Restaurant Start Up Quick Guide
Guide Book #1
Getting Started in the Food BusinessOk so you want to start a food business. Almost everyone dreams of some day owning their own restaurant, bar or coffee shop.
Imagine you are at a dinner party. A friend calls everyone to attention. Herself and her husband are about to open a cafe. Oh the buzz. Would they generate the same excitement if they had just announced that they planned to start their own dry cleaners or hard ware store. I guess not. The prospect of setting up ones own food business is just so exciting.
But the reality is, the restaurant business is one of the toughest businesses of all. And like any other business the key goal must be to make money, few businesses survive without doing so.
Starting a restaurant is an ambitious undertaking. Any many restaurants fail within a few years of opening because of poor planning. But dont fear. Catering Mentor is the ideal resource to lead you to success.
This first guide will help you understand what it takes to succeed in the food business and explain in simple terms the first steps that you need to take.
Best of luck
CEO Catering Mentor
Are you ready for the challenge?How much profit should you expect?Franchise or Not?Deciding on a conceptDeciding on a Location, should I buy or lease a location?Designing the restaurantDesigning the menuWhat are the costs involved in setting up a restaurant?Buying EquipmentRaising FinanceForming a companyRegistration and licensesWhat insurance do I need?Some Tax stuffWhat are the best Catering Industry Trade Shows?What industry associations are there for support?
Are you ready for the challenge?Firstly you need to be passionate about your business. If you are not passionate about coffee, dont get into the coffee business. There are many days when you will question why you choose this route and you will need to be able to fall back on this passion.
Are you prepared to work harder and longer than you ever have before? During your first few years of operation you will invariably find yourself working sixteen hours per day, six or seven days per week.
Are you a multi-tasker? Few industries have as many moving parts. As a restaurateur you will have to wear many different hats. It is not just about serving great food; you will need to understand Marketing, HR, Finance, the Law etc.
Finally dont forget that the nature of the industry means that you will be providing entertainment for people on their time off, so you will find yourself working while your friends are playing.
A Scary Stat
Restaurants have the highest attrition rate of any type of business. According to latest figures only 34.2% of hotel and catering businesses started in the UK in 2003 have survived.
How much profit should I expect to make?A well run restaurant or cafe typically make between 5% and 8% profit.
While every restaurant is different, typical after tax sales are distributed inline with the graph below.
Franchise or Not This is probably the number one question that we get asked by people thinking of entering the food business? Are you better off taking a franchise in an already proven concept or should you develop your own concept?
In simple terms franchising involves paying someone else for the right to their concept.
So what are the advantages and disadvantages of franchising?
An Instant Business - A restaurant franchise offers you an instant business. You dont have to worry about the name, the dcor, the menu or the marketing. Its all done for you.
Support - A restaurant franchise comes with support from the head office. If you have questions or concerns, you can always ask them. This can be very helpful for new restaurant owners, who dont always know what to do when they encounter certain problems.
Better Buying Power - Restaurant franchises have bigger buying power. Food and other inventory can often be purchased far cheaper than your local independent restaurant.
Name Recognition - Name recognition is a huge benefit of a restaurant franchise. You dont have to worry about start-up costs for advertising.
Money - (or lack of) is often major drawback of buying a restaurant franchise. Many of the bigger restaurant chains require you to have significant assets, before they will consider letting you buy into their company.
Lots of Rules - In order to maintain a certain quality of customer service, as well as continuity at each location, franchises have many rules and regulations that must be followed. Everything from the seating plan of the dining room, to the colour of the bathrooms can be subject to specific rules. Make sure you are okay with all the rules beforehand.
Lack of independence - Basically you will have to do things their way. You have no say in the menu, the dcor, or the signage of your restaurant. If you have a certain theme or concept in mind, it may not mesh with a restaurant franchise. You may find yourself resenting the restrictions placed upon you.
Royalties - On top of the upfront franchise fee, you are also expected to pay royalties. This covers the advertising, training, and other support the restaurant corporation gives you throughout the year. Franchise royalties are usually between 3% and 8% of turnover.
Exit Strategy - When you come to sell, the franchisor will have the right to vet and potential new franchisees.
Limited Growth Potential - If you develop you own concept, perhaps it could one day be franchised itself. This is where the real money is in the industry. Can you take an idea and not just build one location put perhaps dozens or even more. Perhaps you could become a franchisor yourself.
Essentially, deciding to either buy a restaurant franchise or create an independent restaurant will depend on your wallet, your experience, the time that you can commit and your personality. If you are comfortable working with a team and being told what and how to do something, a franchise may be the right move for you. However, if you are starting your own restaurant to get away from people telling you what to do, an independent is probably a better choice for you. Admittedly we are a little biased, but if you are confident that you have a good idea you could most probably get it up and going for less money than talking a franchise. Whats more it will be all yours.
Get some experience working in a restaurant to learn the ins and outs of the business before investing your time and money in your own restaurant. Learn from other people's mistakes
How to decide on a concept
What is going to be youre (USP) Unique Sales Position? Is there a niche in the market? I spent a lot of time in the US and I loved the seafood restaurants there. Great Crab houses etc. Would a seafood chain work in the UK? Remember niche concept work best in bigger markets.
Avoid gimmicks and theme restaurants. Analysts say that most people often only visit theme restaurants once and dont come back. They have a kind of being there done that attitude to these establishments.
See whats hot in other markets for inspiration. Be first to market. Check out our BLOG to keep up with what's hot or explore these two great resources for a little bit of inspiration:
Springwise.com and its network of spotters scan the globe for smart new business ideas.www.springwise.com/food_beverage/
Ones To Watch is a monthly review of some of the hottest restaurant trends, from US based Quick Service Magazine.www.qsrmagazine.com/articles/ones_to_watch/archives.phtml
Also look at what the big chain restaurants do, particularly because they spend a fortune on expensive market research and then implement it.
If you are just at the idea stage why not take a grand tour, this is the fun part. If you are thinking about opening up a BBQ Restaurant, take a trip to the southern states of America. Rent a car and drive around, see the best and get ideas, collect sample menus and memorabilia and take lots of photos. Maybe even twin your new restaurant with one that you meet on your travels.
Always compete on great service. Service doesnt really have a cost. And the smaller owner run business can always out service the big chains.
How do you decide on a location?Location, location, location, it can make or break a restaurant. Finding the perfect location is a time-consuming and tedious process, but it's essential that you give it all the attention it deserves. Do not rush this decision. It is the most important one that you will make. Wait until you have several prospective properties and then weigh your options carefully. Remember, once you sign the lease and opened your restaurant, the one thing that is almost impossible to change, is your location.
You need to consider the following factors when choosing a location:
Visibility and passing traffic (Foot and car) Parking Demographics Potential for outdoor seating Zoning Refurbishment required Freehold or leasehold Competition Complementary businesses located close by
Dont just get stats from the yellow pages or the last census. Pound the pavement, check pricing, service, style, when are the busy, when are they not? Are there enough potential customers in the specific segment you are targeting to ensure you get your own share?
Finally dont be afraid to open right next door to your comp
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