The way we dine out has been transformed in the last decade with independent cafes and restaurants opening on every corner and food stalls booming throughout multiple UK cities.
As an entrepreneur who is thinking of opening a restaurant, it is important to consider the time, money, legalities and commitment needed to start a food business. However, many of these considerations are often forgotten.
Many food businesses that start as an idea and quickly grow into a brick and mortar venue without sufficient planning can often face hurdles in the future, such as cash flow problems and even liquidation.
It’s frustrating for any business owner to see their hard work dissolve, so by seeking professional advice and investing in time to set up your business properly, you have a better chance of running an effective and profitable restaurant.
Here are 10 ingredients for a profitable restaurant start-up, from Bobby Kalar, managing director of Yu Energy.
1. Deciding on a concept
You may have an idea already in mind or you may still be at the drawing board, but choosing what type of restaurant you want to offer, your target audience and its unique selling point are important to think about when creating a restaurant concept.
Dev Biswal, owner of The Ambrette restaurants in Kent and Sussex, explains why it is important to decide on your restaurant’s ‘voice’.
‘The voice of your restaurant, which encompasses its values and aims, will differentiate it from the competition; it’s your USP.
‘It’s essential that entrepreneurs establish their restaurant’s character early in the process and then ensure that this ‘voice’ is present in the dishes, the menus, the marketing and that it is conveyed by the staff.
‘At our restaurant we design our menus with the aim of challenging perceptions and educating diners about the food in front of them.
For example, our recent detox tasting menu showcased the nutritional benefits of spices such as cinnamon and nutmeg and I took the time to explain this to diners in the hope that they leave my restaurant knowing how to boost their well-being using these store cupboard ingredients.’
2. Market research: Competitor analysis
Having an idea for a business is all well and good, but without sufficient research you could be opening a restaurant that your target market has no interest in, there’s no guarantee that you will receive a return on your investment.
Regardless of your chosen industry, it is important for anyone with a business concept to research their competition, customers, funding options and profitability as a business prior to investing hard work and time into an idea that may already be out there or isn’t profitable.
Primary research taken from customers in your region can be far more accurate than sourcing secondary information because while data may be insightful, it might not apply to your unique concept.
For example, a survey taken in Manchester about the number of people who would visit a new gourmet burger restaurant could collect a very different opinions to an identical survey of Birmingham residents. Therefore it is valuable to conduct your own, real research on potentially new customers in your area.
3. Business plan
Business plans are essential for structuring your business model, clarifying direction, attracting financing and team members, as well as being a document that you are able to refer back to during the everyday management of your restaurant.
Many entrepreneurs are often daunted by the thought of creating a business plan to support their idea, however there are plenty of resources out there that are helpful to read when writing a business plan.
What’s more, a business plan doesn’t need to be excessively long; it is acceptable to write just a few pages if it includes everything yourself, your employees and your investors would need to know about your concept, finance and marketplace.
4. Funding a restaurant start-up
Finding the funding to get your food business off the ground can be difficult. In 2012 a study by the Federation of Small Businesses (FSB) found that 42 per cent of small businesses that applied for a loan were turned down.
Since then, there has been a rise in successful funding initiatives for startups, including The Prince’s Trust, Funding Circle, and increased government grants for small businesses.
Rob Martyniak, co-owner of Meatcure talks about the financial challenges entrepreneurs typically face when opening a restaurant.
‘One of the main challenges you’ll face when opening a restaurant is the financials to fund your business. The financial investment is often why so many great ideas never become a reality.
An entrepreneur is simply someone willing to take the steps to crafting their dreams when others aren’t, or are, intimidated by the financial commitment. However the financial injection you put into your business idea doesn’t need to be excessive.
‘At Meatcure we build, design and create everything in-house ourselves. We have invested time into learning our craft independently, from installing the toilets, building the bar to creating the perfect patty and brioche marriage.’
Finding the perfect premises for your business can be a challenge as it’s dependent on many factors: where you want your restaurant to be, the type of building you want your restaurant to be in, where your customers are mostly likely to be based and how much money you have to purchase or rent.
Choosing a property based on your business concept and ethic is a sensible method of ensuring your restaurant will please your own objectives and your customers’ expectations.
If your brand is passionate about energy saving, you may opt for somewhere with a high EPC rating or is completely powered by renewable energy.
If the purpose of your food business is to offer fast, healthy and easily accessible meals to workers at lunchtime, it would be sensible to find premises in a city centre where your target market is likely to be.
Utilities were the second cause for rising business costs in 2015, with labour taking first place, in a recent study carried out by the Federation of Small Businesses (FSB).
With running costs, including electricity and gas, being one of the biggest overheads for restaurant start-ups, it’s important to choose the correct supplier for your business.
There are so many utility providers out there that it can be difficult for businesses to understand what they want from their supplier.
