How to Start Restaurant Business
22 September, 2023
The restaurant business is a significant sector in India. As of March 2023, the industry is estimated to be worth ₹4.9 lakh crore and is projected to grow at a compound annual growth rate (CAGR) of 10% over the next few years.w
The sector is growing at a rapid pace owing to various factors such as rising disposable incomes, changing consumer preferences, the growing number of young professionals, and the increasing popularity of eating out.
If you wish to start your own restaurant, read this article to understand your initial steps.
Guide to starting a restaurant business
Choose the restaurant concept
Choosing the right restaurant concept is crucial to the success of your business. It is important to think about what kind of food you want to serve, the atmosphere you want to create, and the target audience you want to attract.
Do you want to open a fine dining restaurant with a romantic ambiance, or a casual eatery that caters to families with children? Or do you want to open a cloud kitchen? Will you focus on a specific cuisine, such as Italian or Mexican, or offer a diverse menu?
Consider your strengths and interests, the demand in your local market and your investment capacity. Once you have a clear concept in mind, it will be easier to develop your menu, design your space, and market your restaurant to the right audience. A well-defined concept can set you apart from the competition and attract loyal customers who appreciate what you have to offer.
Select name and location
When applying for a license, it is important to provide the name and location of your restaurant. The name of your restaurant should be catchy and appealing since it will give the first impression to your customers. Also, you must ensure that the name should have domain availability.
It is important to research the local market before deciding on the location. You need to identify competitors and understand their business models.
Create a business plan
Creating a business plan is a crucial step when starting a restaurant business. It helps you define your goals and objectives while also providing you with a roadmap to follow those goals and present them to potential investors. Your business plan should include details on your restaurant concept, target market, menu, marketing strategy, financial projections, and operational plan.
It is essential to have a financial plan with realistic projections for revenue and expenses. This will help you determine how much investment capital is required and when you can expect a return on investment. Create an operational plan that outlines your day-to-day operations, including staffing, inventory management, and customer service.
Evaluate costs
Evaluating your restaurant business costs is an ongoing process that requires careful attention to detail. As a restaurant owner, you will have to bear the cost of raw materials for preparing food. This should ideally amount to about 30% of the menu price.
Labour costs can shoot up your overall costs when opening a restaurant. It is also important to evaluate your overhead costs, such as marketing, advertising, and maintenance. These expenses can add up quickly and need to be factored into your budget.
Apart from these costs, consider other expenses such as rent, kitchen equipment, a POS system, obtaining a license, etc.
Get funding
Funding your restaurant business can be challenging, but there are several options available to help you get started. One option is to seek out investors who are interested in supporting your venture. This can involve pitching your business plan to potential investors and securing funding in exchange for equity in your restaurant.
Another option is to apply for a small Business Loan from a bank or lending institution.
Crowdfunding is another popular option for funding a restaurant business. This involves raising small amounts of money from a large number of people through online platforms.
Get licences
A restaurant business requires obtaining licences and registration. You will need to register your business entity whether as a proprietorship firm or in partnership with others as a partnership firm. You may also establish it as a private limited company. It is advantageous to choose a One Person Company (OPC) or Limited Liability Partnership (LLP) business structure.
You need to get a Food Safety and Standards Authority of India (FSSAI) licence mandated as per Food Safety and Standards (FSS) Act, 2006. You are also required to obtain Shop and Establishment Act registration, a trade licence from the municipal corporation, a no objection certificate (NOC) from at least three neighbours, Eating House License, GST registration, trademark registration, etc. If you plan to provide liquor to customers, then you must get a liquor license from the Local Excise Commissioner.
Hire the right staff
You will need to hire three types of staff: kitchen staff such as cooks; service staff such as waiters, and delivery drivers and management staff such as cashiers, restaurant managers, etc.
Once hired, train these new hires thoroughly so they know exactly what's expected from them during each shift (and beyond).
Partnership with delivery companies
Collaborating with food delivery companies instantly expands your customer base. By leveraging their extensive network, you can reach a wider audience hungry for your delectable offerings. Setting up your restaurant business on Zomato and Swiggy provides a robust online presence. Customers searching for nearby restaurants or craving specific cuisines can easily discover and order from your menu.
Menu planning
This is the process of selecting and arranging food items that will be served in your restaurant. The process typically involves several steps, including:
Choosing the menu style
Selecting the menu items
Creating a balanced menu
Determining the quantities and price
Tasting the menu before going live
Marketing
Once you have a good idea of what kind of restaurant business you want to start, it is time to think about marketing. Marketing is the process of communicating your brand and products or services to potential customers.
Many different types of marketing strategies can be used for restaurants, including:
Online advertising (Google Ads)
Social media campaigns (Facebook ads)
Content marketing
Final word
Now that you know the basics of setting up a restaurant business, it is time to get your restaurant up and running. Don't forget to look into factors such as using modern technology that will be useful for your business. These include cloud-based POS systems, apps that can be useful for placing online orders, etc.
