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How to Write a Restaurant Business Plan in 2024 (Step by Step Guide with Templates)

A comprehensive restaurant business plan is a framework that guides you to plan and forecast every element of restaurant management and operations.

This includes anything from your restaurant's menu design, location, financials, employee training, and a lot more.

Crafting a solid business plan is important, as it helps:

• Transform your restaurant ideas into reality.
• Boosts entrepreneurial success by 16% (Harvard Business Study) .
• Equips you to navigate challenges before they arise.
• Attracts potential investors.

“You have to show any potential investor that you have an actual plan, you know what you’re talking about, it looks professional, and you’re not just screwing around.” - Charles Bililies, owner of Souvla

Planning is key to restaurant success. Without a plan, you're more likely to join the 26% of restaurants that fail within a year.

Create a business plan to set yourself up for success.

Here's how to get started. 

A step-by-step guide to writing a restaurant business plan

Embarking on a restaurant venture is an exciting prospect filled with endless possibilities.

However, the key to transforming your culinary dreams into reality lies in the foundation of a well-crafted restaurant business plan.

This guide will walk you through creating a winning restaurant business plan , from defining your niche to seeking expert advice.

So, are you ready to cook up some success?  Let's get started. 

Essential components of a restaurant business plan

A well-structured restaurant business plan typically consists of the following key components:

• Executive Summary

Company Description

• Market Analysis
• Restaurant Design
• Market Overview
• External help
• Financial Analysis

Delving into each section

Now, let's take a closer look at each section of your restaurant business plan and explore the key elements to consider:

1. Executive summary

A restaurant business plan should always begin with an executive summary. Why?

• 80% of venture capitalists say they read the executive summary first.
• 62% of investors say they would not continue reading a business plan if the executive summary did not capture their interest.
• A strong executive summary can increase the likelihood of securing funding by up to 40%.

An executive summary not only acts as the introduction to your restaurant business plan samples but also as a summary of the entire idea.

The main aim of an executive summary is to draw the reader (oftentimes an investor) into the rest of your business plan.

The executive summary also helps you envision the identity of your restaurant which essentially shapes the customer experience and sets you apart from competitors.

To establish a distinct identity, you need to focus on c ommon elements of an executive summary, including:

• A mission statement  
• Proposed concept development
• Cuisine selection
• The overall execution
• The potential costs
• Expected return on investments (ROI)

Let's take a more in-depth look at the concept development, cuisine selection, and mission statement.

Further reading

• How to write a restaurant executive summary

Concept Development

Selecting the type of restaurant, service style, and atmosphere is the first step towards creating a unique dining experience. Whether you envision a sample menu for a:

• cozy, intimate bistro
• bustling quick-service deli
• fast-casual restaurant
• fine dining establishment

Your concept should reflect your passion and expertise in the industry.

With a broad range of options, it’s critical to scrutinize your target market and pinpoint the most suitable choice considering their preferences and your capabilities.

When planning your restaurant design, keep in mind that it should effectively complement your chosen theme and cuisine.

Additionally, consider the potential for patio seating and the involvement of your management team in making these critical decisions.

A well-thought-out concept will not only set the stage for an unforgettable dining experience but also pique the interest of potential investors.

Cuisine Selection

The cuisine you select for your restaurant can significantly influence its success.

Choosing the appropriate cuisine is vital for distinguishing your establishment from competitors and attracting your target market.

To make an informed decision, consider factors such as:

• Market demand
• Expertise and passion
• Ingredient availability
• Competition
• Profitability
• Cultural fit
• Seasonality

Dietary restrictions and trends

In the highly competitive restaurant industry, keeping track of current and emerging cuisine trends can be a significant advantage.

From regional delicacies to innovative fusion dishes, understanding what’s popular and in demand can help you tailor your offerings to the desires of your target audience.

By thoroughly analyzing the market and adapting to evolving tastes, your restaurant can remain relevant and successful in the long run.

Crafting a mission statement

A well-constructed mission statement communicates the purpose, values, and goals of your restaurant to potential investors and customers alike.

A mission statement serves as a guiding light for decision-makers and employees, fueling their efforts to achieve your restaurant’s objectives.

To create an impactful mission statement, consider the following steps:

• Identify the purpose of the restaurant.
• Contemplate the brand’s image.
• Account for the target audience.
• Incorporate company values.
• Ensure brevity and comprehensiveness.

Related content:  How to Write a Restaurant Mission Statement  

Remember, your mission statement should not only differentiate your restaurant from competitors but also resonate with your target market.

By articulating your restaurant’s unique values and vision, you’ll create a strong foundation upon which to build a thriving and successful business.

2. Company description

This is the part of the restaurant business plan where you fully introduce the company.

Start this section with the name of the restaurant you are opening along with the location, contacts, and other relevant information. 

Also, include the owner’s details and a brief overview or description of their experience.

The second part of the company description should highlight the legal standing of the restaurant and outline the restaurant’s short and long-term goals.

Provide a brief market study showing that you understand the trends in the regional food industry and why the most independent restaurant investors will succeed in this market.

Here's an example of the page layout:  

Restaurant Name: [Restaurant Name]

Location: [Restaurant Address]

Contact: [Restaurant Phone Number] | [Restaurant Email Address]

Owner: [Owner Name]

Experience: [Owner Name] has over [Number] years of experience in the restaurant industry. They have worked in various roles, including [List of Roles]. They are passionate about food and creating a memorable dining experience for their guests.

Legal Standing: [Restaurant Name] is a [Type of Legal Entity] registered in [State/Province].

Short-term Goals:

• Generate [Amount] in revenue within the first year of operation.
• Achieve a [Percentage] customer satisfaction rating within the first six months of operation.

Long-term Goals:

• Expand to a second location within five years.
• Become a recognized leader in the regional food industry.

Market Study:

The regional food industry is experiencing a number of trends, including:

• An increasing demand for fresh,  local ingredients.
• A growing interest in ethnic cuisine.
• A preference for casual dining experiences.

3. Market analysis

The market analysis portion of the restaurant business plan is typically divided into three parts.

3.1 Industry analysis

What is your target market? What demographics will your restaurant cater to?

This section aims to explain your target market to investors and why you believe guests will choose your restaurant over others.

Comprehending your target market is key to customizing your restaurant offerings to their preferences and needs.

By diving into demographics, preferences, dining habits, and trends, you can fine-tune your concept and marketing strategy to reach and appeal to your target audience effectively.

An example of analyzing your target market

  Comprehending your target market is key to customizing your restaurant offerings to their preferences and needs.

Demographics and preferences

Identifying your primary target market involves considering factors such as:

For example, a neighborhood with a high concentration of families might prefer a family-friendly restaurant with a diverse menu catering to various age groups and dietary preferences.

Conversely, a trendy urban area with a predominantly young and affluent population may gravitate towards upscale dining experiences and innovative cuisine.

Cultural and ethnic backgrounds also have a significant impact on restaurant preferences, with people from different backgrounds having distinctive tastes and customs that influence their dining choices.

By thoroughly understanding the demographics and preferences of your target market, you’ll be better equipped to create a restaurant concept that resonates with them and ultimately drives success.

Dining habits and trends

As the restaurant industry continues to evolve, staying informed about dining habits and trends is crucial for adapting your offerings and attracting customers.

For example, the rise of online ordering and delivery services has significantly influenced dining habits, with many consumers seeking the convenience of having their meals delivered to their doorstep.

Health trends have also had an impact on dining habits, with an increasing number of individuals seeking healthier options when dining out.

By staying abreast of current habits and trends, you can anticipate the needs and desires of your target market and tailor your restaurant’s offerings accordingly.

This forward-thinking approach will not only help you stay competitive but also foster long-term success in the ever-changing restaurant landscape.

• How to find your restaurant's target market

3.2 Competition analysis

It's easy to assume that everyone will visit your new restaurant first, so it is important to research your competition to make this a reality.

What restaurants have already established a customer base in the area?

Take note of everything from their prices, hours, and service style to menu design to the restaurant interior.

Then explain to your investors how your restaurant will be different.

3.3 Marketing analysis

Your investors are going to want to know how you plan to market your restaurant. How will your marketing campaigns differ from what is already being done by others in the restaurant industry?

How do you plan on securing your target market? What kind of offers will you provide your guests? Make sure to list everything.

The most important element to launching a successful restaurant is the menu . Without it, your restaurant has nothing to serve.

At this point, you probably don’t have a final version, but for a restaurant business plan, you should at least try to have a mock-up.

Add your logo to the mock-up and choose a design that you can see yourself actually using. If you are having trouble coming up with a menu design or don’t want to pay a designer, there are plenty of resources online to help.

The key element of your sample menu though should be pricing. Your prices should reflect the cost analysis you’ve done for investors. This will give them a better understanding of your restaurant’s target price point. You'll quickly see how important menu engineering can be, even early on.

5. Employees

The company description section of the restaurant business plan briefly introduces the owners of the restaurant with some information about each. This section should fully flesh out the restaurant's business plan and management team.

The investors don’t expect you to have your entire team selected at this point, but you should at least have a couple of people on board. Use the talent you have chosen thus far to highlight the combined work experience everyone is bringing to the table.

6. Restaurant design

The design portion of your restaurant business plan is where you can really show off your thoughts and ideas to the investors. If you don’t have professional mock-ups of your restaurant rendered, that’s fine.

Instead, put together a mood board to get your vision across. Find pictures of a similar aesthetic to what you are looking for in your restaurant.

The restaurant design extends beyond aesthetics alone and should include everything from restaurant software to kitchen equipment. 

7. Location

The location you settle on for your restaurant should be well aligned with your target market (making it easier to cater to your ideal customer) and with your business plans.

At this stage in the process, its not uncommon to not have a specific location in mind - but you should at the very least have a few options to narrow down.

Tip: When you approach your investors about potential locations, make sure to include as much information as possible about each venue and why it would be ideal for your brand. Go into as much detail as possible - including everything from square footage to the demographics of the area.

Example for choosing an ideal location

Choosing the ideal location for your restaurant is a pivotal decision that can greatly influence your success. 

To make the best choice, consider factors such as foot traffic, accessibility, and neighborhood demographics.

By carefully evaluating these factors, you’ll be better equipped to maximize visibility and attract your target market.

Foot traffic and accessibility

Foot traffic and accessibility are essential factors in selecting a location that will attract customers and ensure convenience.

A high-traffic area with ample parking and public transportation options can greatly increase the likelihood of drawing in potential customers.

Additionally, making your restaurant accessible to individuals with disabilities can further broaden your customer base and promote inclusivity.

It’s also important to consider the competition in the area and assess whether your restaurant can stand out among existing establishments.

By choosing a location with strong foot traffic and accessibility, you’ll be well on your way to creating a thriving restaurant that appeals to your target market.

Neighborhood demographics

Analyzing neighborhood demographics can help you determine if your restaurant’s concept and cuisine will appeal to the local population.

Factors such as income levels, family structures, and cultural diversity can all influence dining preferences and habits.

By understanding the unique characteristics of the neighborhood, you can tailor your offerings and marketing efforts to resonate with the local community.

Conducting a market analysis can be a valuable step in this process.

To gather demographic data for a particular neighborhood, you can utilize resources such as the U.S. Census Bureau’s American Community Survey and reference maps.

Armed with this information, you can make informed decisions about your restaurant’s concept, menu, and pricing, ensuring that your establishment is well-positioned for success within the community.

Conducting market research will further strengthen your understanding of the local demographic.

8. Market overview

The market overview section is heavily related to the market research and analysis portion of the restaurant business plan. In this section, go into detail about both the micro and macro conditions in the area you want to set up your restaurant.

Discuss the current economic conditions that could make opening a restaurant difficult, and how you aim to counteract that. Mention all the other restaurants that could prove to be competition and what your strategy is to set yourself apart.

9. Marketing

With restaurants opening left and ride nowadays, investors are going to want to know how you will get word of your restaurant to the world.

The next marketing strategy and publicity section should go into detail on how you plan to market your restaurant before and after opening. As well as any plans you may have to bring a PR company on board to help spread the word.

Read more: How to write a restaurant marketing plan from scratch

10. External help

To make your restaurant a reality, you are going to need a lot of help. List any external companies or software you plan on hiring to get your restaurant up and running.

This includes everything from accountants and designers to suppliers that help your restaurant perform better, like POS systems and restaurant reservation systems .

Explain to your other potential investors about the importance of each and what they will be doing for your restaurant.

11. Financial analysis

The most important part of your restaurant business plan is the financial section . We would recommend hiring professional help for this given its importance.

Hiring a trained accountant will not only help you get your own financial projections and estimates in order but also give you a realistic insight into owning a restaurant.

You should have some information prepared to make this step easier for the accountant.

He/she will want to know how many seats your restaurant has, what the check average per table will be, and how many guests you plan on seating per day.

In addition to this, doing rough food cost calculations for various menu items can help estimate your profit margin per dish. This can be achieved easily with a free food cost calculator. 

• Important restaurant metrics to track

A well-crafted restaurant business plan serves as a roadmap to success, guiding every aspect of the venture from menu design to employee training.

By carefully considering each component of the plan, aspiring restaurateurs can increase their chances of securing funding, attracting customers, and achieving their long-term goals.

Remember, a restaurant business plan is not just a document to satisfy investors; it is a living tool that should be revisited and updated regularly as the business grows and evolves.

By staying committed to the plan and adapting it as needed, restaurateurs can ensure that their culinary dreams have a solid foundation for success.

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Saif Alnasur used to work in his family restaurant, but now he is a food influencer and writes about the restaurant industry for Eat App.

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How to write a restaurant business plan

A small restaurant business plan is the roadmap you use to open a successful spot. As a first step to creating yours, ask your friends and colleagues to share restaurant business plan examples. Their restaurant business plan samples can inspire yours.

Once you’ve studied those examples, it’s time to start writing your own. No matter how much thought you’ve put into your concept or how many trusted colleagues have assured you of its greatness, you must write a restaurant business plan. It will prove the viability of your concept to potential investors and provide them with a clear and engaging answer to the question: “Why does the world need this restaurant?”

“The point of a business plan is to show that you’ve done your homework,” says Charles Bililies, owner of Souvla , a fine casual Greek restaurant in San Francisco that has received national acclaim since opening in the spring of 2014.

“You have to show any potential investor that you have an actual plan, you know what you’re talking about, it looks professional, and you’re not just screwing around.”

Quick links Branded cover Table of contents Concept Sample menu Service Management team Design Target market Location Market overview Marketing and publicity Specialists and consultants Business structure Financials

1. Branded cover

Include your logo (even if it’s not finalized), the date, and your name.

2. Table of contents

A table of contents in a restaurant business plan provides an organized overview of the document’s structure and content. It typically appears at the beginning of the plan and lists the major sections and subsections with their corresponding page numbers.

The table of contents is important for several reasons. Firstly, it allows readers to quickly navigate through the plan, enabling easy access to specific sections of interest. Secondly, it helps in presenting a professional and well-structured document, showing that you have carefully organized your thoughts and ideas. It also improves readability and comprehension, as readers can easily locate and refer back to relevant information

3. Restaurant concept

Describe your restaurant concept and get the reader excited about your idea. Specify whether the restaurant will be fine dining or more casual. Include an executive summary and go into detail about the food you’ll be serving, inspiration behind your concept, and an overview of service style.

Define clearly what will be unique about your restaurant and include your mission statement. This section should include a market analysis that shows how your restaurant will be similar and different from competing restaurants.

4. Sample menu

The menu is the most important touchpoint of any restaurant’s brand, so this should be more than just a simple list of items. Incorporate your logo and mock up a formatted menu design (tap a designer for help if needed).

Your sample menu should also include prices that are based on a detailed cost analysis. This will:

• Give investors a clear understanding of your targeted price point
• Provide the info needed to estimate check averages
• Show the numbers used create financial projections for starting costs
• Show investors that you’ve done the homework
• Prove you can stay within a budget

This section is most relevant for:

• Fine-dining concepts
• Concepts that have a unique service style
• Owners who have particularly strong feelings about what role service will play in their restaurant.

It can be a powerful way of conveying your approach to hospitality to investors by explaining the details of the guest’s service experience.

Will your restaurant have counter service and restaurant hostess software designed to get guests on their way as quickly as possible, or will it look more like a theater, with captains putting plates in front of guests simultaneously?

If an extensive wine program is an integral part of what you’re doing, will you have a sommelier? If you don’t feel that service is a noteworthy component of your operation, address it briefly in the concept section.

6. Management team

Write a brief overview of yourself and the team you have established so far. You want to show that your experience has provided you with the necessary skills to run a successful restaurant and act as a restaurant business owner.

Ideally, once you have described the strong suit of every member of your team, you’ll be presenting a full pitch deck. Most independent restaurant investors are in this for more than just money, so giving some indication of what you value and who you are outside of work may also be helpful.

Incorporate some visuals. Create a mood board that shows images related to the design and feeling of your restaurant.

Whether you’re planning to cook in a wood-burning oven or are designing an eclectic front-of-house, be sure to include those ideas. Photos of materials and snippets of other restaurants that you love that are similar to the brand you’re building are also helpful.

8. Target market

Who is going to eat at your restaurant? What do they do for a living, how old are they, and what’s their average income? Once you’ve described them in detail, reiterate why your specific concept will appeal to them.

9. Location

There should be a natural and very clear connection between the information you present in the “Target Market” section and this one. You probably won’t have a specific site identified at this point in the process, but you should talk about viable neighborhoods.

Don’t assume that potential investors will be familiar with the areas you’re discussing and who works or lives there—make the connections clear. You want readers to be confident that your restaurant’s “ideal” diner intersects with the neighborhood(s) you’re proposing as often as possible.

If you don’t have a site , this is a good place to discuss what you’re looking for in terms of square footage, foot traffic, parking, freeway accessibility, outdoor seating , and other important details.

10. Market overview

Address the micro and macro market conditions in your area and how they relate to licenses and permits. At a macro level, what are the local and regional economic conditions?

If restaurants are doing poorly, explain why yours won’t; if restaurants are doing well, explain how you’ll be able to compete in an already booming restaurant climate. At a micro level, discuss who your direct competitors are. Talk about what types of restaurants share your target market and how you’ll differentiate yourself.

11. Marketing and publicity

The restaurant landscape is only getting more competitive. Discuss your pre- and post-opening marketing plans to show investors how you plan to gain traction leading up to opening day, as well as how you’ll keep the momentum going.

If you’re going to retain a PR/marketing company, introduce them and explain why you’ve chosen them over other companies (including some of their best-known clients helps). If not, convey that you have a solid plan in place to generate attention on your own through social media, your website , and media connections.

12. Specialists and consultants

List any outside contractors you plan to retain, such as:

• General contractor
• PR and marketing

Briefly explain the services they’ll be providing for you, why you chose them, and any notable accomplishments.

13. Business structure

This section should be short and sweet. What type of business structure have you set up and why did you make that specific decision? You will need to work with an attorney to help you determine what business structure is best for you.

“Step one: write a business plan. Step two: hire a good attorney. In addition to helping me build a smart, sustainable business structure, my attorney was also a great resource for reviewing my business plan because she’s read thousands of them. She was a very helpful, experienced outside perspective for more than just legal matters,” says Charles Bililies.

14. Financial projections

Let your accountant guide you through this portion of your business plan. It is crucial that whoever you hire to help you with your finances has a wealth of restaurant experience (not just one or two places). They should be familiar with the financial specifics of starting a restaurant and know what questions to ask you.

Before creating realistic financial projections, your accountant will want to know:

• How many seats the restaurant will have
• What your average check will be
• How many covers per day you plan to do

Being conservative in these estimations is key. These three data points will be used as the basis for figuring out whether your concept is financially feasible.

Lou Guerrero, Principal at Kross, Baumgarten, Kniss & Guerrero, emphasizes, “You’ll get a lot of accountants that tell you that they’ve done a couple of restaurants, but you have to choose someone that has a deep expertise in what you’re doing. There’s nothing to gain from going with someone that doesn’t have a very restaurant-centric practice.”

A well-vetted accountant with restaurant experience will know exactly what you’ll need to have prepared to show investors.

The key projections you can expect to work on are:

• Pro forma profit and loss statement for the first three to five years of operation
• Break even analysis
• Capital requirements budget

Writing a comprehensive restaurant business plan is a crucial step towards opening a successful establishment. By seeking inspiration from examples, demonstrating your expertise, and addressing all the essential components, you can prove the viability of your concept to potential investors.

Remember, a well-prepared business plan demonstrates professionalism and a clear understanding of your goals, increasing your chances of achieving long-term success in the competitive restaurant industry.

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Restaurant Business Plan Template

Written by Dave Lavinsky

Restaurant Business Plan

You’ve come to the right place to create your restaurant business plan.

We have helped over 100,000 entrepreneurs and business owners with how to write a restaurant business plan to help them start or grow their restaurants.

Below is a restaurant business plan template to help you create each section of your business plan.

Restaurant Business Plan Example

Executive summary, business overview.

Bluehorn Restaurant & Steakhouse is a new restaurant and steakhouse located in Oklahoma City, Oklahoma. The menu of Bluehorn Restaurant & Steakhouse will include bistro-type dishes that are authentically created and crafted by acclaimed Chef Peter Logan. It will be located in the trendy part of town, known as the Plaza District. The restaurant will be surrounded by classy art galleries, live theater, high-end restaurants and bars, and expensive shopping.

Owned by emerging restaurant operators Chef Peter Logan and Anastasia Gillette, Bluehorn Restaurant & Steakhouse’s mission is to become Oklahoma City’s best, new restaurant for patrons to celebrate their next big event, have a nice date night, or gather with friends or family for a fun evening while dining over finely crafted entrees, desserts, and cocktails.

Products Served

The following are the menu items to be offered by Bluehorn Restaurant & Steakhouse:

• Soups & Salads
• Gourmet sides
• Wine, Beer & Spirits

Customer Focus

Bluehorn Restaurant & Steakhouse will target adult men and women between the ages of 21 – 65 with disposable income in Oklahoma City, Oklahoma. Within this demographic are millennials, young professionals, newlyweds, young families, more established families, and retirees. Because of the pricing structure of the menu, the patrons will likely be upper middle class to the wealthy population of Oklahoma City.

Management Team

Bluehorn Restaurant & Steakhouse is owned and operated by fellow Oklahoma City natives and culinary enthusiasts, Chef Peter Logan and Anastasia Gillette. Both come with a unique skill set and complement each other perfectly. They formerly worked together at another OKC fine dining establishment and made a great team for serving guests delectable food and wine while ensuring the highest level of customer service.

Chef Peter will manage the kitchen operations of Bluehorn Restaurant & Steakhouse, while Anastasia will oversee front of the house operations, maintain and ensure customer service, and manage all reservations.

Financial Highlights

Bluehorn Restaurant & Steakhouse is seeking $300,000 in debt financing to open its start-up restaurant. The funding will be dedicated for the build-out and design of the restaurant, kitchen, bar and lounge, as well as cooking supplies and equipment, working capital, three months worth of payroll expenses and opening inventory. The breakout of the funding is below:

• Restaurant Build-Out and Design – $100,000
• Kitchen supplies and equipment – $100,000
• Opening inventory – $25,000
• Working capital (to include 3 months of overhead expenses) – $25,000
• Marketing (advertising agency) – $25,000
• Accounting firm (3 months worth and establishment/permitting of business) – $25,000

Company Overview

Bluehorn Restaurant & Steakhouse is a new restaurant and steakhouse located in Oklahoma City, Oklahoma. Bluehorn Restaurant & Steakhouse will serve a wide variety of dishes and beverages and will cater to the upper middle class to wealthier population of Oklahoma City. The menu of Bluehorn Restaurant & Steakhouse will include bistro-type dishes that are authentically created and crafted by acclaimed Chef Peter Logan. It will be located in the trendy part of town, known as the Plaza District. The Plaza District is one of Oklahoma’s trendy neighborhoods and is considered the “it” area for newlyweds, millennials, professionals, and young singles. The restaurant will be surrounded by classy art galleries, live theater, high-end restaurants and bars, and expensive shopping.

Owned by emerging restaurant operators Chef Peter Logan and Anastasia Gillette, the restaurant’s mission statement is to become the best new steak restaurant in OKC. The following are the types of menu items Bluehorn Restaurant & Steakhouse will serve- shareables, steaks, soups, gourmet sides and salads.

Bluehorn Restaurant & Steakhouse History

Bluehorn Restaurant & Steakhouse is owned by two Oklahoma City natives, Chef Peter Logan and Anastasia Gillette. They have both worked around the country in fine dining establishments and have a combined twenty years in the restaurant industry. Upon working alongside each other at another fine dining establishment in Oklahoma City, the two of them became good friends and decided to venture into owning their own restaurant.

Chef Peter is the kitchen guru and critically acclaimed chef, while Anastasia manages the front of the house and is a certified Sommelier. Together, with both of their expertise and knowledge, Bluehorn Restaurant & Steakhouse is destined to become Oklahoma City’s next big restaurant.

Industry Analysis

The Restaurant industry is expected to grow to over $220 billion in the next five years.

Consumer spending is projected to grow. The Consumer Confidence Index, a leading indicator of spending patterns, is expected to also grow strongly, which will boost restaurant industry growth over the next five years. The growth in consumer confidence also suggests that more consumers may opt to segment their disposable income to eating outside the home.

Additionally, an increase in the number of households earning more than $100,000 annually further contributes to the industry growth, supporting industry operators that offer more niche, higher-end products.  This group is expected to continue to grow in size over the next five years.

The urban population represents a large market for the industry. Specifically, time-strapped individuals living in urban areas will likely frequent industry establishments to save time on cooking. The urban population is expected to increase, representing a potential opportunity for the industry.

Customer Analysis

Demographic profile of target market, customer segmentation.

Bluehorn Restaurant & Steakhouse will primarily target the following customer profile:

• Upper middle class to wealthier population
• Millennials
• Young professionals
• Households with an average income of at least $75k
• Foodies and culture enthusiasts

Competitive Analysis

Direct and indirect competitors.

Bluehorn Restaurant & Steakhouse will be competing with other restaurants in Oklahoma City. A profile of each competitor is below. The Press Located in the trendy area known as the Plaza District, The Press has reimagined our favorite foods of the surrounding regions through the lens of home.

The menu consists of appetizers, soups, burgers and sandwiches, bowls, main dishes, sides, desserts, and a large selection of alcoholic beverages. The Press serves craft beer, domestic beer, wine spritzers, house cocktails, wine, and mimosas. They also offer brunch. The menu of The Press is affordable with the most expensive dish being $16. The wine menu is also not pretentious as the wine is sold either by the glass or bottle, with the most expensive bottle being $52 for the Gruet Sparkling Brut Rose. Oak & Ore Oak & Ore is a craft beer and restaurant in OKC’s Plaza District. They have a 36-tap beer selection and offer vegetarian, vegan, and gluten free dining options. Oak & Ore offers a rotating, 36-tap selection of their favorite brews from Oklahoma and around the world. Each beer is thoughtfully paired with a craft beer-inspired dining experience.

The food menu of Oak & Ore offers starters, salads, wings, fried chicken, sandwiches, tacos, banh mi, and sides. They also have a selection of kids dishes so the whole family can enjoy comfort food while sampling one of their delectable beers.

The Mule OKC The Mule is a casual, hip restaurant offering a large beer and cocktail menu plus sandwiches and more. Located in the constantly growing and buzzing hub that is the Plaza District, The Mule takes the timeless favorite and contorts it into a whole menu of wild offerings.

