7 Things to Consider Before Starting a Restaurant

What to consider before starting a restaurant

Before you launch your new restaurant, consider the following elements.

1. Restaurant name

Have you ever been chatting with a friend who said they went to a place with an intriguing name and then immediately asked them, “What’s that?” That’s the power of an attention-grabbing, memorable restaurant name. Come up with a word (or two or three) that both reflects your restaurant concept and lingers in someone’s mind.

The name you choose should stand out not just in conversation but also on listing websites. When someone is faced with a big list of options on Yelp or Google Maps, they’ll be drawn to the most interesting names. Make sure your restaurant is one of those.

2. Funding

A fully functional restaurant requires a location, a sizable staff, tons of kitchen equipment and plenty of other resources, all of which quickly become costly. Chances are, you don’t just have the money lying around to cover all of these expenses, so it’s essential to consider how you’ll fund your operations. 

Joe Camberato, founder of National Business Capital, advised saving enough to cover costs while giving yourself some extra for the unexpected. “You need enough to cover the full cost of the buildout, plus at least 25 percent more for the inevitable surprises,” he said. “On top of that, you’ll want a minimum of six months’ worth of operating expenses, though having a full year’s cushion is even better.”

Traditional loans are an option, but you may need funding from multiple sources. Izzy Kharasch, president of Hospitality Works, noted that aspiring restaurateurs will probably have to use at least some of their own funds and that it may take time to obtain all of the capital you need. 

“I recommend that in addition to looking at bank loans, look to the SBA [Small Business Administration], investors and, of course, putting in their own investment money,” Kharasch said. “Some of my clients achieve the funding in 12 months, but most are closer to 18 months.”

3. Location

Wherever you decide to set up shop, be sure your restaurant is visible. It should be easy to spot from the street. Your parking is almost as important as your restaurant’s space; if a customer can’t find a place to park, you’ve lost business. Restaurants located off of a highway are often busy. 

It’s not enough to pick the right neighborhood, though. Camberato emphasized that the amount of space at your new location will affect restaurant profits. 

“Location can make or break your business,” Camberato said. “You need enough foot traffic to bring people in, but you also need a space big enough to generate the revenue required to stay profitable. Too many restaurant owners don’t do the math before signing a lease. They fall in love with a spot but don’t calculate how many tables they need to turn each night to cover costs.” 

He stressed the importance of having a detailed financial plan before committing to a location. “Before you even start looking, be really clear on what size and setup you need to hit your financial goals,” Camberato said. “Some restaurant models, especially quick-service concepts, only make sense at scale. If your numbers don’t work for a single location, you might need to plan for multiple locations from the start.”

4. Marketing

Have a plan to get the word out about your new restaurant. Take advantage of social media marketing, and look into joining restaurant coalitions so you can work with other restaurateurs to cross-promote your businesses. Many cities promote local businesses, so join a chamber of commerce and participate in food festivals to get the word out.

Joshua Wood, CEO of CJ Digital, also recommended leveraging digital marketing tools and focusing on search engine optimization (SEO). 

“Restaurant entrepreneurs should use an SEO tool to see how many people are searching for restaurants in that area,” he said. “These tools can tell you that 10,000 people are searching ‘restaurants in Greenwich,’ for example. This indicates the level of demand. This software also indicates how competitive the area is (e.g., how many restaurants are competing for the same keyword phrase).” 

Wood also mentioned that partnering with influencers, who already have large followings, can help spread the word about your new restaurant. “Our favorite way of marketing a restaurant is currently to find influencers, get them to create a video advocating that restaurant as a hot spot and then boosting that video via a brand partnership ad [or] spark ad on TikTok to everyone that lives within … [the area],” Wood explained.

5. Licensing and permits

Before you can open your restaurant, you need to apply for the proper licenses and permits. You may need to pass several inspections before you can begin operations. Reach out to your city government to find out what you need for your restaurant. You also must consider state and federal requirements, so do your homework long before you set a date for your grand opening.

Your permit needs will vary depending on your location, but it helps to start with a checklist when you’re doing your research. Kharasch offered a rundown of which bases to cover. 

“All cities have different licenses and permits, but most have building permits, demolition permits, electrical installation permits, HVAC requirements, liquor license requirements,” he said. “But the most important [thing] to keep in mind is the health permit. We recommend to our clients that they meet with the health department as soon as possible so that they understand what is required and begin building that relationship which is the longest-term city relationship they will have.”

6. Target customers

The type of customers you want to attract will affect the kind of restaurant you operate. It’s important to consider the income level, age and lifestyle of your ideal customer persona. For instance, do you want to attract customers who typically take their time while eating? Will your target audience be willing to travel to the restaurant? How much money will they be willing to pay for their meal? Is your target customer available in the early morning, late evening and/or anytime during the month?

Once you know the answers to these questions, you will have a clearer vision of the type of restaurant you want to own, as well as the menu, price range and decor.

7. Competition

Before you sign the lease on a restaurant, it is essential to know your competition. Be sure to visit as many of the restaurants in the area as possible. Visiting your competitors gives you a chance to identify their strengths and weaknesses, which can help you differentiate your offerings and atmosphere. Look for their customers’ preferences so you can incorporate them into your restaurant, and recognize their failures and successes to learn what and what not to do. A solid competitive analysis is key if you want to take your restaurant to the next level. 

The best restaurant software and services

The perfect software for your business can minimize the chance that human error will hinder your business’s growth. Everyday tasks, such as completing transactions and managing your staff, can be streamlined to let you focus on the big picture.

• Point-of-sale (POS) system: If there’s one piece of software you pick up for your restaurant, it should be a POS system. The best restaurant POS systems easily connect the front and back of the house to help everyone stay on the same page and get orders out in a timely manner.
• Business phone system: Customers call restaurants constantly to make reservations, verify allergen safety, inquire about specials and provide crucial feedback. Missing a call can mean losing a customer, but the top business phone systems can help manage it all.
• Accounting software: Regardless of why you chose to open a restaurant, it was most likely not to become an accountant. The best accounting software takes away the guesswork and simplifies the process, giving you a healthy sense of your business’s finances.
• Credit card processor: Customers expect fast service, easy refunds and convenient payment options. Having one of the highly rated credit card processors can expand the card options you accept while cutting your fees.
• HR software: Your staff, from front-of-house personnel to line cooks, are the backbone of your company. Managing your team and their schedules can be especially complicated and messy, but the top HR software can structure schedules and payroll, as well as find and maintain the best employees.
• Restaurant management system: The best restaurant management systems (RMS) are similar to expanded POS systems that include staff management and inventory. An RMS also performs typical POS services, like order management and payment processing. 

Natalie Hamingson contributed to this article.