How to Start a Restaurant Business in 2023: Complete Guide
If profit maximisation is your primary objective for starting a restaurant, we’d suggest you follow the outline discussed in this guide in the order presented. We’ll basically show you how to start a restaurant business anywhere in the world.
Anyone preparing to open a new restaurant should be careful of the three common factors determining whether the restaurant prospers or shuts down within a year: location, business plan, and cuisines offered. We’ll describe several steps you should follow to establish a restaurant that starts attracting customers from day one. One of the crucial steps to be discussed is menu design, which you can do for free with Menuzen.
How to Start a Restaurant Business: Introduction
Let’s briefly outline the purpose of this guide and the reason behind coming up with such a long piece in the first place.
What this guide is and isn’t.
What you get from this guide is a vivid picture of the critical steps to follow and their correct order while establishing a new restaurant in the UK, or wherever else you fancy. None of these steps are discussed in-depth because that would require separate articles or a PDF book. Rather, we’re focused on the need for each step and when to embark on each one as part of an overall roadmap on how to start a restaurant business.
Why we wrote this guide.
Numerous articles, guides, and PDFs, both offline and on the internet, provide in-depth discussions on starting a restaurant. In fact, there are paid online courses on the subject of restaurant start-ups. However, one problem we’ve noticed with most sources is a wrong arrangement of the necessary steps.
We’ve seen disorderly arrangements in many articles, some from high-authority websites. This is quite disturbing, especially considering that the order of a restaurant start-up guide influences the reader’s understanding and implementation of the lessons.
As a software company catering to the hospitality industry, particularly food service businesses, it’s our responsibility to steer prospective restaurateurs right when they visit the Menuzen website for information. We’ve written this restaurant start-up guide to serve as a digital handbook for food service entrepreneurs setting up shop anywhere in the world, with some emphasis on the UK.
This guide presents the natural sequence of steps in setting up a new successful restaurant. Switching between these steps randomly or taking untimely steps can inflate the overall cost, delay completion, or even cause the project to fail. Without wasting time, let’s jump to the first step on how to start a restaurant business: location.
Step #1: Carefully choose a restaurant location.
Upon understanding this article, reflect on all the points discussed, and you’ll agree that choosing your vicinity should be the first step towards establishing a new restaurant.
Location is the single factor that can get your restaurant off to a powerful start within days of launching. Similarly, this same factor could bring your food business to a screeching halt in less than a year, as you’ll see from statistical findings later in the guide. In summary, you can’t risk the severe mistake of mislocating your restaurant start-up.
We’ll talk quite a bit about restaurant positioning. This is vital since this guide aims to provide an all-encompassing picture of the different steps on how to start a restaurant business in the UK and beyond. We’ve arranged these steps in chronological order so that you don’t make any serious mistakes that either delay the project or hurt your business in the long run.
The need for a restaurant.
If you’ve already noticed a neighbourhood or several neighbourhoods in dire need of a restaurant or more restaurants, you’ve almost completed the first step of finding a restaurant position. This is because detecting a lack of or shortage of restaurants in an area can be tasking if you were to look deliberately.
However, how you detect these market gaps doesn’t matter, provided your assessment of a need is correct. So, how do you assess a need?
Assessing the need for a restaurant.
How do you determine whether a neighbourhood needs restaurants?
There are different signs, among which are:
- No or few restaurants despite heavy pedestrian traffic.
- Long queues or wait times at restaurants in the area.
- You notice a restaurant that’s clueless about what it’s doing.
- People complain about some restaurants in the neighbourhood.
- Limited menu options where some staple foods aren’t served.
- People travel long distances to eat.
These aren’t surefire signs that a new restaurant will thrive in such neighbourhoods, but they signal a possibility. Hence, you must investigate further to be sure. For example, you can scout the area and find out how and where the locals dine.
Sometimes, you’d find they travel long distances to get food, while others might resort to cooking their food for lack of restaurants. With some thorough investigation, you should be able to turn up information on the eating habits of the locals.
Why location should precede menu items.
In learning how to start a restaurant business in Australia and beyond, our advice is to let the locale decide what foods you’ll offer. This is because it’s more challenging to nail down a location if you already predetermine the foods to sell.
You might spot a good locality but discover that your preferred food items aren’t the favourites there. Even worse, some of your menu items might be morally or legally prohibitive — such as selling alcohol or pork in a community that frowns upon such consumables or a settlement with laws against such foods (e.g., Islamic neighbourhoods).
