A Complete Guide to Opening a Restaurant

If you're dreaming of starting a restaurant, now is the best time. The National Restaurant Association forecasts that the foodservice industry will reach $997 billion in sales in 2023.

And this growth is unlikely to subside anytime soon: With Americans facing increasingly busier lifestyles leaving them little or no time to cook, the convenience of eating out is often simply too good to pass up.

Combine the sustained industry growth with the freedom of being your own boss, the ability to entertain and nourish the community, and the wish to create a space to foster connection and good times—starting a restaurant is a no-brainer for many entrepreneurs.

In this post, you'll learn how to open a restaurant step by step and what you need to start a restaurant and a 13 ingredient recipe to help you successfully open a new restaurant.

How to Start a Restaurant Business

Think about your favorite restaurant. Now, picture your favorite dish. Just imagine what went into creating it:

• A bold work ethic: The hard work of the chef, not only in the kitchen but in the years spent practicing the craft of creating mouth-watering culinary masterpieces.
• A creative recipe: To make amazing dishes, you need the finest ingredients and guide to using them at scale. An unforgettable dish depends on a clear, careful, creative recipe.
• An unbeatable spirit: A passion for food, meticulous attention to detail, and an attitude undaunted by the stress of busy, high-volume rush order periods.

Starting your own restaurant may be a bit different from creating a delicious plate of food (ok, maybe a lot!) but it too takes a resilient work ethic, a dazzling recipe and an unbeatable spirit.

Let's be honest, starting a restaurant is hard.

When facing real challenges, a positive attitude paired with fierce discipline and commitment to success will serve you well when things get tough. Not only does starting a restaurant entail loads of research and planning, you'll have to create a menu, craft a business plan, choose a location, obtain the right permits, and market your restaurant.

All this can come with the cost of late nights and weekends–and that's only the half of it.

We can't help you with the spirit and work ethic–that's on you! But if you're reading this, there is good news. We've spent the time and done the research to build you a guide. A recipe you can follow—like the skilled chef—to make your restaurant dream into a reality.

How to Start a Small Restaurant

In this guide, the 13 steps to open a restaurant are divided across four main categories:

Prep: Research, location hunting, etc.

This is the preliminary market research stage you need to do before getting too committed to a particular restaurant concept. Learn to find the right location and conduct a feasibility study to start a restaurant.

Cook: Funding, business plans, permits

This is where things get real and you create the foundation for your success, craft a persuasive business plan, obtain funding, permits and licenses, and build out your menu.

Floor plans, equipment, kitchens

This is when you focus on materials, design, and construction, building out the physical space your restaurant. Here you'll learn about designing the ideal layout, sourcing supplies and equipment, and building the bar.

Serve: Staffing and marketing

Once you've built your new hot spot you'll need to find, hire and schedule awesome staff to service your guests. You'll also need guests to dine and order, so now you'll learn to spread the word without breaking the bank.

Ready? Let's get started.

Prep: Research, location hunting, etc.

Choose a restaurant concept, understand your market, and decide if your idea is worth pursuing.

1. Choose A Concept

Fine Dining or Fast Food?

Having a basic concept in mind from the start will help you answer crucial questions about cost, space, equipment, and staffing. It will also help you choose your location, conduct a market feasibility study, and create a business plan (more on that in a bit).

Ultimately, properly executing your concept will help satisfy and retain customers who are more likely to spread the word. Get your concept wrong—with a menu that doesn't fit the ambiance or music that doesn't appeal to your regular's tastes—and customers will be confused and less likely to return.

But, How Exactly Do You Choose a Concept?

A concept consists of many different elements and selecting one right out the gate can be hard. The good news is that there are ways to get the creative juices flowing, starting with your choice of restaurant type.

Select Your Restaurant Type

You restaurant type is not your concept, but one core element of it. It's an ideal place to start when choosing a concept because it lets you view it from a broad lens before diving into the details like your menu and prices.

Below are four common restaurant types and tips to help you choose yours.

Common Restaurant Types

1. Fast food without table service: Restaurants that prepare food quickly and offer only counter services
2. Takeout and food delivery: Restaurants providing food for consumption elsewhere e.g. at home. (virtual restaurants are a new twist on this type)
3. Food trucks: Mobile restaurants that provide food service
4. Table service: Waiters serve guests, take orders, and expedite to the kitchen. Food is prepared, then delivered to tables by servers. Common table service establishments include: cafe's, fast-casual chains, upscale restaurants, and diners.