There is also a fantastic assortment of soups offered and The Mule shakes up a seasonal list of cocktails designed by their bar staff. During the winter months, patrons can stave off the cold with their versions of hot toddies and buttered rum. For the beer drinkers, they always have a reliable line-up of fresh cold brews on draft, as well as a wide selection of can.

Competitive Advantage

Bluehorn Restaurant & Steakhouse offers several advantages over its competition. Those advantages are:

• Gourmet dishes elegantly prepared to the finest standard.
• Selection of steaks sourced from local Oklahoma farms.
• An exclusive and unique wine menu that includes a wine selection of all price points.
• Highly sought after location: Bluehorn Restaurant & Steakhouse will be located in the trendy and attractive neighborhood known as The Plaza District.
• Trendy, welcoming, and energetic ambiance that will be perfect for a night out or a celebration.

Marketing Plan

Promotions strategy.

The marketing strategy for Bluehorn Restaurant & Steakhouse is as follows: Location Bluehorn Restaurant & Steakhouse’s location is a promotions strategy in itself. The Plaza District is a destination spot for locals, tourists, and anyone looking for the trendiest food fare in Oklahoma City. The Plaza District is home to OKC’s most popular bars and restaurants, art galleries, theaters, and boutique shopping. The millennials, young professionals, and foodies will frequent Bluehorn Restaurant & Steakhouse for the location itself.

Social Media Bluehorn Restaurant & Steakhouse will use social media to cater to the millennials and Oklahoma City residents. Chef Peter and Anastasia plan to hire an advertising agency to take professional photographs of the menu items and location to create appealing posts to reach a greater audience. The posts will include pictures of the menu items, as well as upcoming featured options. SEO Website Marketing Bluehorn Restaurant & Steakhouse plans to invest funds into maintaining a strong SEO presence on search engines like Google and Bing. When a person types in “local fine dining restaurant” or “Oklahoma City restaurant”, Bluehorn Restaurant & Steakhouse will appear in the top three choices. The website will include the full menu, location, hours, and lots of pictures of the food, drinks, and steaks. Third Party Delivery Sites Bluehorn Restaurant & Steakhouse will maintain a presence on sites like GrubHub, Uber Eats, Doordash, and Postmates so that people looking for local food to be delivered will see Bluehorn Restaurant & Steakhouse listed near the top.

Operations Plan

Operation functions:.

The company will hire the following:

• 4 sous chefs
• 2 bartenders
• 2 hostesses
• The company will hire an advertising agency and an accounting firm

Milestones:

Bluehorn Restaurant & Steakhouse aims to open in the next 6 months. The following are the milestones needed in order to obtain this goal.

7/1/202X – Execute lease for prime location in the Plaza District.

7/2/202X – Begin construction of restaurant build-out.

7/10/202X – Finalize menu.

7/17/202X – Hire advertising company to begin developing marketing efforts.

8/15/202X – Start of marketing campaign

8/22/202X – Final walk-thru of completed restaurant build-out.

8/25/202X – Hire team of sous chefs, servers, and bussers.

9/1/202X – Decoration and set up of restaurant.

9/15/202X – Grand Opening of Bluehorn Restaurant & Steakhouse

Bluehorn Restaurant & Steakhouse will be owned and operated by Chef Peter Logan and Anastasia Gillette. Each will have a 50% ownership stake in the restaurant.

Chef Peter Logan, Co-Owner

Chef Peter Logan is an Oklahoma City native and has been in the restaurant industry for over ten years. He was trained in a prestigious Le Cordon Bleu Culinary Academy in San Francisco and has worked in some of the nation’s most prestigious fine dining restaurants. His tenure has took him from the west coast to the east coast, and now he’s back doing what he loves in his hometown of Oklahoma City.

Chef Peter will manage the kitchen operations of Bluehorn Restaurant & Steakhouse. He will train and oversee the sous chefs, manage inventory, place food inventory orders, deal with the local food vendors, and ensure the highest customer satisfaction with the food.

Anastasia Gillette, Co-Owner

Anastasia Gillette was born and raised in Oklahoma City and has garnered over ten years in the restaurant industry as well. While in college, Anastasia worked as a hostess at one of the area’s most prestigious restaurant establishments. While there, she was eventually promoted to Front of the House Manager where she oversaw the hostesses, servers, bussers, bartenders, and reservations. Her passion always led to the beverage portion of the restaurant so she obtained her Sommelier certificate in 2019. With her wine education, Anastasia is able to cultivate an interesting and elegant wine selection for the restaurant.

Anastasia will oversee front of the house operations, maintain and ensure customer service, and manage all reservations. She will also be in charge of the bar and wine ordering, training of front of the house staff, and will manage the restaurant’s social media accounts once they are set up.

Financial Plan

Key revenue & costs.

The revenue drivers for Bluehorn Restaurant & Steakhouse will come from the food and drink menu items being offered daily.

The cost drivers will be the ingredients and products needed to make the menu items as well as the cooking materials. A significant cost driver is the fine dining equipment, serving dishes, and beer and wine glasses. Other cost drivers will be the overhead expenses of payroll for the employees, accounting firm, and cost of the advertising agency.

Funding Requirements and Use of Funds

Bluehorn Restaurant & Steakhouse is seeking $300,000 in debt financing to open its start-up restaurant. The breakout of the funding is below:

Financial Projections

Income Statement

  Balance Sheet

  Cash Flow Statement

Restaurant Business Plan FAQs

What is a restaurant business plan.

A restaurant business plan is a plan to start and/or grow your restaurant business. Among other things, it outlines your business concept, identifies your target customers, presents your marketing plan and details your financial projections.

You can  easily complete your restaurant business plan using our Restaurant Business Plan Template here .

What Are the Main Types of Restaurants?

There are many types of restaurant businesses. Restaurants can range in type from fast food, fast casual, moderate casual, fine dining, and bar and restaurant types. Restaurants also come in a variety of different ethnic or themed categories, such as Mexican restaurants, Asian restaurants, American, etc.  Some restaurants also go mobile and have food trucks.

How Do You Get Funding for Your Restaurant Business Plan?

Restaurant businesses are most likely to receive funding from banks. Typically you will find a local bank and present your business plan to them. Another option for a restaurant business is to obtain a small business loan. SBA loans are a popular option as they offer longer loan terms with lower interest rates.

What are the Steps To Start a Restaurant Business?

1. Develop A Restaurant Business Plan - The first step in starting a business is to create a detailed restaurant business plan that outlines all aspects of the venture. This should include potential market size and target customers, the services or products you will offer, pricing strategies and a detailed financial forecast.  

2. Choose Your Legal Structure - It's important to select an appropriate legal entity for your restaurant business. This could be a limited liability company (LLC), corporation, partnership, or sole proprietorship. Each type has its own benefits and drawbacks so it’s important to do research and choose wisely so that your restaurant business is in compliance with local laws.

3. Register Your Restaurant Business - Once you have chosen a legal structure, the next step is to register your restaurant business with the government or state where you’re operating from. This includes obtaining licenses and permits as required by federal, state, and local laws. 

4. Identify Financing Options - It’s likely that you’ll need some capital to start your restaurant business, so take some time to identify what financing options are available such as bank loans, investor funding, grants, or crowdfunding platforms. 

5. Choose a Location - Whether you plan on operating out of a physical location or not, you should always have an idea of where you’ll be based should it become necessary in the future as well as what kind of space would be suitable for your operations. 

6. Hire Employees - There are several ways to find qualified employees including job boards like LinkedIn or Indeed as well as hiring agencies if needed – depending on what type of employees you need it might also be more effective to reach out directly through networking events. 

7. Acquire Necessary Restaurant Equipment & Supplies - In order to start your restaurant business, you'll need to purchase all of the necessary equipment and supplies to run a successful operation. 

8. Market & Promote Your Business - Once you have all the necessary pieces in place, it’s time to start promoting and marketing your restaurant business. This includes creating a website, utilizing social media platforms like Facebook or Twitter, and having an effective Search Engine Optimization (SEO) strategy. You should also consider traditional marketing techniques such as radio or print advertising. 

Learn more about how to start a successful restaurant business:

• How to Start a Restaurant Business

Where Can I Get a Restaurant Business Plan PDF?

You can download our free restaurant business plan template PDF here . This is a sample restaurant business plan template you can use in PDF format.

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How to Write a Restaurant Business Plan: Complete Guide

• January 31, 2023
• Food & Beverage

👇 Check all our resources on restaurants 👇

Whether you’re looking to raise funding from private investors or to get a loan from a bank (like a SBA loan) to open a restaurant , you will need to prepare a solid business plan.

In this article we go through, step-by-step, all the different sections you need in the business plan of your restaurant . Use this template to create a complete, clear and solid business plan that get you funded. Let’s dive in!

1. Restaurant Executive Summary

The executive summary of a business plan gives a sneak peek of the information about your business plan to lenders and/or investors.

If the information you provide here is not concise, informative, and scannable, potential lenders and investors will lose interest.

Though the executive summary is the first and the most important section, it should normally be the last section you write because it will have the summary of different sections included in the entire plan.

Why do you need a business plan for a restaurant?

The purpose of a business plan is to secure funding through one of the following channels:

• Obtain bank financing or secure a loan from other lenders (such as a SBA loan )
• Obtain private investments from investment funds, angel investors, etc.
• Obtain a public or a private grant

How to write your restaurant’s executive summary?

Provide a precise and high-level summary of every section that you have included in your business plan. The information and the data you include in this segment should grab the attention of potential investors and lenders immediately.

Also make sure that the executive summary doesn’t exceed 2 pages in total: it’s supposed to be a summary for investors and lenders who don’t have time to scroll through 40-50 pages, so keep it short and brief.

The executive summary usually consists of 5 major sub-sections:

• Business overview : start by introducing your restaurant and the products and services that you intend offer. Mention the type of restaurant you intend to open (such as fine dining, casual dining, fast casual, ghost restaurant, café, pub, etc.), the menu and prices. Also add here the total number of customers your restaurant can host at once, its location, and some details on the surface and the design layout
• Market analysis : summarise the market where you will operate and provide a brief about the target audience, market size , competitors, etc. No need to provide granular data here, save it for the Market Overview section later on (or the appendix)
• People : introduce your restaurant’s management and employee structure. Provide a brief (no more than a couple of sentences each) of the knowledge and experience of the team. Also, speak about your hiring plans.
• Financial plan : how much profit and revenue do you expect in the next 5 years? When will you reach the break-even point and start making profits? You can include here a chart depicting your key financials statements
• Funding ask : what loan/investment/grant are you seeking? How much do you need? How long will this last?

Restaurant Financial Model

Download an expert-built 5-year Excel financial model for your business plan

2. Restaurant Business Overview

This is the section where you will provide details about your restaurant and the chosen business model. You must address some important questions that lenders and/or investors generally ask .

Here is a quick list of some of those questions you must address:

• What is the rationale behind you opening this type of restaurant today?
• What’s the restaurant’s location and why did you select that location?
• Why did you select the type of restaurant you want to open?
• What will be the products and services you will offer?
• What will be your pricing strategy and why?
• What will be your opening days / hours?
• How many customers can you serve at once (capacity)?
• What is the surface of your restaurant? How is the restaurant designed (incl. dining rooms and kitchen area)?
• What will be the legal structure of your company?

a) History of the Project

Any business must have two components:

• Passion & experience of the business owner
• Rationale behind starting this type of business today

Passion & experience

You may or may not have prior experience. If you have experience, speak about it and how it will help you to run your business. For instance, you may have been a restaurant manager in a popular restaurant for 6 years, and now you want to start your own restaurant and use your knowledge to run it more efficiently.

However, if you don’t already have experience, that’s fine. You must demonstrate your passion and some industry knowledge (you may have conducted thorough research).

What is your restaurant’s mission?

For example, there may not be any fine dining restaurant in your area where wealthy residents or tourists can enjoy an upscale meal experience in a sophisticated and elegant environment.

But that’s not all: your market must be suitable for your business to thrive.

For instance, if you are planning to open a fine dining restaurant in a low-income area, it is probably not going to attract many customers. Similarly, if the population of the target market has a high percentage of people preferring takeaway/delivery food options because of their busy lifestyle, a fine dining restaurant may not be a good idea.

b) Business Model

This sub-section of the Business Overview will explain your business model. Describe the following points briefly:

• Will you buy an existing restaurant and do some remodeling, or will you start a new restaurant and design it from scratch?
• Will you buy a franchise or do you plan to open an independent restaurant instead?
• The type of restaurant you want to open and why

What are the different types of restaurants?

There are multiple types of restaurants. Some of them that you may consider include, but are not limited to:

• Fine Dining : They provide upscale meal experience with several courses. The atmosphere is sophisticated and classy. They can be franchises or individually owned. Of course, they are quite expensive.
• Casual Dining : This type of restaurants serve customers at their tables and the food prices are moderate. The atmosphere is not very sophisticated. Though the décor is often unique, it can be based on the type of food a restaurant serves.
• Fast Casual : These restaurants will make your food available quickly, but the food is healthier than fast food. Also, food is cheaper than casual dining. They have a counter service (you must collect food from the counter) and the décor is more contemporary.
• Ghost Kitchens : ghost kitchens (or “dark kitchen”) restaurants do not have a storefront, a dining room, signage, or décor. They operate using food delivery partners and take orders through online ordering or phone ordering.
• Fast Food : Think of Taco Bell , KFC, Burger King, etc. The food is relatively cheap and is served quickly. Food ingredients are usually preheated or precooked, and food delivery happens over the counter or via a drive-through window.
• Buffet Style : These restaurants are similar to the Family Style restaurants but with a fundamental difference. People get to select from a selection of food that are made available against a fixed price. However, customers need to serve themselves and they are allowed to return to the buffet for as many times as they want.

c) Products & Services

Of course, the products you will offer in your restaurant will depend on the type of restaurant you are opening. A Buffet Style restaurant, for example, usually prefer specialty cuisines like Indian, pizza, home cooking, Chinese, etc. Similarly, if you are opting for a Diner, you will most likely offer fried foods (fish & chicken), breakfast items, burgers, etc. at a low cost.

It is a good idea to give a list of food and drinks that you want to sell. Depending on the scale of your operations, you may have too many menu items. It is not possible to list every item on your menu, but make sure that you are listing the most important ones. If you specialize in one or a few specific dishes, mention that, too.

d) Pricing Strategy

In this sub-section, you must explain the pricing strategy of your restaurant. If you have multiple competitors (in the same niche) in the vicinity, you cannot have huge pricing variation, especially for the similar food items. Pricing will, of course, depend on the type of restaurant you are opening, and the food items you are offering.

For example, if you are sourcing the raw materials only from organic farms that do not use fertilizers and pesticides, your menu items will have a higher price tag.

Similarly, you cannot expect to charge expensive Fine Dining-like prices if you are opening a Casual Dining restaurant instead.

Create a pricing table and ensure to provide an average price range for your products. You don’t need to provide exact pricing for each product. Use price ranges instead.

Offering a pricing table is important because your pricing strategy will allow investors to tie your pricing strategy with your financial projections .

e) Legal Structure

Finally, your business overview section should specify what type of business structure you want. Is this a corporation or a partnership (LLC)? Who are the investors? How much equity percentage do they own? Is there a Board of Directors? If so, whom? Do they have experience in the industry?

3. Restaurant Market Overview

A complete understanding of the market where you want to operate is important for the success of your business.

For example, if your intentions are to open a classy Fine Dining restaurant in a low-income area, you will not attract enough customers. Similarly, if you want to open a fast-food restaurant in a place where family dining is more popular, it will be a disaster.

Therefore, you must cover here 3 important areas:

• Market size & growth : how big is the restaurant industry in your area? What is its growth rate (or decline rate) and what are the factors contributing to its growth or decline?
• Competition overview : how many competitors are there? How do they compare vs. your business? How can you differentiate yourself from them?
• Customer analysis : who is your target audience? What type of restaurants do they prefer? How regularly do they visit restaurants for dining? What type of food do they prefer? How much do they spend at restaurants on average?

a) Restaurant Industry Status Quo

How big is the restaurant industry in the us.

According to Finance Online , there were over 1 million restaurants (all types combined) in the US in 2021. The industry recovered post a 60% drop in sales in April 2020 due to the pandemic, and recorded an annualised market size of over $1 trillion dollars in July 2022 ($1,033 billion)..!

How big is the restaurant industry in your area?

Once you provide the overall picture of the US, divert your attention to the area where you want to operate. It might not be possible to find region or area-specific studies, and hence, you must estimate the market size .

For example, if there are 1,000,000 restaurants in the country with total annual revenue of $1 trillion, the average annual revenue for each establishment is around $1 million.

Therefore, if the area where you want to open your restaurant has 30 restaurants, you can safely assume that the restaurant industry in your area is worth approximately $30 million.

How fast is the restaurant industry growing in the area?

You must show the expected growth rate of the restaurant industry in your area. This information may not be available via online research papers. However, assessing the growth rate will not be difficult as you can use metrics such as the number of competitors in your area.

For instance, if there were 25 restaurants in 2018 and 30 restaurants in 2022, the average annual growth rate would be 5%.

What are the current restaurant market trends in your area?

It is vital to understand the trends of the restaurant industry in your area. Understanding trends will allow you to devise marketing strategies.

Understanding trends won’t be easy. You must conduct research and talk with your target audience. Additionally, you must also study your competitors to understand their target audience, the products they sell, etc.

Some common questions you may ask the target audience include:

• What type of restaurants do they prefer?
• At what time of the day do they prefer to visit a restaurant (breakfast, lunch, dinner)?
• How frequently do they visit restaurants?
• What type of foods do they usually order?

You can ask as many questions as you need to understand the evolving trends.

b) Competition Overview

Studying your competitors’ business models is vital. You need to understand what makes them successful or why they fail. A clear understanding of their food offerings, marketing strategies, etc., will allow you to provide a better service.

If your competitors are offering nearly the same products & services, then what is their market share and how do they market their products & services to attract new customers?

It is always a good idea to do some research (if necessary, physically visit your competitors without revealing your business intentions) and create a comparative table summarizing their product & service offerings, marketing strategies, target audience, etc.

Here is a sample table that you can use:

The table you will create will depend on what information you need and want to include based on your proposed business model.

Restaurant SWOT Analysis

Try to provide a SWOT analysis . It must be crisp and highly focused. SWOT stands for Strength, Weakness, Opportunities, and Threats.

Here is a sample that you can use as a reference:

• Strength: 8 years of senior manager experience in a reputed Michelin Star Fine Dining restaurant operated & owned by a renowned chef and a master’s degree in Hospitality management, experienced senior chef with 22 years of experience
• Weakness: Startup cost, zero reputation
• Opportunities: An affluent neighborhood with a rising demand for fine dining establishments, only one fine dining restaurant in the 3-mile radius
• Threats: Increasing cost of raw materials because of geo-political turmoil restricting international trade routes

A clear understanding of your strengths and weakness along with opportunities and threats in the real market can help you to design your marketing strategy. It also helps potential investors to assess the risk and reward profile of your business.

c) Customer Analysis

This is the sub-section where you will provide a detailed analysis of your target audience.

Some important points that you must include in your customer analysis include:

• Age and gender distribution (you can get local demographic data from census.gov )
• Per capita expenditure on dining
• Frequency of restaurant visits
• Average monthly income and disposable income
• Average bill size per visit
• Average yearly or monthly spending on food at restaurants
• Type of restaurants preferred
• The expected price range for food
• Inclination towards loyalty programs & free perks
• Things they dislike about existing restaurants and what they expect to be improved

You can add as many data points as required to validate your business decision. The idea here is to display your deep understanding of the target audience and their needs, preferences, and expectations. This knowledge can help you to tailor your products & services to attract new customers and increase sales .

4. Sales & Marketing Strategy

This is the segment where you outline your customer acquisition strategy. Try to answer the following questions:

• What is your USP ?
• What are the different marketing strategies you will use?
• How do you intend to track the success of your marketing strategy?
• What is your CAC or customer acquisition cost ?
• What is your marketing budget?
• What introductory promos and offers do you intend to provide for attracting new customers?

Let’s expand a bit on a few questions below:

What marketing channels do restaurants use?

A few marketing channels that restaurants typically use are:

• Word-of-mouth, recommendations,
• Local listing & reviews (e.g. Google reviews)
• Online booking platforms (e.g. TheFork , Opentable , etc.)
• Influencer marketing
• Print media, etc.

It is not necessary to use all channels. You can start by focusing on a few of them and include other marketing strategies later instead.

What is your unique selling proposition?

In other words, how do you differentiate yourself vs. competitors? This is very important as you might need to win customers from competitors.

A few examples of USPs can be:

• Organic raw materials : we source organic farm fresh raw materials from local farmers
• Authentic Indian food : prepared by a Michelin Star chef from India
• Family run restaurant : run by a family, helping families connect over delicious food
• Price : affordable food & menu for the quality vs. competitors
• Location : the restaurant is located in a busy street, thereby attracting many customers who can easily glance over the menu
• Uniqueness : you may be the only tapas-style restaurant around, in an area where people are fond of this type of restaurant

5. Management & People

You must address 2 things here:

• The management team and their experience / track record
• The organizational structure : different team members and who reports to whom?

a) Management

Small businesses often fail because of managerial weaknesses. Thus, having a strong management team is vital. Highlight the experience and education of senior managers that you intend to hire to oversee your restaurant business.

Describe their duties, responsibilities, and roles. Also, highlight their previous experience and explain how they succeeded in their previous roles.

It is also important that you explain how their experiences and qualifications help you in implementing the restaurant you are proposing. If they have specialized training, achievement, and experience (such as a degree in hospitality management, 3 Michelin stars, experience in developing menus for 5-star hotels, etc.), add that information.

b) Organization Structure

Even if you haven’t already hired a restaurant manager, server, chef, head cook, busser, cashier, bartenders, and other relevant staff members, you must provide here a chart of the organizational structure defining the hierarchy of reporting.

6. Financial Plan

The financial plan is perhaps, with the executive summary, the most important section of any business plan for a restaurant.

Indeed, a solid financial plan tells lenders that your business is viable and can repay the loan you need from them. If you’re looking to raise equity from private investors, a solid financial plan will prove them your restaurant is an attractive investment.

There should be 2 sections to your financial plan section:

• The startup costs of your project (if you plan to start a new restaurant, renovate your restaurant, etc.)
• The 5-year financial projections

a) Startup Costs

Before we expand on 5-year financial projections in the following section, it’s always best practice to start with listing the startup costs of your restaurant . For a restaurant, startup costs are all the expenses you incur before you open your restaurant and start making sales . These expenses typically are:

• The leasing deposit for the space (if you rent) or to buy the real estate (if you buy)
• Renovations and improvements
• Equipment & appliances
• Furniture & tableware

Of course, the startup costs depend on a number of factors, like the size of your restaurant, its location, the facilities, the menu, etc.

On average, it costs $484,000 to $685,000 to open a casual restaurant with 150 seats (2,500 sq. ft.) in the US.

Note that these costs are for illustrative purposes and may not be fully relevant for your business. For more information on how much it costs to open and run a restaurant, read our article here .

b) Financial Projections

In addition to startup costs, you will now need to build a solid 5-year financial model for your restaurant.

Your financial projections should be built using a spreadsheet (e.g. Excel or Google Sheets) and presented in the form of tables and charts in the business plan of your restaurant.

As usual, keep it concise here and save details (for example detailed financial statements, financial metrics, key assumptions used for the projections) for the appendix instead.

Your financial projections should answer at least the following questions:

• How much revenue do you expect to generate over the next 5 years?
• When do you expect to break even ?
• How much cash will you burn until you get there?
• What’s the impact of a change in pricing (say 15%) on your margins?
• What is your average customer acquisition cost?

You should include here your 3 financial statements (income statement, balance sheet and cash flow statement). This means you must forecast:

• The number of covers (customers or orders) over time ;
• Your expected revenue ;
• Operating costs to run the business ;
• Any other cash flow items (e.g. capex, debt repayment, etc.).

When projecting your revenue, make sure to sensitize pricing, cost of raw materials (food supplies) and your sales volume. Indeed, a small change in these assumptions may have a significant impact on your revenues and profits.

7. Use of Funds

This is the last section of the business plan of your restaurant. Now that we have explained what your restaurant’s business model and concept are, what is your menu, your marketing strategy, etc., this section must now answer the following questions:

• How much funding do you need ?
• What financial instrument(s) do you need: is this equity or debt, or even a free-money public grant?
• How long will this funding last?
• Where else does the money come from? If you apply for a SBA loan for example, where does the other part of the investment come from (your own capital, private investors?)

If you raise debt:

• What percentage of the total funding the loan represents?
• What is the corresponding Debt Service Coverage Ratio ?

If you raise equity

• What percentage ownership are you selling as part of this funding round?
• What is the corresponding valuation of your business?

Use of Funds

Any restaurant business plan should include a clear use of funds section. This is where you explain how the money will be spent.

Will you spend most of the loan / investment in paying your employees’ salaries? Or will it cover mostly the cost for the lease deposit and the renovation?

Those are very important questions you should be able to answer in the blink of an eye. Don’t worry, this should come straight from your financial projections. If you’ve built solid projections like in our restaurant financial model template , you won’t have any issues answering these questions.

For the use of funds, we also recommend using a pie chart like the one we have in our financial model template where we outline the main expenses categories as shown below.

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How to Write a Restaurant Business Plan: A Step-by-Step Guide

• Business , Restaurants
• April 1, 2023

If you’re planning to start a restaurant, writing a business plan is a crucial step. A well-written business plan serves as a roadmap for your restaurant, outlining your goals, strategies, and financial projections. It’s also a document that potential investors or lenders will want to see before they consider investing in your restaurant.

Writing a restaurant business plan can seem daunting, but it doesn’t have to be. The key is to break it down into manageable sections and take it one step at a time. In this article, we’ll walk you through the essential elements of a restaurant business plan and provide tips on how to write each section effectively.

Executive Summary

The executive summary is a critical part of your restaurant business plan, as it provides an overview of your entire plan. It should be concise and clear, highlighting the most important aspects of your business plan.

In this section, you should include:

• A brief introduction to your restaurant concept and target market
• Your mission statement and core values
• A summary of your management team and their experience
• A description of your menu and pricing strategy
• A financial summary, including startup costs, projected revenue, and profit margins

Keep in mind that the executive summary is often the first part of your business plan that potential investors or lenders will read. Therefore, it’s important to make a strong first impression and clearly communicate the key points of your plan.

Overall, the executive summary should be no more than one or two pages long, and should be written in a clear and concise manner. It should be easy to read and understand, and should leave the reader with a clear understanding of your restaurant concept and the potential for success.

Market Analysis

Before starting a restaurant business, it is essential to conduct a thorough market analysis to understand the market trends, competition, and target customers. The market analysis section of the business plan should provide a detailed overview of the restaurant industry’s current state and future growth potential.

One way to conduct market research is by analyzing industry reports, such as those published by the National Restaurant Association. These reports provide valuable insights into consumer trends, industry growth rates, and market size. Additionally, researching local competition and their offerings can help identify gaps in the market and opportunities for differentiation.

Another critical aspect of market analysis is identifying the target market. Understanding the demographics, preferences, and behaviors of potential customers is crucial in developing a successful restaurant concept. This information can be gathered through surveys, focus groups, and analyzing customer data from similar businesses.

Finally, it is essential to analyze the economic and regulatory environment in which the restaurant will operate. Factors such as minimum wage laws, health and safety regulations, and taxes can significantly impact a restaurant’s profitability.

