You’ve always wanted to open a restaurant, but your life and career had taken you in different directions. Recently, the time is right to finally realize your dream. You have a restaurant name planned, some great menu ideas, and the money to make it happen. The only thing you’re missing is experience. Can you still successfully run a restaurant?
While breaking into the restaurant industry without experience is difficult, it’s not impossible. What you lack in restaurant knowledge should be offset by some skill or ability in:
- Customer relationship management
- Restaurant computer software
- Small business
- Food supply
- Marketing and advertising
Owning a restaurant is about far more than what’s on the menu. You need to choose the right location, get licensing and permits, hire on staff, manage payroll, promote yourself, and so much more. In this article, we’ll tell you exactly what you need to know and do to successfully open a restaurant, even if you lack experience.
Is There a Benefit to Having Restaurant Experience Before Opening Your Own Restaurant?
To say owning and running a restaurant is simple would be the understatement of the century. According to food management and restaurant inventory resource Orderly, in only a year, 60 percent of new restaurants will permanently shutter their doors.
Even if yours survives that first 364 days, there’s more trouble ahead. Orderly also notes that within four years, 80 percent of restaurants will shut down.
There are countless reasons this can happen. Sometimes, it’s due to management mistakes and other times, financial errors. Focusing on an unpopular type of cuisine can spell the end for a restaurant, as can opening in an oversaturated part of town with a lot of steep competition. Going too remote can hurt you as well, because no one will know you’re even there.
In some instances, a restaurant will fail for a combination of the reasons above or for causes that are more difficult to pinpoint. At the end of the day, the result is the same: your restaurant is no more.
Having experience in the restaurant industry, even if it’s not with a restaurant you own, means you have a chance at identifying issues that could lead to closure. You can’t always prevent a restaurant form shutting down, but going through the experience presents a lot of learning experiences.
You’ll have a solid understanding of what works and what doesn’t. Instead of making costly, possibly restaurant-ending mistakes yourself, you’ve seen other establishments be the guinea pig. Now you know what to avoid.
What Do You Need to Know for a Successful Restaurant Opening?
Knowledge is power, and the more you live and breathe the restaurant industry, the better off you’ll be when opening day arrives. Here are the areas we recommend you pour most of your free time into. Whether you read books, take college courses, enroll in an online class, or even chat with a restaurateur about these topics, you need at least a passing knowledge in them all.
Customer Relationship Management
Your customers are everything in the restaurant industry. Without a base of reliable, loyal customers who come in every so often (once a month or even once a week), business would be a lot less steady.
Besides the current customers you have, you also have to go to lengths to attract new business and convert these people into regulars as well. Part of this is in marketing and promotions, which we’ll talk about a little later. The rest comes down to customer relationship management abilities.
If math has never been your strong suit, then you’ll need a top-notch accountant to guide you through the weeks, months, and hopefully years ahead with your restaurant. There are many areas of accounting to focus on pertaining to the restaurant industry. These include the following.
- Cost-to-sales ratio: Your cost-to-sales ratio is a calculation. You take the price of food and divide that by your food sales. Then you multiply that number by 100 percent. You’re aiming for a cost-to-sales ratio of 26 to 36 percent. If your cost-to-sales ratio is too low, you’re either not making enough money on food or you’re incorrectly pricing your menu.
- Operating expenses: This one is a little more straightforward. Your operating expenses include the cost of what keeps your business operational, such as advertising, marketing, lighting, linens and napkins, silverware, plates and cups, etc. Make sure you exclude rent, food, ingredients, and payroll from this.
- Occupancy expenses: You would want rent calculated into your occupancy expenses instead. This should also encompass your property insurance, utilities, and property taxes.
- Restaurant labor cost: What does it take to run your restaurant? With the restaurant labor cost, you can find out. All staff on your payroll are in this tally.
- Cost of goods sold: The “sold” part of calculating cost of goods sold can get confusing, so here’s an explanation. This includes all the ingredients and food products necessary to craft everything on the menu. From appetizers, drinks, and desserts, you can determine your own cost of goods sold by multiplying the dish’s menu cost by the price of making the dish.
- Prime cost: From there, it’s relatively easy to determine your prime cost. You’d add your labor costs to the cost of goods sold.
