How to Start a Business: Opening a Restaurant

How to Start a Business: Opening a Restaurant

by Stephanie Morrow, March 2009

From steakhouses to sub shops, more and more restaurants are popping up in cities every day. Since restaurants are such a common business venture, people must enjoy running them. How do these benefits sound to you? Be your own boss, have more flexibility, and sincerely enjoy what you do. Not bad. However, all of those advantages come at a price - building a restaurant from scratch isn't easy.

It's a hard and expensive process, and the reality is that many restaurants fail in their first year of business. But rest assured, there are ways to reduce the risk of becoming another statistic. Follow some of these handy tips and you too can run a successful food establishment.

Work in a Restaurant

One of the best ways to reduce the risk of owning a failed restaurant is to have some restaurant experience before you start. Many successful restaurateurs have said that the best way to prepare for owning a restaurant is by working in one, hopefully in an eatery similar to one you'd like to open. You'll learn more than just how to serve food with a smile; you can learn restaurant marketing, menu development, payroll, and other significant components of the restaurant world. Working in the restaurant industry and learning the basics is an important first step to becoming an owner.

Know Your Target Market

Who do you see eating at your restaurant? Are you targeting the family crowd, teenagers or seniors? Knowing your target market before you start planning will not only help you solidify your menu; it will help determine your location, décor and the overall atmosphere of your restaurant. A family-style restaurant, which caters to parents and their kids, may not appeal to seniors. On the other hand, an upscale, quiet restaurant offering a two-hour dining experience wouldn't be appealing to teenagers or families with small children.

Select a Service Style and Food Concept

What type of restaurant do you see yourself owning? One of the first things you must decide is what specific service style you are interested in. If you are a morning person, you may be more apt to owning a diner specializing in breakfast and brunch. On the other hand, if you consider yourself a night owl you may prefer an after 4 p.m. dinner/bar crowd.

Typically, you service style will either be fast-food, which offers food types that range from burgers, fries, hot dogs and sandwiches; midscale, which has full course meals at value prices; or upscale, offering full service meals with high-class ambiance and, in turn, higher prices. After narrowing your establishment to one of these three options, you can narrow your style of food choices. Is there a particular type of cuisine that you see yourself serving? Do you prefer pizza or seafood? Sandwiches or Chinese? Choosing your food concept goes hand-in-hand with your choice in service style.

Develop a Business Plan

Like any other type of company, a restaurant will need a concise business plan. This plan should include but is not limited to: the overall concept and goal of your restaurant; specific financial information and projections; a description of your target market; your menu and pricing; equipment and employee details; an advertising and marketing plan; and a potential exit strategy.

Create a Menu

The menu can make or break a restaurant, and should be in accordance with the overall concept of the restaurant. Revisit your business plan to make sure the menu is attractive to your target market, is affordable within your budget, and complements your restaurant's design concept. For example, if your restaurant is family-friendly, you will need a kids menu. If you are an upscale establishment, a lot of thought will have to go into your wine list.

Choose a Location and Layout

The old saying of "location, location, location" is vital in the restaurant world. It is important to find a location that has a continuous stream of traffic, convenient parking, and is in proximity to other businesses (especially if you're catering to the lunch crowd). And don't forget to revisit your business plan to make sure you are close to your target market. If you are opening a restaurant/night club, it may not be the best idea to open it in the vicinity of retirement homes. In addition, make sure your monthly rent is in-line with your business plan's projected profit so that you do not become building-poor.

Once you find your location, the layout and design of the interior should be taken into account. You should already have a concept of your restaurant in your business plan; bring this concept into the design of the dining room. When designing your kitchen area, think about what's on your menu in order to determine what is needed for the food preparation area.

Get Funding

Your business plan will help you recognize how much money you will need to start your restaurant. If you are unsure about how much money you will need upfront, talking to other restaurant owners can help you project your expected start-up costs. There are numerous ways restaurateurs raise capital to start their business, including taking advantage of government programs that cater to upstart small business owners; liquidating assets or using them as collateral for a loan; or encouraging a family or friend to become a partner.

Be Familiar With Safety Regulations

Restaurants are regulated and subject to inspection, and failing to be up to speed with these regulations could be detrimental to your company. Most regulatory agencies will work with new restaurateurs to help them become familiar with what they must do to meet the necessary legal requirements.

Hire Employees

One of the biggest challenges restaurants face is a lack of qualified labor. In order to get and retain qualified employees, make sure your employment ads specifically state what you are looking for in an employee, and clearly outline the job's duties and responsibilities. In addition, find out what other restaurants are paying their employees so that you can be competitive in the job market, without spending too much on payroll.



Advertise and Market

As with any business, "build it and they will come" won't have customers breaking down your door. Every business needs a comprehensive marketing plan, and restaurants are no exception. After determining your marketing budget, price out billboard advertising, ads in coupon clippers, and television and radio advertising. Get noticed online by posting your restaurant on sites such as Ask your customers how they found out about you, so that you can record where your advertising and marketing dollars are best spent. Grass roots advertising, such as setting up tasting booths at local events or having an event at the restaurant benefiting a local charity, can be an inexpensive way to achieve positive word-of-mouth.

More Information

Owning and running a restaurant is not for everyone; there is a lot of work involved. However, there are many experts that can help you be a successful restaurateur. Trade associations are an excellent source because they can give you specific information about your particular market niche. Visit the National Restaurant Association's Web site at for more information. And, as with any new business venture, it is important to discuss business options with an attorney.

LegalZoom can help you start a business. Answer a few simple questions and we'll help you decide which business structure is right for you. Find out whether an LLC, C corporation, S corporation, or sole proprietorship fits best with your business goals.

Ready to Begin?