Overall, a comprehensive market analysis is crucial in developing a successful restaurant business plan. By understanding the market trends, competition, and target customers, entrepreneurs can create a unique concept that meets the needs of their customers and stands out in a crowded industry.

Menu and Services

One of the most important aspects of a restaurant business plan is the menu and services section. This section outlines the types of food and beverages that will be offered, as well as the overall dining experience that customers can expect.

When developing your menu, it’s important to consider the target market and what types of cuisine they prefer. It’s also important to consider the cost of ingredients and the profit margins for each dish. Offering a variety of options, including vegetarian and gluten-free choices, can help attract a wider customer base.

In addition to the menu, the services section should outline the overall dining experience. This includes details such as the style of service (e.g. casual, fine dining), the ambiance of the restaurant, and any additional services offered (e.g. catering, delivery). It’s important to consider the competition in the area and what unique services or experiences your restaurant can offer to stand out.

Tables and bullet points can be useful in conveying information about the menu and services. For example, a table could be used to list the different menu items and their prices, while bullet points could be used to highlight any special promotions or events.

Overall, the menu and services section of a restaurant business plan is crucial in outlining the types of food and experiences that customers can expect. By carefully considering the target market, competition, and costs, you can develop a menu and service offering that will attract and retain customers.

Marketing and Sales Strategies

Marketing and sales are crucial components of any restaurant business plan. Without effective marketing and sales strategies, your restaurant may struggle to attract customers and generate revenue. In this section, we’ll discuss some key strategies for promoting and selling your restaurant’s products and services.

Target Market

Before you can develop effective marketing and sales strategies, you need to identify your target market. Who are your ideal customers? What are their demographics, interests, and behaviors? By understanding your target market, you can tailor your marketing and sales efforts to appeal to their specific needs and preferences.

Online Presence

In today’s digital age, having a strong online presence is essential for any business. Make sure your restaurant has a professional website that showcases your menu, location, and hours of operation. You should also create social media accounts on platforms like Facebook, Twitter, and Instagram. These channels can help you connect with potential customers and promote your restaurant’s offerings.

Promotions and Special Offers

Offering promotions and special deals can be an effective way to attract new customers and encourage repeat business. Consider offering discounts on certain menu items or hosting special events like wine tastings or live music nights. You can also use email marketing campaigns to promote your restaurant’s latest offerings and deals.

Customer Service

Finally, don’t overlook the importance of excellent customer service. Providing a positive dining experience can help you build a loyal customer base and generate positive word-of-mouth referrals. Train your staff to be friendly, attentive, and knowledgeable about your menu and offerings.

Management and Staffing

One of the key factors for any successful restaurant is having a strong management team in place. This includes a general manager, kitchen manager, and front-of-house manager. Each of these positions has unique responsibilities that are critical to the restaurant’s success.

The general manager oversees all aspects of the restaurant, including finances, marketing, and staffing. They are responsible for creating and implementing policies and procedures that ensure the restaurant runs smoothly and efficiently.

The kitchen manager is responsible for managing the kitchen staff, ordering supplies, and ensuring that all food is prepared to the highest standards. They must have a deep understanding of food safety and sanitation regulations, as well as excellent organizational and communication skills.

The front-of-house manager is responsible for managing the waitstaff, bartenders, and host/hostess staff. They must have excellent customer service skills and be able to handle any customer complaints or issues that arise. They are also responsible for creating schedules and ensuring that the restaurant is properly staffed at all times.

When it comes to staffing, it’s important to hire people who are passionate about the restaurant industry and committed to providing excellent customer service. This includes waitstaff, bartenders, and kitchen staff. It’s also important to provide ongoing training and development opportunities to ensure that staff members are equipped with the skills they need to succeed.

Having a strong management team and dedicated staff is critical to the success of any restaurant. By investing in your team and creating a positive work environment, you can ensure that your restaurant is well-positioned for long-term success.

Financial Analysis and Projections

As you develop your restaurant business plan, it is essential to include a section on financial analysis and projections. This section should provide a detailed overview of your restaurant’s financial health and future growth potential. Here are some key elements to include:

Revenue Projections

One of the most critical aspects of your financial analysis is revenue projections. This section should include a detailed breakdown of your restaurant’s expected revenue streams, including food and beverage sales, catering, and any additional revenue streams. Use tables and charts to make this information more accessible to readers.

Cost Analysis

Another essential component of your financial analysis is a detailed cost analysis. This section should include a breakdown of all your restaurant’s expenses, including rent, utilities, food costs, and labor costs. Use bullet points to make this information easier to read and understand.

Cash Flow Analysis

Your financial analysis should also include a detailed cash flow analysis. This section should provide an overview of your restaurant’s cash flow, including cash inflows and outflows. Use tables and charts to make this information more accessible to readers.

Profit and Loss Statement

Finally, your financial analysis should include a detailed profit and loss statement. This section should provide an overview of your restaurant’s revenue, expenses, and net income. Use tables and charts to make this information more accessible to readers.

By including a detailed financial analysis and projections section in your restaurant business plan, you can provide potential investors and lenders with a clear picture of your restaurant’s financial health and future growth potential. Use tables, bullet points, and other HTML tags as necessary to make this information more accessible to readers.

Here are a few additional resources that can help you with your restaurant business plan:

• Sample business plans:  Look for sample business plans online to get an idea of what a successful restaurant business plan looks like. You can find templates and examples on websites such as Bplans, LivePlan, and SCORE.
• Industry research:  Conduct thorough research on the restaurant industry to understand your target market, competition, trends, and challenges. Use resources such as the National Restaurant Association, industry publications, and market research reports.
• Financial projections:  Use financial modeling tools such as Excel or software such as LivePlan to create realistic financial projections for your restaurant. Make sure to include all costs, revenue streams, and contingencies.
• Legal requirements:  Consult with a lawyer to ensure that you have all the necessary permits, licenses, and contracts in place. This includes registering your business, obtaining food and alcohol licenses, and complying with health and safety regulations.

Remember that your restaurant business plan should be a living document that you update and refine regularly. It should guide your decision-making, help you secure funding, and keep you focused on your goals. With a well-written and well-researched business plan, you can increase your chances of success in the competitive restaurant industry.

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BUSINESS STRATEGIES

How to create a restaurant business plan

• Nirit Braun

A restaurant business plan is a detailed and strategic document that outlines the fundamental aspects of establishing and operating a restaurant. It encompasses a comprehensive overview of the restaurant's concept, business website , target market, menu offerings, marketing strategies, operational procedures, financial projections and more. Essentially, it serves as a roadmap that guides entrepreneurs through the process of starting a business as well as managing and growing a successful restaurant venture.

When starting a food business , creating a clear business plan is of paramount importance. By meticulously detailing each aspect of your plan, entrepreneurs gain a deeper understanding of their business idea and the steps required to turn it into a reality.

Ready to start making a website for your restaurant venture? Give Wix’s website builder a try.

How to create a successful restaurant business plan in 6 steps

By following these six basic steps, you’ll produce a strategic plan that attracts investors, secures funding and guides your new restaurant venture to success. With a well-thought-out document that aligns with your goals, you’ll be set up for success in starting a business .

Executive summary

Company and domain name

Market analysis and research

Operations plan

Marketing and advertising plan

Financial plan

01. Executive summary

An executive summary is a concise overview of your entire restaurant business plan. It encapsulates the essence of the venture, highlighting key aspects such as the restaurant's concept, target market, competitive advantage and financial projections. This section serves as a hook to capture the reader's interest and provide a snapshot of what the business plan entails.

When writing an executive summary for a restaurant business, clarity and brevity are paramount. Begin by introducing the restaurant concept, its unique selling points and the specific cuisine or dining experience it offers. Outline the market opportunity, demonstrating a clear understanding of the target audience's preferences and needs. Address the competitive landscape by highlighting how the restaurant stands out in terms of menu, ambiance, location or other distinguishing factors.

Example of an executive summary

"Sumptuous Bites Café is a new upscale dining establishment poised to bring an innovative culinary experience to the heart of the city. With a focus on farm-to-table cuisine crafted from locally sourced ingredients, we aim to redefine gastronomy by blending tradition with modernity. Our contemporary ambiance and eclectic menu of fusion dishes, prepared by award-winning chefs, promise a memorable dining journey for both food enthusiasts and connoisseurs.

In a competitive market, Sumptuous Bites Café sets itself apart by offering a diverse menu that caters to various dietary preferences and a commitment to sustainability. Our prime downtown location and collaboration with local farmers create an authentic connection with the community, ensuring a loyal customer base.

With a proven business model and a projected 20% growth in revenue within the first year, Sumptuous Bites Café seeks an initial investment of $220,000 to cover startup costs and marketing initiatives. Our goal is to become the go-to destination for discerning diners seeking an exceptional culinary experience that celebrates flavor, innovation and community."

02. Company and domain name

Knowing how to name a business is crucial, as it forms the foundation of your brand identity and is a key first step as you make plans to register your business . It should reflect the restaurant's essence, be memorable and resonate with your target audience. Consider using a business name generator or restaurant name generator to brainstorm ideas and ensure the name aligns with your concept and values.

Similarly, selecting a domain name is essential for your online presence. The domain name should ideally match your restaurant's name and be easy to remember. Check its availability and secure it early to avoid complications.

Check out these restaurant name ideas for inspiration.

03. Market analysis and research

The restaurant industry is a saturated albeit successful market, with the 2023 sales forecast coming in at $997 billion in the U.S. alone. This is why it’s vital to do market and competitor research before you dive in.

Including a comprehensive market analysis and research section in your business plan helps you understand the competitive landscape and market trends. Identify your target audience, their preferences and spending habits. Analyze your competitors' strengths and weaknesses, learning from their successes and shortcomings to develop a better business strategy.

04. Operations plan

The operations plan outlines the practical aspects of running your restaurant. Detail the proposed location, explaining how it aligns with your target market and why it's strategically advantageous. Discuss the layout, interior design and ambiance, highlighting how they contribute to the overall dining experience.

Include equipment requirements too, from kitchen appliances to POS systems, ensuring they support efficient operations. You’ll also want to address staffing needs, outlining roles and responsibilities and emphasizing the importance of well-trained and customer-focused employees.

05. Marketing and advertising plan

A well-structured marketing and advertising plan is essential to attract customers to your restaurant. Outline a mix of online and offline strategies, including social media marketing, influencer partnerships, local events and promotions.

It’s critical that your business website acts as a hub for showcasing your menu, enabling online reservations and engaging with customers. This is where you’ll provide essential information such as your location, hours of operation and contact details. In today's digital landscape, an online presence is indispensable for all types of business , including restaurants.

As part of your marketing plan, you’ll want to make sure your branding is up to par as well. Ensure your business has a clean, professional logo to use on your website and all marketing materials. Use a logo maker to generate some ideas, or narrow down your options with a dedicated restaurant logo maker instead.

06. Financial plan

Opening a restaurant can be an expensive endeavor, with some estimates putting the cost between $175,000 and $750,000 . A financial plan is a critical component of your business plan. It encompasses startup costs, revenue projections and financial milestones. Detail how you will fund the initial investment and estimate the timeframe to achieve profitability. Include a comprehensive budget that covers all expenses, from lease payments to marketing campaigns, ensuring financial transparency and feasibility.

Restaurant business plan examples

These examples provide a framework for structuring a restaurant business plan, incorporating all the essential elements discussed earlier. Remember that each business plan should be tailored to the specific concept, target market and goals of your restaurant venture.

Restaurant business plan template 1: Taste of Tuscany Bistro

Taste of Tuscany Bistro is a sophisticated Italian eatery dedicated to providing an authentic culinary journey through the flavors of Tuscany. Located in the heart of the city, our bistro combines rustic charm with modern elegance, offering a menu that celebrates the region's traditional dishes using locally sourced ingredients. With a strong commitment to sustainability and community engagement, Taste of Tuscany Bistro is poised to become a culinary destination for food enthusiasts seeking an exceptional dining experience.

Company name: Taste of Tuscany Bistro

Domain name: www.tasteoftuscanybistro.com

Marketing analysis and research

Target audience: Discerning diners aged 25 to 45 seeking authentic Italian cuisine and a refined dining ambiance.

Competitive landscape: Analyzing local Italian restaurants reveals a gap in upscale, region-specific offerings.

Market trends: Growing demand for locally sourced, sustainable and organic ingredients.

Location: Prime downtown area, near cultural attractions and high foot traffic.

Premises: Rustic yet elegant interior design, reminiscent of Tuscan countryside.

Equipment: State-of-the-art kitchen appliances, traditional wood-fired oven for pizzas.

Staffing: Experienced chefs, skilled waitstaff and knowledgeable sommelier.

Online presence: Engaging social media platforms, regular blog posts on Italian cuisine and interaction with food influencers.

Local engagement: Partnerships with nearby cultural centers, participation in food festivals and collaboration with local farmers.

Website: The business website is a hub for the menu, online reservations and engaging content about Tuscan culinary traditions.

Initial funding: Seeking an investment of $300,000 to cover startup costs, interior design, equipment and initial marketing campaigns.

Projected revenue: Anticipate revenue growth of 15% in the first year, reaching profitability within 18 months.

Budget: Detailed budget covering all expenses, from lease payments to food costs and marketing initiatives.

Restaurant business plan template 2: FusionEats Café

FusionEats Café is a dynamic culinary haven that brings together diverse flavors from around the world. Our contemporary fusion concept aims to delight urban food enthusiasts with a menu that combines global ingredients and techniques in innovative ways. Nestled in a vibrant neighborhood, our café offers a relaxed and artistic atmosphere, creating an inviting space for people to explore culinary creativity.

Company name: FusionEats Café

Domain name: www.fusioneatscafe.com

Target audience: Millennials and Gen Z, seeking unique and Instagram-worthy food experiences.

Competitive landscape: Identifying a gap in the market for a café specializing in global fusion cuisine.

Market trends: Increased interest in diverse and fusion flavors, driven by adventurous palates.

Location: Eclectic neighborhood known for its artistic community and diverse population.

Premises: Modern interior with an open kitchen, allowing customers to observe food preparation.

Equipment: Versatile kitchen equipment for experimenting with fusion cooking techniques.

Staffing: Creative chefs and friendly service staff with a passion for engaging customers.

Social media engagement: Active presence on Instagram, TikTok and Pinterest, sharing visually appealing fusion creations.

Event collaborations: Collaborating with local art galleries and cultural centers for themed food and art events.

Website: The café's website showcases the ever-changing fusion menu and allows online orders and reservations.

Initial funding: Seeking $150,000 for startup costs, interior design, equipment and initial marketing efforts.

Projected revenue: Aiming for 20% revenue growth within the first year, with profitability expected in 12 months.

Budget: Comprehensive budget covering operational costs, creative ingredients and digital marketing campaigns.

Top benefits of creating a restaurant business plan

Crafting a business plan is essential when starting a restaurant business, as it offers a comprehensive roadmap to success. This detailed document holds a multitude of benefits that are vital for steering a restaurant venture toward prosperity.

Attracts investors and funding: A thoroughly outlined plan demonstrates a deep understanding of the industry, market trends and potential returns on investment. This instills confidence in potential backers and increases the likelihood of securing funding to raise money for your business .

Assists in resource management: A comprehensive restaurant business plan compels entrepreneurs to evaluate the resources, supplies and staffing needs required to initiate the restaurant business. This evaluation ensures that all necessary equipment, ingredients and skilled personnel are in place, facilitating a smooth launch and efficient operation.

Provides operational clarity: Starting a restaurant business involves a plethora of moving parts, from kitchen operations to customer service. A well-crafted business plan outlines these operational processes, enhancing efficiency, minimizing confusion and contributing to a seamless customer experience.

Allows for risk mitigation and contingency planning: Anticipating challenges and developing contingency plans are integral to any restaurant business. A well-structured business plan encourages entrepreneurs to identify potential obstacles and devise strategies to mitigate these risks, ensuring smoother operations and long-term sustainability.

Facilitates long-term profitability: Beyond the initial launch, a business plan provides a strategic foundation for the restaurant's long-term success. It outlines goals, growth strategies and measures to maintain the business's competitive edge in the dynamic restaurant industry.

By embracing these benefits, entrepreneurs can navigate the complexities of the restaurant industry and increase their chances of establishing a thriving and sustainable dining establishment.

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Restaurants | How To

How to Start a Restaurant in 10 Steps

Published July 18, 2023

Published Jul 18, 2023

WRITTEN BY: Mary King

This article is part of a larger series on Restaurant .

• 1. Research Your Market
• 2. Choose a Name & Concept

3. Write a Business Plan

4. secure financing, 5. find a location.

• 6. Get Permits & Insurance

7. Design Your Layout

• 8. Procure FF&E & Starting Inventory
• 9. Hire & Train Staff

10. Market Your Restaurant

Tools for starting a restaurant, bottom line.

Starting a restaurant is a daunting (but thrilling) task that requires careful planning. A passion for food and service is also helpful to push you through tedious tasks like writing a business plan and obtaining permits. I’ve seen new restaurants take six to 18 months to open and cost from $200,000 to over $2 million. The costs vary based on your location (cities are pricier) and restaurant style (the fancier your food and service, the higher your costs).

These are the basic steps you’ll follow when opening a restaurant:

1. Research Your Market & Consider Your Options

Your first step to starting a restaurant is market research. I have known many aspiring restaurant owners who skip this step because they think that their dream of serving Scandinavian hot dogs or having a dining room that is a replica of the original Super Mario Brothers video game is such a surefire winner that they don’t need research. Having a vision is great, but your restaurant needs to appeal to more than just you if you want to be profitable.

Market research helps you identify your target customer’s preferences, analyze local competitors, and gauge demand and potential profit. You can hire a professional market research company or do the market research yourself.

If you use a third party, look for one specializing in restaurant market research. They’ll analyze your local competition, organize customer focus groups, and survey your likely customers. Most market research firms will custom-quote you a price based on your restaurant size and the specific services you want. You’ll likely be on target if you budget $15,000 to $35,000. If you don’t have the budget, expand the section below for guidance on performing your own market research.

If you have the budget, getting market research from a reputable agency is worth the cost. It will test your business model while providing more complex research than most restaurant owners are capable of performing. Third-party market research will also save you time writing the market research section of your business plan (which we discuss in step 3).

How to Perform Market Research

If you have more time on your hands than cash, you can perform market research yourself. There are two goals to performing market research—identifying your target customer and assessing your competition. Get a notebook ready because both tasks require a lot of observing and notetaking.

Visit Local Restaurants

First, visit several local restaurants as a customer. Don’t worry about whether they match your intended restaurant style or cuisine; look for busy ones. Note everything about them—their hours of operation, their prices, the size of their menu, and how they serve their food (at a counter, tableside, takeout). Try some food and drinks. Note the portion size for the price, the flavor profile, and any vendors listed on the menu. Look at their social media channels; are they active? Do they pay for advertising or just post? How regularly?

Note Your Observations

Observe the customer types you see in the restaurants. Are they mostly families? Young professionals? Groups of friends? Do the customers vary at different meal times (i.e., office workers at lunch and families for dinner)? Strike up a conversation with any staff member that seems friendly. If you’re friendly and conversational, you can typically find out the restaurant’s average check size and what days/meal times they are busiest.

Analyze Your Notes

Next, sit down with your notes and look for patterns. Is there a lot of one type of restaurant? Do you see the same type of customer at multiple restaurants? Are there any gaps in the market your restaurant could fill?

Organize your observations into measurable data sets if you can, such as the percentage of customers you noticed that fall into specific age groups, the number of customers you counted at lunch and dinner services, or the spread of menu prices. Putting this information into a spreadsheet program will give you data to create charts and graphs when you write your business plan later.

Consider Your Options

Most aspiring restaurant owners I know need to take a moment here to consider what the market research is telling them. Nearly always, your market research will reveal more questions than you initially considered when you were dreaming of serving your grandmother’s ragu to grateful customers.

If you find that your market research has made the idea of opening a restaurant seem complicated, don’t be discouraged. That really is a sign that you did a good job on your research. It is normal for your market research to force you to ask some questions and refine your restaurant plan.

Ask yourself two questions:

• Are you looking in the right location?
• Should you consider opening a franchise instead?

Shifting Location

If you’re really in love with your restaurant idea, but don’t see your target customer in your first location, expand your search. Sometimes finding the perfect fit of restaurant and customer means considering a new neighborhood or even a different town.

Opening a Franchise

Many restaurant operators know from the beginning that they plan to open a franchise. But if you haven’t previously considered opening a restaurant franchise, many more aspiring restaurant owners do consider it now. If you are new to the restaurant industry, a franchise is a good way to start since a franchisor typically offers a lot of support for researching your market and learning how to run your restaurant business.

If you’re considering opening a restaurant franchise, it is a good idea to look beyond the big names like McDonald’s and The Melting Pot. Big names tend to require high dollar investments, and your market may already be saturated with them. In 2023, these are some fast-growing restaurant franchise concepts you may want to consider:

2. Choose a Name & Restaurant Concept

Unless you have opted to open a franchise (in which case, you can skip to the next step), your market research will inform your restaurant concept.

What is a restaurant concept? A restaurant “concept” is a combination of your restaurant’s service style, cuisine, and target customer. The restaurant concept is a concise way to communicate your business type to your investors, business partners, staff, and— ultimately—customers. It should be as easy to say as “an upscale full-service vegan restaurant” or “a family-friendly Mexican takeout.”

You can construct a restaurant concept easily by answering a few questions:

• Who is your target customer? Target restaurant customers can be summed up in a couple of words. Think of what word you would put in front of the word “clientele.” A French bistro appeals to an upscale clientele, a wine bar to a singles clientele, a pub to a casual clientele, and a buffet to a family-friendly clientele. Who is coming to your restaurant, and how would you describe them in a word or two?
• What is your service style? There are two major service types: full-service and quick service. Full-service always means that most customers dine in, are served tableside by staff, and pay at the end of their meal. Quick service means customers place their orders at a register and pay before their food is prepared. Quick service spots may be counter-service, buffet, or take-away only. If a restaurant offers both quick and full-service options, they tend to still be categorized as full-service.
• What is your cuisine? This is the easy one. What type of food will you serve? Burgers? Pizza? Tacos?

Now, take all of these words and put them in the order that flows the best. Combine that with your restaurant name, and you have the header for your restaurant business plan.

If you haven’t settled on a name yet, use our restaurant name generator to help brainstorm ideas.

Design a Menu That Fits Your Concept

The final step to solidifying your restaurant concept is designing your menu. Menu design can mean two things: the layout and color scheme of your physical menus or simply the composition of the dishes on your menu. Right now, we’re talking about the second one—your menu composition. This doesn’t need to be your final menu. It is just about getting your ideas written down so you can identify potential holes in your menu and, more importantly, sell potential business partners, investors, and staff on your restaurant idea.

Write down all of your dishes and dish categories on a sheet of paper. You want to see everything laid out. Pencil in proposed prices. This is just a rough sketch. You are not committed to charging $10 for your stuffed poblano burger; just go with your gut and see what it looks like. If you see any obvious holes in your menu—like if you have 14 entrees but only two appetizers—balance it out. This is the fun part. Refine, refine, refine. Get feedback from friends, family, or even strangers in your target customer demographic. Then, refine some more.

Once you’ve selected your mix of dishes, see our guides to the best restaurant menu templates and top digital menu templates for design inspiration and to create a sharp-looking sample menu.

A restaurant business plan is a summary of your restaurant’s business structure, projected sales, and development budget. Your business plan also introduces prospective investors to your management team, restaurant concept, and menu. A strong restaurant business plan includes design details and market research to show banks, investors, or business partners the viability of your restaurant idea.

If you’re collaborating with a chef or have a general manager to work with, you should ask for their input on your business plan. You may also want to have an accountant look over your profit and loss projections to ensure your calculations are accurate. If you need help to get started, email yourself a copy of our restaurant business plan template below.

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Restaurant Business Plan Template

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Just like customers, potential investors eat with their eyes first. Make sure your restaurant business plan looks sharp. Include mouthwatering photos of your food and enticing images (or mock-ups) of your interior design if you have them. Action shots of you and your team cooking or serving will also make you look like seasoned professionals.

This is where your business plan comes into play. Most restaurant owners raise the funds they need through a mix of personal investment, business loans , equipment loans , and individual investors. Crowdfunding and lines of credit can help with smaller amounts of money.

If you have previous restaurant industry experience, a loan through the Small Business Administration (SBA) might be a good fit. It is much easier to qualify for an SBA loan if you have relevant experience in the industry in which you are opening a business.

To get a better understanding of what SBA loan type is right for your restaurant, check out our article on SBA loan types .

Choosing the right location is the most impactful decision you will make when starting a restaurant. You want to be in a location that lets your target customers easily find you and that supports your business type. For example, quick service restaurants may need drive-thru windows, while full-service restaurants need ample parking. Restaurants can be located in strip malls or high-rises, freestanding buildings, new buildings, and old ones.

In most cases, you will save time and money on renovations if you operate in a space that has previously been a restaurant. The other major aspect to consider is the lease terms. Most restaurants rent their location; owning your restaurant space is rare. Commercial real estate prices can be too high for most new restaurant businesses to afford to buy. So, it is important to ensure that your lease terms are favorable.

I cannot stress this enough; most of the independent restaurants I have personally seen close have closed due to onerous lease terms or a landlord’s refusal to renew a lease. Don’t let this deter you from opening your restaurant; just use it as a reason to be extremely careful. You quite literally cannot use too many resources to get the best lease terms. Hire an experienced attorney to look over any lease agreements and negotiate on your behalf.

If you need help finding a qualified attorney to help you negotiate a favorable lease, search lawyer listings on online legal service sites. In addition to document services, they all typically have a searchable index of attorneys and their specialties.

6. Get Permits & Insurance

To keep moving forward, you’ll need permits to authorize your business to operate and insurance to protect your business. Depending on the style of your restaurant and your location, the types of permits and insurance you need will vary.

Permits & Licenses

Restaurant permits and licenses fall into four categories:

• Health & Safety: These are permits like food handlers certifications and a certificate of occupancy from your local fire safety authority.
• Construction Permits: The scope of your building or renovation plans will determine what type of permits you need here. Some locations even require demolition permits, so be sure to check your local requirements.
• Operational Permits: These types of licenses allow you to sell alcohol, as in a liquor license) or play copyrighted music (as in a music licensing permit).
• Specialty Permits: These could be things like a permit for a valet stand or sidewalk seating.

Permit and licensing requirements vary by state, county, and sometimes by city. Check with your local health department, fire department, and local Secretary of State’s office to get a list of the required restaurant licenses and permits in your area. If you plan to renovate or build a location, you should also check with your local building department to inquire about permits. Some locations require a permit even for demolition, so check first to avoid fines.

If you need a lot of permits due to construction or renovations, look for a local permit expediting service. Expeditors are typically former building inspectors who know the ins and outs of the local permit processes. They can ensure you obtain all the necessary permits and get them as quickly (and cost-effectively) as possible.

Insurance Coverage

All businesses need liability in insurance, but restaurants have additional insurance considerations. Restaurants typically buy separate policies to protect against business-related losses, property damage, data breaches that compromise customer data, and injury to employees. If you staff delivery drivers, you will also need to think about a commercial automotive policy , and if you serve alcohol, a liquor liability policy is a must.

Restaurant-specific insurance policies may bundle some of these insurance coverages together in a blanket policy. Others may itemize each policy separately. The best way to ensure your business is covered is to work with an insurance broker that specializes in business. A broker familiar with restaurant operations is even better. Finding the best-fitting policies for your restaurant can take some time.

