Setting Up And Opening A Restaurant

A helpful guide about setting up and opening a restaurant, and what you need to consider.

There are many factors involved in setting up and opening a restaurant, from location to finance, and theme to decorating. What many people fail to understand is that this is a major part of your restaurant success and setting up a restaurant properly before you open is paramount because it will cost you thousands to correct if you get it wrong. This article has been written to highlight the areas you absolutely MUST consider when setting up and opening a restaurant.

Finance

The first thing you need to consider when setting up a restaurant is finance. How much can you afford to put into the business yourself and how much will you need to borrow? The truth here is that there are a multitude of expensive 'hidden' costs involved with setting up a restaurant that many people do not consider.

The following list will highlight the different areas you'll need finance for:

1. Premises

Depending upon the type of premises you require, this will vary accordingly. Leasehold premises are cheaper than freehold premises. Generally a leasehold will cost you between £40,000 up to around £200,000.

2. Property Fees

You will have to pay your estate agent a fee on the premises you obtain through them, and you will also have to pay a surveyor and in some areas an energy efficiency report needs to be compiled on the premises! All these costs vary with individual agents, but for the purpose of your budget it would be safe to say that you should expect to pay anything between £1,500 and £5,000 for this.

3. Legal Fees.

These can be quite expensive depending upon how long you use the services of your solicitor. The usual things you need to pay for are exchanging contracts between the landlord/estate agents for your property, any license applications you need to apply for through your local council, also you may need to draw up a partnership agreement for your restaurant.

The amount this will set you back is variable from case to case, but remember you're solicitor will charge an average of £100 per hour for consultations, £20 per letter and £10 per phone call.

Take the following example into consideration: You purchase a leasehold restaurant for £75,000, on which you pay £3,800 in fees and services. It costs you a further £2,400 in legal fees to get the contracts exchanged and a license for the premises. You have spent £81,200, and you have no stock yet!

What you need to consider next when setting up a restaurant is:

1. How much finance you will require for decorating/refurbishment?

2. How much finance you will require for upgrading your kitchen equipment/storage?

3. How much finance you will require for buying your initial stock?

4. How much finance you will require for your launch/marketing?

5. How much finance do you need for your operating cashflow?

There are no cast iron amounts for these because each restaurant operation is different, we can only generalise what you will need based on our experiences. If you are buying a leasehold restaurant then usually the premises and equipment are in a good working order and state of repair, so your initial costs here are relatively low, you may only need to clean things up a bit and do a bit of light decorating, depending upon your requirements.

Your initial stock, we suggest, should be enough to keep you for 3-4 days, you do not want to compromise your food quality or have too much in storage as this is dead money. Depending upon the size of your menu and the quality of your supplies this will vary, shop around for the best deals from reputable suppliers.

Your launch or advertising/marketing campaign can be simple yet effective and cost you very little, for more information regarding marketing and advertising visit here.

Your cashflow is another variable, you should make sure you always have enough money available to be able to run your restaurant for at least two weeks without any income! Treat this as your emergency fund. To have a look at cashflow in more detail and download a free spreadsheet visit here.

Market Research

Yep, that's right, market research is vital to your restaurant success, whether you are in The UK or The USA. Many people setting up restaurants think they have hit the jackpot with their concept/idea and plow ahead and set it up without any research into their market, only to fail!

Obviously you think your concept is a winner, you thought of it, and it may well be, but you must do some research before you commit yourself.

The things you really need to consider are:

1. The Already Established Restaurants

How are they performing? What do they sell? How much do they charge? Where do they advertise? In order to be able to make your restaurant succeed you need to compete with these restaurants and offer something different, or better than them.

If your idea/concept for a restaurant is the same as 5 others in the town, and you plan to sell the same items at similar prices then the chances are that you will struggle to create an impact on the market.

If there are no vegetarian restaurants in your town and you plan to open one, just ask yourself this one question WHY ARE THERE NO VEGETARIAN RESTAURANTS? It may be that nobody else has decided to open one, or it could be that the concept simply won't work. Do your homework.

2. Who Are Your Potential Customers?

Who are they? Where do they live? Where do they work? How much can they afford to spend? Will they want to come to your restaurant? Again, this is extremely important, whether you are in The UK or The USA.

If you are planning on opening a high class, expensive restaurant where a meal will cost between £30 and £50 each and a bottle of wine sets you back £20 then opening it in a small town where a majority of people are unemployed is ridiculous! Who is going to come? No one, and you'll fail.

These are the main areas we feel you should consider when setting up a restaurant. If you consider these points and put them into practice then your chances of restaurant success are already very good.

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