How To Start A Restaurant The Smart Way

how to start a restaurant the smart way There are a million decisions that need to be made before you can start a restaurant. For one of the most important decisions here’s 3 words to keep in mind. Location, location, location

I have seen restaurants that were setup properly fail simply because of their choice of location. Sometimes just a few hundreds yard could be the difference between thousands of dollars in sales and profits, or a “For Lease” sign in the window.

The location should be considered before the lease or rent rate. If you find a fabulous location, with tons of traffic, it is probably going to be much more expensive than an out-of-the-way location on a dead end street. Remember, without customers, you don’t have a business. Getting a great deal on a bad location will end up being a bad deal for the future of your restaurant.

Even the side of the street can make a big difference. Notice traffic patterns. Is the commuting traffic going the right way, at the right time, for the location you’re considering? Is one side of the street busier than the other side? Why? Is the vehicle access on and off the street easier on one side?

(To read the story of how I started a restaurant with very little money click here)

How To Start A Restaurant The Right Way

how to start a restaurantHow to start a restaurant isn’t as important a question as,

“Is there a need for a restaurant there?”

Is there a need for your vision of a restaurant in THAT area?

Are there more hungry hamburger eaters in that area than there are hamburger joints?

You don’t want to setup a vegan 4 star restaurant in the middle of Texas cattle country.

You do not want to start a four star destination dinner establishment in an industrial area where everyone goes home at night. Are there potential customers for breakfast, lunch or dinner?

How do you REALLY know?

You have to go to your potential location and ask people. It will give you a real insight to the area. You'll gather a ton of information, demographic study, market research and confidence.

There is a lot of researching to be done to become a profitable restaurateur. Fortunately, if you concentrate on a few priorities, most of it can be learned on the job.

How To Start A Restaurant That Stays OPEN!

Right now there are many hopeful restaurant owners carefully planning, creating themes and designs for their potential new restaurant. Creating a restaurant, seeing that idea come to life and opening the doors is an awesome feeling.

However, once again, remember starting a restaurant is NOT the most important thing. Having your restaurant create positive cash flow and remain open for a long, long time is what is MOST important.

Here’s an example of another area where it's easy to get your priorities wrong:

Many people focus on their wedding day and don’t think much about the marriage that follows. The wedding day is a single day. The marriage can be 50 years. (Back to the restaurant business....) Your grand opening is a single day. Your restaurant business should operate and create profits for years.

What Does It Cost To Start A Restaurant?

start a restaurantI’ve seen many restaurants that have millions of dollars invested in them before they open their doors. These are usually started by seasoned chefs and restaurateurs who have other successful restaurant currently operating.

I know of one restaurant in Toronto where just the designer was paid over a million dollars!

Of course, most operators get into ownership by understanding how to start a restaurant on a smaller budget.

Let’s talk a little bit about budgeting.....

It has been my experience that the amount of money invested in the start of a restaurant doesn’t equate to the chances of success. I’ve seen people start a restaurant with huge budgets and fail. Overspending on items that are meant to impress friends, or simply because you have the funds is a waste of money.

In my experience, (including my own budget) the operators who start a restaurant on a tight budget, but have the expertise and knowledge to grow a business, are the most successful.

Consider this scenario:
- New owner “A” spends $400,000 to build out and equip his new family style restaurant in the middle of a city block on a busy street.
- Directly across the street new owner “B” updates a vacant restaurant building and turns it into a buffet restaurant for $60,000
Who has the higher overhead?

If your competition spends ten times more than you do just getting open, who stands a better chance for profits?

There are some things you simply must have some financing for, but financing and budget alone doesn’t improve your chances for success.

How To Start A Restaurant The Wrong Way

Here’s some ways to start a restaurant the wrong way
(I’ve actually witnessed examples of all of these!)

- Spend every penny you have on fancy items and blow the entire operational budget before opening day
- Buy a restaurant for a “great deal” in a terrible location
- Do shotgun advertising and throw money at every advertising salesperson who walks through your door
- Pay your supplier their advertised rate
- Wait until a day or two before opening to start hiring staff
- Save a ton of money by doing everything yourself
- Forget to order a sign for the front of your new restaurant
- Try to start without permits
- Believe that because you make great chili you are ready to start a restaurant
- Think that running a restaurant won’t require much time or effort
- Have your son (who’s a lazy high school dropout) manage the place. Make sure he’s never worked in a restaurant or customer service position before. Don’t train him. Let him do all the hiring. Don’t check the books. Don’t consider or examine ratios or keep inventory of food or liquor. (Yep, it happened)

Unfortunately, many new people who try to start a restaurant simply don’t have the “insider knowledge” and “tips and tricks” that the veteran operators now know. Make sure YOU are aware of what is really working in today’s restaurant industry in your are before you start a restaurant.

How to start a restaurant isn’t as important as “How to keep your restaurant open, and profitable.”