The restaurant business is a booming industry. If you’re planning to launch a restaurant startup, you are in interesting times. Technology has disrupted the way this industry works and this calls for a re-evaluation of what it means to be a restaurant start-up. Today, opening up a restaurant means much more than just making food and serving it. There are tons of other things associated with it like, finding a location, renting or purchasing land, buying all the necessary commercial kitchen equipment and more. Let’s break this process down and analyze each step of starting up a restaurant business.
Restaurant Startup Ideas by type of restaurant
Here are some restaurant startup ideas that will give you a fair idea of the different types of food businesses you can venture into.
Quick Service Restaurant
If you believe in the concept of prompt service, you might want to give QSR a shot. A typical Quick Service Restaurant looks something like this.
- They are fast-paced. The orders are completed within 10-15 minutes of being punched in.
- Take-away, delivery and dine-in, both function simultaneously. There’s usually a small space designated for those customers who wish to stay back and eat.
- The cost of opening one in India ranges from 10L to 20L. There are other miscellaneous costs that get added for promotional activities, commercial kitchen equipment, etc.
If there’s anything you must look out for, in the restaurant business, it’s the constant competition you’d be facing right from day one. The increasing competition combined with high costs of rent and design might force you to look out for reasonable alternatives. This is where the concept of Cloud Kitchen comes into the picture.
- As you must have guessed from the name, ghost kitchens operate online. They don’t have a physical presence, a restaurant per se.
- Online orders and delivery are the only two order sources of a Cloud Kitchen.
- These are low investment restaurant startups that require around Rs. 5-10 lakhs to get established.
A neatly plated dish of perfectly cooked shrimps with rice and a bottle of Chardonnay to go with it? If you wish to provide customers with the best dining experience then you can think of opening a fine-dine as your restaurant startup.
- Fine dines have lavish interiors, snug ambiance, soothing music and are warmly lit.
- They are well-staffed. People are hired for job roles that are very specific and well defined.
- The cost of two at a fine-dine is typically Rs. 4000 and up.
Want to be that ideal Cafe that serves a cup of coffee with some lemon tart? Cafes have a casual set-up and usually play around with outdoor spaces. A terrace cafe with your buddies after a long day of work does sound pleasing.
- Cafes adorn a very quirky and modern interior that is usually very captivating.
- The interesting concepts and themes attract the young generation mostly.
- A cafe would cost you around 10-15 lakhs. This number varies according to the location, kitchen equipment, staff and more.
Bar & Nightclubs
Weekends are meant for Bourbon punches or Cajun Margaritas. And if you know a thing or two about combining two drinks and creating something sweet out of it then you can go ahead and open bars, breweries, pubs or nightclubs.
- A bar’s menu is dictated by a range of alcoholic and non-alcoholic drinks.
- They spend a good deal of money in preparing their bar and getting hold of the drinks.
- Typically a person tends to spend Rs. 1000 and up in a bar and their cost ranges between Rs. 60 to 70 lakh.
Go and check out 10 must-have bar POS features for higher sales.
Also termed as family restaurants, casual dinings are ideal for hosting large groups of people. A place where people go for family lunches and dinners.
- They are kid-friendly having larger tables with a lively ambiance.
- It can either be cuisine specific or have multiple cuisines.
- The cost of two is generally Rs. 1500 and above.
Increased revenue for these restaurants comes with added delivery services.
Bakery and Patisserie
How good are you with whipping a double-layered chocolate chip cookie? Good enough to attract people? Then a Bakery could be your restaurant startup. Starting a Bakery Business can prove to be very challenging and exciting at the same time.
- You could either open a patisserie if you’re just willing to sell pastries or a bakery where you can sell baked items like cakes, cookies, bread and more.
- For added revenue, you could also add a little coffee bar, a delivery system or some other food and drink items.
- When equipped with the latest technology, commercial kitchen equipment, and efficient staff that can operate it, a bakery startup is highly profitable today.
More on sweet reads: How to start a bakery business in India?
There’s nothing better than taking your kitchen around. You cook inside a truck and open one side of that to serve customers some ‘truck-cooked’ food.
- Since this is not your regular pick-up truck, a food truck needs to be vivid so that it captures attention while it’s on the road.
- A food truck would cost you around 8L to 10L with zero rental and other related costs. However, you’d need all the licenses that a regular restaurant would need.
- For someone looking to get into the restaurant startup business, starting a food truck can literally drive your business.
Opening a food truck is still a very unique concept in the restaurant business and if done in a correct method can prove to be a highly profitable business. Read more on Food Truck Business to get an understanding of how you can ace your food truck game.