- Chart of accounts: Lastly, there’s the chart of accounts. Equity, expenses, revenue, liabilities, and assets are all rolled into here, but categorized so everything stays neat. For example, you might organize your chart of accounts by sales, supplies, marketing, and other like categories.
While you might not sit at a desk all day, computer software is going to be a major part of your job as a restaurant owner. The above customer relationship management we discussed before can be streamlined into a software known as CRM. Automating some customer-related tasks makes your busy life even easier.
Accounting software will allow you to make the above calculations accurately while keeping your expenses organized if you don’t yet have an accountant. It’s much better you invest in this software right off the bat than try to do your bookkeeping on old receipts and notebook paper.
Restaurant management point of sale or POS is a crucial piece of software that will come up in your day-to-day life as a restaurant owner as well. You and your waitstaff will track analytics, open orders, seating, payroll, and inventory through the software, making it absolutely invaluable.
While you have high hopes your restaurant will grow in the time to come, for now, you have to consider yourself a small business. Knowing the ins and outs of running a small business of any kind can come in handy when the time comes to open your restaurant.
If your business is based in Europe, business and illness insurance are legal requirements in order to set up your business and will be simply part of the start-up process.
However get in contact with a professional adviser of the country of your interest in order to get informed and avoid further inconveniences.
If you’ve been a part of any industry in the U.S. that requires insurance, then you know how important this is. Having insurance for your restaurant can protect you if an employee sustains an illness or injury at your establishment, there’s a fire onsite, or any other incident goes down.
No matter what kind of restaurant you run, from a small sandwich shop or pizzeria to a full-scale, sit-down establishment, insurance is a good idea. You may want to hire an insurance professional to advise you if you think you need extra help in this area.
Arguably one of the biggest areas most worth mastering before opening your restaurant is food supply. Your supply chain is what keeps you furnished with the ingredients and products necessary for your chefs to keep cooking great dishes at your restaurant.
You’ll have a supplier and a distributor. You also must establish a quality management system to ensure the foods and ingredients you receive are good enough. Then you can serve them to your customers with peace of mind.
Marketing and Advertising
You also have to wear the hat of a marketer when running your own restaurant. At the beginning, marketing is all about screaming to the world that yes, your restaurant exists, and to come enjoy a bite to eat. Even once you build an audience, as we said before, continuous marketing will keep new people coming in.
Social media is a major key to your promotions. You’ll need accounts on each platform, from Facebook to Twitter, Instagram, and YouTube. Keep these accounts active and consider paying for advertising on some of these platforms to expand your reach.
Email marketing, which involves you obtaining the email contact information for your customers and keeping in touch, is another great option in your marketing arsenal. You may send your audience newsletters or promotions, deals, and exclusive coupons.
Don’t discount more traditional means of marketing either, such as radio advertisements, television commercials, and even mailed media. These are to your benefit to use.
How to Open a Restaurant Without Experience
You’ve brushed up on the necessary skills to be a successful restaurateur. Now you’re itching more than ever to get things going. Where do you begin with your career aspirations of running a restaurant?
Here are the steps to follow.
Plan the Concept of Your Restaurant
What kind of restaurant do you want to open? Is it one with a cuisine near and dear to the heart? Are you a fan of cuisine fusions that mix different cultures and tastes? While you want to do something unique so you stand out from the competition, make sure you’re not so unique that consumers steer clear.
Make Your Menu
Next, you want to plan what you’d like to serve. If you’re open all day, you might have three separate menus; one for breakfast, lunch, and dinner. Some restaurants update their menus seasonally, which is something else you can do.
Do keep in mind this menu doesn’t have to be set in stone yet. You can omit or add to it later, but for now, you do want it to be as complete as possible. That means accounting for appetizers or small plates, drinks, main dishes, sides, and desserts.
Get Funding If You Don’t Already Have It
Perhaps you’re in a situation like we described in the intro where you can afford your restaurant. If so, then great! You can skip this step. However, if money is tight, then you need to work harder to get your restaurant dreams off the ground.
First, you need to determine your startup costs. Then you need to add to those the operational costs. Since your restaurant isn’t actually running yet, the operational costs are projections, but that’s okay.
Restaurant loans can provide the capital you need to get started, as can investors if you can find the right one.