For more answers to insurance questions, see our guide to small business insurance coverage , and rankings of the best small business insurance companies .

You’re heading steadily toward opening. Now, it’s time to ensure that your space flows the way you need for your business. The best restaurant floorplans allow for the flow of people, products, and information. Your layout will naturally include spaces for your dream kitchen and dining room, but it also needs to include less flashy things like electrical outlets and floor drains.

Most restaurants set aside 40% to 60% of their entire space for the dining room and customer area. Kitchens are usually 30% of the total footprint, with half of that space dedicated to food preparation and the other half devoted to food storage, dishwashing, sanitation, and supply receiving. You’ll also need to lay out exactly where key equipment like refrigerators, dishwashers, cooking ranges, and sinks will be located, as that impacts your electrical and plumbing needs.

You can sketch your layout with simple pen and paper or use online drawing tools. Many furniture and equipment brands include some rudimentary free tools on their websites. If you use a point of sale (POS) to operate, you can also use the floorplan tools in that system to tinker with your dining room layout until it is perfect.

See our detailed guide to designing a restaurant floorplan for design inspiration and guidelines on how much space to allocate for various needs.

Renovations & Buildout

If you need to renovate your space or are constructing a new space, this is the time to do it. Restaurant renovations are complex, involving electrical, plumbing, ventilation, and gas line work. You’ll also need to adhere to many health, safety, and building codes. So any restaurant buildout (the industry term for kitting out a restaurant space) should include licensed construction professionals—general contractors, electricians, and plumbers.

Buildout can increase the time it takes to open, so be sure about your updates and renovations before you begin. A typical restaurant buildout takes from three months to a year, depending on the complexity of the project. Costs for buildout can run from $250,000 to more than $1 million.

Many leases will stipulate that any work be completed by licensed contractors. They may also require that these technicians list the landlord or property management company as an additional insured on their business insurance before beginning work.

8. Procure FF&E & Starting Inventory

With your floorplan finalized, it’s time to purchase furnishings, fixtures, and equipment (FF&E) and your starting inventory. Your equipment will include any cooking, refrigeration, and sanitation equipment that your space is missing (or that you want to upgrade). Equipment also includes tools like your POS hardware . Most restaurant owners also take this time to make software purchases for things like marketing, payroll management, or employee scheduling.

Furnishings are all your tables and chairs, and any small wares and tableware that you need for serving your customers. Depending on the level of renovations you performed, you could also consider specialty light fixtures and ceiling fans as part of your FF&E.

FF&E are all pieces that you own and that won’t damage the building when removed. So, your cooking range falls under the category of FF&E, but the gas and electrical lines that feed it are part of the building.

In addition to your equipment and software, this is also the time to secure your opening inventory. Since food and beverages are perishable, you don’t want to do this too far from your opening date. Start with the items with the longest shelf life, like bottled beverages and bulk dry goods.

See our guide to restaurant suppliers for advice on finding vendors and opening vendor accounts.

9. Hire & Train Staff

Most restaurants have two major categories of employees: managers and hourly staff. Some very small restaurants operate with hourly supervisors rather than salaried managers. Staff like line cooks , servers, and bartenders generally work part time and are paid hourly.

Hire Managers or Supervisors

Even if your restaurant is small, you may need additional managers to supplement the work you do as an owner. Depending on the type of restaurant you have and the role you play in the daily operation, the types of restaurant managers in the front and back of house you need will vary. Typically, managers in the back of house are some type of chef.

Word-of-mouth referrals from other restaurant owners are a great way to find restaurant managers with relevant experience. If you are located in a city with lots of restaurants, using industry-specific job sites like Culinary Agents and Poached Jobs can save you administrative time. In smaller markets with fewer hospitality professionals, a tool like Indeed’s resume search tool can be a great way to scan resumes for relevant experience.

Hire Hourly Staff

The types of restaurant staff you need will vary based on your restaurant’s style. The fastest way to find restaurant staff is to wallpaper the internet with open positions. Write job descriptions, settle on a salary range, and post your openings on job posting sites and social media channels. Encourage friends and family to share your social media posts as well.

You will get the most relevant applicants if your postings contain a detailed description of each job’s tasks. If the prospect of writing job descriptions for every role on your team sounds exhausting, look at the functions of your restaurant software. Some tools, like the Homebase scheduling app actually contain job description templates for the most common restaurant roles.

Train Staff

One of the major benefits that a new restaurant has over an existing one is the ability to focus on training. The weeks before your restaurant opening will be one of the few times in your restaurant’s lifespan that you are able to bring your entire staff together and get everyone on the same page.

A comprehensive staff training plan should include time to cover:

• Skills training: Show your staff how you would like trays, plates, and glassware to be carried. Teach them your restaurant’s table settings and beverage recipes. Go over daily side work tasks to ensure everyone knows what is expected of them.
• Menu knowledge: Have your management team write detailed guides about each dish, including common allergens. Include the same information for your beverage program.
• Customer service procedures: Your staff should know the answers to common questions customers ask, like parking information, driving directions, and brief biographical information about the chef and owner. Make sure your team knows how you prefer to handle customer complaints.
• Safety procedures: Everyone on your team should know where to find emergency exits and who to contact if an emergency arises. Beyond that, you should also cover basic, daily safety protocols like cash handling, opening and closing the restaurant, and how to safely work in the kitchen and bar areas.

You’ve been subtly marketing your restaurant since you started this process, as curious neighbors and vendors have likely been watching your location become busier with construction, staff arrival, and deliveries. In the month or weeks before you open, you should kick your marketing into high gear. Write a brief press release and announce your opening to local newspapers and news channels.

Buy ads in local papers, and schedule social media posts and ads to find customers where they are. Take the time to also create a user-friendly website with optimized online ordering (if you plan to offer that service).

Don’t forget your location itself. Those curious neighbors who have been watching your construction would love to see an eye-catching grand opening announcement in your front window. As you hang that sign, take a moment now to look back on all your work so far; you’ve made it to your grand opening, and that is something to celebrate.

See our guide to the best restaurant marketing software for ideas, inspiration, and tools for keeping your marketing organized.

Starting a restaurant takes a lot of administrative bandwidth. With all the numbers you need to keep in mind, supplies you need to order, and employees you need to pay, it can be impossible to stay on top of everything. Onboarding some smart software and technology partners can lighten your load.

From a restaurant supplier that helps you design a mouthwatering menu to a POS provider that transfers your menu to a POS screen and online ordering site, these are some of our top recommendations when you are opening a new restaurant.

Starting a Restaurant Frequently Asked Questions (FAQs)

How profitable is owning a restaurant.

A well-run restaurant generally earns between 3% and 10% profit (though most fall in the 3% to 5% range). Depending on the restaurant’s price point, that 3% to 10% could be $50,000 to $1 million. You’re unlikely to earn a million dollars in profit your first year in operation, but after years of operation, many of the top-performing independent restaurants in the US see $10 million to $40 million in annual sales; 3% to 10% of that is a substantial sum.

Is $10,000 enough to start a restaurant?

In most US cities, $10,000 is not enough to start a full-blown brick-and-mortar restaurant. That amount of money won’t cover the rent, permits, supply orders, and employee payroll that most restaurants must pay. If your ultimate goal is to start a restaurant, but you only have $10,000, consider starting a smaller-footprint food business. A home-based catering business or a cottage food business can both get started for $10,000. You can grow a customer base with your catering or cottage foods, then build toward opening a restaurant a year or two down the line.

What is the first step to opening a restaurant?

The first step to opening a restaurant is researching your market. If you open the 10th sandwich shop in a neighborhood, you’re unlikely to make the profit you need to stay open. So, really look at what businesses are successful in your area. Consider their menu prices, locations, and service style. Then try to mold your restaurant concept around the customers you see supporting other businesses. Starting with market research ensures that you will open a restaurant that already has a likely customer base. That’s the first step to restaurant success.

Opening a restaurant is thrilling but challenging. So remember to hydrate and celebrate the wins along the way. Restaurants are among the most complex businesses to open, but—in my experience—one of the most rewarding to run. There are a lot of moving pieces to opening a restaurant, but if you stay focused, you can get your restaurant open in six to 12 months. A solid business plan helps you raise the funds you need, and partnering with software providers ensures you have the tools to support the customers and employees of your dreams.

About the Author

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Mary King is an expert restaurant and small business contributor at Fit Small Business. With more than a decade of small business experience, Mary has worked with some of the best restaurants in the world, and some of the most forward-thinking hospitality programs in the country. Mary’s firsthand operational experience ranges from independent food trucks to the grand scale of Michelin-starred restaurants, from small trades-based businesses to cutting-edge co-working spaces.

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How to Start a Restaurant: A Step-by-Step Guide

Opening a restaurant can be an exciting and rewarding experience. Whether you’re passionate about cooking or hospitality, there are many factors to consider before getting started. This step-by-step guide will help you navigate the process of starting your own restaurant, from creating a business plan to obtaining the necessary licenses and permits.

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An Introduction to Starting a Restaurant

Starting a restaurant can be an exciting and rewarding venture. Not only do you get to share your love for food with others, but you also have the opportunity to create a welcoming atmosphere for customers to enjoy. However, it’s important to understand that running a restaurant comes with its own set of challenges and rewards.

Why start a restaurant?

There are many reasons why people choose to start a restaurant. For some, it’s a passion for cooking and the desire to share their culinary creations with others. For others, it’s the opportunity to create a unique concept that stands out in the market. Whatever your motivations may be, it’s important to have a clear understanding of what you hope to achieve with your restaurant.

One of the most rewarding aspects of running a restaurant is the ability to create a welcoming atmosphere for customers. Whether it’s a cozy cafe or a fine dining establishment, the ambiance of your restaurant can make all the difference in the dining experience. Additionally, owning a restaurant allows you to be your own boss and have more control over your work-life balance.

However, it’s important to note that starting a restaurant can be a challenging endeavor. From managing staff to keeping up with food safety regulations, there are many aspects of the business that require careful attention. It’s important to be prepared for the hard work and dedication that comes with running a successful restaurant.

Types of restaurants to consider

When starting a restaurant, it’s important to consider what type of establishment you want to open. There are many different types of restaurants to choose from, each with their own unique challenges and advantages.

Casual dining restaurants are a popular option for those looking for a more laid-back atmosphere. These restaurants typically offer a variety of menu items at an affordable price point. Fast food restaurants are another option to consider. These establishments are known for their quick service and convenience, making them a popular choice for those on the go. Fine dining restaurants offer a more upscale dining experience, with higher prices and a focus on quality ingredients and presentation. Cafes and coffee shops are a great option for those looking to create a cozy atmosphere for customers to relax and enjoy a cup of coffee or a light meal.

Ultimately, the type of restaurant you choose to open will depend on your interests and business goals. It’s important to carefully consider your options and choose a concept that aligns with your vision for your restaurant.

1. Creating a Solid Business Plan

Let’s explore one of the first steps of starting a restaurant business: writing out your business plan .

Defining your restaurant’s concept

Before you can create a business plan, you need to define your restaurant’s concept. This includes the type of cuisine you’ll serve, the atmosphere you want to create, and the target market you hope to attract. By understanding your concept, you can create a more effective business plan and make informed decisions about your restaurant’s future.

When it comes to defining your restaurant’s concept, there are a few key factors to consider. First, the type of cuisine you’ll serve is a crucial element. Decide whether you’ll specialize in a particular type of cuisine, such as Italian or Mexican, or whether you’ll offer a more diverse menu.

Secondly, the atmosphere you want to create is important. Determine whether you want your restaurant to be casual and relaxed, or more upscale and formal. Lastly, consider your target market — who you want to attract to your restaurant, like families with children or young professionals. By finding these answers, you can start to develop a clear vision for your restaurant’s concept.

Market research and analysis

Market research is an essential part of creating a successful restaurant. You need to understand your competition, target audience, and potential opportunities for growth. This includes conducting surveys, analyzing data, and staying up to date with industry trends. By doing so, you can identify potential challenges and develop strategies for success.

When conducting market research, it’s important to look at both local and national trends. Explore whether there are any popular food trends that you can capitalize on or any gaps in the market that you can fill. Additionally, you should look at your competition — what they’re doing well and what they could improve on. By analyzing your competition, you can identify areas where you can differentiate yourself and stand out from the crowd.

Financial projections and funding

Once you have a solid business plan in place, you need to consider how much it will cost to start and run your restaurant. This includes everything from equipment and supplies to staffing and marketing. It’s important to create realistic projections and secure funding before you open your doors. This may include loans, investors, or personal savings.

When creating financial projections, it’s important to be as accurate as possible. Consider all of your expenses, including rent, utilities, and insurance, as well as your expected revenue. Additionally, think about how long it will take for your restaurant to become profitable and plan accordingly. When it comes to small business funding , there may be several options available to you. You may be able to secure a loan from a bank or online lender, or you could seek out investors who are interested in supporting your business. Alternatively, you could use your personal savings to fund your restaurant.

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2. Choosing the Perfect Location

Choosing the perfect location for your restaurant is crucial to its success. The right location can help you attract more customers and increase your revenue. However, finding the perfect location can be challenging and requires careful consideration of several details.

Factors to consider when selecting a location

One of the most important issues is foot traffic. Choose a location that has a lot of foot traffic since this will increase the visibility of your restaurant and attract more customers.

Parking availability is another important factor to consider. A location that has ample parking space can make it easier for your customers to get to you. If parking is limited, customers may be discouraged from visiting your restaurant.

Competition in the area is also an important factor to consider. Pick a location that has minimal direct competition or a unique concept that sets you apart from your competitors. Try not to open an Italian restaurant in the same locale as a Sicilian pizza restaurant, for example. 

It’s also important to think about your target audience and the surrounding community. If your restaurant caters to families, you may want to choose a location that is close to residential areas. If your restaurant caters to young professionals, you may want to choose a location close to business districts.

By choosing a location that aligns with your restaurant’s concept and goals, you can increase your chances of success.

Negotiating a lease or purchasing property

Once you have identified potential locations, you’ll need to negotiate a lease or purchase property. This can be a complex process, and there are several steps to take.

First, it’s helpful to seek legal advice and understand the terms of the agreement before signing a lease or purchasing property. Make sure that the terms are favorable to your restaurant and that you’re not taking on too much financial risk.

You may also need to work with contractors and designers to customize the space to fit your restaurant’s needs. This can be a time-consuming and expensive process, but it’s important to create a space that is functional, aesthetically pleasing, and aligned with your restaurant’s concept.

By taking the time to research and evaluate potential locations, you can increase your chances of success in creating a thriving business.

3. Designing Your Restaurant Space

Here are several factors to consider when creating a restaurant design. 

Creating a functional layout

The layout of your restaurant can make or break the success of your business. A well-designed layout will not only maximize the use of space but also ensure smooth operations. When creating a functional layout, it’s important to consider the flow of customers and employees as well as the placement of kitchen equipment and seating arrangements.

Where you put the kitchen is one of the biggest things to take into account. The kitchen should be easily accessible from the dining area to ensure your staff can serve food quickly and efficiently. Also, consider the placement of kitchen equipment such as ovens, stoves, and refrigerators. These should be placed strategically to make sure that chefs can easily access them and prepare food quickly.

Another important consideration is the seating arrangement. The layout should allow for comfortable seating and easy movement for both customers and staff while maximizing the number of potential customers at one time. Leave enough space between tables for customers to move around and make sure that staff can easily navigate between tables without disrupting customers.

Interior design and ambiance

The interior design of your restaurant plays a crucial role in creating a welcoming and memorable dining experience. The right ambiance can set the tone for the entire experience and increase customer satisfaction and loyalty.

One important element to consider is lighting. Lighting should be warm, inviting, and not too bright or too dim. The right lighting can create a cozy and intimate atmosphere while also highlighting the décor.

Music is another important element to consider. The right music can create a lively and energetic atmosphere or a mellow and calm feeling while also enhancing the overall dining experience. It’s important to choose music that’s appropriate for your restaurant’s theme and target audience.

The décor is also an important element of the restaurant’s ambiance. All decoration should be consistent with the restaurant’s theme and create a cohesive and visually appealing space. This may include artwork, plants, and other decorative elements.

Kitchen equipment and supplies

The kitchen equipment and supplies you choose for your restaurant can have a significant impact on the quality of your food and the safety of your employees. It’s important to invest in high-quality equipment and supplies that meet industry standards and your restaurant’s specific demands.

When choosing kitchen equipment, consider factors such as durability, ease of use, and energy efficiency. Also, try to pick equipment that is appropriate for the size of your restaurant and the volume of food you plan to serve.

In addition to equipment, it’s important to choose high-quality utensils and cookware. These should be durable and easy to clean to ensure that your kitchen runs smoothly and your food is prepared to the highest standards.

Overall, designing your restaurant space requires careful consideration of a variety of factors. By creating a functional layout, a welcoming ambiance, and investing in high-quality equipment and supplies, you can create a successful and memorable dining experience for your customers.

4. Obtaining Licenses and Permits

To serve food legally, you’ll need to get the appropriate licensing and permits for your business. 

Food service license

Obtaining a food service license is essential for starting a restaurant. Getting this license requires meeting health and safety standards and going through the process for necessary permits and inspections. It’s important to research the requirements in your area and work with local officials to ensure compliance.

Liquor license

If you plan to serve alcohol in your restaurant, you’ll need to get a liquor license. This license requires meeting specific regulations and obtaining necessary approvals. Make sure you understand the process and requirements in your area before applying.

Health and safety permits

Various health and safety permits may be required for your restaurant, depending on factors such as food handling and waste disposal. Research the requirements in your area and work with local officials to ensure compliance. This regulation often requires regular inspections and renewals.

The Bottom Line

Starting a restaurant requires careful planning and execution. By following these steps and seeking guidance from experienced professionals, you can increase your business’s chances of success and create a memorable dining experience for your customers. They’ll soon be spreading the word about the delicious new restaurant in town.

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This article was originally written on December 4, 2023.

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A Step-by-Step Guide to Opening a Restaurant

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If you love food and want to start your own small business, you've possibly done some research into how to open a restaurant. After all launching a restaurant is one of the most common routes to entrepreneurship in the United States. According to the National Restaurant Association , restaurant workers make up 10% of the United States workforce. What's more, projected sales in the restaurant industry are projected to reach $863 billion in 2019.

But starting a restaurant means entering a highly competitive space. There are over 1 million restaurant locations in the United States, and 60% of restaurants fail within the first year. So how do you stand out, and build something that will last?

In this guide, we'll show you how to open a restaurant and avoid the common mistakes that plague most new restaurateurs.

A step-by-step guide to starting a restaurant

Whatever background or level of experience you come from, nothing can totally prepare you for starting your first restaurant, or really starting any business. Even more, no matter how much you read or what research you do, there are certain things about being a restaurateur that you can truly only learn from experience. But the steps below can help you avoid some of the most common pitfalls.

Step 1. Pick a niche

There are a wide variety of eateries out there in the world, and it takes lots of different skills to keep them running smoothly.

As you look around your own little corner of the universe, what cuisine, service, or convenience do you see as missing? What foodie need is still left to be filled? Would your market be best served by opening a pizza shop, starting a food truck, or opening a cafe?

If this isn’t narrowing down your options well enough, consider some of these top trends .

Step 2. Write your business plan

In the same way that recipes give you a roadmap to create an excellent dish, your restaurant business plan is the recipe you’ll follow to make your business a success.

Ultimately, writing a business plan is about thinking through and answering questions about your future restaurant that force you to contemplate the market you serve, the viability of your overall plan, and challenges you might not have otherwise have thought of.

When done right, this process will help you refine define the next steps involved in opening your restaurant, giving you the highest possible shot at success.

Take a look at the 12 biggest questions you should be answering as part of the business planning process for your future restaurant:

What kind of restaurant do you want to run? This is known as your “elevator pitch,” and it’s something you’ll repeat over and over and over to friends, family, customers, lenders, investors, and just about everyone else.

Who is your restaurant for? This is called your target market—the group of people whom your restaurant is meant to serve.

Who are your competitors? It helps to understand who you are competing against in your market and how their restaurants are similar and different than yours.

Where will your restaurant be located ? Having an expensive steak house in the middle of a low-income neighborhood probably won't work out.

What is your value proposition? What makes your restaurant different from the competition?

How will customers find your restaurant? Will you market your business through word-of-mouth, paid advertising, social media, or another method? We recommend leveraging popular review apps like Yelp, OpenTable, and Resy to allow customers to find and review your restaurant or even book a reservation online.

What resources will your restaurant need? Take the time now to list out all the one-time and recurring expenses you’re likely to incur as part of your cost of doing business—leaving no stone unturned.

How will your restaurant make money? Your business model determines how your restaurant will generate revenue, cover expenses, and eventually make more money than it spends.

How long will it take for your restaurant to turn a profit? Use a revenue forecast to determine how long it will take to recuperate your initial investment, break even, and run a profitable business.

What are you not willing to compromise on? What values are most important to you, both personally and as a business? What are your non-negotiables? This will help you make critical business decisions down the road.

What is your staffing plan? Your head chef, friends, and family will be the place to start looking for stand-up, smart, reliable people. But even when you find the right staff, you'll have to train them.

What's your endgame? Are you building a restaurant that you hope to eventually sell, or are you working towards a long-term, sustainable business? Knowing where you want to end up, and when, will help to inform many of your business decisions along the way.

How much do you need?

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We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Step 3. Choose your restaurant's name and legal structure

If you plan to use a unique name for your restaurant, go ahead and file your “doing business as” (DBA) name with your state’s agency, as this will keep you from losing your name idea to another business.

Once you have your DBA figured out, you'll need to select a business entity type for your restaurant. The structure you choose will impact how you file state and federal business taxes, the roles of different team members, and how you can be held liable in the event that someone files a legal claim against your business.

Because of the long-term and potentially weighty impact of your chosen business structure, it’s a good idea to consult a business attorney to help you make this choice. Here are the most common entity types for restauranteurs:

Sole proprietorship

This is the most basic form of business structure, in which you alone own the company and are responsible for any liabilities associated with it.

If you plan to have a food truck, pop-up, or any very small operation and won’t be taking on fixed assets or hiring any employees, a sole proprietorship might be the perfect structure for you. And the best part is you don’t have to take any formal action to form a sole proprietorship.

If you’ll be operating under your own name, you can just jump right into business. And if you have a clever idea for a business name, your “doing business as” filing (from above) will be all you need.

Partnership

This structure defines a single business in which there are two or more individuals are owners.

There are a few different partnership structures you can choose from, including a general partnership, limited partnership, or a joint venture.

Most experienced entrepreneurs don’t recommend partnerships as a business structure because they don’t offer much protection from liability.

If you do go with a partnership, make sure you choose a business partner is someone you can work well with for the long haul, and put clear terms and expectations in writing from the beginning detailing the roles and responsibilities of each party.

C-Corporation

A C-corporation is a more complex business structure usually reserved for larger companies, or those in particularly high-liability industries looking for a little extra insulation.

Most attorneys tend to put restaurants in this high-liability category, so a C-corporation structure is most likely to be recommended. That said, keep in mind that establishing a C-corporation requires having a board of directors as well as officers, and has more complicated tax filing requirements.

So consult your attorney, but also be prepared that the process might be a bit complex.

S-Corporation

Structured very similarly to a regular C-corporation, S-Corporations stand out because they’re taxed at the individual business owner level, rather than being taxed corporately.

If you think you may need the structure of a corporation but don’t want to mess with complicated dividend filings, an S-Corp might be a great middle ground for you.

Limited Liability Company (LLC)

Offering the liability protections of a corporation along with the flexibility and tax simplicity of a sole proprietorship or partnership, the limited liability company (LLC) is a “best of both worlds” business structure that has grown significantly in popularity over recent years.

Entrepreneurs who opt for an LLC structure can choose between a single-officer LLC, a partnership LLC, or a limited-liability corporation.

Step 4. Get a tax identification number for your restaurant

Also known as your employer identification number (EIN for short), this number helps the IRS keep track of your business for tax purposes.

Think of it like a social security number for your business.

If you plan to retain employees (think wait staff, hosts and hostesses, cooking staff and even dishwashers)—and especially if your business is established as a corporation or partnership—you’ll need this number to keep things on the up and up.

To obtain an employer identification number, apply online at the IRS website.

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Step 5. Register your restaurant for state and local taxes

In addition to federal business taxes, most U.S. states and territories will require you to pay income and employment taxes for your business. Certain states have additional fiscal requirements, like state-mandated workers’ compensation and unemployment insurance.

Registration, requirements, and filing procedures vary widely from state to state, so check out the business tax information specific to where you live.

Step 6. Secure permits, licenses, and insurance for your restaurant

The FDA updates the Food Code every four years, but the details of what is required, strongly encouraged, and just optional will vary from state to state, and even between counties.

You could read the 600+ pages published by the FDA , but we would recommend starting by finding your state's food service code regulation department . Here you'll find some of the highlights you should expect to encounter to get up to code in your area. This resource is useful, but not comprehensive, so be sure to check in with your local health department to make sure all of your bases are covered.

It’s a good idea to keep a master calendar with reminders for all of your renewal and payment due dates.

Food licenses

The most important part of remaining complaint is acquiring food and health code licenses. These licenses certify that you are safely handling, storing, and serving food. And don’t think that having a food cart or even a booth at a festival gets you out of this: they thought of those, too.

Included in this, but with its own special set of permits and rules will be serving alcohol. This covers not only safely serving alcohol but also includes training for dealing with customers that have perhaps overindulged. Read our complete guide for getting a liquor license in every state.

Health department permits

The health department has a lot to say about what is safe for the places you want to store, prepare, and serve your food. Your establishment will need to be inspected for operational safety, as well as edible safety.

Think maximum occupancy, fire hazards, ventilation, food surface types, sink placement, restroom regulations, and so on.

Restaurant insurance

Even with all the necessary licenses and permits, you still need to have some extra safety nets in place. You'll need to look into the specific business insurance requirements for restaurants.

Requirements vary depending on where you live and how you’re funded, but at the very least, you’ll want to consider these:

Property insurance

General insurance

Liquor liability

Auto liability

Workers compensation insurance

Unemployment insurance

Life insurance

Fire insurance

Loss of business

Food contamination

Americans with Disabilities Act compliance

In 1992, the Department of Justice passed the Americans with Disabilities Act so that consumers and employees with disabilities could avoid discrimination from places of public accommodation.

The complete details of the ADA are pretty detailed, but you can use this U.S. Small Business Administration guide to understand what is expected.

When you get past all the angles, measurements, and legalese, it boils down to having accommodations in place so that people with disabilities can safely park, travel into your restaurant, order food, and eat at a table.

Step 7. Set up accounting documents

Running a restaurant involves a lot of paperwork. You’ll need accounting documents to file your taxes, apply for business financing, and for internal tracking of your revenue, expenses, and profitability.

At a minimum, every restaurant owner should regularly maintain these three basic accounting documents:

Balance sheet

The balance sheet is essentially a snapshot of your restaurant’s financial standing at a given moment. It lists the assets, liabilities, and equity your company holds at a given time and is used to calculate the net worth of your business. Maintaining a “balanced” balance sheet—one in which total assets equals liabilities plus equity—is the foundational tenet of basic bookkeeping.

Income statement

Sometimes called a profit and loss statement, your income statement summarizes your business revenues and expenses over the course of a year, letting you calculate your net profit or loss for that year. Maintaining an accurate income statement is critical to measuring profitability over time.