Have a theme for your restaurant startup?
The very first thing you must consider while opening a restaurant startup is the concept that it’s going to follow. In today’s time and age, it’s very important to keep up with the expectations of the customers. Not just that, the theme of your eatery will eventually help you decide your budget. You can’t possibly go ahead without finalizing a restaurant startup concept since the following steps are all interlinked to it. Your restaurant’s interior design must follow your restaurant’s theme.
A key filter for you to decide your theme is your capital investment or the amount of money you would invest in your restaurant. For you to be profitable you would have to recover your investment. And for this to happen you would have to know how much money your customers might be willing to spend at your restaurant. Estimate and calculate the average cost of one (ideally two) customer(s). For example, the average cost for two would be higher at a fine-dining restaurant than a patisserie.
Once that is done, finalize the food you’re going to be serving at your restaurant startup. All these things will eventually help you make a concrete business plan.
Restaurant startup theme. Check.
Designing a menu for your restaurant startup
Time to get those quesadillas on the menu!
Speaking from a customer’s perspective, if you ace the menu, you ace the game. Once the menu is set, you will have a fair idea of the ingredients you will need for your restaurant kitchen and the vendors who will provide them.
So, how should you create your restaurant menu? Typically this is a decision based on the cuisine, your competition and what’s trending. Tip: To avoid massive kitchen waste, it is advised that you create a menu that’s more centric. In simple words, put dishes that share common ingredients. This, in turn, makes managing inventory a whole lot easier.
The reports given out by the POS system in your restaurant startup should be able to notify you of your most frequently ordered dish and ones that are not so famous. This will help you and your head chef decide what goes on the menu and what gets scrapped off.
Now that you have your menu in place, it’s time to design your menu card.
Here are some handy tips about creating the best restaurant menu card.
Restaurant startup costs
Opening a restaurant is much more than just owning a space and serving food to customers. There are a whole lot of other things that are linked with setting up a restaurant. There are various expenses you need to take care of before you go all out with your restaurant. Let’s look at the things you will be required to invest into.
- Rental Costs
The rental costs of a restaurant largely depend upon the size, location, and material that’s used in building that establishment. Typically, the rental costs of a restaurant in the US range between $150 – $750 per square foot according to the leading global restaurant consultants, Aaron Allen & Associates. The rental costs of a QSR would be ideally less than that of a fine-dine establishment. There are two ways of going about it. One, you rent a space or you buy it. Buying could cost you a dime and it also doesn’t make a lot of sense if you’re planning to open a small cafe. In India, the cost of land differs as you move to different cities. The average cost of buying a land for your restaurant startup lies between 50L to 1 Cr. If you plan on renting a space, it would cost you approximately 30,000 – 1,00,000 INR a month. Again, the price fluctuates depending on the city you’re planning to go in for.
There is however something to be said about rising real estate costs, the world over. Be wise when selecting the location of your future restaurant start-up. High footfall areas would have higher rent than more residential spaces. So be wise about the rent vs. footfall trade-off.
- Licenses cost
For running any restaurant establishment, you must have all the legal documents and licenses that are necessary for running a restaurant. Here’s a list of licenses you’d need to run a restaurant.
- FSSAI License – The central license costs Rs. 7500 INR and the state license ranges between Rs. 2,000 to Rs. 5,000. The registration cost is Rs. 100.
- Health/Trade License – This license costs anything between Rs. 500 to Rs. 50,000.
- Eating House License – The cost of obtaining this license is Rs. 300, having validity of three years,
- Shop and Establishment License – The cost depends on the number of employees and the location of your restaurant. The cost of this license ranges from Rs. 200 to Rs. 4,000 annually.
- Music License – The cost ranges between Rs. 3,500 – Rs. 10,000.
There are other licenses that you’d require for your restaurant. Head here to read more about them.
- Design and furnishing
Out of the total budget, 30-40% is reserved for furniture and fixtures, half of which goes into design and architecture. The cost also depends on the kind of establishment. QSRs can make do with a limited number of chairs and tables. A fine-dining establishment would have lavish interiors. The cost of basic furniture ranges anything between Rs. 3L to Rs. 5L
- Cost of Operations
Operational costs include the cost of commercial kitchen equipment and other electrical appliances. These costs would be approximately Rs. 5L.
- Hiring and Training Costs
Around 20% to 30% of the total budget is reserved for the restaurant staff. And depending on the kind of restaurant, you need to decide exactly how many people are required to run your restaurant.