For more information on how to pick the perfect restaurant concept to ensure your concept stands out and your unique selling proposition read How to Pick The Right Type Of Restaurant

2. Research the Market

The Market and Potential Customers

In Restaurant Success by the Numbers, author Roger Fields, CPA shares how he and his partners invested $90,000 into creating an upscale full-service restaurant in New York City's Theater District. Although they had an excellent concept, killer location, and popular Mexican food, they made one big mistake: They misread their market.

A large portion of their surrounding market couldn't afford their food. And those who came from surrounding areas to eat before watching a theater show had conventional tastes that didn't align with the restaurant concept.

But, after studying what their competition did well, Roger and the team made several changes that led to more customers and positive reviews. These included switching their concept to Southwest cuisine which gave them a unique selling proposition (USP) as no one in the area was offering this cuisine, changing their name, and altering the colors of the interior.

This one example underscores just how important it is to understand the market and how valuable it is to be willing to pivot if your concept gets something wrong.

But How Do You Better Understand Your Market?

There are several ways:

1. Research the demographics of your market area. Review factors such as age, education level, household size, income, rental prices, and population trends. Get this information from informal research, formal surveys, statistical research, and online. If your budget allows it, you can also pay someone to collect this data.
2. Analyze your market's lifestyle characteristics. Using restaurant market research methods, you may discover that many of your potential customers are vegan. It follows then that your menu should incorporate vegan based dishes.
3. Study the spending patterns of different groups. Again there are studies online that will provide this information. For example, a recent IFIC study found that 19% of Gen Z report eating a plant-based diet.

Research Your Competition

You should also research direct and indirect competition. Your direct competition shares your restaurant's concept and indirect competition is all the others. For example, if you're an upscale restaurant offering top-notch service and a fantastic ambiance, your direct competition is other similar fine dining restaurants and your indirect competition—cafés and diners.

Researching the competition will help you better understand what your competition does well (maybe their service is stellar) and what you can do better—perhaps you can create a better ambiance or serve better food. It may even give you a deeper understanding of your market—the dishes regular's like and what kind of music appeals to them.

The easiest way to conduct your research is to select a few direct and indirect competitors and visit their establishments. Then, study their menu, listen to the type of music they play and even assess the decor. You can also speak to their customers and ask them what they like about your competition's restaurant.

3. Find the Right Location

But, remember this: Your location is only as good as your concept. If you choose the wrong location for your site or execute it poorly, you risk closing your doors. I've seen this time and time again where I live in Franschhoek, South Africa.

The small town is saturated with fine dining restaurants—many of which are located on the main road that runs through the entire village. This main road is a prime spot. Many restaurants have opened up over the years, only to close down soon after because they either had the wrong concept or failed to deliver on it.

The bottom line: Take the time to find a suitable location but don't ignore the needs of your concept.

4. Conduct a Feasibility Study

What Is a Restaurant Feasibility Study?

A feasibility study helps to determine the likelihood of your restaurant succeeding by analyzing relevant factors like concept appeal, restaurant revenue levels and cost projections, and financial goals.

A High-Level Feasibility Study Outline

Below are the core sections to cover. As you work through these sections, you may notice they look similar to the elements included in a business plan. However, a feasibility study is not a business plan. Instead, it surfaces the probability of achieving the ideas detailed later on in your plan.

Let's dive in.

Section 1: Executive Summary

The executive summary summarizes your market research findings and helps answer one crucial question: “Is my idea worth pursuing?” It will detail important financials like revenue projections and explain your USP (unique selling proposition). This section is usually only a few paragraphs at the top, but is written after the main feasibility study.

Section 2: Market Overview and Analysis

In this section, include relevant market research findings such as the saturation of the market, demographics, and competition in your area.

Section 3: Business Explanation

Detail your concept, highlight your competitive advantage, and explain how you'll fulfill your market's needs.

Section 4: Financial Projections

This is arguably the most important section as it helps establish if your restaurant will be profitable. The main areas to include are your break-even point, capital requirements, expenses, and income.

How much does it cost to open a restaurant?

The cost of opening a restaurant varies depending on the location, size, and scale. Up-front costs include a security deposit, construction and renovations, licensing, kitchen equipment, and POS hardware. Other costs to consider include marketing costs before launch like signage and advertising, food inventory, rent, restaurant utilities, and staff wages. If you take a business loan, you should also prepare for payments to the lender with interest.

Expected Expenses

The median startups costs for any restaurant are $375,000. But, because your restaurant is unique, you'll have to determine your expected expenses. Start by listing all the costs—from equipment and licensing to your menu, and marketing.