Cash flow statement

Having enough cash on hand to cover expenses can make or break a restaurant’s financial health. In fact, this issue is so important, there is an accounting document dedicated to the tracking of cash flow.

Your cash flow statement reflects the inflow of revenue and outflow of expenses resulting from all your restaurant activities during a specific time period—usually a month or a financial quarter. Inflow will come from serving food and drink to your paying customers, while outflow represents things like purchasing ingredients, payroll, and paying rent and other overhead expenses.

Consider hiring a bookkeeper or accountant

If you feel a bit overwhelmed by these accounting protocols, we recommend asking around for a certified public accountant. It’s important to choose someone whose personality fits with yours, who will be available to answer questions as needed, and who can handle financial areas where you have less experience. Having a CPA experienced in the restaurant industry will help you understand your local laws to avoid problems when it comes servers minimum wage, tips as income, and over time for your staff.

Step 8. Invest in the right tools for your restaurant

Especially with all the moving parts involved in a working restaurant, managing the accounting documents above by hand can get overwhelming fast.

Not to mention employee schedules, timesheets, payment processing, payroll processing, and all the other logistics that go into keeping your restaurant afloat!

Thankfully, there are great restaurant accounting software options and other useful tools available that will take the guesswork out of your bookkeeping and generate these accounting documents automatically.

Restaurant POS system

One of the things entrepreneurs often overlook when researching how to open a restaurant is a restaurant POS system. A restaurant POS system is a combination of hardware and software that allows you to perform many important functions, including payment processing, front-of-house management, order coursing, and tip reconciliation. Most POS systems also produce helpful reports that allow you to more efficiently run your business.

Here are some of our favorite POS systems, based on the type of restaurant you own:

Square for Restaurants: Best POS system for new restaurants.

Clover POS: Best POS system for quick-service restaurants.

Lightspeed Restaurant POS: Best POS system for small and medium-sized restaurants.

TouchBistro POS: Best POS system for full-service restaurants.

Toast POS: Best overall restaurant POS system.

Loyverse POS: Best free restaurant POS software.

Step 9. Keep up with your restaurant's tax obligations

Along with getting your books in order, understanding and fulfilling tax requirements should be a first priority in the financial management of your restaurant. The consequences for failing to file your state and federal business taxes are severe—as in you could lose your business and even face criminal charges.

So even though dealing with the IRS can be intimidating, this isn’t something you can ignore.

Let’s break down the main business tax obligations you’ll need to keep track of:

All businesses must file annual income tax returns and make payments based on revenue received.

The exact tax form you use to make income tax payments depends on the structure of your business: sole proprietorship, partnership, corporation, S-corporation, or limited liability company (LLC).

Self-employment tax

Individuals who work for themselves (including small business owners) must pay social security and Medicare taxes via a self-employment tax. This tax is similar to the taxes withheld from the pay of most wage earners.

Estimated tax

Income and self-employment taxes both qualify as “pay as you go” taxes. You’ll need to file quarterly documents estimating the taxes you owe in these categories and make payments accordingly.

Click here for forms and more information about how to make quarterly estimated tax payments.

Employment taxes

Since you'll probably have employees working in your restaurant, you'll face additional tax obligations related to those employees, including social security and Medicare taxes, federal income tax withholdings, and the federal unemployment tax.

Learn about the specific IRS information about filing employment taxes for your business.

Step 10. Fund your newly opened restaurant

Unless you happen to be independently wealthy, you’ll likely need some funding from somewhere for starting a restaurant.

Entrepreneurs choose to finance their businesses in any variety of ways, but the most common approach is to take out a business loan . The growth of the alternative lending industry has brought about a wide variety of loan products to meet the needs of entrepreneurs, each with different costs, payment structures, and application processes.

Let's review the business loan options available to restaurateurs.

Probably the first thing you think of when you imagine business lending, term loans offer a set repayment time, set number of payments, and have a fixed or variable interest rate.

Depending on your business needs, credit rating, and other factors, there are a wide variety of term loans available to many small business owners—both from traditional banks and from non-bank alternative lenders—and with terms ranging from one year with daily payments up to five-year terms with monthly payments, and everything in between.

Because of the risky nature of small business lending, many commercial lenders have in the past been hesitant to lend money to small business owners, especially new restaurant ventures.

As a solution, the Small Business Administration began guaranteeing as much as 80% of the loan principal for term loans through participating lending institutions. This could be a viable option if you are already experienced in the food industry. (Otherwise, you probably won’t be considered.)

The SBA offers a variety of loan programs, including for restaurateurs. If you plan to use an SBA loan as your main source of funding to start your restaurant, you will need to go into this process with your ducks in a row. Write a stellar business plan that highlights the uniqueness of your idea, and be prepared to have 20%-30% of your loan amount in cash—or to take out a mortgage on your home.

Keep in mind, though, that while the SBA’s stamp of approval may make some lenders more willing to consider applicants who don’t fall within their strict loan criteria, applying for an SBA loan still involves lengthy paperwork, and the process can take several months.

Equipment financing

If you specifically need cash to make a big equipment purchase (like point of sale technology, commercial kitchen appliances, flatware, or furniture) for your new establishment, restaurant equipment financing might be the right choice for you.

This financing product works very similarly to a car loan, with the amount you can borrow depending on the price and type of equipment you’re buying.

And because the equipment itself serves as collateral, you likely won’t be asked to put up additional collateral for the loan.

Equipment financing terms typically work at a fixed interest rate—usually between 8% and 30%—with a fixed term length so your payments will be the same from month to month.

Short-term loans

For businesses with smaller and immediate financing needs, short-term loans can be a lifesaver. These loans work similarly to traditional term loans but cover amounts in the $2,500 to $250,000 range with terms of between three and 18 months.

With interest rates as low as 14%, short-term loan providers can often get you cash in hand in as few as two days, letting you make rent, cover payroll, pay food vendors, or meet other immediate overhead expenses—even when cash is tight.

Line of credit

Perhaps the most flexible form of business financing available, a business line of credit gives you capital to draw upon to meet a variety of business needs.

Once established, you can draw on your line of credit as you would a personal credit card, to get more working capital, buy inventory, handle seasonal cash flows, pay off other debts, or address almost any other business need.

If you do plan to apply for a small business loan at any point in the future, make sure that you are regularly reviewing your personal and business credit reports, as well as doing what you can improve your credit score.

Along with your annual revenue, time in business, and average bank balance, your personal and business credit scores are the single most important factor that will determine your ability to qualify for a small business loan.

How much does it cost to open a restaurant?

Now that you know your financing options, you're probably wondering exactly how much financing you'll need.

Obviously, the cost to open a restaurant varies widely depending on the type of restaurant you want to open, service style, decor, location, menu, and more. However, a recent survey by RestaurantOwner.com provided some insight into what entrepreneurs might have to pay.

According to a survey of 350 restauranteurs, a small restaurant can cost as much as $175,500 in total startup costs. A medium sized restaurant costs up to $375,500, and a large restaurant costs up to $750,500. You can view the full results of the survey here :

Step 11. Market your restaurant

The last step in how to open a restaurant? Tell the world about it!

There are a variety of methods for marketing your restaurant to your target audience. Here are a few ideas to get you going:

Use social media marketing to share photos of your dishes, answer customer inquiries, and communicate the merits of your brand.

Make a professional looking website to show the world that you are a legitimate and trustworthy business.

Get your business aforementioned customer review websites like Yelp, OpenTable, and Resy.

Offer promotions such as discounts for first-time customers or a customer referral program.

Have a grand opening that stirs up interest in your restaurant and attracts media attention.

The bottom line

Being a restaurateur is truly not for the faint of heart, as owning your own restaurant is a never-ending, 24/7 adventure. The challenges and questions that come up for each restaurant owner will vary as widely as the different eateries and states they operate in. But if food is your passion and owning a restaurant is your dream, the steps above can offer a good start toward making that dream a reality.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

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How to Start and Open a Restaurant Step by Step (2023) If you're interested in starting a restaurant business, this guide provides all the information necessary to open and operate a successful eatery.

By The Staff of Entrepreneur Media, Inc.

Starting and opening a new restaurant is an exciting venture. It can be both a rewarding and challenging experience, but the hard work you put in will pay off.

Opening a successful restaurant requires having a strong business plan, understanding the local market, finding the right location and staff, obtaining permits and your business license, managing inventory and supplies, creating menus that appeal to customers, and more.

There's a lot that goes into it. If it's your first time, you'll need to look beyond the grand opening and strategize for generating a cash flow that allows you to do more than just break even. Still, with the right guidance, you can make your dreams of owning a successful restaurant come true.

This guide will give you all the information you need to know about starting and opening a restaurant. It will cover everything from creating a new business plan to setting up operations and marketing your restaurant. By following this guide step by step, you can open a restaurant that will thrive and last for years.

What's Inside

• Target Markets

Restaurant Service Styles

Carving your niche, writing a business plan, choosing a location, creating a menu, hiring employees, marketing and promotions, more articles on restaurant businesses ".

No single food-service operation has universal appeal. This is a fact that many newer entrepreneurs have trouble accepting, but the reality is that you will never capture 100 percent of the market. When you try to please everyone, you end up pleasing no one. So focus on the 5 or 10 percent of the market that you can get, and forget about the rest.

With that said, who is eating at restaurants? Let's look at the main market categories of food-service business customers:

• Generation Y . This generation, also tagged the "millennial generation," the "echo" or the "boomlet" generation, includes those born between 1980 and 2000. Generation Y is the most ethnically diverse generation yet and is more than three times the size of generation X. They are a prime target for a food-service business. Members of Generation Y go for fast-food and quick-service items. About 25 percent of their restaurant visits are to burger franchises, follow by pizza restaurants at 12 percent.
• Generation X . Generation X is a label applied to those who were born between 1965 and 1980. This group is known for strong family values. While earlier generations strove to do better financially than their parents, Gen Xers are more likely to focus on their relationship with their children. They are concerned with value, and they favor quick-service restaurants and midscale operations that offer all-you-can-eat salad bars and buffets. To appeal to this market group, offer a comfortable atmosphere that focuses on value and ambience.
• Baby boomers . Born between 1946 and 1964, baby boomers make up the largest segment of the U.S. population. Prominent in this generation are affluent professionals who can afford to visit upscale restaurants and spend money freely. During the 1980s, they were the main customer group for upscale, trendy restaurants. In the 1990s, many baby boomer were two-income households with children. Today, those on the leading edge of the boomer generation are becoming grandparents, making them a target of restaurants that offer a family-friendly atmosphere and those that provide an upscale, formal dining experience.
• Empty nesters . This group consists of people in the age range between the high end of the baby boomers and seniors (people in their early 50s to about age 64). Empty nesters typically have grown children who no longer live at home, and their ranks will continue to increase as the baby boomers grow older and their children leave home. With the most discretionary income and the highest per-capita income of all the generations, this group typically visits upscale restaurants. They are less concerned with price and are more focused on excellent service and outstanding food. Appeal to this group with elegant surroundings and a sophisticated ambience.
• Seniors . The senior market covers the large age group of people age 65 and older. Generally, the majority of seniors are on fixed incomes and may not often be able to afford upscale restaurants often, so they tend to visit family-style restaurants that offer good service and reasonable prices. "Younger" seniors are likely to be more active and have more disposable income than "older" seniors, whose health may be declining. Seniors typically appreciate restaurants that offer early-bird specials and senior menus with lower prices and smaller portions, since their appetites are less hearty than those of younger people.

Restaurants are classified into three primary categories: quick-service, midscale and upscale. Quick-service restaurants are also known as fast-food restaurants. These establishments offer limited menus of items that are prepared quickly and sold for a relatively low price. In addition to very casual dining areas, they typically offer drive-thru windows and take-out service.

When people think of fast-food restaurants, they often think of hamburgers and french fries, but establishments in this category also serve chicken, hot dogs, sandwiches, pizza, fresh seafood and ethnic foods.

More Articles on Restaurant Businesses "

Midscale restaurants, as the name implies, occupy the middle ground between quick-service and upscale restaurants. They offer full meals but charge prices that customers perceive as providing good value with plenty of special offers . Midscale restaurants offer a range of limited- and full-service options. In a full-service restaurant, patrons place and receive their orders at their tables; in a limited-service operation, patrons order their food at a counter and then receive their meals at their tables. Many limited-service restaurants offer salad bars and buffets.

Upscale restaurants offer full table service and do not necessarily promote their meals as offering great value; instead, they focus on the quality of their cuisine and the ambience of their facilities. These are the places that are find themselves on a list of trip ideas for tourists looking for great food from a renowned chef. Fine-dining establishments are at the highest end of the upscale restaurant category and charge the highest prices.

Selecting a Food Concept

Restaurant patrons want to be delighted with their dining experience, but they don't necessarily want to be surprised. If you're anticipating a family-style steakhouse (based on the name or the décor of the establishment), but you find yourself in a more formal environment with a bewildering--and pricey--gourmet menu, the surprise may keep you from enjoying the restaurant. Concepts give restaurateurs a way to let patrons know in advance what to expect and also to provide some structure for their operation. Here are some of the more popular restaurant concepts:

• Seafood. Quick-service seafood restaurants generally offer a limited range of choices, often restricted to fried seafood. Midscale and upscale seafood restaurants offer a wider selection, prepared in ways other than fried, such as baked, broiled and grilled. Seafood can be a risky area on which to focus, as prices are always changing, and many kinds of seafood are seasonal. Also, quality can vary tremendously. When shopping for seafood, make sure the items are fresh and meet your standards of quality. If you are not happy with what a distributor offers, you can be sure your customers won't be, either.
• Steakhouses. Steakhouses are part of the midscale and upscale markets. Midscale steakhouses are typically family-oriented and offer a casual environment with meals perceived as good values. In terms of décor, comfort is emphasized and Western themes are popular. Upscale steakhouses offer a more formal atmosphere and may serve larger cuts of meat that are of better quality than those served in midscale restaurants. Upscale establishments also charge higher prices, and their décor may be similar to that of other fine-dining establishments, offering guests more privacy and focusing more on adult patrons than on families.
• Family-style restaurants. As the name implies, these establishments are geared toward family fun. Since they charge reasonable prices, they also appeal to seniors. They offer speedy service that falls somewhere between that of quick-service places and full-service restaurants. Their menus offer a variety of selections to appeal to the interests of a broad range of customers, from children to seniors. Family-style restaurant prices may be higher than those at fast-food restaurants, but these establishments provide table service to compensate. The décor of family-style restaurants is generally comfortable, with muted tones, unremarkable artwork, and plenty of booths and wide chairs. Booster seats and highchairs for children are readily available.
• Casual-dining restaurants. These establishments appeal to a wide audience, ranging from members of Generation Y to Generation X to baby boomers with families to seniors, and they provide a variety of food items, from appetizers and salads to main dishes and ice cream for dessert. Casual-dining restaurants offer comfortable atmospheres with midrange prices. Many center on a theme that's incorporated into their menus and décor. You may need to get your liquor license, depending on what you plan to serve.
• Ethnic restaurants. Ethnic restaurants enjoy a significant share of the U.S. restaurant market. They range from quick-service places with limited selections to upscale eateries with a wide variety of menu items. Their menus typically include Americanized versions of ethnic dishes with unique flavor, as well as more authentic food. The three most popular kinds of ethnic restaurants are Italian, Chinese and Mexican. Other popular ethnic restaurant types include Indian, Thai, Caribbean, English, French, German, Japanese, Korean, Mediterranean and Vietnamese. An even wider variety of ethnic restaurants can thrive in areas with a culturally diverse population, such as large metropolitan areas.
• Pizzeria. You have two primary choices when entering starting a pizzeria. One is a to-go restaurant in a modest facility with a specialized menu highlighted by pizza and beer, limited seating and a self-service atmosphere. The other is a full-service pizza restaurant with a menu that features not only a variety of pizzas, beer and wine, but also Italian entrees like spaghetti, ravioli and lasagna, side dishes such as salads (or even a salad bar), and a few desserts. The foundation of a pizzeria is, of course, the pizza. If you don't know how to make a good pizza, hire a good pizza cook who does. Invest in top-quality ingredients and preparation methods, and make every pizza as if you're going to eat it yourself. Do that, and your customers will keep coming back for more.
• Sandwich Shop/Delicatessen. One reason sandwich shops are so successful is that they enjoy high profit margins. Sandwich shops and delicatessens can also change their menus quickly and easily to adapt to current tastes. For example, with the growing interest in health and nutrition in the United States, sandwich shops and delicatessens have started offering more low-fat, healthy ingredients in their sandwiches, salads and other menu items. In addition, many sandwich shops and delis have been able to keep up with workers who eat at their workplaces by adding delivery and catering to their sit-down and take-out operations. Sandwich shops and delicatessens can be differentiated by the foods they serve. Most sandwich shops serve only sandwiches, possibly with some side dishes or desserts. A delicatessen usually offers a more extensive menu, including sandwiches, prepared meats, smoked fish, cheeses, salads, relishes and various hot entrees.
• Coffeehouse. With more than 400 billion cups consumed every year, coffee is the world's most popular beverage. But beyond the beverage itself, people frequent coffeehouses and espresso bars for a variety of reasons: to meet with friends, for a quick lunch and a drink to perk up the afternoon, or simply to start off each morning with a great cup of coffee to start off each morning. Most successful coffeehouses have heavy foot traffic and high-volume sales. The majority will serve up to 500 customers per day and manage up to five customer turnovers during the lunch hour, despite having limited floor space and modest seating capacity. Profit margins for coffee and espresso drinks are extremely high--after all, you're dealing with a product that's more than 95 percent water. At the same time, your average ticket amount is around $3, so you need volume to reach and maintain profitability. Besides specialty roasted coffee by the cup, most coffeehouses also have espresso-based drinks (cappuccinos, lattes, etc.), assorted teas, bottled water and fruit juices, along with an inviting assortment of baked goods, a selection of desserts, and coffee beans by the pound.
• Bakery. With the emergence of strip malls and competition from supermarkets that have in-store bakeries, "bread-only" retail bakeries have almost disappeared from the United States. Bakeries today offer cakes, scones, bagels and coffee drinks, and sometimes even offer full dining menus, including sandwiches, hot entrees, beer and wine. Consumers love fresh bakery goods, but the market is extremely competitive. As you develop your particular bakery concept, you'll need to find a way to differentiate yourself from other bakeries in town.

Before you can begin any serious business planning, you must first decide what specific segment of the food-service industry you want to enter. While there are many commonalities among the various types of food-service businesses, there are also many differences. And while there is much overlap in the knowledge and skills necessary to be successful, your own personality and preferences will dictate whether you choose to open a commercial bakery, a coffee cart, a fine-dining restaurant or another type of operation. Then, once you have decided what business best suits you, you must figure out the niche you'll occupy in the marketplace.

For example, are you an early riser, or do you prefer to stay up late and sleep late? If you like--or at least don't mind--getting up before dawn, your niche may be a bakery or a casual breakfast-and-lunch operation. Night owls are going to be drawn to the hours required for bar-and-grill types of restaurants, fine-dining establishments and even pizzerias.

Do you like dealing with the public, or are you happier in the kitchen? If you're a people person, choose a food-service business that gives you plenty of opportunity to connect with your customers. If you're not especially gregarious, you'll probably lean more toward a commercial type of business, perhaps a bakery or even a catering service, where you can deal more with operational issues than with people.

Some other types of questions to ask yourself include, Do you have a passion for a particular type of cuisine? Do you enjoy a predictable routine, or do you prefer something different every day? Are you willing to deal with the additional responsibilities and liabilities that come with serving alcoholic beverages?

As you do this self-analysis, think about your ideal day. If you could be doing exactly what you wanted to do, what would it be?

Once you've decided on the best niche for you as an individual, it's time to determine if you can develop a niche in the market for your food-service business.

Working in a Restaurant

Dealing graciously with customers and playing the role of elegant host are only part of a restaurateur's many duties. Food-service business operators spend most of their time developing menus; ordering inventory and supplies; managing personnel; creating and implementing marketing campaigns; making sure their operation is in compliance with a myriad of local, state and federal regulations; completing a wide range of paperwork; and performing other administrative chores. Certainly the financial opportunities are there--as are the fun aspects of the business--but starting, running and growing a food-service business is also hard work.

Regardless of the type of food-service business you intend to start, the best way to learn the ropes is to work for a similar operation for a while before striking out on your own. Doing so will give you significant insight into the realities and logistics of the business.

Successful restaurateurs agree that the best preparation for owning a restaurant is to work in someone else's first. Think of it as getting paid to be educated. Certainly you should read books and take courses, but you should also plan to work in a restaurant for at least a few years doing as many different jobs as possible. And if you're not actually doing the job, pay attention to the person who is--you may find yourself doing it when your own restaurant is unexpectedly shorthanded.

Ideally, you should work in a restaurant similar to the type you want to open. You may find you don't like the business. Or you may find you're more suited to a different type of operation than you originally thought. Hopefully, you'll discover you're in exactly the right place.

"As soon as I started working in a restaurant, I realized this was my passion," says Scott Redler, "when you have a busy restaurant, and you're watching everything happen as it should, it's just a wonderful feeling of satisfaction." Redler has worked in various restaurants for 11 years, he opened a Chinese fast-food place at the age of 26. That venture failed within eight months, then Redler went to work for a large restaurant company, where he eventually advanced to the position of senior vice president, overseeing 15 operations. But he still yearned for his own place, so he developed the concept that became Timberline Steakhouse & Grill in Kansas (which he sold in 2011). He recognized that the fast, casual segment was gaining momentum, so he created Freddy's Frozen Custard, which offers hot dogs, hamburgers, and (as you might expect) frozen custard. Freddy's Frozen Custard is now a franchise operation with 60 stores in nine states.

Armed with practical experience, you're ready to put together your business plan—the most critical element of your restaurant. Map out everything on paper before you buy the first spoon or crack the first egg.

When you're writing a business plan you should include:

• A clear definition of your concept
• A description of your market
• Your menu and pricing
• Detailed financial information, including data on your startup capital (amount and sources) and your long-term income and expense forecasts (including operating costs such as kitchen equipment and food costs)
• A marketing plan including target customers
• Employee hiring
• Training and retention programs
• Detailed plans that outline how you'll deal with the challenges restaurateurs face every day (including health department compliance, customer experience, and expansion)
• An exit strategy

A well-crafted business plan is the cornerstone of any successful restaurant. It's best to have it professionally written, but if you're short on cash, you can also draft a document yourself. Just be sure that your plan is comprehensive and as accurate as possible. Include realistic projections, research data (such as current industry trends), and thorough analyses of the competition.

No matter what you decide, your business plan should be a living document that you update and refine as your restaurant evolves.

Funding Your Business How much money you need to start depends on the type of business, the facility, how much equipment you need, whether you buy new or used, your inventory, marketing, and necessary operating capital (the amount of cash you need on hand to carry you until your business starts generating cash). It's easy to spend hundreds of thousands of dollars starting a restaurant, but it's not essential. For instance, when Borealis Breads owner Jim Amaral started his first bakery in Maine, he rented a space that had been a commercial bakery and came complete with mixers, benches, ovens and other equipment. He was able to start with just $10,000 he'd borrowed from family and friends, and used that primarily for inventory.

Regardless of how much you need, you will definitely need some cash to start your food-service business started. Here are some suggestions of where to go to raise your startup funds:

• Your own resources. Do a thorough inventory of your assets. People generally have more assets than they realize, including savings accounts, retirement accounts, equity in real estate, recreation equipment, vehicles, collections and other investments. You may opt to sell assets for cash or use them as collateral for a loan. Also look at your personal line of credit. Many a successful business has been started with credit cards.
• Family and friends. The logical next step after gathering your own resources is to approach friends and relatives who believe in you and want to help you succeed. Be cautious with these arrangements; no matter how close you are with the person, present yourself professionally, put everything in writing, and be sure the individuals you approach can afford to take the risk of investing in your business.
• Partners. Using the "strength in numbers" principle, look around for someone who may want to team up with you in your venture. You may choose someone who has financial resources and wants to work side by side with you in the business. Or you may find someone who has money to invest but no interest in doing the actual work. Be sure to create a written partnership agreement that clearly defines your respective responsibilities and obligations. And choose your partners carefully--especially when it comes to family members.

Government programs. Take advantage of the abundance of local, state and federal programs designed to support small businesses. Make your first stop the SBA, but be sure to investigate various other programs. Women, minorities and veterans should check out special financing programs designed to help them get into business. The business section of your local library is a good place to begin your research.

Banks and other lending institutions . Despite the general mood of tight credit, many banks are still willing to make small-business loans. They may even be more open now as they seek to increase their loan portfolios.

Be prepared with a business plan and financial projections . These help prove your concept and show lenders you are serious about your business. Also, compare rates from multiple lenders, and don't forget to factor in closing costs and other fees.

Venture capitalists and angels . If you have a capital-intensive concept with proven profitability potential, venture capitalists or angel investors may be willing to provide the funding you need for a stake in your business.

As you can see, there are many ways to get the capital you need to get your restaurant off the ground — you just need to be organized, prepared, and willing to do your research.

Depending on how much money you have to invest in your food-service business and the particular type of business you choose, you can spend anywhere between $70,000 and $1.5 million on a facility.

Not every food-service operation needs to be in a retail location, but for those that do depend on retail traffic, here are some factors to consider when deciding on a restaurant location:

• Anticipated sales volume. How will the location contribute to your sales volume?
• Accessibility to potential customers. Consider how easy it will be for customers to get into your business. If you are relying on strong pedestrian traffic, consider whether or not nearby businesses will generate foot traffic for you.
• The rent-paying capacity of your business. If you've done a sales-and-profit projection for your first year of operation, you will know approximately how much revenue you can expect to generate, and you can use that information to decide how much rent you can afford to pay.
• Restrictive ordinances. You may encounter unusually restrictive ordinances that make an otherwise strong site less than ideal, such as limitations on the hours of the day that trucks can legally load or unload.
• Traffic density. With careful examination of food traffic, you can determine the approximate sales potential of each pedestrian passing a given location. Two factors are especially important in this analysis: total pedestrian traffic during business hours and the percentage of it that is likely to patronize your food service business.
• Customer parking facilities. The site should provide convenient, adequate parking as well as easy access for customers.
• Proximity to other businesses. Neighboring businesses may influence your store's volume, and their presence can work for you or against you.
• History of the site. Find out the recent history of each site under consideration before you make a final selection. Who were the previous tenants, and why are they no longer there?
• Terms of the lease. Be sure you understand all the details of the lease, because it's possible that an excellent site may have unacceptable leasing terms.
• Future development. Check with the local planning board to see if anything is planned for the future that could affect your business, such as additional buildings nearby or road construction.
• Appearance . It's important that the building or site be attractive and inviting in order to draw customers.

Once you have chosen a location, it is time to establish the restaurant. You must decide on a concept for your restaurant, create a menu, design the layout of your business, secure staffing and start marketing your product. With a well-thought-out plan, you will be well on your way to having a successful food service business.

Layout and design are major factors in your restaurant's success. As you factor it into your startup costs, you'll need to take into account the size and layout of the dining room, kitchen space, storage space, and office. Typically, restaurants allot 45 to 65 percent of their space to the dining area, approximately 35 percent to the kitchen and prep area, and the remainder to storage and office space.

• Dining area. This is where you'll be making the bulk of your money, so don't cut corners when designing your dining room. Visit restaurants in your area and analyze the décor. Watch the diners; do they react positively to the décor? Is it comfortable, or are people shifting in their seats throughout their meals? Note what works well and what doesn't.