- Restaurant Marketing
There’s a certain amount of money that you need to reserve for marketing. These include offline and online marketing. Depending upon the platform and the agency/people you hire for marketing, the cost varies. It could cost up to a lakh.
- Restaurant Technology
Restaurant technology includes a robust and compliant Point Of Sale system, Kitchen Display System, tablets or other systems and the software that is compatible with all these systems.
Hiring professionals for designing your restaurant menu and interiors, fresh products and ingredients for your kitchen and maintenance are a few of the other areas that require financing when starting a restaurant.
Head over to Cost of Opening a Restaurant for a deeper dive into the finances needed to open a restaurant.
Now that you know the costs involved, you can calculate the approximate capital you would require for starting up. There are three ways to go about this.
- Informal loan – You can ask for funds from the people you know. They could be your friends, family or close acquaintances. Some of them might also become your future business partners. Also, there’s a level of comfort with your peers.
- Formal loan – Taking a loan from banks is more orderly and will help you raise a good amount for your restaurant startup.
- Look for investors – Investors look for a scalable business to invest in. You can get them to invest entirely or partially in your restaurant business, after having a certain percentage of your stakes.
- Self-funding – You can become your own funder if you think you have a sufficient amount of money to open a restaurant startup. The best part about this being you wouldn’t be accountable to anyone since it’s your money that’s involved.
What’s in a name? Restaurant Startup names
Well, there is a lot in a name. Your restaurant startup should have a name that sticks with customers. Something that resonates with the concept of your brand. The restaurant name gives you a distinct identity that helps beat the competition in the restaurant industry.
Read Indian Restaurant name ideas for a detailed analysis of over 3500 restaurant name ideas.
Now that you have a fair enough idea about the different options for your restaurant startup, let’s move ahead and look at the essentials of opening a restaurant, a restaurant startup checklist.
1. Licenses and Certificates
You can’t own a restaurant startup without having certain legal licenses. Given below are the key restaurant Licenses that are absolutely necessary for a restaurant.
- FSSAI License
- Liquor License
- Health/Trade License
- Eating House License
- Shop and Establishment License
- Fire Safety License
- Lift Clearance
- Music License
- Certificate of Environmental Clearance
- Signage License
2. Restaurant Staff recruitment and training
A restaurant startup without the staff is like an Uber without a driver. You require a team that is going to help you run your startup better. The number of people required at your establishment depends on the kind of restaurant you’re starting. If it’s a fine-dine, you’ll require a decent number of employees to take care of various FOH and BOH operations. On the contrary, if yours is a delivery kitchen, you’d need limited staff that deals with cooking and delivering. Food trucks won’t even require more than 3-4 people.
If you’re running a complete dining restaurant startup, you will require a proper team with you. Based on the two areas of operation in a restaurant, the staff roles vary.
Front Of House restaurant staff roles
They are the first point of contact for the diners. They are the ones who deal with the customers.
- Restaurant Manager
- Bar Manager
Back Of House restaurant staff roles
The kitchen geniuses who are responsible for creating those scrumptious meals.
- Head Chef
- Sous Chef
- Line Cooks
- Prep Cooks
- Maintenance and cleaning staff
Once hired, you need to train them accordingly. Training them accordingly leaves no room for complications in the restaurant. Training doesn’t mean you have to teach them their role. Given that no two restaurants are the same, you need to teach them basics about your restaurant and what’s expected of them in the restaurant. Everyone, especially the wait-staff, needs to be thorough with the restaurant’s menu. Kitchen staff must know how to manage the restaurant kitchen when there is a high volume of orders.
For a complete breakdown of the staff, their salaries and respective roles in restaurants read Restaurant Staff – Hiring the best team.
3. Commercial Kitchen Equipment
Next in the restaurant startup guide comes an equipment checklist. Your kitchen needs to be well-equipped with the latest technology and appliances. These are some of the basic commercial kitchen equipment you’d need.
- Cooling Equipment – No kitchen can possibly function without refrigerators. Given the size of your restaurant, you can choose the refrigerators you’d need in your restaurant.
These include refrigerators, freezers, ice-makers and display freezers.
- Heating Equipment – An absolute essential required for heating food using different methods like grilling, roasting, baking, etc.
Ranges, ovens, display food warmers, grills, microwaves, and broilers come under this category.
- Preparation Equipment – All the slicking, dicing and chopping is done using these. The majority of these are electrical appliances making the food prep a whole lot easier.
Food processors and slicers, mixers and grinders, blenders, come under preparation equipment.
