Walk through any city or neighborhood in the country, and you’ll quickly notice that restaurants are often the most prominent small businesses. They offer so much to communities. They’re a place to gather, a place to meet people, and, of course, a place to enjoy a good meal with friends and family. Owning a successful restaurant that is such a centerpiece of a neighborhood would be a dream. You would also be an integral part of the community.
However, launching and operating a restaurant is a challenging task. It takes meticulous planning, drive, and ambition to see your idea grow from the concept stage to a successful launch. You also need to think about being successful despite your competitors. In fact, 47% of restaurant owners believe that the competition will continue to intensify.
Despite the challenges, it can be done, and entrepreneurs are doing it every day in cities across the country. Below, we’ll share the blueprint for how you can launch the restaurant of your dreams and operate it successfully for years and years.
Start With A Concept
For restaurants, the concept is essentially their brand. It encompasses the complete experience guests will enjoy when they come to your restaurant. When it comes to what makes a restaurant successful, the concept is a key element.
The concept involves the restaurant’s theme, like the menu prices, the dining experience, the type of food, and the type of service provided.
Regarding a restaurant concept, your imagination is the only limit. Certain basic concepts have been proven to work over the years, such as fast-casual restaurants or quick-service restaurants. But many restaurateurs put their own spin on these existing concepts or develop their own.
This goes for all types of establishments, including a profitable bar or running a bistro. Each one needs a strong concept to help it stand out in the market.
Choosing A Concept
Choosing a restaurant concept is about finding that middle ground between what you feel is exciting and inspiring but is also achievable based on your market and operating costs.
This means the concept you choose has to be personal, and what works for other people may not work well for you. You can also combine existing concepts in exciting new ways to create something totally new to your area.
Another place to look for inspiration is to investigate other cities and look at some of the newest profitable restaurant concepts opening there. Local online newspapers and city guides will generally have a food section featuring some recent restaurant openings.
Keep an eye on these resources for ideas or concepts you can adopt for your local market.
It’s important to remember that the concept doesn’t always have to revolve around the type of food you’ll be offering. The concept can also include pricing, how the food is served or delivered, or simply the style and ambiance of the restaurant. Even how the food is prepared or sourced can be a major part of your concept.
It’s possible that you have one concept that you feel is perfect, and you don’t need to look any further. However, you may want to try to develop a few concepts in your mind first.
Once you have a few concepts in mind, you can review them individually and look at their feasibility. This means whether or not your budget fits the concept and whether your current local market has a need for such a concept.
During this process, you may even combine various ideas from different concepts to build the perfect restaurant idea.
Just remember, the concept for your restaurant is the foundation for almost everything that comes next. So take your time with this decision and be open to making changes so that you have the highest chance of success and the fewest obstacles possible.
Market Research In Your Area
Even if you’ve lived in an area for most of your life, you may not fully understand the demographics of the neighborhood and what types of businesses it can support.
This is where detailed market research comes into play. You need to know whether or not your concept will work in the area you plan on launching it. This may seem obvious, but many businesses fail to follow this step, and they launch a great concept, but it’s in the wrong area. Successful restaurants require a high demand for what they are offering.
If the concept doesn’t match the area, it won’t succeed, no matter how good it is.
Check Market Pricing
A key part of market research is looking at competitor pricing and seeing the range for a specific neighborhood. Unless your concept is to beat competitors on pricing, you don’t want to be underpriced or overpriced.
If your concept has pricing far outside the norm for the area, there likely isn’t a customer pool large enough to sustain your business. If there were, there would likely already be restaurants in that price range.
There can be exceptions to this. For example, if the neighborhood is undergoing demographic changes or if it’s a new area. But these are outliers, and for the most part, you want to fall into the price ranges that the area already supports.
Overall, you want to shoot for average gross profit margins of around 70% when determining your pricing. After expenses, the average restaurant profit margin is generally around 3-7%. Quick-service locations like fast food restaurants tend to have higher margins than full-service restaurants.
Another area of research is to examine what service options are popular in your area and what your competitors offer. Is it mostly seated dining areas, or are online orders and take-out a large portion of their business?
Depending on which options are most popular in your area, you may need to modify your concept slightly. If your customers like take-out options, you’ll likely need to offer them to stay competitive and keep customers coming back.