Income Projections

Make conservative revenue estimates. Obtain these numbers by reviewing various elements such as the average number of guests you expect to serve in a day, your seating capacity, average restaurant check size, and expected menu prices (base this data on menu prices of restaurants with similar concepts).

Break-even Point (BEP)

BEP is the point where your total costs equal your overall revenue. The calculation establishes how much food you need to sell to turn a profit.

Make this calculation using the following formula:

BEP =Fixed Costs / (Sales Price Per Unit - Variable Costs)

Capital Requirements

Detail how much you need to start your restaurant and what portion you need from private investors and banks.

Recommended Reading: The Ultimate Guide to Restaurant Costs

Section 5: Conclusion

Sum up the findings and conclude whether it's worth starting the restaurant or not.

If you conclude that starting a restaurant is feasible, move on to the next section.

Cook: Funding, business plans, permits

Now it's time to get your hands dirty and start to give shape and structure to your idea, from obtaining restaurant funding and licenses to crafting a business plan and menu.

5. Obtain Funding

There are, however, a few requirements you need to qualify for an SBA loan:

• Your restaurant must operate in the U.S.
• You need to have a decent amount of capital and equity
• You cannot be a non-profit
• Need to be an independent restaurant

6. Write A Business Plan

For more information on how to create an effective restaurant business plan to ensure your restaurants success read How to Write a Restaurant Business Plan [with Sample]

7. Obtain Permits and Licenses

• Business license: obtainable from your local government
• Liquor license: The two most common liquor licenses are a beer and wine license and “full” liquor license that lets you sell beer wine, and spirits. The cost and application process varies by state. Consult your Alcohol Beverage Control Board when applying.
• Restaurant zoning and sales tax permit: Visit your state's website for more information.
• Alcohol tax permit provided by your state's business tax department
• Food handler's and health permit you can acquire from your Health Commission
• Building and sign permit from your local zoning commission
• Music licenses such as BMI license and SOCAN license

8. Create a Menu

Choosing Your Menu Items

Besides your target market, these factors will guide your choice of items.

• Produce availability: If you want to update your menu with seasonal produce but don't have access to fresh ingredients at short notice, you may choose to revise this decision.
• Ingredient affordability: The cost of ingredients affects your food cost
• Preparation time: Some items will take longer to prepare. These items, for example, will not suit a fast food chain.
• Kitchen space: You'll need enough space in your kitchen to create the items
• Profitability: Ensure there's enough market appeal for your meals
• Food trends: If your market is open to it, incorporate dishes based on current trends. For example, you may choose to include protein alternatives in your menu in response to the growing number of diners looking to reduce their meat intake.

Looking for more menu-design inspiration? Check out: 6 Restaurant Menu Ideas And 3 Design Trends To Grow Your Revenue.

Pricing Your Menu in 3 Steps

After you've chosen your items, it's time to price them. Here is a three-step process:

To learn more about menu pricing and the right way to set menu costs read here Restaurant Menu Costing 101

Designing Your Menu

Here are five menu design principles to follow:

1. Format. Select from four standard menu formats: Single page, panel booklet, two-panel single fold menu or three-pane, two-fold menu. Each has its pros and cons. For example, you can update single-page menus more often, but they generally aren't a fit for restaurants wanting to offer a broader variety of dishes.
2. Layout. How will you organize your menu? You have various options including columns and rows, main categories like starters and desserts, and subcategories—e.g., pizza and steak.
3. The number of items. Menu engineer Gregg Rapp suggests having no more than seven items per menu category, whether the group is mains, desserts, or starters.
4. Branding. Ensure menu descriptions match your brand. If you're a fine dining restaurant, for example, you'll likely have formal and more detailed descriptions.
5. Photos. Whether you choose to use images depends on your restaurant. For example, upscale restaurants usually don't. But if you do—perhaps you're a fast food chain—use them sparingly and ensure they look professional.

Plate: Floor plans, equipment, kitchens

This is when you focus on materials, design, and construction, building out the physical space your restaurant.

9. Design the Floor Plan Layout

Essential Factors When Creating Your Layout

Here are four factors to consider:

• Customers and brand. What type of people will visit your establishment? If they're customers quickly popping in to grab a bite to eat on their way home after a busy days work, ensure there's a clear path to the ordering counter. Also, don't forget your brand image. For example, if you're an upscale restaurant targeting couples, you can create a relaxed and romantic setting with private tables and light fixtures on these tables.
• Regulations. These include local and federal building codes, and health regulations
• Accessibility. You'll need to abide by the Americans with Disabilities Act (ADA) and ensure people with disabilities can easily access restaurant facilities
• Flow. This is a core component of the restaurant layout. Think about the different traffic routes in your restaurant—from customers going to the toilet, and servers moving on the floor to your back of house and how chefs move from food prep to food storage.