- Washing Equipment – The kitchen equipment and utensils must be washed regularly and timely for the staff to use. Sinks, dishwashers, glassware washing, and polishing equipment are some of the washing equipment that is required in a restaurant startup.
- Cookware Accessories – There has to be a sufficient amount of kitchen utensils for everyone to work on. Pots, cookers, pans, cutlery, dinnerware, and more fall under this category of equipment for a restaurant startup.
- Tables and Shelves – To make your kitchen look more organized with all equipment in place you need shelves and racks. Wall mount shelves, prep tables, and counters help arrange all the utensils and appliances.
- Safety Equipment – Everything from fire extinguishers to safety mittens, your restaurant kitchen must have it all in case of emergencies.
For a more comprehensive guide on Commercial Kitchen Equipment, read Buying Commercial Kitchen Equipment for your Restaurant.
4. Sourcing, listing, and managing vendors
Vendors and suppliers are an integral part of your restaurant startup. They are the ones who provide you with all the raw materials, supplies and ingredients you require for your establishment. Therefore, it only makes sense that you have a cordial association with them. It’s important to be in contact with more than one vendor in case of any emergencies. This also helps you analyze the price of each of these vendors before you get on a contractual basis.
5. Restaurant Technology
Technology is the most important part of the restaurant biz. The level of comfort and convenience that technology brings is astonishing. Your restaurant startup requires all the latest technology so that it helps you generate more revenue.
- Restaurant POS system – A robust Point Of Sale system is what you need for your restaurant startup. One that makes order processing fairly easy and restaurant management better.
- Online Food Ordering System – Given the high competition in today’s restaurant industry, it is always a good option to have your own online ordering website. The greatest advantage of this is that you wouldn’t have to pay any commissions to third-party aggregators.
- Integrated features and Software – Modern POS systems come with multiple integrations like built-in CRM integrations, Loyalty Programs, Reports, and Analytics. All restaurant operations can be maintained on a single platform.
- Kitchen Display System – KDS help digitize the order taking process. As can be guessed, it is located inside the restaurant kitchen where things like order taking, prep time and more are displayed.
Here’s more for some power reading- A Complete Guide to Restaurant Management Systems
Marketing and Promotion
Marketing is an inevitable part of the restaurant startup guide. Excellent meals alone wouldn’t bring you revenue. Marketing is linked to acquiring new and retaining old customers. There are two ways to go about it, offline and online marketing.
- Promote your brand using social media platforms like Facebook, Twitter, Instagram, etc. since it’s the easiest way to attract audiences. People are always on the lookout for interesting new things on these sites.
- Run effective CRM campaigns to reach out to all existing customers via texts and emails that give them discounts on their frequent orders.
- Another way of increasing the number of customers at your restaurant startup is to hold in-house events like karaoke nights, movie screening and more.
- Participating in events that are organized outside your establishment like food festivals is another great way of knowing what are the latest trends that are attracting more people.
Restaurant Startup – uncertainties and pitfalls to avoid
The recent #Logout movement by NRAI had led multiple restaurants to rebel against Food Delivery Apps. The movement was started because of the ever-increasing commissions charged by food aggregators like Zomato, Uber Eats, and their likes.
Having your own restaurant startup has highs and lows of its own. Many restaurateurs struggle within the first few months of starting out. This can be attributed to quite a few reasons. Let’s look at some of the risks that are associated with opening a restaurant.
1. Arriving at the wrong location
Choosing the wrong location is one of the major road bumps, quite literally. Most restaurant startups struggle with finding that one perfect location or end up opening one at an irrelevant place. For example, you would want to open a Chinese take-out when your competitor is right across the street.
2. Poorly constructed Restaurant Business Plan
A business plan must contain all the crucial steps of opening a restaurant startup. Some people have an uneven business plan whereas many don’t even have any. Having an unorganized or no plan at all is one of the major reasons why restaurants shut.
3. Legal afflictions
Getting proper licenses and certificates is very crucial for a frictionless run of restaurant startups. One less acquired license and you might end up losing your entire business. Even the most basic ones like the Music License is very essential for your restaurant.
4. Shooting staff attrition rates
Restaurant staff needs to be trained according to the guidelines that your establishment follows. Poor/lack of training, toxic restaurant culture, unsafe working environment, troubled employees, are some of the many reasons why many restaurant startups fail.
Over to you
If opening a restaurant is what you’ve always dreamt of, then this restaurant startup guide will definitely come in handy. Starting a restaurant from scratch has a majority of things associated with it. Once you have a solid restaurant startup plan in hand, you’re good to go.