Identify Your Target Customer
One misconception that new restaurateurs often make is believing that everyone is a potential customer. All they need to do is try your food or experience your concept, and they’ll be a customer for life.
Unfortunately, this is not true of any business, and it’s definitely not true in the restaurant industry. Depending on the food you are offering, the service options, the pricing, and the branding, you have to attract a specific customer to which all those things appeal.
When thinking about your core customers, determine what sets them apart. Things like their average age, income, hobbies, and things of this nature are all worth considering.
Is your concept targeted at young professionals? If so, there must be a large enough pool of young professionals in your area to sustain it.
You’ll also want to be aware of certain sub-cultures within your target market. Understanding what’s important to those people and what they believe in will help you cater your marketing messaging directly to them.
If you don’t fully understand your target customer, you will risk your marketing or branding not hitting the mark or coming off as disingenuous.
One of the best ways to learn about your target market is to look at competitors running similar restaurant concepts to yours. Identify what their customers are like from a demographic perspective.
You’ll also want to examine how your competitors market to those customers. Look at their messaging and branding to get an idea for tapping into the market and finding a message that resonates with local customers.
Market research like this can be difficult. Some restaurateurs have a sense of these things and need little outside help. However, if you are stuck here, consider using a market research firm that can analyze your local area.
They can also conduct focus groups to find more detailed information about how potential local customers view your concept. These types of services can start as low as $5K for a detailed analysis, so it may be well worth the investment.
Create A Business Plan
Next up is your business plan. A business plan is essential for any successful restaurant, and it acts as a blueprint for your idea. Think of your restaurant concept as a dream, and the business plan is the physical outline of how to turn that dream into a reality.
A business plan is the foundational document of a business, and it explains the mission of the business, the business model, the marketing model, and other core aspects of how the restaurant intends to operate and set itself apart.
If you’re wondering how to start a restaurant with no experience, then a solid business plan is even more important as it allows you to carefully flesh out your idea from start to finish.
A business plan is also necessary if you plan on seeking financing or loans of any kind to help fund the restaurant. Most loan applications will require a business plan if you are seeking funds for a business that does not yet exist.
There are software programs and templates to help you create a business plan if you’ve never created one before. However, it is relatively simple, and you can do it using a basic outline such as the one below.
The first page or section is your executive summary. Think of this like your “pitch,” but in a precise format with carefully chosen wording.
For example, if you were trying to explain your entire restaurant concept and business model to a friend or family member, that would be your executive summary. However, your audience will be people familiar with the restaurant business, so be as precise as possible with your wording.
This part outlines the details of the company structure for your restaurant. For example, the owners or investors involved. It should also include other details like the type of business entity it will be, such as an LLC or a corporation.
This part should describe what your restaurant is looking to achieve and the need it proposes to fill within the market. This part may be important if you’re seeking investors since they want to know what exactly sets your business apart and how you plan to succeed.
The next part of the business plan includes your products or services; in this case, that means your food and how you plan to offer it.
The type of food you will be offering, as well as the pricing model and target customer, will all be included in this section. You’ll also want to explain how you plan on sourcing your ingredients and other supplies in a way that ensures you can maintain healthy profit margins and adequate inventory.
If you performed any market analysis as we described earlier, then this is the place to explain those results and how you used that data to flesh out your restaurant concept.
Even if you didn’t perform any formal analysis, you should include your understanding of the market and how you plan on serving it in this section.
This section should outline how you plan on marketing your business and attracting customers. Launching a successful restaurant takes preparation, and you need to let potential customers know well in advance about the grand opening. Cash flow is usually tight when starting, so when you open a restaurant, you want customers walking in on day one.
Having a sound marketing plan well in advance is the best way to ensure you have a successful launch. This includes your social media strategy and the money set aside for advertising.
Financial Analysis and Projections
If you’re launching a restaurant, these numbers will be mostly estimates. But they are still important, especially if you are seeking a loan. Keep in mind research has indicated that starting a restaurant can cost up to $500,000.
You’ll want to outline your overhead expenses, food costs, and profit margins. After that, you want to make projections based on an estimated number of customers per month. It would be best to base this estimation on your earlier market research.
Use these projections to determine how soon after launching, you will be profitable and what your cash flow situation will be.