The only time we think you can map out your dishes before looking for a spot is when you don’t intend to hire a chef. This means you’ll prepare the dishes yourself, and those are the ones you know to cook best. Still, if you love cooking, you can learn to prepare any dish.
The problems of menu preceding locale selection.
Suppose you settle for a less favourable zone because you can’t prepare specific dishes and don’t want to employ a chef. In that case, what would you do if your business expands and you can now afford to hire chefs?
Let’s say you’re located in a small Chinese community in the UK. You obviously can’t serve more than the available customers, limiting your room for expansion. Short of opening a new location, growing your business would be difficult even if you have the physical real estate.
This argument brings us back to the main point that you shouldn’t lay out dishes before pinning down a location. Hopefully, we’re now on the same page that location should precede and determine menu items when curating your “opening a restaurant checklist.”
Zooming in on the restaurant area.
So, you’ve confirmed a suitable neighbourhood for a restaurant. Now, it’s time to locate the best (or most popular) shops in that area.
It goes without saying that the visibility and exposure of shops along the same street aren’t equal. You want to find a shop that’s easy to notice by passersby. Try to secure a location on a busy street so it can serve as a form of built-in advertisement for your business.
Leasing a shop off the beaten path, even with heavy foot traffic, can cost your business in the long term. For example, if you don’t have convenient access to customers, delivery services would be a headache for you. Similarly, if your food service shop is located within a shopping complex, it won’t be seen by customers outside the complex’s building.
Features of a good restaurant point.
Selecting the right neighbourhood isn’t enough — you need to position your restaurant to maximise exposure to your target market.
That said, look for the following features:
- Proximity to a busy road.
- Access to good roads for delivery services.
- Good line of sight for pedestrians.
- Complementary business like a library or gym.
- Visibility of your shopfront.
Step #2: Conduct in-depth local market research.
Analyse your market and the competition. Doing this will help you make the right decision that benefits some future steps. For example, understanding the competition will help in designing your menu.
Being in sync with consumer preferences and tastes will give you an idea of the kind of food to offer. Staple foods would generally find widespread acceptance. However, be realistic about the demand for your cuisine in a certain area. For example, maybe don’t focus on pushing European dishes in a Chinese district and vice versa as an approach towards how to run a restaurant successfully.
Why conduct market research?
You know that a neighbourhood with several restaurants probably already has some or most diners loyal to these restaurants. Most of this patronage comes from staple foods that diners are used to. If you don’t provide some or most of these staple dishes, trying to attract customers from competitors would be a steep uphill battle you’re unlikely to win.
This is why your offers must include dishes locals are used to, even if you have other specials in mind. Regardless, you still need to do more to outperform competitors.
Your business needs to take off with an unstoppable force that takes competitors by surprise. For that, you need critical market info about the local restaurants, such as their popular dishes. However, while you’re at it, we’d caution against asking these questions inquisitively.
Questions about bestsellers would likely be too intrusive for the comfort of any restaurateur or restaurant employee. Although they’re likely to be more receptive if you’re asking about the availability of a particular dish — perhaps you’re a wannabe customer.
Outright and competition-inclined questions like those about their best-performing dishes could only mean one thing: you’re a present or future competitor trying to gather the information you’ll use against them someday. Still, exploring the competition is an indispensable step if you seek how to start a restaurant bar business or some other restaurant business.
Collecting sensitive information on competitors.
Suppose there are restaurants or other food service shops in proximity to your designated location. In that case, you need to study their offers, bestsellers, and business environment before mapping out the dishes to serve.
This requires some scouting or probably even investigations. So, put on your detective hat because you’ll be visiting restaurants and food service shops in and around your chosen location — albeit virtually.
You need to visit as many of your competitors as possible, with their menus being the first thing you examine. Make a list of the cuisines and prices while taking note of any special dishes and offers. If a particular dish appears on many different restaurant menus, that could be a must-have for all restaurants in that locale.
Suppose some restaurants in your chosen locale operate off digital menus, like the multi-featured ones Menuzen offers. In that case, your task becomes easier as you only have to check their websites or social media pages to research their menu.
The competition influences your menu design.
The prices and special offers of competitors will most likely influence yours. This doesn’t mean you must price your foods lower or the same as competitors. In fact, you can do for customers what competitors aren’t and make an extra profit by charging higher than average prices.