Much of your dining room design will depend on your concept. It will help you to know that studies indicate that 40 to 50 percent of all sit-down customers arrive in pairs; 30 percent come alone or in parties of three; and 20 percent come in groups of four or more.

To accommodate the different groups of customers, use tables for two that can be pushed together in areas where there is ample floor space. This gives you flexibility in accommodating both small and large parties. Place booths for four to six people along the walls.

• Production area. Too often, the production area in a restaurant is inefficiently designed--the result is a poorly organized kitchen and less than top-notch service. Keep your menu in mind as you determine each element in the production area. You'll need to include space for receiving, storage, food preparation, cooking, baking, dishwashing, production aisles, trash storage, employee facilities and an area for a small office where you can perform daily management duties.

Arrange your food production area so that everything is just a few steps away from the cook. Your design should also allow for two or more cooks to be able to work side by side during your busiest hours.

As you put together a plan for your food-service business, be aware of some of the trends in terms of menu content and design: These factors could--and, in fact, should--influence the type of food-service business you open.

Restaurant operators report that vegetarian items, tortillas, locally grown produce, organic items, fusion dishes (combining two or more ethnic cuisines in one dish or on one plate) and microbrewed or local beers are gaining in popularity. Pita dishes and wraps continue to be in high demand, too, as an easy-to-consume alternative to sandwiches. You will also see a strong demand for bagels, espresso and specialty coffees, and "real meals," which are typically an entree with a side order. Consumers are also eating more chicken, seafood and beef dishes than they have in recent years. At the same time, people expect to see meatless alternatives on the menu. Consumers are also demanding "comfort food"--the dishes that take them back to their childhoods, when mothers baked from scratch, and meat and potatoes were at the center of each plate.

Menus are also showing a number of ethnic dishes and spice-infused offerings. It's not surprising to find Thai, Vietnamese, Creole, Tuscan and even classic French cuisines on the same menu and even the same plate.

At the same time, be sure to keep the kids in mind as you plan your selections. If families are a key part of your target market, you'll want a range of four or five items in smaller portions that youngsters will enjoy. If you serve snack items as well as entrees, note that kids are choosing healthier snacks more often than they did a few years ago, thanks to concerned parents. For example, while both sweet and salty snacks remain popular, yogurt is the fastest growing snack food based on consumption frequency among kids ages 2 to 17. While most restaurants still offer fixed kids' meals, you might consider allowing your young diners to choose among a selection of nutritious options.

Though menu variety has increased over the years, menus themselves are growing shorter. Busy consumers don't want to read a lengthy menu before dinner; dining out is a recreational activity, so they're in the restaurant to relax. Keep your number of items in check and menu descriptions simple and straightforward, providing customers with a variety of choices in a concise format. Your menu should also indicate what dishes can be prepared to meet special dietary requirements. Items low in fat, sodium and cholesterol should also be marked as such.

Safety Regulations Though we don't think of food service as heavily regulated an industry as something like medical services or public utilities, the reality is that many aspects of your operation are strictly regulated and subject to inspection. Fail to meet regulations, and you could be subject to fines or get shut down by authorities. And if the violations involve tainted food, you could be responsible for your patrons' illnesses and even death. Issues such as sanitation and fire safety are critical. You must provide a safe environment in which your employees can work and your guests can dine, follow the laws of your state on sales of alcohol and tobacco products, and handle tax issues, including sales, beverage, payroll and more.

Most regulatory agencies will work with new operators to let them know what they must do to meet the necessary legal requirements. Your state's general information office can direct you to all the agencies you'll need to be concerned with.

One of the biggest challenges businesses in all industries face is a lack of qualified labor. As the food-service industry in general continues to grow and thrive, the demand for workers in an already-diminished labor pool is also increasing. Finding qualified workers and rising labor costs are two key concerns for food-service business owners.

The first step in developing a comprehensive HR program is to decide exactly what you want someone to do. The job description doesn't have to be as formal as one you might expect from a large corporation, but it needs to clearly outline the job's duties and responsibilities. It should also list any special skills or other required credentials, such as a valid driver's license and clean driving record for someone who is going to make deliveries for you.

Next, you need to establish a pay scale. You should do research to find out what the pay rates are in your area. You'll want to establish a minimum and maximum rate for each position. You'll pay more even at the start for better qualified and more experienced workers. Of course, the pay scale will be affected by whether or not the position is one that is regularly tipped.

Every prospective employee should fill out an application--even if it's someone you already know, and even if that person has submitted a detailed resume. A resume is not a signed, sworn statement acknowledging that you can fire the person if he or she lies about his or her background; the application, which includes a truth affidavit, is. The application will also help you verify the applicants' resumes, so you should compare the two and make sure the information is consistent.

Here are some tips to help you find and keep great people:

• Hire right. Take the time to thoroughly screen applicants. Be sure they understand what you expect of them. Do background checks. If you can't do this yourself, contract with a HR consultant to do it for you on an as-needed basis.
• Create detailed job descriptions. Don't make your employees guess about their responsibilities.
• Understand wage-and-hour and child labor laws. Check with your own state's Department of Labor to be sure you comply with regulations on issues such as minimum wage (which can vary depending on the age of the workers and whether they're eligible for tips), and when teenagers can work and what tasks they're allowed to do.
• Report tips properly. The IRS is very specific about how tips are to be reported; for details, check with your accountant or contact the IRS .
• Provide initial and ongoing training. Even experienced workers need to know how things are done in your restaurant. Well-trained employees are happier, more confident and more effective. Plus, ongoing training builds loyalty and reduces turnover. The National Restaurant Association can help you develop appropriate employee training programs.

There are several categories of personnel in the restaurant business: manager, cooks, servers, busboys, dishwashers, hosts and bartenders. When your restaurant is still new, some employees' duties may cross over from one category to another. For example, your manager may double as the host, and servers may also bus tables. Be sure to hire people who are willing to be flexible in their duties. Your payroll costs, including your own salary and that of your managers, should be about 24 to 35 percent of your total gross sales.

• Manager. The most important employee in most restaurants is the manager. Your best candidate will have already managed a restaurant or restaurants in your area and will be familiar with local buying sources, suppliers and methods. You'll also want a manager with leadership skills and the ability to supervise personnel while reflecting the style and character of your restaurant.

To get the quality of manager you want, you'll have to pay well. Depending on your location, expect to pay a seasoned manager $35,000 to $55,000 a year, plus a percentage of sales. An entry-level manager will earn $28,000 to $32,000 but won't have the skills of a more experienced candidate. If you can't offer a high salary, work out a profit-sharing arrangement-it's an excellent way to hire good people and motivate them to build a successful restaurant. Hire your manager at least a month before you open so he or she can help you set up your restaurant.

• Chefs and cooks. When you start out, you'll probably need three cooks--two full time cooks and one part time. Restaurant workers typically work shifts from 10 a.m. to 4 p.m. or 4 p.m. to closing. But one lead cook may need to arrive early in the morning to begin preparing soups, bread and other items to be served that day. One full-time cook should work days, and the other evenings. The part-time cook will help during peak hours, such as weekend rushes, and can work as a line cook during slower periods, doing simple preparation. Cooking schools can usually provide you with leads to the best in the business, but look around and place newspaper ads before you hire. Customers will become regulars only if they can expect the best every time they dine at your restaurant. To provide that, you'll need top-notch cooks and chefs.

Salaries for chefs and cooks vary according to their experience and your menu. Chefs command salaries significantly higher than cooks, averaging $1,300 to $1,800 a week. You may also find chefs who are willing to work under profit-sharing plans. If you have a fairly complex menu that requires a cook with lots of experience, you may have to pay anywhere from $575 to $650 a week. You can pay part-time cooks on an hourly basis; check around for the going rate in your area.

• Servers. Your servers will have the most interaction with customers, so they need to make a favorable impression and work well under pressure, meeting the demands of customers at several tables while maintaining a pleasant demeanor. There are two times of day for wait staff: very slow and very busy. Schedule your employees accordingly. The lunch rush, for example, starts around 11:30 a.m. and continues until 1:30 or 2 p.m. Restaurants are often slow again until the dinner crowd arrives around 5:30 to 6 p.m.

Because servers in most establishments earn a good portion of their income from tips, they're usually paid minimum wage or just slightly more. When your restaurant is new, you may want to hire only experienced servers so you don't have to provide extensive training. As you become established, however, you should develop training systems to help both new, inexperienced employees and veteran servers understand your philosophy and the image you want to project.

Every business needs a marketing plan, and your food-service business is no exception. But even as you consider various marketing vehicles, keep this in mind: Research conducted by the National Restaurant Association reveals that word-of-mouth is still the best method of advertising. More than four out of five consumers are likely to choose a table-service restaurant they haven't patronized before on the basis of a recommendation from a family member or friend. So make the foundation of your marketing program an absolutely dazzling dining experience that customers will want to talk about and repeat.

Ask every new customer how they found out about you, and make a note of this information so you know how well your various marketing efforts are working. You can then decide to increase certain programs and eliminate those that aren't working.

More articles on restaurant businesses "

A key question for restaurant owners is this: Do your marketing materials--menus, signs, table tents, ads and other items--send an accurate message about who you are and what you do?

The first step in creating a complete marketing package is to know your market, and it's not enough to gather demographic information once. Markets change, and food-service businesses that don't change their marketing strategies with population shifts are missing out on a lot of opportunities.

Next, step back and take a look at each element in your facility. Everything from the parking lot to the interior decor to the printed items contributes to your marketing message--and each should be an accurate reflection of what that message is.

One cheap and easy way to promote your food-service business is by giving away gift certificates--such as dinner for two, coffee and bagels for 10, or a free pizza. Call local radio stations that reach the demographics of your target market and ask to speak to their promotions manager. Offer to provide gift certificates or coupons to use as prizes for on-air contests and promotions. Your company name and location will be announced several times on the air during the contest, providing you with valuable free exposure, and it's always possible that the winner will become a paying customer.

You can also donate coupons and gift certificates to be used as door prizes at professional meetings or for nonprofit organizations to use as raffle prizes. Just be sure every coupon or gift certificate clearly identifies your business name, location, hours of operation and any restrictions on the prize.

Some other promotional methods you can try include local event or sporting team sponsorships, discount coupon books, frequent-dining clubs, menu promotions and contests.

Restaurant Startup Resources

• Restaurant and More: Step-By-Step Startup Guide : Entrepreneur 's official guide describes the ins and outs of starting and running a successful restaurant, pizzeria, coffeehouse, deli, bakery or catering service. Packed with tips on how to keep your restaurant growing and healthy, the book answers most commonly asked questions and covers the essential business basics.
• The Menu Maker : Having trouble creating that memorable menu for your restaurant? This site specializes in spicing up menus to increase your profits, complement your eatery and reinforce your desired image. It also offers tips for menu presentation and helps determine your menu needs.
• National Restaurant Association (NRA) : Founded in 1919, the NRA is the leading business association for the restaurant industry. Its site offers access to an information service and library, various publications and industry research. It also provides networking opportunities and training, and emphasizes the ways in which local restaurants can contribute to their communities.
• National Restaurant Association (NRA) Educational Foundation : This nonprofit organization is dedicated to fulfilling the NRA's educational mission. The site offers classes for professionals and listings of U.S. Food Safety Regulatory System laws and training requirements. Where available, county and municipal requirements are also listed.
• PlanMagic Restaurant : This comprehensive package is geared toward startup restaurants. It focuses on methods for writing a successful business plan, and helps you figure out specific financial calculations to beef up your proposal.
• Restaurant Associations (by State) : Find out state-specific information regarding the restaurant and food-service industry.
• Restaurant Business Plan from Bplans.com : This site is a collection of resources and tools for starting a restaurant, including a restaurant industry report, sample restaurant business plans and a link to a local Small Business Development Center finder.
• Restaurantfunds : This website allows you to order a package called the Restaurant Success Kit, which includes a restaurant business plan creation tool, restaurant financials creation software, and a complete e-book and user's manual to help answer all your restaurant questions.
• Restaurant Startup & Growth magazine : Here you'll find resources to help you get organized, increase sales, reduce theft, control costs, improve service, hire better employees, safeguard your cash and much more.
• SCORE : To get some practical, real-world advice, contact SCORE and ask to speak with small-business counselors who owned or managed a restaurant. Find offices or counselors in your area by visiting the website.
• Women's Foodservice Forum (WFF) : The WFF is dedicated to providing women in the food-service industry with the resources to succeed. It offers leadership development programs, market research, and a regional partnership program for networking. The site also provides answers to FAQs, advice and a community of peers.

Starting and opening a restaurant can be an exciting, rewarding, and sometimes overwhelming experience. When done correctly, the rewards will far outweigh any anxieties that may come along with it. With proper planning and research, you will have the necessary tools to make your dream of owning a successful eatery a reality.

Check out Entrepreneur's other guides and resources for more informational articles like this one!

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How to Start a Successful Restaurant

Lisa Furgison

11 min. read

Updated March 18, 2024

Free Download:  Sample Restaurant Business Plan Templates

If you’ve wanted to start a restaurant for years, it might be time to sit down and draw up a plan to open your own business. To help you create a recipe for success, we’ve put together a how-to-get-started guide to make sure you have all the ingredients you need to open your restaurant with confidence.

While starting a restaurant is exciting, it’s also time-consuming and one of the toughest businesses to successfully launch. In fact, 60 percent of restaurants fail in the first year.

We’re not telling you this to temper your passion. We’re merely pointing out that if you want a successful restaurant, you’ll need to invest some serious time and money.

Why do many restaurants fail?

What’s the biggest reason for failure? Lack of planning. Before you ever make dinner for a customer, you’ll spend a lot of time figuring out every detail of your restaurant. From kitchen appliances and menus to floors plans and staff selections, the planning stage will make or break your restaurant.

To help you plan, fund, and manage your new restaurant, we’ve asked a couple of owners to share their trade secrets. Kim Strengari owns three successful restaurants in the Philadelphia region, including Stella Blu , and Lambrine Macejewski is the co-founder of Cocina 214, a contemporary Mexican restaurant in Winter Park, Florida. Omer Orian, co-founder of Off the Waffle, has three locations—two in Eugene, Oregon and one in Portland. Below are their tips for success.

Tips for starting a successful restaurant

• 1. Have the right intentions

If you want to make it as a restaurant owner, you have to love what you do, Kim Strengari says. While she knew a restaurant was the right path for her, she had to work nights cleaning office buildings to make ends meet when she first opened her restaurant.

“I wanted the restaurant more than anything else in life, so the sacrifices were endless and I never minded making them,” she says.

To be successful, you’ll invest a lot of time and money—so make sure that starting a restaurant is your passion, not just a business venture you hope will make money. “It’s harder than you can imagine,” says Omer Orien, “but people do it all the time. It’s not at all dreamy.”  

In these early days, it’s also a good idea to figure out what you want your restaurant to look like. What will be your restaurant’s aesthetic? What furniture will you need to purchase to fit the theme? How will you lay your restaurant out? Trent Furniture, a British furniture company, has a great article on the topic to help you get started.

Orien says, “A lot of it has to do with figuring out what kind of environment you want to work in, what will make you feel the way you want to feel. It also doesn’t hurt to have people in your life who have an eye for design.” Orien sat down with his co-founders and built a 3-D model to plan the layout of their first location. And ultimately, they did most of the work to build out the space themselves.

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• 2. Have a solid business plan in place

You can’t scratch a business plan out on a cocktail napkin. You need a detailed business plan that charts the course for your success. That said, we suggest beginning with a one-page plan  that keeps the business planning process simple. Think of your business plan as a living document that you return to regularly to help you plan for growth and measure your progress.

Orien says that he really got serious about his business plan when it was time to grow and expand to a new location. It helped them figure out what was feasible and figure out how to move forward.

Your business plan should include market research , a comprehensive look at your competitors, information on your target audience, an outline of your marketing plan, and a solid financial and budgeting projection. To get you started, check out these templates specifically for restaurant planning.

As you think about what you want your restaurant to look like, don’t forget to keep an eye on industry trends . As with any startup, timing is key.

Pay special attention to your marketing plan

You can only rely on word of mouth to bring in so many customers, so you’ll need a marketing  plan in place to keep new people streaming through your doors.

Here are a few ideas:

• Participate in community events and give out food samples
• Offer discounts to new customers
• Join the local business association
• Utilize social media channel s
• 3. Location, location, location

With a restaurant, location is everything . You need a spot that draws crowds, is easily accessible, and has the potential for growth. Of course, you need a location that fits within your budget too.

It makes sense to take your time, as you’re looking for the right space. You might also want to do some research to find out of there are any startup incubator spaces for restaurants that you can join to keep initial costs low and that might come with mentorship opportunities. Whether you decide to rent space or build from scratch, selecting a location is one of the biggest decisions you’ll make as an owner. But you don’t have to do a huge build out at first.

When Orien was ready to launch Off the Waffle, he says he only had $3,000 to get the business started. “It sounds impossible,” he says, “but we found a bunch of hacks to make it work. We found a house that was actually in a commercial zone, so we were able to live and work in the same place.”

Orien’s three locations are all dedicated restaurant spaces, but it’s a good reminder to start small. “Once you’re $300,000 into a buildout for your location, it’s not like a house that you can just sell. There’s not a lot of retained value, he says. You’re sort of stuck with it.” So it makes sense to think it all through and test a smaller scale version before taking a huge and expensive leap.

• 4. Test your menu

Approach building your menu like an experiment. Consider having a dinner party featuring your proposed menu where you ask people for their honest feedback.

But don’t just invite your closest friends and family members. You might love the taste of a certain dish, but if customers won’t pay for it or aren’t keen on its taste, you won’t make money. When you ask for feedback, consider using a method that allows anonymous comments so that you get people’s honest reactions. Do your market research. Visit other restaurants to get a sense of appropriate pricing.

Orien says that when Off the Waffle first launched, there were only two items on the menu: a liege waffle and a glass of milk. He tested a lot of different ideas, including folding ingredients into the waffle dough and stuffing waffles like a pita pocket. Those approaches didn’t really delight their customers. So they moved on to interesting waffle toppings, and people loved it.

• 5. Hire essential help

How many people do you need on staff to get started? Some restaurant pros advocate for bringing on a manager prior to opening day, but think through your biggest needs. Do you need a dishwasher? How many cooks? What about servers? Take your time as you hire staff. Consider doing a soft opening so you can see how smoothly things run with just a few essential positions.

When Orien launched his first restaurant, the only employees were family. They scaled up slowly, but now they have around 50 employees working at their three locations. “When we started, we were newbies, so if we hired too quickly, we would have had trouble paying people a salary that would have brought in people with enough skills to make up for our inexperience. Over time, we learned how to do all the roles.” But now, he says if he opened a fourth location, it would be a natural progression to hire a manager right off the bat. He’s in a better position to be able to train them well.

Invest in training your employees

To better manage your staff, make sure you have employee training materials ready. Create job descriptions, codes of conduct, and an employee handbook. Create a training guide so employees are well prepared for their respective positions. Document recipes for your cooks so every meal is made to perfection. In other words, give your employees all of the necessary tools to succeed, Macejewski says.

Be willing to fill in where needed

As the owner, you can’t have an ego, Strengari says. If your idea of owning a restaurant is walking around in a pretty dress and makeup and asking customers what they think of the food, you’ll be in for a surprise. You have to be willing to do every job. From chopping vegetables to seating customers, you’ll have to fill in from time to time.

Watch your labor costs

A lot of restaurateurs have the urge to hire, hire, hire. While you will probably need to hire some staff to make your restaurant a success, don’t go overboard. Paying employees can be daunting, especially in the first few months when you’re not making a lot of money. It’s not always easy to figure out how many staff to hire the right amount of staff, Macejewski says.

“It’s tough to plan for if you are seasonal or have sporadic business, but you don’t want people on the clock if you don’t have the business,” she says. “You can’t afford it.”

• 6. Secure funding and manage your cash flow

Generate startup capital:  As with every business, make sure you know how much money you need to get your restaurant off the ground.

You’ll need three pools of money. The first pool is for one-time costs like equipment (check out this calculator to help you figure out startup costs). The second pool is to cover the restaurant expenses for at least six months, and the third pool is to cover your personal bills for at least six months. You’ll want to have at least six months of cushion because you’ll probably find that your expenses outpace your revenue for at least that long.

Plan to lose money for the first six months:  Restaurants aren’t profitable overnight. It takes time to market your new place, attract a crowd, and get people to come back for more. Some say you shouldn’t plan on making money for at least the first six months.

Plan for bumps in the road:  It’s easy to go over budget when you’re first starting out, so make sure that you have some additional money to cover the unexpected. If you’re not sure about how to do this, consider a business line of credit.

When you do hit a bump, evaluate the numbers and your processes, Lambrine Macejewski says. For example, when she first opened her restaurant, she realized her food costs were too high. She called her vendors and switched from a five-day delivery schedule to a two-day schedule. She saved the money she needed by investigating the problem and looking for a solution.

Watch your food cost:  You’re in the business of making food, but if your food costs are out of line you’ll end up losing money. Make sure you keep track of your inventory, prepare food well, avoid waste, and keep prices competitive.

• 7. Keep marketing

You can’t depend on repeat customers, so you’ll need to keep your marketing efforts up to make sure your revenue stream doesn’t thin out. Establish a strong social media presence, try an ad in your local paper, participate in the local fair, or host a small non-profit get together at your restaurant to keep marketing your business.

Share your restaurant startup advice with us!

For the right owner, there’s nothing better than running a restaurant. You get to create an atmosphere and cuisine that people will love, but it comes with a lot of hard work.

Reach out to us on Twitter and share what you’ve learned through starting a restaurant, or let us know what else you think it takes. We’d love to hear from you!

Clarify your ideas and understand how to start your business with LivePlan

Lisa Furgison is a multimedia journalist with a passion for writing. She holds a graduate degree in mass communications and spent eight years as a television reporter before moving into the freelance world, where she focuses mainly on content creation and social media strategies. Furgison has crisscrossed the U.S. as a reporter, but now calls Key West, Florida home. When she's not conducting interviews or typing away on her laptop, she loves to travel.

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How to Start a Restaurant Business

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How to Open a Restaurant

• How To Start a Restaurant FAQs

Helpful Videos

• Additional Resources in the Restaurant Industry  

If you’re looking to start a restaurant business, you’ve come to the right place. Since we’re going to show you exactly how to do it.

We’ll start with key restaurant industry fundamentals like how big the market is, what the key segments are, and how revenues and profits are generated.

Then we’ll discuss the keys to not only starting a restaurant business but succeeding in it!

Before we continue, here’s where you can access your restaurant business plan template since having a plan will be key to your success.

Download our Ultimate Restaurant Business Plan Template here

15 Steps To Starting Your Own Restaurant:

• Choose the Name for Your Restaurant
• Develop Your Restaurant Business Plan
• Choose the Legal Structure for Your Restaurant
• Secure Startup Funding for Your Restaurant (If Needed)
• Secure a Location for Your Business
• Register Your Restaurant with the IRS
• Open a Business Bank Account
• Get a Business Credit Card
• Get the Required Business Licenses and Permits
• Get Business Insurance for Your Restaurant
• Buy or Lease the Right Restaurant Equipment
• Develop Your Restaurant Marketing Materials
• Purchase and Setup the Software Needed to Run Your Restaurant
• Hire and Train the Restaurant Wait Staff & Managers
• Open for Business

1. Choose the Name for Your Restaurant

The first step to starting a restaurant is to choose your restaurant’s name.  

This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally, you choose a name that is meaningful and memorable.

Here are some tips for choosing a name for your restaurant:

• Make sure the name is available . Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also, check to see if a suitable domain name is available.
• Keep it simple . The best names are usually ones that are easy to remember, pronounce and spell.
• Think about marketing . Come up with a name that reflects the desired brand and/or focus of your restaurant.

2. Develop Your Own Restaurant Business Plan

One of the most important steps in starting a restaurant is to develop your restaurant business plan . The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.

To enhance your planning process, incorporating insights from a  sample restaurant business plan  can be beneficial. This can provide you with a clearer perspective on industry standards and effective strategies, helping to solidify your own business approach.

Your business plan should include the following sections:

• Executive Summary – This section should summarize your entire business plan so readers can quickly understand the key details of your restaurant.
• Company Overview – This section tells the reader about the history of your restaurant and what type of restaurant you operate. For example, are you a traditional restaurant, fine-dining restaurant, fast-casual, or food truck?
• Industry Analysis – Here you will document key information about the restaurant industry. Conduct market research and document how big the industry is and what trends are affecting it.
• Customer Analysis – In this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products like the ones you will offer?
• Competitive Analysis – Here you will document the key direct and indirect competitors you will face and how you will build a competitive advantage.
• Marketing Plan – Your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
• Product : Determine and document what products/services you will offer 
• Prices : Document the prices of your products/services
• Place : Where will your business be located and how will your restaurant’s location help you increase sales?
• Promotions : What promotional methods will you use to attract customers to your restaurant? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization, and/or social media marketing.
• Operations Plan – Here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
• Management Team – This section details the background of your company’s management team.
• Financial Plan – In this section, you will document the financial projections for your restaurant. This should include your sales and revenue projections, cash flow statement, and your expense budget, detailing the restaurant startup costs .
• What startup costs will you incur?
• How will your restaurant make money?
• What are your projected sales and expenses for the next five years?
• Do you need to raise funding to launch your business?

Finish Your Business Plan Today!

3. choose the legal structure for your restaurant.

Next, you need to choose a legal structure for your restaurant and register it and your business name with the Secretary of State in each state where you operate your business.

Below are the five most common legal structures:

1) Sole proprietorship

A sole proprietorship is a business entity in which the owner of the restaurant and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.

2) Partnerships

A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a restaurant together. The partners share in the profits and losses of the business. 

The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.

3) Limited Liability Company (LLC)

A limited liability company, or LLC, is a type of business entity that provides limited liability to its small business owners. This means that the restaurant owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a restaurant include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.

4) C Corporation

A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a restaurant is that it offers limited liability to its owners. This means that the restaurant owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.

5) S Corporation

An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.

Once you register your restaurant, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.

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4. Secure Startup Funding for Your Restaurant (If Needed)

In developing your restaurant business plan , you might have determined that you need to raise startup capital to launch your new restaurant. 

If so, the main sources of funding for a restaurant to consider are personal savings, loans from friends and family, small business loans, and equity investors.

• Personal Savings : The personal savings of the owners are often the largest source of startup funding for a new restaurant. If you have saved enough money to cover all of your startup costs, then you may not need to seek outside funding.
• Loans from Friends and Family : Another common source of funding for a new restaurant is loans from friends and family. If you have people in your life who are willing to invest in your business, this can be a great option. However, it is important to remember that these loans should be treated like any other loan, with interest rates and repayment terms that are agreed upon in advance.
• Small Business Loans : Small business loans are another option to consider when seeking funding for your new restaurant. There are a variety of small business loans available, and you should shop around to find the one that best suits your needs. Be sure to read the terms and conditions carefully before signing any loan agreement.
• Equity Investors : Another option for funding your new restaurant is to seek equity investors. Equity investors are individuals or companies that invest money in your business in exchange for a stake in the company. This means that they will own a portion of your business and will be entitled to a portion of the profits. 

If you decide to seek equity investors, it is important to have a well-crafted business plan and pitch deck. You will need to convince potential investors that your restaurant is a good investment.

