Creative extroverts will love the idea of opening a restaurant. This business will compel you to exercise all of your creativity, flexibility, and socialization skills. Restaurants are also theoretically very lucrative since it fulfills a basic human need. People will always need to eat, after all.
Starting a restaurant business these days is a unique endeavor. Restaurateurs face new challenges that the industry has not faced in at least a hundred years, thanks to COVID-19. The ongoing crisis makes starting a restaurant nowadays a slightly different journey. Here are a few tips about opening a restaurant business that you should bear in mind.
Study Your Business Idea
Make sure that you thoroughly understand the restaurant industry before you commit to your business idea. Read about the pros and cons of owning a restaurant. Learn about how the market moves in this particular industry, and what kind of skills you’ll need to bring into the team. Invest time in conducting a feasibility study to see if your business idea is truly profitable.
Know Your Target Market
One attribute that makes restaurant businesses unique from an entrepreneurial perspective is the myriad markets that they cater to. One restaurant could target affluent celebrities or government officials. Another may choose to cater to young families and professionals within a central business district. The list is very expansive.
You and your partners will need to specify a customer persona. This persona will contain the profile of your ideal customer. It would have details like the customer’s age, their profession, their desires or expectations from a restaurant, and the price range they’d want to spend within.
Having a customer persona to target will make menu planning a breeze. It’s easier at this point to conceptualize menu items because you know what your customer is looking for. Your customer persona will also be central to planning and executing your marketing campaigns as well.
Write a Business Plan
Every business needs to have a written plan. One of the business plan’s functions is to provide potential investors and lenders a peek into your restaurant’s future operations. It contains information like your top management team’s profiles, your customer persona, your operational goals, and how you plan to attain them.
Think of the business plan as a sales pitch. If you’re looking for someone to fund your capital needs, you’ll have to convince them that your restaurant is a good investment. The text in your business plan will do most of the talking for you. You just need to get ready to answer some questions.
Measure Your Capital Requirements
This part is where you dive into the details of your business. You should start to love looking at numbers as early as now. You’ll be seeing them non-stop when you start managing your restaurant, and the paperwork grows when the business is successful!
Your most immediate concern at this point, however, is your capital. You need to know how much you need to raise to get the business off the ground. Take time to write down all your capital requirements, which may include the following:
- Heavy-duty equipment
- Custom furniture
- Lease/rent terms
- Development costs
Put everything into writing. This checklist will come in handy when you start seeking loans like equipment financing for your startup costs.
Evaluate Sources of Funding
Loans are the most common sources of funding for businesses, but there are other avenues that you should explore. You should try and see if you have sources for financing that do not involve debt. You can never fully fund a business on your own, but putting your own cash to partly fund the capital is not a bad idea. It reduces the amount of money that your business has to pay off as debts.
When you do take out a loan, you should avoid those that require a personal guarantee. This is a huge risk for you. Your personal assets will be used to secure the loan, and they could be taken from you if the business folds. It also puts a red mark on your personal credit and adversely affects your ability to secure financing for your personal needs.
There are various loans for small businesses. You could try invoice factoring if you have an existing business that you’re expecting payments from soon. These lenders will purchase those accounts receivables from you and collect those dues as repayment for the loan.
Other sources of financing include venture capitalists, angel investors, and crowdfunding platforms.
Consider How to Implement Public Health Protocols
It’s the year 2021 and the pandemic is still in force. One of your business’ responsibilities is to ensure the safety of your patrons from COVID-19. Each jurisdiction has its own set of rules concerning public health protocols.
Brush up on your city’s rules on public health and safety. Some cities and states, for example, have done away with mask mandates but require other protocols to protect people from infection. Other states are stricter when it comes to viral containment.
With vaccines already rolling out, laws could change as the situation improves. Keep yourself up to date with the latest legislation and news about public health protocols up until your launch date.
Secure the Needed Paperwork
Your capital has been fully funded. You’ve invested in the necessary equipment for your restaurant. At this point, you’re ready to roll. All you need to do now is to secure the necessary paperwork as a business. These include permits and licenses from the appropriate government agencies, as well as a state tax ID and the federal Employer Identification Number.
You would also need to incorporate your business and register its name. You could choose to incorporate as a sole proprietorship, a limited liability company, or a corporation. Each type has its own advantages and disadvantages and comes with different taxation schemes and incentives.
You should also open a bank account under the restaurant’s name. This is where all of the business’ money will go into. A separate bank account can make accounting and tax calculations more streamlined. There’s a dedicated paper trail to follow when reconciling numbers.
The Bottom Line
Managing a restaurant can be fun and exciting. It’s also very rewarding financially, but only if you pull your strings right. Now’s a good time as any to put your business idea into motion despite the current health crisis.
The industry had indeed suffered a decline for the past year because of COVID-19, but it’s bouncing back, thanks to vaccine rollouts. A huge gap has been left by restaurants that have closed down shop during the pandemic, and that gap is yours to fill. At the same time, the demand for the food industry has not diminished at all.
This is an opportunity you cannot afford to miss as an entrepreneur. You would want to strike while the iron is hot. Keep the tips above to heart, and you could be on your way to becoming a very successful restaurateur.