gaps you could be filling, the demographic you want to appeal to, and the business costs that running your sort of establishments will incur. For example, a fine-dining restaurant that serves fewer patrons, operates in a chic neighborhood, and needs to pay for fine ingredients will need justify its prices by offering quality and a certain degree of conceptual novelty. This is called your unique value proposition: what exactly are you offering in your restaurant that customers won’t find anywhere else? Your concept isn’t just about the particular kind of food you’re serving, either: it’s the space’s layout, decoration, and feel, as well as the attitude of your servers and staff. In 2018, establishments experiencing particular success, among others, are vegetarian/vegan, feature locally-grown and/or organic ingredients, ethnic fusions, and craft beers. Don’t discount the possibility of doing pop-ups at first, or even considering a food-truck operation; these two unique business models can be interesting choices when you’re just getting started, and they’re quite popular with younger demographics. And this brings us to our final essential element in opening a restaurant.
Whether you’re a fast-food chain or an upscale dining establishment, you’ll need to establish one or, in the latter case, several menus depending on the meal, season, and more. This will be done with the help of one or several chefs that you’ll choose to help you with the task, either employing on a consultancy basis to establish a standardized fast-food menu or more permanently to run the kitchen. At the end of the day, restaurants live and die based on whether they serve mouth-watering food, no matter what kind of food that is. Where the restaurant business is one where you’ll never be able to command the market by simple virtue of the fact that no one wants to eat the same thing every day, it’s one where quality (or at least yumminess) is king. Hiring one or more fantastic chefs is one of the keys to success in opening a restaurant.
Keeping it Clean
All around the world, restaurants are subject to strict hygienic and operational standards that you’ll need to know by heart to ensure the continued operation and good reputation of your dining establishment. Nothing can harsh the hospitality mellow like coming up short on permits or hygiene, two factors that can result in getting your establishment fined and/or shut down temporarily, or even permanently.
Of course, before opening a restaurant you’ll need to register it as a business under the structure that you deem best for your particular organizational makeup. You’ll need to register your business name, and make sure you haven’t used the same name as another establishment where you’re registering, register with your local tax authorities, and acquire proper documentation for hiring your staff (you can check out our sections on starting up in the US, UK, Cameroon, or Quebec for more information on these particulars). Then, you’ll need to apply for further permits and licenses for opening a restaurant specifically. If you plan to serve alcohol at your establishment, you’ll need to acquire a serving permit and, in many cases, ensure that any employees who will be serving alcohol will have undergone the appropriate assessments. You’ll need to acquire permits from your local Health Department, and make sure that you and all of your employees are familiar with and adhere to the health standards that must be met in your dining establishment. Many countries require that servers undergo some form of training before they begin working in a restaurant. You’ll need to keep your establishment ready for inspection at all times. Here are the most important factors you’ll need to be wary of in keeping up with food hygiene laws; you’ll notice that many of them will mean incurring certain business costs for your restaurant:
- Storage: in most countries, raw foods must be stored separately from foods that are already prepared. This includes raw produce, which can still harbor bacteria like salmonella and E.coli. Prepared foods must be labeled for when they were made and when they should be thrown away.
- Preparation: Your restaurant’s sink(s) and surfaces should be decontaminated at the beginning and end of service, as well as after washing raw fruits and vegetables. While it’s ideal to have different sinks and workspaces for washing and preparing raw and already-prepared foods separately, if this is not feasible, it’s important that you keep all of your washing and preparing spaces sterile between uses in order to prevent cross-contamination. Creating a schedule can help with this; for example, preparing meat products first thing, and sanitizing afterwards to ready the area for preparing salads, fries, etc.
- Hygiene: Using dish-clothes or rags to clean your kitchen is one excellent way to fail inspection, given that they harbor more bacteria and specifically E.coli than a toilet handle! You’ll need to use antibacterials to clean everything, and something disposable to wipe down, like paper towel or blue roll. Staff must always wash hands when arriving and before returning to work, and you’ll need to create a cleaning schedule with them to make sure that your bathrooms, dining spaces, preparation spaces and kitchen, and more are all spic and span at all times.
Insurance is also extremely important in the restaurant industry; depending on where you’re opening your business, you’ll definitely need to acquire not just the standard Liability and Property Insurance, but Food Contamination Insurance, Liquor Liability, Fire Insurance, and more. You should secure all necessary insurance before you even think of opening a restaurant.
No man is an island, and this is particularly true in the restaurant industry. Depending on what kind of establishment you open (LSR, MSR, or Upscale), you’ll be hiring differently for your dining establishment. You’ll need to be very familiar with your state or country’s labour laws, including child labour, and specifics on the legal ages at which servers can, for example, serve alcohol, use knives, and more. If you’re running an upscale restaurant, you’ll need to make sure that you’re hiring wait staff with specific competences, like sommelier knowledge, etiquette like how to open and pour wine correctly, and how to serve on a platter, where staff that you hire for a LSR will need fewer competences in this vein. Regardless of your establishment’s level, however, it’s important that servers know how to work under pressure and maintain an amicable attitude with clients. Wait staff tend to work either opening to 4pm, or 4pm to close. Oh, and if you’re opening a restaurant in the US, you’ll need to keep a close eye on your wait staff and their tips: the IRS expects you to declare them.
Most restaurants will want at least two cooks when they’re starting out, regardless of their scale level, and at least one cook will often need to be present at the establishment before wait staff arrives to begin preparing for the day’s meal services. Cooks and chefs are different; the former are paid less and are not responsible for devising the menu, but they tend to have less training both in the kitchen and in terms of menu concepts. Your head chef will be responsible for devising your restaurant’s menu(s) and keeping your restaurant on-concept in the kitchen.When you’re opening a restaurant, you’ll have different hiring needs based on your establishment. Upscale restaurants will often hire professional sommeliers, for example, while LSRs will be more focused on who to hire to manage the floor and counter staff.
As you can see, there’s a host of things you’ll need to take under close consideration before opening a restaurant. Besides more standard market concerns like competition, location, concept, marketing demographics, and how you’re actually going to secure funding for opening a restaurant, you’ll also need to keep an eye on other important factors like local health and labour codes, dining and decoration trends, and how many glasses of wine that gentleman at the bar has downed in the last half hour. But for all of its complications, the great reasons for opening a restaurant are endless: it combines social interaction, epicurean pleasure, and ambiance in the same dish, making a good dining experience a joy not only for customers, but for staff members and restaurant owners themselves.