5. Secure a Location for Your Restaurant

The next step in starting a restaurant is to find a location. The ideal location for your restaurant will depend on several factors such as the type of food you’re serving, your target market, and your budget.

Some things to keep in mind when looking for a location include: 

• Foot traffic : Is the location in a high-traffic area?
• Parking : Is there enough parking for your customers?
• Zoning : Make sure the location is zoned for a restaurant.
• Visibility : Is the location visible from the street?
• Competition : Is there much competition in the area?

Once you’ve found a few potential locations, you will need to negotiate the lease with the landlord. We recommend that you consult an attorney or leasing agent to help you with this process.

6. Register Your Restaurant with the IRS

Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).

Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.

Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.

7. Open a Business Bank Account

It is important to establish a bank account in your restaurant’s name. This process is fairly simple and involves the following steps:

• Identify and contact the bank you want to use
• Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
• Complete the bank’s application form and provide all relevant information
• Meet with a banker to discuss your business needs and establish a relationship with them

8. Get a Business Credit Card

You should get a business credit card for your restaurant to help you separate personal and business expenses.

You can either apply for a business credit card through your bank or apply for one through a credit card company.

When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.

Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.

9. Get the Required Business Licenses and Permits

Next, you need to obtain the required business licenses and permits for your restaurant. The specific licenses and permits you need will vary depending on your location, the type of food you’re serving, and the size of your restaurant.

Some of the most common licenses and permits for restaurants include:

• Business license : A business license is generally required in order to operate a business.
• Health permit : A health permit is required in order to serve food.
• Food handler’s license : A food handler’s license is required in order to prepare and serve food.
• Liquor license : A liquor license is required in order to serve alcohol. You can usually obtain the required licenses and permits from your local city or county government offices.

10. Get Business Insurance for Your Restaurant

It is also important to get business insurance for your restaurant. This will protect you in the event that something goes wrong and someone is injured or there is damage to your property.

There are many different types of business insurance, but some of the most common types of insurance for restaurants include:

• Property insurance : This type of insurance covers damage to your property, such as your restaurant building or equipment.
• Liability insurance : This type of insurance covers injuries or damage that you or your employees may cause to others.
• Product liability insurance : This type of insurance covers injuries or damage that may be caused by the food you serve.
• Business interruption insurance : This type of insurance covers lost income if your restaurant is forced to close due to a covered event, such as a fire.

You can usually obtain business insurance through an insurance agent or broker. Make sure to shop around and compare rates before choosing an insurer.

11. Buy or Lease the Right Restaurant Equipment

In order to open a restaurant, you’ll need to have the right equipment. This includes things like commercial kitchen appliances, dining room furniture, and smallwares.

You can either buy or lease the equipment you need. Buying equipment is usually more expensive upfront, but it may be cheaper in the long run. Leasing equipment is usually less expensive upfront, but it may be more expensive in the long run.

12. Develop Your Restaurant Marketing Materials

As part of your restaurant marketing plan , marketing materials will be required to attract and retain customers to your restaurant.

The key marketing materials you will need are as follows:

• Logo : Spend some time developing a good logo for your restaurant. Your logo will be printed on company stationery, business cards, marketing materials, and so forth. The right logo can increase customer trust and awareness of your brand.
• Website : A website is a must in today’s business world. Not only will it help you attract customers, but it will also allow you to take online orders and reservations.
• Restaurant Menu : Design a menu that accurately reflects the food you’ll be serving at your restaurant. Be sure to include pricing information and any special offers or promotions.
• Business Cards : Business cards are an essential marketing tool. Be sure to include your restaurant’s name, logo, website, and contact information on your business cards.
• Social Media Accounts : establish social media accounts in your restaurant’s name. Accounts on Facebook, Twitter, LinkedIn, and/or other social media networks will help customers and others find and interact with your restaurant.

To run a restaurant business, you’ll need to purchase and set up software for various tasks, such as accounting, point of sale (POS), and customer management.

Some of the most popular software programs used by restaurants include:

• QuickBooks : QuickBooks is a popular accounting software program that can help you track your restaurant’s finances.
• Microsoft Office : Microsoft Office includes programs like Word, Excel, and PowerPoint that can be used for various tasks, such as creating marketing materials and tracking sales data.
• Square Register : Square Register is a POS system that can be used to accept credit and debit card payments.
• OpenTable : OpenTable is a software program that can be used to take online reservations.

14. Hire and Train the Restaurant Wait Staff & Managers

After you have all the necessary supplies and equipment, it’s time to hire and train your restaurant wait staff and managers.

When hiring restaurant employees, look for individuals who are friendly, outgoing, and have experience in customer service. Be sure to conduct background checks on all potential employees.

Once you have hired your restaurant staff, provide training on topics such as food safety, customer service, and operating the POS system.

15. Open Your Restaurant for Business

You are now ready to open your restaurant. If you have little experience in running a restaurant, consider a soft opening, where you invite friends and family to dine at your restaurant for a discounted price. This will allow you to work out any kinks in your operations before opening to the general public.

After your soft opening, advertise your restaurant through signage, social media, word-of-mouth, and other marketing channels in preparation for your Grand Opening and beyond.

Be sure to track your sales and customer feedback so you can make necessary adjustments to your business.

If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.

How to Finish Your Restaurant Business Plan in 1 Day!

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How to Start a Restaurant FAQs

Where can i download a restaurant business plan pdf.

You can download our restaurant business plan PDF template here. This is a business plan template you can use in PDF format.

If you are opening a restaurant bar, here you can find a sample business plan for restaurant and bar pdf .

Is it hard to start a restaurant?

Starting a restaurant can be difficult, but it is possible to succeed if you have a well-thought-out business plan, the right location, and the necessary funding. Your success will depend on your ability to execute your business plan and attract customers to your restaurant.

How can I start a restaurant with no experience?

If you have no experience in the restaurant industry, it is important to do your research and develop a well-thought-out business plan. You should also consider hiring an experienced consultant or manager to help you run your business.

What type of restaurant is most profitable?

There is no one-size-fits-all answer to this question. The most profitable type of restaurant will depend on factors like your location, the type of food you serve, and your operating costs. In general, higher-end restaurants tend to be more profitable than fast food or casual dining establishments.

How does a restaurant make money?

A restaurant's business model is based on generating revenue from the sale of food and beverages. In order to be successful, a restaurant must generate enough sales to cover its operating expenses and generate a profit.

Is owning a restaurant profitable?

Owning a restaurant can be profitable, but it is important to carefully consider all of the costs associated with starting and running a business. There is no guarantee that your restaurant will be successful, so it is important to have a well-thought-out plan and realistic expectations.

Why do restaurants fail?

There are many reasons why restaurants fail, but some of the most common include poor restaurant location, bad management, high costs, and low customer demand. Additionally, many restaurants fail because they do not have a clear vision or purpose.

How big is the restaurant industry?

According to IbisWorld, there are 254,744 restaurants, and the restaurant industry generated $181.0 billion in revenue in the United States alone last year. This represents an annual growth rate of 3.5% over the past 5 years.

What are the key segments of the restaurant industry?

The Full-Service Restaurants industry is segmented based on the main type of food served. The main segments include Asian, American, Mexican, European and Pizza.

What external factors affect the restaurant industry?

A number of factors affect the performance of the restaurant industry. These drivers include:

• Consumer spending : Taxes, consumer sentiment, and oil prices are some of the factors that influence the growth of consumer spending. Conversely, when the economy is good, consumers will be more likely to spend money on eating at restaurants.
• Consumer Confidence Index : During a recession, demand for discounted value products from restaurants increases, driving revenue down.
• Health Eating Index : Consumers are aware of issues related to weight and obesity, fatty-food intake, and food safety issues.
• Households earning more than $100,000 : Full-service restaurant customers are from higher-income households. Due to this fact, growth in the number of households earning over $100,000 annually will benefit the industry.

What are the key costs in the restaurant industry?

• Purchases – Purchases comprise the largest cost for industry operators, which include items such as alcohol, food, and other incidentals, like paper towels, cleaning equipment, and glassware.
• Wages – Wages are the next largest expense category for an average operator’s revenue.
• Rent and utilities – Rent and utilities are also a major expense.
• Other Expenses – Other costs include those incurred in the normal course of business, such as insurance, accounting and legal costs, licensing fees, stationery, and office costs. These costs account for an estimated 6.0% of the average restaurant’s revenue.

What are the keys to launching a new restaurant?

1. ensure you have sufficient start-up capital.

Always overestimate your capital needs. Opening a restaurant is an expensive venture and requires the following:

• Enough cash reserve for the first 12 months
• Initial start-up costs (construction, equipment, furniture, etc.)

2. Determine the Best Location

Market research is crucial in deciding the best location and the following should be considered:

• Accessibility
• Sufficient parking

3. Have a Business Plan

A restaurant business plan is the essence of your restaurant, and a poor and unrealistic business plan will not earn you any profits. A good plan will also attract potential investors or banks for financing.

From being greeted at the door to paying the check, first impressions determine repeat customers. Furthermore, with the proliferation of user-review sites like Yelp and Urbanspoon, these platforms will become the gatekeepers to customer acquisition.

4. Establish Quality Control

Ensuring quality and consistency in the kitchen is essential for a successful restaurant. If it’s not good enough, don’t serve it – it could ruin your reputation.

5. Implement a Simple Menu

Long menus lead to confusion for everyone. Start with a simple menu concentrating on quality items done well vs. quantity. This will increase efficiency and there will be less waste and costs.

6. Calculate Food Costs

Determine the appropriate menu prices based on costs and market research. Pricing factors

• Portion size
• Quality of ingredients
• Competitor pricing

7. Execute a Strategic Marketing Plan

The goal of a restaurant’s marketing plan is to ensure long-term success. Employ an integrated strategy that will reach your target market segments. Utilize marketing, public relations, advertising and sales efforts to gain brand recognition and ultimately drive revenue.

8. Control Inventory and Costs

Profitability analysis and inventory control is an important task of every restaurant owner, which must be carried out regularly in order to prevent theft and reduce unnecessary costs.

It has been shown that the average monthly restaurant loss is about 20%.

9. Keep It Clean and Organized

There’s nothing worse than a dirty restaurant. Make sure all your staff have the right hygiene certificates and set up a thorough cleaning regime. Get to know your local environmental health officer so they can help you with any issues that may arise. 

What are the typical startup costs for a new restaurant?

Average restaurant startup costs vary from a few thousand to a few million. According to a survey, the median cost to open a restaurant is $275,000 or $3,046 per seat. If owning the building is figured into the amount, the median cost is $425,000 or $3,734 per seat.

How much do restaurant operators make?

A well-run restaurant typically makes between 5% and 8% profit.  

Restaurant Business Plan Example PDF

Download our restaurant business plan pdf here. This is a free restaurant business plan example to help you get started on your own restaurant plan.

Additional Resources in the Restaurant Industry

For additional information on the restaurant market, consider these industry resources:

• National Restaurant Association : www.restaurant.org
• Institute of Food Technologists : www.ift.org
• Nation’s Restaurant News : nrn.com

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Since 1999, Growthink has developed business plans for thousands of companies that have gone on to achieve tremendous success.

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How to Write a Winning Restaurant and Bar Business Plan (+ Template)

Creating a business plan is essential for any business, but it can be beneficial for restaurants and bar s that want to improve their strategy or raise funding.

A well-crafted business plan outlines your company’s vision and documents a step-by-step roadmap of how you will accomplish it. To create an effective business plan, you must first understand the components essential to its success.

This article provides an overview of the key elements that every restaurant and bar owner should include in their business plan.

Download the Ultimate Bar Business Plan Template

What is a restaurant and bar business plan.

A restaurant and bar business plan is a formal written document describing your company’s business strategy and feasibility. It documents the reasons you will succeed, your areas of competitive advantage, and information about your team members. Your business plan is a key document that will convince investors and lenders (if needed) that you are positioned to become a successful venture.

Why Write a Restaurant and Bar Business Plan?

A restaurant and bar business plan is required for banks and investors. The document is a clear and concise guide to your business idea and the steps you will take to make it profitable.

Entrepreneurs can also use this as a roadmap when starting their new company or venture, especially if they are inexperienced in starting a business.

Writing an Effective Restaurant and Bar Business Plan

The following are the critical components of a successful restaurant and bar business plan:

Executive Summary

The executive summary of a restaurant and bar business plan is a one- to two-page overview of your entire business plan. It should summarize the main points, which will be presented in full in the rest of your business plan.

• Start with a one-line description of your restaurant and bar  
• Provide a summary of the key points in each section of your business plan, which includes information about your company’s management team, industry analysis, competitive analysis, and financial forecast, among others.

Company Description

This section should include a brief history of your company. Include a short description of how your company started and provide a timeline of milestones your company has achieved.

You may not have a long company history if you are just starting your restaurant and bar. Instead, you can include information about your professional experience in this industry and how and why you conceived your new venture. If you have worked for a similar company before or have been involved in an entrepreneurial venture before starting your restaurant and bar company, mention this.

You will also include information about your chosen restaurant and bar business model and how, if applicable, it is different from other companies in your industry.

Industry Analysis

The industry or market analysis is an important component of a restaurant and bar business plan. Conduct thorough market research to determine industry trends and document the size of your market. 

Questions to answer include:

• What part of the restaurant and bar industry are you targeting?
• How big is the market?
• What trends are happening in the industry right now (and if applicable, how do these trends support your company’s success)?

You should also include sources for your information, such as published research reports and expert opinions.

Customer Analysis

This section should include a list of your target audience(s) with demographic and psychographic profiles (e.g., age, gender, income level, profession, job titles, interests). You will need to provide a profile of each customer segment separately, including their needs and wants.

For example, a restaurant and bar business’ customers may include office workers who are looking for a place to have after-work drinks or families who are looking for a kid-friendly restaurant for dinner. 

You can include information about how your customers decide to buy from you and what keeps them buying from you.

Develop a strategy for targeting those customers who are most likely to buy from you, as well as those that might be influenced to buy your products or restaurant and bar services with the right marketing.

Competitive Analysis

The competitive analysis helps you determine how your product or service will differ from competitors, and what your unique selling proposition (USP) might be that will set you apart in this industry.

For each competitor, list their strengths and weaknesses. Next, determine your areas of competitive differentiation or advantage; that is, in what ways are you different from and ideally better than your competitors.

Marketing Plan

This part of the business plan is where you determine and document your marketing plan. . Your plan should be laid out, including the following 4 Ps.

• Product/Service : Detail your product/service offerings here. Document their features and benefits.
• Price : Document your pricing strategy here. In addition to stating the prices for your products/services, mention how your pricing compares to your competition.
• Place : Where will your customers find you? What channels of distribution (e.g., partnerships) will you use to reach them if applicable?
• Promotion : How will you reach your target customers? For example, you may use social media, write blog posts, create an email marketing campaign, use pay-per-click advertising, or launch a direct mail campaign. Or you may promote your restaurant and bar business via word-of-mouth or by partnering with another business.

Operations Plan

This part of your restaurant and bar business plan should include the following information:

• How will you deliver your product/service to customers? For example, will you do it in person or over the phone?
• What infrastructure, equipment, and resources are needed to operate successfully? How can you meet those requirements within budget constraints?

You also need to include your company’s business policies in the operations plan. You will want to establish policies related to everything from customer service to pricing, to the overall brand image you are trying to present.

Finally, and most importantly, your Operations Plan will outline the milestones your company hopes to achieve within the next five years. Create a chart that shows the key milestone(s) you hope to achieve each quarter for the next four quarters, and then each year for the following four years. 

Examples of milestones for a restaurant and bar include reaching $X in sales. Other examples include expanding to a second location or launching a new menu.

Management Team

List your team members here, including their names and titles, as well as their expertise and experience relevant to your establishment. Include brief biography sketches for each team member.

Particularly if you are seeking funding, the goal of this section is to convince investors and lenders that your team has the expertise and experience to execute your plan. If you are missing key team members, document the roles and responsibilities you plan to hire for in the future.

Financial Plan

Here, you will include a summary of your complete and detailed financial plan (your full financial projections go in the Appendix). 

This includes the following three financial statements:

Income Statement

Your income statement should include:

• Revenue : how much revenue you generate.
• Cost of Goods Sold : These are your direct costs associated with generating revenue. This includes labor costs and the cost of any equipment and supplies used to deliver the product/service offering.
• Net Income (or loss) : Once expenses and revenue are totaled and deducted from each other, this is the net income or loss.

Sample Income Statement for a Startup Restaurant and Bar

Balance sheet.

Include a balance sheet that shows your assets, liabilities, and equity. Your balance sheet should include:

• Assets : Everything you own (including cash).
• Liabilities : This is what you owe against your company’s assets, such as accounts payable or loans.
• Equity : The worth of your business after all liabilities and assets are totaled and deducted from each other.

Sample Balance Sheet for a Startup Restaurant and Bar

Cash flow statement.

Include a cash flow statement showing how much cash comes in, how much cash goes out and a net cash flow for each year. The cash flow statement should include:

• Cash Flow From Operations
• Cash Flow From Investments
• Cash Flow From Financing

Below is a sample of a projected cash flow statement for a startup restaurant and bar .

Sample Cash Flow Statement for a Startup Restaurant and Bar

You will also want to include an appendix section which will include:

• Your complete financial projections
• A complete list of your company’s business policies and procedures related to the rest of the business plan (marketing, operations, etc.)
• Any other documentation which supports what you included in the body of your business plan.

Writing a good business plan gives you the advantage of being fully prepared to launch and grow your restaurant and bar . It not only outlines your business vision but also provides a step-by-step process of how you are going to accomplish it.

A well-written restaurant and bar business plan is a must for any business owner. It’s a great tool for attracting investors and keeping the company focused.  

Finish Your Bar and Restaurant Business Plan in 1 Day!

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Moscow's culinary opportunities: How to open a restaurant

Having a nice family-style restaurant in the Russian capital with a flavor of your home country is a popular business option for many expats. But it’s not as easy as it might seem. Here are a few things to consider for potential restaurant-owners.

Thinking it through

First and foremost, one should make sure that owning a restaurant, even a small one, is really something you would like to do. As any kind of business, it takes a significant amount of time and money to manage and develop. “Success in public catering requires hard work, without weekends or holidays,” Ilias Iliadis, owner of Pita&Suvlaki Greek restaurant in Moscow, told Russia Beyond. “It is not as hard to open a place as running it.”

One will need to learn everything about every aspect of a business, from legal, fire and sanitary requirements to managing business partner relationships and hiring experienced staff. “There are many difficulties in this sphere, so you need to be totally in love with what you do to be successful,” says Radomir Krajinovic, owner of Serbian restaurant Optimist.

The number of national cuisine restaurants have grown in Moscow over the last few years.

Market trends

As we noted previously, the economic crisis had led to many Russians cutting back and, as a result, there has been a growth in interest in developing fast food outlets.

Yet, the general dynamic for restaurants is toward growth: According to Poster company 2017 review of trends in the restaurant business, healthy eating, vegetarian food, open kitchen format, craft beer, food trucks (mobile cafes), and regional cuisine are becoming more popular in Moscow. The number of restaurants and bars grow and they compete for custom by offering special deals and interesting dining formats.

“Over the last few years the number of national cuisine restaurants have grown,” says Krajinovic. ”Yes, the crisis has led to fewer people visiting us, but we are still doing well - we are opening a new restaurant soon.”

Iliadis’s venture is also experiencing growth: He opened his first café in city center in 2014 – now he has opened a second restaurant and a third one is on the way.

Of course, setting up a firm without back is impossible. “To open a small restaurant or a cafe one would need 5 million rubles ($87,160),” Vladimir Shalaev, a lawyer at BMS Law Firm, told Russia Beyond. Iliadis confirms this figure. “In our case it was a year before it paid off. Our small restaurant became popular quickly so we had to find a bigger place,” he adds.

“The biggest part of what you’ll need to pay is rent. It is very expensive here,” Krajinovic says. “Other things depend on what one wants. A home-style restaurant might require from seven to 10 million rubles of investment which will pay off in two years.”

Russian banks also offer business loans. “You need to have 30 percent of the necessary investment for the new project and the bank will cover the remaining 70 percent,” says Igor Glukhov, deputy director of Credit Department of RosEvroBank.

If you serve good food and your clients sense it, they will become regulars and inspectors will not come often if they don’t receive complaints.

Legal aspect

The procedure of setting up a legal entity is no different for a foreigner than for a Russian national. “You need to gather all necessary documents to register a firm: Passport, various papers, a receipt of registration fee payment; foreign citizens need to provide a certified passport translation as well,” Shalaev said.

Of course, just registering a company will not be enough. You need to get a license for selling alcohol, rent a place for your café, add it to the commercial register, then get all necessary permits from sanitary and fire inspections, as well arrange for garbage disposal, Shalaev added.

“The legal framework is very similar to that in Greece,” Iliadis says. “The Russian requirements gradually develop to European standards. Of course, like in Greece, there are still some outdated rules, such as having a separate room for peeling potatoes, but inspectors don't take it seriously. No one terrorizes you every day without reason. If you serve good food and your clients sense it, they will become regulars and inspectors will not come often if they don’t receive complaints.”

Krajinovic, who has been running his restaurant since 2012, agrees. “There are no problems. If you follow all the necessary requirements and use fresh products, no one will bother you asking for money,” he says. “A good thing here is that 3-4 months after starting a business you know how much tax you will need to pay, as opposed to Europe, where the percent might change. Here we pay 15-20 percent of our profits.”

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Top-5 Restaurants in Moscow-City business district

Table of contents

• 1. Burgers with healthy buns
• 2. Beef, cocktails, and karaoke
• 3. A slice of Bali in Moscow
• 4. The highest restaurant in Europe
• 5. Lobster and octopus with a view

The Moscow-City business district is known for the headquarters of Russian and global companies as well as for the newest landmarks of Moscow, the skyscrapers, and one of the biggest malls in the city, Afimall , full of fashion and beauty stores, cafes, and leisure activities. Here is our list of 5 best restaurants in Moscow-City. Leading Moscow chefs and bartenders serve food and drinks to remember, from burgers with avocado to grilled octopus, from sweet potato waffles to matcha tea with a piña colada flavor. These restaurants also offer great entertainment like music shows, karaoke, and parties with DJs. You may take a break here after sightseeing Moscow from above, relax after shopping, and make friends with people from tech startups. At lunchtime, and in the evenings CEOs and business leaders gather there making Moscow-City restaurants the best place for networking in the city.

Burgers are made with meat, cheese, tomatoes, onions, pickles and are seasoned with ketchup, mustard, or another sauce. The ingredients are placed between two halves of a bun. Typically, burgers are made with beef, but other types of meat, such as turkey, chicken, and salmon can be used as well.

The Misha Fisher in Jaffa restaurant’s chef replaces burger buns  with avocado halves making the kosher version of this street food. Try here also sorrel soup, hummus, and falafel. There are no dairy dishes on the menu, it’s a kosher and halal certified meat restaurant. But the cuisine is not Jewish only. In their reviews, people praise Misha Fisher in Jaffa’s Peruvian ceviche, a Thai tom yum soup, and Maki sushi rolls with vegan cheese. The restaurant works in the Afimall shopping center and is closed on Saturdays.

Steaks and shrimp pasta are the highlights of Six Floor Restaurant on the 6th floor of the Oko tower. The bartender here flavors his cocktails with essential oils making them one-of-a-kind drinks. Reviewers on Restaurant Guru laud the restaurant’s karaoke club, City Voice , for its acoustics and futuristic design. In-house backing vocalists help City Voice’s guests to perform most tricky pop songs and rock ballads. The restaurant is open 24 hours a day, they start serving breakfasts at 6:30 am. 

Matcha tea served in Touch of matcha cafe in the IQ Quarter tower is believed to be the best in the city. Definitely, the matcha menu here is the longest in Moscow, with 13 versions of tea, from Matcha Latte to Matcha Piña Colada . The cuisine is Indonesian and vegetarian, on Restaurant Guru you may find positive feedback about poke and buddha bowls , cereal dishes, and avocado toasts. Waffles get special mention, try those made of sweet potato and served with a poached egg as well as waffles with coconut ice cream, caramel and strawberries.

It is a popular seafood meal with a buttery savory flavor. Crabs may be boiled, grilled, deep-fried, stewed, or steamed. There is a wide range of dishes with crabs.

Birds self-described as the highest city restaurant in the world is located on the 84th floor of the Oko tower at a height of 354 meters. At least, it is listed in the Russian Book of Records as the highest restaurant in Europe. You will see breathtaking views of Moscow here together with getting fresh crabs  and yummy ice cream. One of the restaurant’s rooms is called Secret Garden and looks like a genuine conservatory. It opens at 6 pm. There is also a karaoke room with a separate entrance and a club famous for its music stage shows.

Reviewers on Restaurant Guru note great views of Moscow from the terrace of Bamboo.Bar , a restaurant located in the City of Capitals tower. Guru Vibes parties on Saturday nights are also highly praised for starring leading Russian DJs and electronic music performers. The restaurant’s signature dishes are seafood salad with Thai tomatoes and green tapioca chips as well as lobster miso soup  and grilled octopus. Restaurant rooms are decorated with natural elements and antiquities. A 12-meter-long bar counter is Instagram-worthy.

The Moscow-City business district restaurants have become new places-to-see on their own. Visit them if you want to get a special gourmet experience and to discover a new side to the Russian capital.

I am absolutely fascinated by the Misha Fisher in Jaffa restaurant! As someone who loves to experiment with food, this burger featuring avocado buns is definitely on my to-try list. Additionally, I am intrigued by the fact that this restaurant serves kosher and halal certified meat, but also has Peruvian, Thai, and vegan dishes on the menu, making it a perfect place for foodies looking for a diverse range of culinary experiences.

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California fast-food workers will get $20 minimum wage, starting Monday

Vanessa Romo

Alina Selyukh

A McDonald's worker hands food to a customer at a drive-thru window in Los Angeles, on Sept. 28. Damian Dovarganes/AP hide caption

A McDonald's worker hands food to a customer at a drive-thru window in Los Angeles, on Sept. 28.

California fast-food workers cooking Big Macs or whipping Frappuccinos will start making a minimum wage of $20 an hour on Monday. For many, this means a 25% raise.

The new state minimum uniquely focuses on a particular segment, fast food, affecting some of the country's biggest chains, including McDonald's, Starbucks, Subway and Pizza Hut.

It's a big win for cooks, cashiers and other fast-food workers – some of the lowest-paid jobs in the U.S. – whose wages have been growing at a faster clip since the pandemic, after decades of stagnation.

California is one of the country's most expensive states; about half a million people are estimated to work in fast food here, mostly women, immigrants and people of color. Many live below the poverty line.

Uber and Lyft threaten to halt operations in Minneapolis over minimum wage law

Sandra Jauregui from Sacramento is counting down the days to her first bigger paycheck in two weeks. After 18 years working at several Jack in the Box franchises, her pay will jump from $17.50 to $20. That means she could be bringing home another $120 each paycheck.

"It's super great," says Jauregui, 52, speaking in Spanish. "At the very least it'll give me some breathing room ... and make it easier to pay the rent and other bills."

Chipotle, McDonald's warn of price hikes, less work

But the dramatic pay raise has also touched off a heated debate about the impact on local businesses. Smaller franchise restaurant owners warn they'll have to raise prices, reduce worker's hours, cut jobs or even close shop.

California's pay hike is a result of a contentious deal struck by labor leaders, including the large Service Employees International Union, and fast-food companies last year. The new wage law applies to fast-food chains with at least 60 locations nationwide, with exemptions for some bakeries and smaller fast-food outposts inside grocery stores, airports and other venues.