10. Source the Equipment

Equipment Breakdown

• Small-wares including tableware, utensils and take-out containers
• Bar equipment if you choose to have a bar (more on that in the next section)
• Kitchen equipment consisting of big-ticket items like ovens, freezers, refrigerators, and fryers, as well as smaller appliances like blenders
• Furniture such as tables, chairs, shelving and bar counters
• POS system which includes the hardware and software

Sourcing Options

Sourcing options include buying used or new, and leasing.

Buying Used or New

Purchasing new gives you peace of mind the equipment won't break anytime soon. But, it can be a substantial monetary investment so you may choose to buy used. If you opt for the latter, follow these guidelines:

• Purchase from reputable dealers
• If you do buy from a private seller, research and test the equipment before buying it
• Limit used purchases to only certain items such as tableware and gas equipment. Gas equipment, for example, breaks down less often and is easy to repair
• Avoid buying fridges and freezers used. They are one of your most important equipment investments. Buying them used, only to have them break down soon after, can be catastrophic, and lead to food spoilage, rising food costs, and shrinking margins

Places to Buy Used and New

You can buy new and used equipment from a variety of places:

• Online stores like Zanduco Restaurant Equipment and Supplies and RestaurantSupply.com
• Retail suppliers like Bowery Restaurant Supply Co in New York
• Online and offline auctions. For example: (U.S.) Restaurant Auction Company

Leasing

With leasing, you pay monthly instalments which reduces your initial capital investment. However, you'll pay more than the purchase price over the lifetime of the lease. The most common type of lease is “lease to own” where companies provide a buyout option at the end of the lease period.

11. Build out The Bar

Why Build a Bar?

• An attractive and well-positioned bar can drive customers through the door
• A bar lets you sell high-margin appetizers
• Margins on alcohol are higher than food, making it a lucrative profit center
• Some customers enjoy eating at the bar. And with easy access to drinks and food, customers will probably order more, allowing you to increase your average restaurant check size

Bar-Building Tips

Below are bar-building tips across two categories: Logistics and Inventory. “Logistics” refers to everything from deciding on your bar size and kitting it out with the right equipment and supplies. "Inventory" covers the details of stocking your bar: Brand choice and quantity.

Logistics of Starting Your Bar

Tip 1: Your target market should inform your bar concept. Refer back to your market research, review market demographics, analyze drinking habits, and understand their drinking preferences.

Tip 2: Your concept and location will inform your bar size. For example, upscale restaurants that focus on food and the experience generally have smaller bars. Casual neighborhood restaurants, though, often have larger ones.

Tip 3: Visit your competitor's bar to see how they operate. Assess their restaurant size, bar size and the number of customers who eat there.

Tip 4: Ensure you have the right liquor license to sell alcohol (See “Obtain Permits and Licenses” above)

Tip 5: Stock your bar with the right equipment and supplies. Everyday items include bar stools, cocktail shakers, bottle openers, ice buckets, glasses, wine coolers, glass racks, reach-in coolers, and beer taps.

For a full list of items you'll need and more details on owning a bar, read Opening and Owning a Bar: Everything You Need to Know.

Building an Inventory List

Stocking your bar involves sourcing the right brands and ordering the correct quantity from suppliers. Follow these three tips when doing so:

Tip 1: Use your budget to partially guide your choice of brands, but don't forget your concept...

Tip 2: Your concept will, ultimately, inform brand choice. For example, an upscale concept will generally offer premium labels and a large variety. Similarly, restaurants specializing in specific cuisine will often have drinks matching that theme.

Tip 3: When deciding on the quantity follow this rule of thumb, laid out by Roger Fields: “Limit the amount of inventory you keep in stock of any brand to not more than 150 percent of your estimated weekly usage.”

With your logistics and inventory startup tasks complete, you're just about set to open your bar. But remember, completing these tasks is only the start. You'll also need to properly manage your bar to reduce shrinkage and remain profitable.

For tactics on how to better manage your bar and bar inventory read: 7 Bar Inventory Building and Management Tactics for Restaurant

Serve: Staffing and marketing

Now you need people–to serve and to eat. Find, hire, and schedule awesome staff to service your guests and spread the word about your grand opening.