Create Your Short-Term Business Plan
Your business plan should account for the first five months of your restaurant at this time. Once you get your establishment open, you can plan for the rest of the year after that.
What kind of milestones do you want to achieve in those first five months or so? That’s something to really think about. Ask yourself some questions, like how many customers should you attract a day/night? How much growth do you want? Then keep all these points in mind as you formulate your business plan.
Pick Your Location
With the basics all sorted out, you have another major decision to make. Where will your restaurant be? Since location can be a restaurant killer, it’s worth it to take the time to thoughtfully select a building that’s highly visible but not heavy with competition on the same block or right around the corner.
The building doesn’t have to be perfect, but it should be habitable at the very least. It also needs the space to occupy customers. If you’re a smaller establishment, then a building that can fit 50 people ought to suit you fine. Should you find the room in your budget, you could even rent a building that can accommodate 100 patrons.
Make sure the cost to rent is comfortably within your budget now. You should expect rent to increase as time goes on, but hopefully, by that time, your restaurant will be turning such a profit that the costs won’t be a big deal.
Get Your Licenses and Permits
Just because you found a perfect location doesn’t mean you can open your restaurant right up tomorrow. Before you do, you need to register for permits and licenses.
You’ll have to stop by the county office or the city clerk office in your neighborhood to apply for a restaurant license. This isn’t free, and fees vary. On the lower end, you may pay as little as $100, while on the higher end, you could shell out $1,000.
Once you get your restaurant license, you next need a liquor license if your establishment serves alcohol. Your state authority should provide you with more information on obtaining this license. Also, some states do ask for a state registration as well, so you may need that.
When you’re done with your licenses, you’ll have to get permits. These include resale tax permits for sales tax as well as a health permit.
As with many other parts of this article we try to give general advice, which might be applicable for many countries but please consider always contacting professionals of your specific area.
Find Your Suppliers
Your continuous delivery of ingredients will come from food suppliers and distributors, as we mentioned earlier. Suppliers come in all shapes and sizes. We recommend asking for a lot of quotes and comparing your options carefully. You don’t necessarily want the cheapest supplier, as they may cut corners or deliver poor-quality ingredients that will turn off customers.
If you can, schedule a visit to see your supplier’s facility and watch them in action. Ensure the supplier has a quality control protocol and they meet all necessary compliance standards. Although the search for a supplier isn’t easy, if you can find a good one, the business relationship you two enjoy could go on for years to come.
Furnish the Restaurant
Here’s the fun part: decorating your restaurant for business. You’ll also do your seating arrangements, which is admittedly a lot less fun. You need to add tables and booths while making sure there’s adequate space between each as well as plenty of room for the waitstaff to get around.
A poorly-designed restaurant is not only uncomfortable to be in, but it could be a safety hazard.
You’ve got ingredients in the back and a restaurant that’s ready to open. Now you need people to make it happen. You may hire for bar services, auditing and accounting, public relations, sales and marketing, dishwashing and cleaning, cooking, waitstaff, and human resources.
A skeleton crew is okay to start with, but you want most of these roles filled within the first month or so of your restaurant’s life. Otherwise, you could have major gaps that can lead to issues if left unaddressed.
Promote, Promote, Promote
Your sales/marketing professional or team can aide you with this, as the time has finally come to put out the word that your restaurant will soon open. A combination of fliers, online advertisements, email ads, social media promotions, and commercials can drum up interest in your establishment. You might even mail out coupons for those who dine in on the first week.
Do a Soft Opening Before the Big One
You don’t have to jump in with both feet first when opening your restaurant. A soft opening lets you prepare for what will go wrong, as there’s always bound to be something.
During a soft opening, limit your customers. You may offer a smaller menu and keep the restaurant open for only half the day. The point of this trial run is to get everyone comfortable and familiar with the rigors of running the restaurant.
Given your inexperience, we really advocate for a soft opening first. Then, once you’ve got the kinks worked out, host that big grand opening.
Opening a restaurant without experience is doable, but you’ll need a lot of staff that knows what they’re doing. You can also brush up on areas like business management, food supply, restaurant software, and marketing to make yourself a better restaurateur overall.
While it will take more hard work and perseverance, you can make your restaurant dreams finally come true. Best of luck!