Several fast-food executives have suggested prices would go up 2.5% to 3.5% to offset higher wages; Jack in the Box, Starbucks, McDonald's and Chipotle have all warned of upcoming price hikes. That's on top of price increases many restaurants have been rolling out for months. The cost of eating out has stubbornly inched higher even as inflation has cooled elsewhere .

Other chains plan to speed up their use of automation, including kiosks and robots. A major Pizza Hut franchisee cited the wage hike as the reason for layoffs of more than 1,000 delivery drivers this year, in a switch to apps like Uber Eats and DoorDash that pushes more delivery fees onto shoppers.

One big Pizza Hut franchisee in California cited the upcoming wage hike as a reason for laying off more than 1,000 delivery drivers in a shift to delivery apps like Uber Eats and DoorDash. Justin Sullivan/Getty Images hide caption

One big Pizza Hut franchisee in California cited the upcoming wage hike as a reason for laying off more than 1,000 delivery drivers in a shift to delivery apps like Uber Eats and DoorDash.

Franchisees weigh cuts to workers' hours

Many restaurant owners expect workers to be working fewer hours. That was the main side-effect a decade ago, when Seattle hiked its minimum wage to $15, research suggests .

"I am used to being a champion of labor and I'm in this odd position," says Michaela Mendelsohn, a longtime advocate for LGBT workers and also owner of six El Pollo Loco restaurants with about 170 employees.

Her restaurants lost shoppers after a pre-emptive price increase in February, she says. Now, the focus is on cutting costs by simplifying operations, changing how long it takes workers to make sauces, for example, or to close up for the night.

Minimum-wage workers in 22 states will be getting raises on Jan. 1

"We're having to get more efficient," Mendelsohn says. "So really what's left is ... to reduce labor hours. And I hate saying that."

In recent years, the battle for higher minimum wages has increasingly played out at the city, county and state levels as the federal minimum wallows at $7.25 an hour .

Broadly, California often sets the bar for many business decisions that other states later follow. Advocates hope something similar will happen with fast-food pay – spreading to other industries in the state and across the country.

California's minimum previously rose to $16 an hour on Jan. 1.

Workers are thrilled, but also anxious

Employers' warnings have left many workers with mixed feelings about the raise, despite the potential for extra spending power.

The Jack in the Box worker Jauregui, 52, has been cobbling together two salaries, working about 54 hours a week between the restaurant and a laundromat.

She says she's always trying to save a bit to treat her grandchildren – she has custody of three of them – who are constantly growing out of clothes and shoes. And although she marched alongside fellow SEIU members to win the wage increase, she is fearful of the downside.

These millionaires want to tax the rich, and they're lobbying working-class voters

"My boss told me that he won't reduce my hours but that he will cut others' hours," Jauregui said.

All this makes California's wage hike a high-profile case study for how exactly a higher minimum wage reverberates through the local economy.

"This policy is going to be really different in different parts of California," says Jacob Vigdor, professor of public policy and governance at the University of Washington, who has studied the effects of Seattle's 2014 minimum wage hike.

The research found that after the minimum wage rose from $9.47 to $13 – in the early years of the Fight For $15 labor campaign – workers generally didn't lose jobs even though they did lose hours. And they ended up with higher pay.

"The restaurant business is a really tough business," Vigdor says. "Restaurants open and close all the time, even in places where the minimum wage hasn't changed for more than a decade. ... Generally speaking, we found that in the restaurant industry, businesses were able to find ways to adapt to higher wage costs."

KQED's Farida Jhabvala Romero contributed to this report.

• fast food workers
• minimum wage

Best Restaurants in Moscow City (Business District), Central Russia

Moscow city (business district) restaurants, establishment type, online options, traveler rating, dietary restrictions, restaurant features, neighborhood.

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The Newest Tech Start-Up Billionaire? Donald Trump.

Trump media, which went public this week, attracted a frenzy of interest on its first day of trading..

This transcript was created using speech recognition software. While it has been reviewed by human transcribers, it may contain errors. Please review the episode audio before quoting from this transcript and email [email protected] with any questions.

From “The New York Times,” I’m Michael Barbaro. This is “The Daily.”

[THEME MUSIC]

Over the past few years, Donald Trump’s social media company Truth Social was dismissed as a money-losing boondoggle. Today, Matthew Goldstein on how over the past few days, it somehow became a publicly traded company worth billions of dollars.

It’s Thursday, March 28.

Matthew, thank you for coming on “The Daily”-

Thank you for having me.

— your debut.

Do you go by Matt?

I go by Matt. I go by Matt.

Matt. You’re a Matthew —

Because my mother likes me using — when I first started out, my mom says, I named you Matthew. You should use Matthew for your by-line. Because I initially did use Matt, and then she —

She caught it?

This is literally the tale of the —

Yeah, right.

The Jewish mother.

Yes, yes, the way all journalism sort of starts. Why did you go into journalism to begin with, though?

Right, you could have been a doctor. Here we are. At least use my name. OK, so, Matt, I wonder if we could start by having you tell us the current market value of this new publicly traded company, Donald Trump’s social media business.

OK, so as we sit here —

11:26 AM on Wednesday.

— on Wednesday, it’s trading right now for around $65 a share. If you work that out, it’s worth about $8 billion.

That’s huge.

That is huge. I think it’s bigger than “The New York Times,” actually.

I think “The New York Times” is like around $7 billion.

It’s bigger than a lot of companies, which is crazy when you think about it.

Yeah. And what is Donald Trump’s personal stake in that, and what is that now worth?

OK, so he owns 79 million shares. So roughly doing the math, and this changes, it somewheres around $5.6 billion. It’s been going up sometimes as high as even $6 billion.

That’s extraordinary.

That is extraordinary. Because if you believe what Forbes had said last fall, he was worth about $2.6 billion. So he’s more than doubled his net worth in basically the last few days with Trump Media.

Wow. And not a moment too soon, right? Because as we’ve talked about on the show, Trump owes about every last cent of cash he has — I think it’s an estimated $500 million or so — to various courts, and this would be very auspicious timing to suddenly have an extra $5 billion in his life.

It’s a critical lifeline for him right now. There of course, are limitations to how he can tap that money, but I think also it should not be understated, it’s a huge bragging point for him, which he likes to go out and talk about being the most successful businessman on the planet.

He can say, look, I built a company that’s worth $7 billion overnight. Where have you done that, Joe Biden?

Or where have you done that pretty much almost anyone other than a very select, rarefied group of tech startups?

Absolutely.

So tell us the story of how this company, which I think a lot of people candidly dismissed from the beginning as Trump’s little kind of renegade corner of the internet somehow became this, a real financial behemoth in a way. What is that story?

So you have to go back to January 2021. Trump is kicked off of what was then Twitter after the January 6 riots at the Capitol.

And not just Twitter, right? Facebook, Instagram.

Yeah, he was kicked off everything, but Twitter was really where he had lived, as we all knew.

Right. Tens of millions of followers.

Tens of millions. So Trump is at this low point. He’s out of the White House. He’s sort of down there at Mar-a-Lago. And all of a sudden, a blast from the past.

[MUSIC PLAYING]

He gets approached by these two guys who had been contestants on his old reality show, “The Apprentice.”

and their names are Andy Litinsky and Wes Moss.

I’m no dummy.

No, I know.

They’re not particularly notable or famous people. I don’t know if the word is “star” is on the show.

To be perfectly honest, I want to see Mr. Trump as much as possible.

Litinsky was a really young guy.

I toast to the men dominating the women.

Wes Moss came out as almost like a frat boy type of character.

Andy, you’re fired. Wes, you’re fired also.

And they weren’t particularly successful, but they go to Trump.

And what exactly is their pitch to him?

Their pitch is basically, forget about Twitter. Forget about all these other platforms. Create your own platform. Create your own social media company. It will be great. You won’t be censored. You can say whatever you want. All your followers will come here. We’ll make a lot of money. We’ll be huge.

What was Trump’s response?

Well, he’s intrigued, but he never really totally commits to anything. At that point, Trump is sort of taking a back seat on it. He’s basically agreeing to lend his name if nothing else.

They sign an agreement that they’re going to go out and pitch the deal. And “The Apprentice” guys know that they’re going to need a lot of money to get this company off the ground. But they’re not going to be able to turn to traditional Wall Street sources because Trump at this point —

Is kind of toxic.

Yeah, he’s a toxic guy. So the solution for “The Apprentice” guys to raise this money was to do something called a SPAC, which is these companies that have come into vogue during the pandemic. They’re basically shell companies that go public, raise hundreds of million from investors. And essentially their sole purpose is to go out and look for another company to buy.

It’s basically money in a bank account that’s just sitting there to be transferred over to the private company that you buy. So for the private company that ends up merging, it’s a great deal because they get tons of cash where they had nothing the day before. And the other advantage of a deal with a SPAC is that beyond the cash, the private company becomes a public company, and that gives it the ability to sell stock to investors and go out and raise more money that way.

And then through that merger, eventually the two companies coming together, the company that Trump is going to be ostensibly heading, that social media company would get everything the SPAC had raised from investors. So all that cash is going to come flooding into the company “The Apprentice” guys envision.

So if I’m understanding this plan correctly, “The Apprentice” guys envision a plan where they go off, they find a SPAC that has raised a bunch of money, and eventually it will merge with the Trump social media company they envision building. And when that marriage is consummated, their work will be over and they will hopefully have a lot of money.

Basically, that’s exactly what their goal was. Yeah. So “The Apprentice” guys are out there in the market looking for a SPAC. But given the lack of really any kind of business plan, they don’t go to the top flight guys out there. They end up at the bottom of the barrel.

And so they end up with essentially a very no name sounding SPAC called Digital World Acquisition Corporation. Digital World has its IPO in September of 2021, raises $300 million. Lo and behold, like a month after, a press release comes out late at night. Donald Trump and Trump Media are merging with Digital World Acquisition Corp

I remember people pinging me, is this a joke? Because most people I’m sure had never heard of Digital World. And even more people had no idea that Trump was even doing a social media company. Because while all this is going on and they’re trying to put a deal together, the social media platform that will become Truth Social hasn’t even launched, and it won’t do so for months later.

But there’s trouble right away. The Securities Exchange Commission comes in and announces it’s opened an investigation into how this deal came together, looking into whether Digital World violated securities laws by engaging in merger talks ahead of time, which technically isn’t kosher in the way SPACs are supposed to work. But this investigation just drags on and on and on, and it’s going to delay everything.

So this is turning out to be a pretty big mess.

Very big mess. It looks like this deal’s never going to happen. And finally, when they launch Truth Social in early 2022, it’s a little bit of a joke. It’s like this sort of very early version of Twitter when it’s sort of clunky.

How clunky? You were on it?

Yeah, I actually think I was one of the first people to get in, which I thought was sort of funny because I said I was from “The New York Times.” They actually verified me.

There was very little traffic. It was almost like you’d post something and you could literally hear the crickets.

Trump never posted for three months.

Trump never posted on Truth Social the site that exists for his —

And I remember writing a story and you couldn’t get an answer from them, why is he not posting?

Perhaps because he has his own doubts.

And also wasn’t a place — no one was there. I mean, they had a few million users. There’s a few million dollars in advertising on Truth Social, a lot of them the equivalent of almost late night TV advertising that you would see. It’s losing tons of money, which is in fairness, it’s not unusual for a startup company to lose money, but it was not clear where it was ever going to make money and where the money was going to come in.

And we’re looking at this thing, is it even going to happen? Your deal is in trouble because of regulators. And also the company is in trouble because there’s just nothing there. So everyone, I think for the most part, sort of counts this thing out. For them it was a desperate situation.

And then last summer, a bunch of things started to go right all of a sudden for Trump Media. And it really started to raise the prospects that this deal actually could happen.

We’ll be right back.

So Matt, how is it that things start to turn around for this real mess of a social media company that Donald Trump has founded?

OK, so the single biggest thing was last summer, the SEC settles its investigation with Digital World, with the SPAC that it was merging with. And that basically at that point clears the gates for them to start to really move forward with the merger.

What kind of settlement was it?

They had to pay $18 million, and they had to rewrite all their disclosures to make it consistent to reveal all the early talks they had had with Trump Media.

The other thing is Elon Musk buys Twitter, now X. And one of the first things he does is he says, Trump, you can come back. Start posting again. We want you. We love you. Everyone thinks Trump’s going to do that. But then he stays.

He continues the post on Truth Social, and it’s clear he’s sticking with his own platform. And if anything, he starts ramping up his postings on Truth Social, and they become increasingly, as we with the way Trump is, bombastic, inflammatory, attacking all the judges and all the cases going on, the prosecutors, political opponents. And he’s been doing it with increasing frequency.

And this is a key ingredient of last summer’s turnaround, because it’s clear at this point Trump is sticking with Truth Social. He’s not going anywhere. He’s leaning into it, and it’s become his platform.

But we shouldn’t lose sight that may be the most important thing is the loyalty of shareholders. And I’m not talking about big hedge funds, big institutions, wealthy people. I’m talking about ordinary Trump supporters, many of them who are posters on Truth Social and happen to be stockholders of this cash-rich SPAC that’s eventually going to merge with Trump Media. And they’re the ones who have kept this thing going to some degree.

As investors.

As investors. Because there were many points where the SPAC deal itself could have just failed. But they really want to make sure this company succeeds. It’s almost like a religious kind of thing for some of them. And I can tell you, one guy has been very vocal is actually sort of a Christian minister.

Good evening, DWAC stock.

He has his own streaming video show on Rumble, which he called DWAC Live, named after the shares.

Lord we ask in the name of Jesus, that you help the executives finish this strong and that you protect them from all the forces that would try to stop the merger and —

They talk about the stock and the merger, and it’s got his own following.

Just all show up at Mar-a-Lago, knock on the door and be like, hey, President Trump, we’d like to come party with you because we all own little bits of your company and we love you. Let’s just check on the price one more time before we head out for the night.

So in some way, Trump really owes a lot to his small shareholders who made this possible. Because if it wasn’t for them, there would be no merger.

And when they talk to you about why they have bought shares in this business, in this SPAC, even when it’s at its least successful and most imperiled, how do they talk about why it’s worth their hard earned money?

First of all, they view they’re building something. And they’ve all believed that, right or wrong, whatever you may think about it, that Truth Social is free from censorship, that it allows Trump and others to say what they want. And they really believe that as the founding principles, they’re the original owners essentially going to be of this company, and they’re helping it flourish and build.

So this has become a real personal thing for a lot of them, more so than I think I’ve ever seen with any other publicly traded company before.

So the folks who are investing in this SPAC, anticipating it will eventually get together with Truth Social, and who, as you have just said, sustained this through its darkest chapter, they aren’t really there because they see this as a highly profitable business. You just said, Matt, that it was losing money.

They’re doing it as a statement and I guess a measure of their fervor for Trump, for the movement he represents. Buying the stock is a way for them to put their money where their mouth is when it comes to MAGA.

Right, right. For them, this is about supporting Trump and supporting this company, which they view as critically important n keeping its message out there alive.

So, Matt, I think that more or less brings us to this week, when this turnaround you’re describing results in this crazy takeoff of the stock price. But just walk us through the mechanics of it.

What happened was there’s the shareholder vote. And the way it works is Digital World shareholders have to vote to approve the merger with Trump Media. It was at this point it was a foregone conclusion. But it’s a vote, so you never know what’s going to happen, though. And they get the vote on Friday. It’s overwhelming. I think it was 29 million shares voted in favor, and 200,000 voted against. I mean, you just don’t see that.

A landslide.

A landslide. Yes, like an electoral landslide. So the deal goes through. On Monday, the deal is actually closed, and we have our first day of trading on Tuesday of this week.

Ticker symbol DJT.

Donald John Donald.

Donald J Trump.

Former President Donald Trump’s newly merged social media company has begun trading, and shares are soaring.

It opens for trading at around $40 something a share.

More than 6.5 million shares in Trump Media had changed hands by 9:50 this morning.

They have to actually halt trading briefly because the volume, the level of trading is off the charts in the stock.

And currently you take a look at where shares are, they’re up about 40 percent.

At one point, it reaches $70 a share.

This is the highest profile SPAC we’ve seen in quite a while.

Really, I’d say ever, Katie. I mean —

And on the end of trading on Tuesday, it closes around $60 or so. And that’s how we get this $7, $8 billion valuation for the company and the paper gain of $5.6 billion —

But for now, quote, unquote, “DJT” is the mother of all meme stocks, with the stock up 32 percent up, as much as 58 percent today, hard to disagree.

I just want to make sure I understand why this company is now valued so highly. And I guess what I’m really getting at is, is there an actual business case for it, given what folks in your calling would describe as the fundamentals of the business? Or is this just a measure of these Trump-supporting investors’ deep affinity for him? Is this basically a bubble, or is there maybe a true financial justification that can be laid out here?

OK, so if we go pure fundamentals, it’s crazy. This company is not a $7 or $8 billion company. It had $3.3 million in revenues for the first nine months of last year. It lost about $49 million.

Yeah, that is not the makings of an $8 billion valuation company.

No, no, no. I mean, the one good thing it got going, it got $300 million in cash from this merger. Not for Trump, for the company. So that’s good. They can use that cash to go out and buy something, bring in more people, hire influencers on Truth Social.

But even then, they have 10 million downloads of Truth Social. I mean, Twitter is what, like hundreds of millions of users? I’m sorry, X has hundreds millions of users. Where’s it going to go for that kind of growth to justify that?

But this is what Wall Street is. I mean, we call them our meme stocks. They’re fantasy stocks. They take on a life of their own. We had this during the pandemic with GameStop and AMC. The shares run up to ridiculous levels, driven largely by retail investors.

And just to remind people, those were stocks where retail investors were buying shares it felt like because they wanted to send a message, largely anti-establishment message, they were mad at a hedge fund that had shorted it in one case, I remember. They wanted to make a point. They wanted to stick it to the man.

Right. And also it becomes a self-fulfilling prophecy. It becomes a mania. Then others see this and get in because you feel like if you keep buying, it’s never going to fall. It’s never going to go down. And that can work for a while, but eventually gravity will always take hold at some part.

I’m not saying that Trump Media is going to collapse. But at some point, something will happen that will trigger the stock to sell off.

Right, it’s fragile.

It’s fragile, right. It’s not sustainable at this level. But when it’s happening, it’s hard for me or anyone to give you a rational reason, and that’s why there’s this old thing, irrational exuberance. It’s not necessarily unusual. It’s just that it’s unusual because you have a very loyal investor base to him personally that is driving a lot of these surges in the stock.

I’m really curious how Trump’s position in this presidential campaign factors into what you just described. Because it feels like this irrational exuberance has to be linked somewhat to the reality that he is the now lead candidate in the polls for re-election. But I’m curious what investors think about that, how they think his chances of becoming president with the financial health and future promise of this company.

It’s definitely, I think, going to be a barometer, actually, of Trump and his political fortunes. I mean just by way of example, the SPAC stock started to soar this year when Trump was on the verge of locking up the nomination. It was around the time DeSantis dropped out in New Hampshire.

The stock surged like 60 percent, 70 percent overnight. It was really because people were like, hey, Trump is going to be the nominee, and we’re going to be going forward.

But can you just explain that? What does one have to do with the other?

In theory, it doesn’t have anything to do with it. But it’s like a proxy for him.

It’s also the idea that as long as Trump is still politically viable, Trump Media is viable. Truth Social is viable.

And presumably a president 2.0 Trump is the best possible situation for this stock price.

If he wins, I think it probably will be a high watermark for the stock. And I would just think given the dynamic with the election right now, it’s hard to see the stock not continuing to rise at least until November.

OK. I want to turn now to Trump’s access to this very valuable stock at a time when, as we all know, he seems to need money. How and when could he tap into this money?

OK. So at the moment, he actually can’t.

He can’t. There’s what’s called a lockup, a restriction. It’s not just for him. It’s for any major shareholders. They can’t sell for six months. It’s actually not unusual in these kind of circumstances.

The logic is you don’t want important people to the company, important shareholders, to bolt as soon as the deal goes through.

But there are other ways you can get around that. One way is for the board. It’s a seven member board. They’re all loyalists, for the most part. They could allow him to sell shares early. I personally think that’s unlikely because it shows a lack of faith. Just like if he had jumped from Truth Social onto Twitter, this would be the same kind of message being sent.

What they could do is allow him to pledge those shares, meaning he can go out and get a loan, use it as collateral. The shares don’t get sold, but you’re giving them to some other like a bank or probably more likely a hedge fund. So that would be a way for him to monetize his stock without actually selling it.

So if Trump really wanted to, he could find a way working through this board of loyalists to tap into this money pretty quickly if he so chose to.

If he asked the board to do it, I think there’s probably a good chance the board would do it. But if he doesn’t really need the money that desperately, I think he probably won’t. And I think the board would be reluctant because it doesn’t really help anyone to have lots of stock coming out into the market. That only will probably depress the price of the shares.

And it doesn’t help to have the face of the company, the man whose initials are on the ticker, selling the stock because that suggests he doesn’t have a tremendous amount of faith in the business. And that might trigger a sell off, which would undermine the value of the rest of his stock. It’s a pretty bad cycle to start.

It’s a bad — right, that’s like the event that starts to send the sell off. And even at that point, even your most loyal shareholders may say, well, I don’t want to be left the last one holding the bag.

Right. I want to step way back for just a minute and think about the larger meaning of what has happened with Truth Social. I mean, I’ve covered a lot of Trump’s businesses through the years, investigated them when he was a candidate in 2016. And it really strikes me that of all the businesses he’s been in, real estate, casinos, Trump University, selling Trump steaks, Trump wine, whatever, those made money.

This, in some ways, feels like the least sound business of all, and yet it has made him the richest by far. That’s a little bit weird to wrap your head around. What does that tell you about the nature of Trump and these investors who believe in this?

It is weird. I’m not a politics reporter, but from a business perspective, this has given me a little bit better insight into his seemingly unending kind of popularity and support. There’s the old adage on Wall Street, never fall in love with a stock. But the reality is a lot of his shareholders here are in love with the stock. They have fallen in love with it, and they’re in love with him to a large extent.

And when you have that sort of mix there, it allows a stock to soar to unreal levels that we’re seeing now. And who knows where it goes from here? But for the moment, it’s clearly working for Mr. Trump.

Well, Matt, thank you very much.

When the stock market closed on Wednesday afternoon, shares of Trump’s new media company reached $66 a share, up 14 percent from the previous day. As of this morning, the company is worth $9.4 billion.

Here’s what else you need to know today. Authorities said that the six missing workers who were on the Francis Scott Key Bridge when it collapsed are now presumed dead. The workers were members of a construction crew who were repairing masonry and potholes when a massive container ship plowed into the bridge on Tuesday morning.

This is no ordinary bridge. This is one of the cathedrals of American infrastructure.

Experts say that rebuilding the bridge, which carried 30,000 vehicles a day, will probably take years and cost hundreds of millions of dollars, a reality acknowledged by the Secretary of Transportation Pete Buttigieg.

So the path to normalcy will not be easy. It will not be quick. It will not be inexpensive. But we will rebuild together.

And the first ever congestion pricing system in the United States crossed a major milestone on Wednesday when New York officially approved tolls for cars driving through the busiest sections of Manhattan. The system, modeled on those in London and Singapore, is designed to significantly reduce traffic and air pollution. The tolls, $15 for most passenger cars and as much as $36 for large trucks, are expected to raise $1 billion a year for mass transportation.

The new system could still be blocked by several lawsuits seeking to derail it. But if those cases fail, the tolls will begin in mid-June.

Today’s episode was produced by Will Reid, Mary Wilson, and Asthaa Chaturvedi. It was edited by Lexie Diao, contains original music by Marion Lozano and Dan Powell, and was engineered by Alyssa Moxley.

Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly.

That’s it for “The Daily.” I’m Michael Barbaro. See you tomorrow.

• April 1, 2024   •   36:14 Ronna McDaniel, TV News and the Trump Problem
• March 29, 2024   •   48:42 Hamas Took Her, and Still Has Her Husband
• March 28, 2024   •   33:40 The Newest Tech Start-Up Billionaire? Donald Trump.
• March 27, 2024   •   28:06 Democrats’ Plan to Save the Republican House Speaker
• March 26, 2024   •   29:13 The United States vs. the iPhone
• March 25, 2024   •   25:59 A Terrorist Attack in Russia
• March 24, 2024   •   21:39 The Sunday Read: ‘My Goldendoodle Spent a Week at Some Luxury Dog ‘Hotels.’ I Tagged Along.’
• March 22, 2024   •   35:30 Chuck Schumer on His Campaign to Oust Israel’s Leader
• March 21, 2024   •   27:18 The Caitlin Clark Phenomenon
• March 20, 2024   •   25:58 The Bombshell Case That Will Transform the Housing Market
• March 19, 2024   •   27:29 Trump’s Plan to Take Away Biden’s Biggest Advantage
• March 18, 2024   •   23:18 Your Car May Be Spying on You

Hosted by Michael Barbaro

Featuring Matthew Goldstein

Produced by Will Reid ,  Mary Wilson and Asthaa Chaturvedi

Edited by Lexie Diao

Original music by Marion Lozano and Dan Powell

Engineered by Alyssa Moxley

Listen and follow The Daily Apple Podcasts | Spotify | Amazon Music

Over the past few years, Donald Trump’s social media platform, Truth Social, has been dismissed as a money-losing boondoggle.

This week, that all changed. Matthew Goldstein, a New York Times business reporter, explains how its parent venture, Truth Media, became a publicly traded company worth billions of dollars.

On today’s episode

Matthew Goldstein , a New York Times business reporter.

Background reading

What to know about Trump Media’s high-flying stock debut .

Ethics experts say the publicly traded company could present a new way for foreign actors or others to influence Mr. Trump , if he is elected president.

There are a lot of ways to listen to The Daily. Here’s how.

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The Daily is made by Rachel Quester, Lynsea Garrison, Clare Toeniskoetter, Paige Cowett, Michael Simon Johnson, Brad Fisher, Chris Wood, Jessica Cheung, Stella Tan, Alexandra Leigh Young, Lisa Chow, Eric Krupke, Marc Georges, Luke Vander Ploeg, M.J. Davis Lin, Dan Powell, Sydney Harper, Mike Benoist, Liz O. Baylen, Asthaa Chaturvedi, Rachelle Bonja, Diana Nguyen, Marion Lozano, Corey Schreppel, Rob Szypko, Elisheba Ittoop, Mooj Zadie, Patricia Willens, Rowan Niemisto, Jody Becker, Rikki Novetsky, John Ketchum, Nina Feldman, Will Reid, Carlos Prieto, Ben Calhoun, Susan Lee, Lexie Diao, Mary Wilson, Alex Stern, Dan Farrell, Sophia Lanman, Shannon Lin, Diane Wong, Devon Taylor, Alyssa Moxley, Summer Thomad, Olivia Natt, Daniel Ramirez and Brendan Klinkenberg.

Our theme music is by Jim Brunberg and Ben Landsverk of Wonderly. Special thanks to Sam Dolnick, Paula Szuchman, Lisa Tobin, Larissa Anderson, Julia Simon, Sofia Milan, Mahima Chablani, Elizabeth Davis-Moorer, Jeffrey Miranda, Renan Borelli, Maddy Masiello, Isabella Anderson and Nina Lassam.

Matthew Goldstein covers Wall Street and white-collar crime and housing issues. More about Matthew Goldstein

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