12. Staffing: Find, Hire and Schedule

Kitchen Staff

When hiring kitchen staff, assess their skills and ability to cook your restaurant cuisine. As for the number of staff you need, consider restaurant size, the number of tables, and the complexity of the menu. Generally, a larger restaurant and a more elaborate menu means more employees.

The Chef

Your concept dictates whether you need a chef. Fast food restaurants, a local pub, or a diner, probably won't need a chef, whereas a fine dining restaurant will.

If you decide to hire a chef, here are a few best practices to find the right chef for your restaurant:

• Understand your concept and what type of cuisine you offer and narrow down your search to chefs specializing in that cuisine
• Visit restaurants offering a similar concept to yours, find out who the chef is, and contact them to gauge if they're interested in a new job
• Ask those same chefs for other chefs' contacts
• Contact other restaurateurs you may know in the industry for referrals

Servers

Your servers are your first point of contact with customers so find ones that will leave a strong first impression on guests. Traits to look for include strong interpersonal skills, attentiveness, hard-working, and an aptitude for learning.

When searching for suitable candidates, hire slowly: Follow a similar process to the one above—ask for referrals and speak to contacts in the industry.

When you do finally have a list of suitable candidates remember this:

“When the time comes to make your final decision, always opt for attitude over skill. It is relatively easy to teach people how to set a table or the proper etiquette of serving, but it is very difficult to teach attitude.” - Roger Fields, Author of Restaurant Success by the Numbers

Scheduling Decisions

After hiring the right employees, it's time to create your shift schedules. You'll need to:

• Choose the right mix of work schedules. For example, your mix can be a combination of fixed schedules where employees work a predictable amount of hours each week and rotating shifts, where they switch with other employees on a set schedule
• Choose your scheduling method. Methods include no formal method, pen and paper, spreadsheets, and scheduling software. Each method has its pros and cons, but if you want to spend less time scheduling and better optimize your schedules, consider investing in restaurant employee scheduling software
• Ensure your schedules factor in staff and business needs. For example, staff will want advance notice about schedule changes while your business balances this need against having the right mix of schedules to maximize efficiency

Want to learn more about creating optimal shift schedules to reduce labor costs?

13. Market and Promote the Opening

1. Inform family and friends about the launch
2. Ensure you have a website
3. Create a press release for your local newspaper
4. Personally invite other business owners in the area, e.g., send a card.
5. Use social media like Twitter, Instagram, and Facebook to spread the word.
6. Send flyers to households in your community
7. Reach out to influencers and blogger who can write reviews
8. Share your menu online so potential customers can view it. Most customers today view menus online first before visiting a restaurant.
9. Share menu items on Facebook and Instagram in staggered intervals before launch day. Include a brief write-up and a stunning photo to create buzz.
10. Host a soft opening where you invite a limited number of people. This helps you iron out the kinks.

Finally, You're Ready to Open!

The only thing left to do after completing all the restaurant startup tasks —including your marketing— is to open your doors, deliver on your concept and pop some champagne! It's a feeling you'll remember for years to come.

But as chuffed as you may feel, from that day forward you'll have a whole other kettle of fish to deal with: running your restaurant. You'll have to market your restaurant long after opening day because “hype” soon wears off. You'll have to make critical staffing decisions, find ways to optimize your scheduling process, control food costs, and keep tabs on your labor costs.

The good news? Opening up your first location gives you the confidence that you have what it takes to succeed in the restaurant industry. And no one can ever take that away from you.

A Final Few Words on How to Start A Restaurant

Now is an excellent time to start a restaurant as the industry continues to face sustained growth. If you do choose to become a restaurant owner, though, make sure you're not only driven by the romance of starting one—because as we saw, opening a restaurant requires passion and hard work.

Assuming you have that passion and work ethic, the only thing left is your recipe for success. Thankfully, this post provided you with that recipe by detailing 13 key ingredients you need to follow to successfully start a restaurant—from core ingredients like choosing your concept and researching your market to the details like creating a menu and making important staffing decisions.

We can't promise you that tackling these various startup tasks will be easy—it won't. But what we can promise you is that if you focus on these 13 ingredients for opening and starting a restaurant, you'll be that much closer to opening your restaurant and hopefully making a massive success out of it.

And who knows, it may be only a matter of time before you open a second location? If that's the case, rest easy knowing you already have restaurant experience and a recipe for restaurant startup success you can replicate.

The only remaining question is: Are you ready to open your restaurant?