The ‘Big Six’ are a popular choice for most due to their existing client base and fairly good introductory offers. However what the ‘Big Six’ stand out in popularity, they often lack in customer service and reliability.
Choosing to opt for an independent utility provider is proving a popular and wise choice for many start-up businesses, who are benefitting from the unrivalled customer service provided by flexible suppliers, often at a considerably lower price than leading electricity and gas giants.
Restaurant owners increasingly say that finding a supplier that offers flexible energy contracts to suit their individual needs is more important to them than sticking with a well-known company because they think it’s easier not to switch.
Apathy is the enemy of any successful business, and this applies to utility bills too. If an owner doesn’t get the deal they deserve from the start then they’re setting themselves up for difficulty later down the line. They need to talk with their feet and take control of their own energy from day one.
7. Equipment installation and maintenance
To run an efficient restaurant business you need equipment that you can depend on. Investing in good-quality apparatus at the start will ensure that maintenance and repairs are kept to a minimum in the long term.
Choosing the most appropriate supplier to service your appliances can often be something that many restaurants forget about. Alex Wrethman, owner of Charlotte’s Group expands on this point.
‘The biggest challenge for someone opening a restaurant has to be building a list of contacts and suppliers that are invaluable to your business. For someone who isn’t already in the restaurant industry, it can be difficult to build a network you can work with and trust.
‘The relationship you have with your suppliers is most important; knowing that you are only a phone call away from a reliable electrician or food supplier is valuable for any restaurant.
‘When choosing suppliers, customer service should be your main deciding factor. Being able to put a name to a face is such an important part of having reputable suppliers for your business. Knowing your restaurant is cared for by your suppliers is something that is priceless to any business.’
8. Regulations and licenses
There are several licenses that you may require to start your restaurant business. These include:
- PRS for Music license: If you, or anyone else, plays music for customers, visitors or staff, you need legal permission from the relevant copyright owners. This license can be obtained from PRS For Music.
- Alcohol license: An on-license must be granted for an establishment to sell alcohol that must be consumed at point of sale. This license can be obtained through your local government website.
- Food hygiene certificate: This certificate proves that you are aware of and operate under the appropriate food hygiene and health and safety regulations.
- Public liability insurance: This protects you if your customers suffer personal injury or property damage because of your business. Public Liability Insurance covers legal expenses or compensation claims and is essential for businesses that interact regularly with customers.
- Building permit: If you intend to construct your premises or add to your existing structures, you will require a construction permit.
- Food premises approval – If your restaurant handles meat, fish, egg or dairy products, you must be inspected and approved by your local council. You can apply for this license through the government website.
Working as a team is an important part of any hospitality business. Restaurants can often spend a third or more of their revenue on staffing, recruitment and training, so it is important to factor in these expenses when thinking about opening a restaurant.
Recruitment can be a difficult part of starting your own business because you are competing against bigger, more reputable brands for the best staff.
However, this problem can be resolved by ensuring your job descriptions are transparent and include that you are a newly-opened restaurant. Applicants are often intrigued by the growth prospect of working for a start-up, so it can beneficial to explain your vision as a small business to your potential staff members.
Similar to competing for staff, you are also against other restaurants when it comes to promoting your brand. It can be difficult as a new business, without the reputation and authority that your competitors already have, to stand out from the crowd.
It’s important to remember that as a small, startup food business, you’re speaking to an interested audience! In a recent survey carried out ahead of Small Business Saturday, a quarter of people (26 per cent) said they were more likely to shop at local, small businesses than five years ago.
This increasing figure shows that consumers are willing to visit independent businesses, including restaurants: by communicating the passion and ethic of your brand through your marketing materials, you can draw them in your direction.
Once these steps are all this in place, you can concentrate on the part you know best – the food.
List of useful resources on starting a restaurant
- Starting up a restaurant: The considerations
- Menu tips 1: How to write great menu descriptions
- Menu tips 2: What to consider when writing a menu
- Restaurant POS systems: 13 different systems to compare
- Kitchen equipment: A ‘Top 20 checklist’ of the essentials for a modern commercial kitchen
- Wholesale food suppliers: Some useful tips on choosing the right suppliers for your type of restaurant
- Restaurant franchises: A selection of UK franchise opportunities. Not all of them are strictly restaurants (does ‘Wendy’s’ really count as a restaurant?) but there are more typical restaurant style businesses available (e.g. Cafe Rouge, Bella Italia etc.)
UPDATE: Since this article was first published we have all had to deal with the effects of coronavirus emergency. Restaurants and hospitality have been particularly badly affected, first with lockdown and then having to deal with restrictions and new operating rules.
For those still brave enough to start a new restaurant we recommend you see our article: How to reopen your restaurant, pub or hotel post-lockdown. It contains lots of useful advice that would also pertain to anyone opening a restaurant.
Most importantly, the article lists out the new specific operating guidelines from the UK government, as well as the draft recommendations from trade association UKHospitality.