As we mentioned earlier, apart from identifying staple dishes from these menus, it’d be great to know the best-selling dishes of your competitors. Again, this information can be a pain in the neck to acquire, primarily due to its competitive implications and confidential nature.
However, some restaurants disclose their bestsellers to convince customers to buy those dishes. For some people, this is how to run a restaurant successfully — that is, by enticing customers to buy the hottest dishes.
If this information isn’t obvious, you can stop by and observe the scenes at a restaurant to find out. Quiet and careful observation can help you identify a restaurant’s hottest offers. You can also get friendly with the staff or even the owner and ask a question or two about their food.
Get a better understanding of potential customers.
Read industry news and discoveries to better understand local customers since conducting any regional study on your own can have a prohibitive price tag. If neighbouring restaurants have reviews online, take time to analyse these reviews. Take note of the praises and complaints they receive from customers and use this information to set up a restaurant that performs better or at least on par with the best around.
Step #3: Plan your menu from the market intel obtained.
Having gathered some market intel, you’re ready to plan your menu. Since we won’t dwell much on this topic, we suggest you read our guide on the importance of menu planning to understand the concept comprehensively.
With menu planning, you’ll decide the cuisines to offer, the ingredients to use, and how many items to stock. You’ll also establish the supply sources and determine kitchen arrangement as well as staff power required to serve those dishes. In summary, you’ll use information from your menu plan to design a menu, which you can do for free with Menuzen.
Step #4: Devise your restaurant’s service concept.
With dozens of different restaurant concepts, you won’t lack one that fits your preferred location perfectly. Research restaurant types and choose one that best fits your selected location.
You can open a luxury restaurant in a corporate neighbourhood and prosper, but a suburb with many average-income families is unlikely to provide the required market. This underscores why you should prioritise the service concept in your “opening a restaurant checklist.”
Neighbourhood selection doesn’t end at cuisine type but also affects service style; your restaurant type or service style also matters a lot. There are over a dozen restaurant types that are popular and profitable, but they need to be promoted in a welcoming vicinity. For example, establishing family-style restaurants in a corporate district won’t be the best idea.
Some neighbourhoods will be more open to full-service restaurants (FSR), such as a corporate district or a suburb with many families. Other locations like shopping complexes would vibe better with casual dining restaurants. If you set up a quick service restaurant (QSR) shop in a family-dominated neighbourhood, most people might find your counter or drive-thru service inconvenient.
You can offer any of the many dining styles depending on the neighbourhoods and real estate available to your restaurant. However, don’t lease a property that you suspect would be too small to accommodate a significant number of all the customers the neighbourhood can offer. This is because any restaurant type you establish can attract many people, and a relatively tiny or cramped space can dismay customers who might choose not to visit again.
In a nutshell, what you offer and how you offer it matters. Therefore, you need to read up on restaurant types and the best neighbourhoods to establish them for maximum compatibility with the locals.
Step #5: Design your restaurant’s menu.
Why does menu design come after the restaurant concept?
Because how you serve customers influences the type of food you’ll offer. A takeaway restaurant is unlikely to offer coffee due to the inconvenience of such a service (you’d need a large, expensive set of machinery). So, if you seek information on how to start a restaurant bar business that provides takeaway dishes only, coffee might not be a convenient menu item.
Menu design entails the selection of dishes, pricing, organisation, and promotion of these items. Based on your market research and menu planning, you’ll know the most profitable dishes on your menu since you already figured out the production cost of that item when planning the menu. On that note, we’d also recommend you read our extensively written piece on how to design a menu for a restaurant.
When designing your menu, we suggest you opt for digital variants as they offer several benefits. Key among these is the ease of editing it provides, the luxury of sharing it on your website and social media via a link, and the relative comfort it brings to online ordering and reservation. Menuzen allows you to design your digital restaurant menu of choice when you select from our various design templates.
Step #6: Determine equipment, layout, and staffing needs.
This could be one of the most difficult steps, considering your restaurant is still in the design phase, but you have to decide how the physical facility will be used. There are numerous restaurant layouts to choose from, but you can also create a unique design. However, ensure your layout maximises staff and customers’ mobility to avoid negative customer experiences.
The menu items will guide your hiring decision for chefs. You can either use recruitment agencies or look for chefs online and locally. The most important thing is finding those who know how to prepare your menu items well.