You have two choices when it comes to funding a new restaurant startup. You can fund it yourself or seek loans to help finance your expenses. The other option is to seek private investors to help with startup costs.
Private investors can be anyone from other restaurant owners in the area to friends and family. Remember that you should treat these private investors like formal lenders. That means precise contracts between the two parties outlining the exact expectations. This helps to avoid any confusion or possible legal fights should things not go as planned.
To finance it yourself through loans, you also have a few options. One option is through your local bank. This can be difficult, but if you have solid personal credit and a well-thought-out business plan, you should be able to get a loan to help you get started.
The other option is to seek out an SBA or Small Business Administration loan. These are government-backed small business loans given out through partner banks nationwide.
These can often have more lenient terms than private loans. This includes higher loan amounts and longer terms to pay them back.
SBA loans require far more paperwork to obtain, so make sure your personal finances and business plan are in order before applying.
Find The Right Team For a Successful Restaurant
Next up, you’ll need to find your staff and hire them. Depending on your concept, this may only be a few people, or you may need an entire staff who knows how to run a successful restaurant.
This process can take time, and you need to schedule it so that you hire people right as your opening. If you hire too early, people may take others while waiting for your restaurant to open.
You’ll also need to carefully consider your payroll situation. As soon as you open and your staff starts working, you’ll need to pay them. It’s not uncommon for a restaurant to have cash flow issues in its early days. If you get off to a slow start, you’ll need to either have enough cash on hand or a line of credit to make payroll.
As part of your business plan, you should have these costs and how you plan on making payroll. For many restaurants, the owner works or manages the restaurant in the early days to help save on labor costs.
Finally, ensure you have the time and resources to properly train any of your employees who need it. If you create a new concept restaurant, your new hires may need to learn exactly how you want things done.
In these cases, you’ll likely need to train them and bring them up to speed on how you want the restaurant to operate.
Prepare For a Successful Restaurant Launch
A lot goes into preparing for a restaurant’s grand opening. This process can take 6-8 weeks on average but can be longer or shorter depending on your concept and experience level.
Most owners will already be aware of any remodeling or equipment installation they need to complete. But other marketing-related tasks may fall through the cracks or not be as high on the list of things to do.
However, these things are crucial to getting off to a good start. Below is a list of some important but sometimes overlooked areas.
- Set up your Google business profile
- Start your social media accounts well before opening
- Submit to restaurant apps
- Build your website and test it if accepting online orders
- Hire an experienced photographer to take pictures of your menu items
- Contact local news agencies and city guides to inform them of your launch
When contacting local media outlets, try to have a good story ready. If you call and say you’re opening a new restaurant, it may not generate much interest. Instead, try to find an angle that makes it a good story for them to cover.
Perhaps something about your past is interesting and led you to open your restaurant. These things make news outlets notice and be more willing to run a story about your grand opening.
Running And Managing A Successful Restaurant
If you’re experienced, you should have no issue managing a successful restaurant. However, if this is your first restaurant, you may have to learn how to run a restaurant as you go.
Hiring a skilled and experienced manager may be your best option, although it will add to your budget and payroll. You must manage the restaurant yourself if you can’t afford to hire a manager at launch.
Just understand that learning to manage a restaurant is a process and takes time. Be flexible and patient. However, you don’t want to be so busy running the operations of the restaurant that you lose track of the finances.
This is a common mistake and one that often leads to a restaurant losing money. You can avoid this by carefully allocating your time to ensure you manage the restaurant and keep tabs on the financial and marketing side.
You don’t want to be too fully engrossed in one area that you ignore another crucial area. If this is difficult for you, you should consider hiring someone to fulfill the other obligations.
This also goes for successful bars or new bar owners if they serve food.
Setting Up A Successful Restaurant
One of the key areas modern restaurants use to improve their operation is using POS systems to handle their payment processing.
These advanced systems do more than process credit and debit cards. They offer additional features such as inventory or ingredient tracking, employee tracking, sales analytics, and much more.
ECS Payments is a leader in payment processing for restaurants, and we offer different payment options and POS systems to fit every kind of concept restaurant, from food trucks to full-service locations.
Contact ECS Payments to learn more about our innovative payment processing solutions for your restaurant.