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How to Open Your Restaurant

Matt Boone / 11.14.2023

Black Owned Restaurant Owner Creating Food

Planning to open your own restaurant? You will feel amazing when you start serving your delicious new food, but with many possible pitfalls in this go-big-or-go-home industry you’ll need a rock-solid plan to ensure your stability and success long-term. To be able to spread your love for the food you decide to sell to your neighbors, getting every step of the process done right is critical. In the restaurant industry, the early bird really does get the gold. That doesn’t just mean early days during launch, it also means submitting all your paperwork and moving the process along early to ensure there are no costly delays. In this article, you’ll learn 5 key takeaways for pre-launch, starting your restaurant, and how the day-to-day will look after you open your doors. If you’ve already opened your shop and are looking for more ways to supercharge your store, check out our article on Avoid These Common Pitfalls If You Want a Successful Restaurant. Or if you’re looking for a way to start a restaurant in an alternative low-cash method, read How to Test Your Restaurant Concept with Low Risk. With this wealth of information, you’ll be well-equipped to make your dream a reality.

1. Business and Financial Plan 💼💰

  1. Make sure to include costs for all startup and operating expenses, equipment, food and drink costs, and margin for a sturdy foundation. In general, it’s safest to keep up to 1 year’s gross operating expenses in reserve. This would prove to be a useful strategy for those businesses that started at the same time when Covid shutdowns did.

Some things your financial plan could include are:
  1. Rent, utilities, property insurance

  2. Other insurances (explained in more detail below)

  3. Food and equipment

  4. Payroll

  5. Marketing

  6. Licensing, permits, cost of new customer acquisition, startup costs, and more. While creating your business plan, you will need to decide on what niche you want to pursue.

2. Niche and Regulations 🔍

  1. You may already have some ideas for your niche, or maybe you have your heart set on a specific niche already. Understanding what that niche means to your how to succeed in each, is more complicated than it might seem at first glance. If you want to open a pizzeria, what makes you different than the other pizza restaurants in the area? Why would customers want to choose your restaurant over anyone else’s? Maybe you want to offer a food that is not represented in your area, or even in your state yet. If you want to offer Hmong cuisine, you need to decide what the demand for that type of food will be and how you will bring in new customers and give them an uncomplicated experience. A well-explained menu can be beneficial here, where if you offer Pabellon Criollo in a Venezuelan restaurant when there are no other Venezuelan eateries within 100 miles, you would avoid customer anxiety by explaining that this dish is rice with shredded beef, fried plantains, fried egg and black beans. Or you could include a quick explanation beside the dish’s name as Venezuelan Ropa Vieja if your customers are familiar with Cuban food, or Venezuelan Shredded Beef Platter to give them a general idea of what it entails. Whatever niche you choose, understand your target market and what they’re looking for. 60% of new restaurants fail, so having a well-planned niche and value proposition is your first step to being in that 40%.

  2. Obtaining the necessary licensing and permits is essential. There are general permits, and some that might be required by different localities. Be sure to check your town, county, city, state and federal license and permit requirements to make sure you are in compliance. Some licenses you need may include:

    1. State Business License. You need this to operate the business.

    2. Federal/State Tax License. Uncle Sam needs to know how to collect after all.

    3. Food and Health Code Licenses

    4. Liquor License

    5. Health Department Permits

    6. Many more. It is important to stay up-to-date on all requirements for licensing, permits, and laws. Failure to do so could result in your hard-earned business having opening delayed, having to move your timelines, incurring fees, or worse. Having a trusted partner in this area, and knowing what is required, is key to startup success.

3. Choose Your Location To Open Your Restaurant 📍

  1. Location, location, truck. How do you want to plant roots? Or do you want to plant roots in a restaurant on wheels? Nowadays there are a myriad of options for where you want your business to be located, but the tried and true saying of location remains the same. Being in an area with high visibility is essential for people stopping in and growing your customer base (think busy lunch hour and hungry workers). Even if you open as a food truck, you’ll need a location with enough traffic and space to make it profitable. For payments, you can lease or buy a space, or for trucks you can buy used, and that depends on what your goals are for the business long-term, your current financial picture and risk tolerance. If you want to be downtown in a large city, the storefront will likely cost more than it would in a sleepy suburb shopping center. If the projected revenues would more than make up for that entirely depends on your specific business plan. Note that margins are notoriously tight for restaurants, so it might be a good idea to include some wiggle room where it makes sense for your plan.

4. Taking Care of Business 🤝

Register Your Business and Open a Business Bank Account
  1. What kind of business structure would you like? Some common structures include S and C corporations, a sole proprietorship, a partnership, an LLC and more. Before choosing, consider how each might impact your tax liability, business safeguards, and operational efficiency. A skilled financial advisor can help you in this field.

  2. Once you have chosen what kind of business you are creating, the legal name of the business, and the DBA (doing business as) name that your customers will see on your new storefront, you can register with your state and receive your Tax ID. Once registered with the state and local government, you can open a business bank account and start hiring.

  3. Opening a business bank account may seem like something that can wait. Think again. Especially for restaurants, keeping a separate account for your business not only makes tax season faster, it also reduces complexities that may arise from having your personal account tied to your business. It also makes it easier to use a bookkeeping system with great reporting, so you track your transactions, update financial planning, and have more data readily available to use when making daily financial decisions.

Get Business Insurance
  1. Business insurance. There is a lot to consider. You always want to make sure your business is protected in case of unforeseen events. This decision might just save your business one day. Some common restaurant insurances are:

  • Workers’ Compensation Insurance

  • Fire Insurance

  • Flood Insurance

  • Liquor Liability

  • Auto Liability

  • Unemployment Insurance

  • Food Contamination Insurance

  • Loss of Business Insurance, and many more.

Choose and vet suppliers
  1. A good meal starts with high quality ingredients, and a great chef. Ingredients are one of the most important decisions you can make because you need reliability for your customers. Once people start coming through the door, they know what to expect from your food. To make sure you deliver every time, your suppliers have to be top notch.

Choose Your Point of Sale
  1. The right point of sale is like your right-hand. Your business thrives when you have a great one behind you. It’s important to work with a company who understands the unique qualities of restaurants, and has experience with the complexities of the industry. Some features and services to put in your mental checklist include:

    1. Excellent data reporting

    2. Smart menu management and fast input and checkout

    3. Vendor/supplier relationship management and tracking

    4. Discount programs and online functionality

    5. Access to additional features

    6. A kitchen display system or reliability with printers

    7. Customer management. This will make regulars very happy, and make more new customers your new regulars.

Launch and How to Accelerate Your Business
  1. Congratulations! You cut the ribbon, and opened the doors for the first time that your restaurant is officially open for hungry customers. Once you hit the ground running at launch, you’ll want to keep that momentum going throughout operation. So how do you build momentum after your store has launched? First, you check your numbers for all areas of your operations, and determine whether your true numbers are lining up with projections. This is especially important because of the slim margins that restaurants operate on. If they’re not lining up, don’t worry that’s why you checked. With the right tools you can succeed in your new business as part of the 40%.

With Xylo as your point of sale partner, you get access to excellent data reporting, customer management, discount and customer loyalty programs, kitchen display or printer functionality depending on your preference, intelligent menu management, effortless order entry and checkout, vendor relationship features, and additional services that are built to suit your business and your unique needs. Learn how our POS can benefit your business with a no-obligation consultation to match your specific needs today.

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