Restaurant ownership can be a lucrative, exciting career. However, opening a restaurant requires a strategic approach if the business is going to be successful. While statistics about restaurant failures vary, some say the first-year failure rate for restaurants is as high as 60 percent. Following these five steps on how to start a restaurant will help prevent your operation from joining the ranks of failed foodservice ventures.
- Identify your target market
The success of any new restaurant depends heavily on how well everything – from its overall concept and menu to its location – suits its intended audience. So, determine whom you’ll be attempting to attract to your new establishment. For example, do you want to play to a younger crowd, or an older one? Families with young children, or just adults? Identifying this target market is crucial because all other decisions will be directly related to who your restaurant is marketed toward.
- Set your service style, menu concept, and menu
This is one of the most important aspects of how to start a restaurant. Once you know who you audience is, think about whether you want your concept to be a quick-service, fast casual, or more formal one. Of course, your target market will dictate part of the decision. For example, if you envision your audience to be young families or students, you almost definitely want to choose a quick-service or fast casual concept, as an upscale, quiet table service restaurant would not appeal to these customers.
One critical item to remember when thinking about the “service style” aspect of how to start a restaurant is ensuring that it’s compatible with your personality. For instance, if you’re a “morning person,” opening a casual café that serves breakfast and possibly lunch—rather than an upscale dinner spot—may be your best bet.
Your menu concept goes hand-in-hand with your service style. For instance, if you’re following the table service restaurant route, fancy French cuisine would be an appropriate menu, while sandwiches wouldn’t. It’s a good idea to test out your menu on friends and family—because if they won’t buy it, chances are customers won’t either.
- Create a business plan
Such a plan should include – but isn’t necessarily limited to – a description of your potential restaurant’s overall concept; specific financial information (including profit projections and potential financing sources); details about your target market; your menu and pricing; an advertising and marketing plan; and an exit strategy. Incorporate information about equipment and staffing needs as well.
- Find the right location
Make sure to think this one through. There’s no sense spending a lot of time figuring out how to start a restaurant, and working through the details, only to find that you’ve chosen the wrong location in which to situate your venture. Just as your restaurant’s menu concept should match your target market, so, too, should its location. So if you’re opening an upscale establishment, find a spot in a neighborhood populated by affluent consumers rather than students. Similarly, if you’re opening a fast casual café that specializes in sandwiches and will operate on weekdays only, pick an area surrounded by office buildings and other businesses whose employees will be seeking a quick lunch.
- Invest in the right point of sale (POS) system
Unless you invest in a point of sale system, every other strategic step you’ve taken in opening a restaurant will be for naught. The right POS system not only enables you to process payments; it also enables you to track sales and, in turn, make adjustments to your menu based on identified patterns. A comprehensive POS system with integrated software modules also plays a critical role in managing inventory and labor, as well as in making it easy to promote your establishment through marketing campaigns and loyalty programs.
Now that you know how to start a restaurant, it’s time to get down to business. Providing you follow these strategic steps, that business has a good chance to succeed. However, it is also important to ensure that you are in love with the restaurant plan you develop. Choosing a restaurant simply because it would be most profitable isn’t always the best choice; you’re more likely to succeed if you’re truly happy with your business.