Similarly, your dishes would determine which kitchen, storage, and serving equipment to purchase.
Step #7: Plan your launching and marketing strategy.
A new restaurant requires an intense marketing campaign to gain quick public awareness. This is the case even if it’s close to a busy street or within the full line of sight of heavy pedestrian traffic.
While some people will see your restaurant as soon as it opens, perhaps while passing through, others won’t discover or notice it early enough. That said, drawing attention is a critical approach if you seek how to run a restaurant successfully.
The above reasons emphasise why you should use catchy signage or even organise a well-advertised launching event for your restaurant’s opening. A beautiful and descriptive shopfront combined with great signposts and a memorable launching event would get your restaurant into gear, setting it up for full-blown momentum in no time.
Host a launch event.
You’ll do a lot of online advertising too. We don’t mean spending a fortune on Facebook ads, even though paid advertising is something you should definitely consider. Rather, the most crucial thing is informing the neighbourhood about the new eating place that will cater to their taste affordably.
For that, you should consider a flashy and noisy opening to kickstart the awareness campaign. Hosting an event would require planning, invitations, and freebies for attendees. While this will cost some money, it’s probably the only marketing channel that allows for deep exposure to your immediate target market.
You can tell people about the event and market through word of mouth, but flyers and invites are best for turnout because they’ll be physical reminders and can reach people who wouldn’t hear about it otherwise.
Ensure that your menu is perfect, the staff highly trained, and every facility is operational before provoking a crowd to come knocking at your doors. We’d say this is how to start a restaurant business in Australia and beyond that opens with a big buzz.
You needn’t invite everyone to your opening ceremony, especially if your dishes cost above the average street price. If you want a modern marketing tip, you should aim towards attracting influential guests, such as vloggers, social media influencers, celebrities, etc., within the town to help get your message to their followers.
Social media marketing strategy.
Your one-time grand opening ceremony isn’t enough for long-term marketing, especially with competitors around. In your market research, you’d have identified the marketing strategies of top competitors. With this knowledge, you can design a better or equally effective long-term plan to acquire and keep customers, such as social media marketing.
Facebook and Instagram are must-haves for restaurant promotion; TikTok is ideal for creating viral content that targets the younger generation. You need social media pages, a social media content calendar, and a roadmap for the type and method of content generation. You must also understand the best restaurant social media campaigns and implement them accordingly.
Step #8: Research permits and licences.
You need several legal documents to run a UK restaurant, such as public liability insurance and the like. Food safety is imperative for any establishment handling food and you must have the documents to prove you're abiding by regulations. These vary by region, county, district and local council. Conduct your research to know the requirements, fees, and procedures for obtaining these permissions from your local authority which are legally required.
You don’t have to initiate the acquisition processes until you’ve secured funding and location for your restaurant and are ready to start implementing your plans. Whether you’re trying to know how to start a catering business in Australia or the UK and beyond, licences and permits are required, and you also need to renew them regularly.
Step #9: Write a detailed business plan.
Even if you fund your restaurant start-up from personal savings, you still need a business plan, let alone when funding it via investors or a loan. A business plan delves deep into all facets of your future restaurant and fleshes out even the finest details of restaurant building and operation.
Summarily, a business plan offers you three main advantages:
- It provides a clear vision of your future restaurant.
- It helps you to plan according to budget.
- It helps to convince investors and lenders.
What the business plan does.
A detailed business plan highlights the critical things to spend money on and how much to allocate to each aspect of restaurant buildup and post-opening start-up costs. This optimises capital usage and minimises resource waste.
A strong business plan prepares you for future challenges by providing a clear view of the business’s future. This enables you to plan ahead of time to overcome these challenges more manageably. This is one of the top reasons you need a business plan, even for a self-funded restaurant start-up.
Entrepreneurs who pour money into a restaurant start-up without following a business plan are more likely to abandon the project due to mounting costs or end up doing an incomplete job that may contribute to the restaurant’s failure.
How to go about the business plan.
This article doesn’t provide the full details for those seeking information on how to write a business plan for opening a restaurant. However, we’ll highlight the critical steps to achieving it.
You’ll need time to brainstorm, think hard, calculate, and incorporate research when putting together the fine details of your business plan. Employing a professional business plan writing service may be necessary to organise your ideas, plug any loopholes, and polish the final copy in a way that’s presentable to financers.
If you intend to fund your restaurant start-up with money from investors or lenders, we strongly recommend working with a professional to design the business plan. Your business plan is what would convince or discourage investors. You can’t afford any amateurish or incomplete write-ups.
Why financiers would need your business plan.
Investors and lenders would want to study your business plan before funding your upcoming venture. Your business plan needs to be bulletproof, especially if you plan for someone else to finance the project.
The business plan lets investors gauge the success probability of your proposed setup, especially since 60% of restaurant start-ups break down within the first year. No experienced investor would invest money in your restaurant idea before researching its success rate.
Without a clear business plan, potential investors would deem pumping money into your start-up a risky venture. Hence, learning how to write a business plan for opening a restaurant (or hiring a professional writing service) isn’t up for debate.
You need to get involved in the business plan writing process.
We’re against entrusting writing your business plan to someone else without participating in the process. There are two compelling reasons why you ought to know your business plan better than anyone else, even if you aren’t the designer.
First, investors would ask questions that you need to be able to answer. Second, you need to operate according to the plan when building the business.
If you haven’t written a business plan before, it isn’t necessary to learn it before going ahead with your start-up plans. Still, learning and practising is the best way to derive the most out of your business plan.
Learning how to write a business plan can be a demanding task, though. Plus, you may already be racing against time to implement the start-up plans. So, just focus on fleshing out the details and let your writer handle the rest.
Should you write the business plan first?
If you already leased a restaurant facility or have the money to do that, then it’s better to write your business plan after dealing with all the other steps. This will make your business plan more complete and clear to you.
At this point, you’ve already been through all the steps—at least in theory—and can provide all the fine details that your writer needs to produce a document that would convince investors and guide your process of implementing the steps. That’s how to write a business plan for opening a restaurant that convinces investors.
Your business plan would be more likely to secure funding this way because it’d fully encompass your business’ fine details. It’ll also be backed by market research. Moreover, potential investors would find that you have a reasonable answer to all their questions.
Whoever offers you start-up money won’t just collect a copy of your business plan, read it, and go quiet about it, no matter how promising the business plan seems. You should be ready to answer a couple of technical questions, at the very least, about the business before financiers open their wallets.
Frequently Asked Questions
Is it stressful to own a restaurant?
We can’t provide a one-size-fits-all answer to this question, considering that “stress” is completely relative.
While owning a restaurant doesn’t have to be highly stressful if you aren’t in charge of cooking and serving, thin margins in the restaurant industry mean you’ll be more attentive to small details and do lots of calculations and thinking.
There’s stress to every job, particularly when you care about what you are creating, but this is quite manageable if you employ the right staff and adhere to good restaurant management practices.
What’s the hardest part of owning a restaurant?
We can see from this guide that the most challenging part of being a restaurant owner is obtaining funding and nailing down the right location to run a successful establishment. It isn’t easy to convince investors and lenders, even if you have a detailed business plan.
Moreover, writing a restaurant business plan—a critical step towards securing funding—is difficult since you need to detail everything about your restaurant start-up. The other challenging aspect of owning a restaurant is surviving the competition and prospering year in and year out.
Is running a restaurant hard?
We’d say running a restaurant is tasking and isn’t a lazy person’s job. Apart from cut-throat competition in the industry, restaurants require more staff on average than many other businesses. Although margins are thin, it’s a highly profitable industry due to the increasing food and beverage consumption rates worldwide.
Why do restaurants fail in the first year?
Most restaurants fail in the first year for a wide range of reasons.
The most common reasons are:
- Wrong location.
- Inadequate funding.
- Poor food or service quality.
- Less effective marketing strategies.
- Unprofessional or unqualified staff.
- Complex menu.
- Poor resource allocation.
This guide provides a complete overview of how to start a restaurant business. Many sources start with a business plan, but we think that sometimes the business plan should come last. This is because you’re likely to collect the elements of your convincing business in the course of completing the earlier steps.
We can see from the guide that the restaurant opening procedure can be split into two: the exploratory stage and the implementation stage. In the exploratory phase, you’re testing possibilities and gathering information — mainly through research and some legwork. On the other hand, the implementation stage is where you put your findings into practical use to establish the physical restaurant.
You’ll likely oscillate back and forth between the two stages, and that’s okay. While at it, remember to create a free digital menu for your restaurant with Menuzen, which gives you a competitive edge over paper menus.