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

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Every great restaurant starts with a spark: an idea for a menu, an atmosphere, or a community space that doesn’t exist yet. But turning that creative vision into a sustainable business is where the real work begins.

You’ll need a blend of kitchen fundamentals, rigorous financial planning, and marketing savvy, not to mention resilience. Although the path to opening night can involve a lot of moving parts, a systematic plan can help simplify the journey.

To help you get started, this guide breaks down the core essentials of building your restaurant from the ground up.

1. Pick a Restaurant Type

Your first step can simply involve brainstorming and choosing a concept that gets you excited. Do you dream of opening a vegan food truck or starting a farm-to-table pop-up restaurant? Perhaps you have your heart set on only serving warm breakfast comfort food.

When picking a restaurant type, also consider the following questions:

• What type of service do you want to offer?
• What does your target audience look like?
• What is your unique brand?

 

Consider Low-Cost Restaurant Start-Up Ideas

In this phase, you may also want to consider your budget. Financing options exist (more on that shortly), but if you’re working with limited capital, consider these lower-overhead restaurant models.

Start a Home-Based Catering Business

With home-based catering, you may be able to cook out of your home, although it’s more likely that you’ll cook from a commercial kitchen space and run the business operation out of your home. This can make catering an economical option, and you can expect lower startup costs than opening a restaurant.

Start a Ghost Kitchen or Ghost Restaurant

A ghost kitchen or ghost restaurant operates out of a rented commercial kitchen space. Food is delivered to customers through third-party delivery apps like Uber Eats or GrubHub. This can be one of the most affordable ways to start a restaurant. You’ll be leasing your kitchen space, but there’s no dining room or bar to pay for.

According to Entrepreneur Magazine, startup costs for a ghost kitchen are estimated to range between $10,000 and $50,000, and in some cities, local providers offer options below $10,000.

Launch a Food Truck

Starting a food truck often comes with a lower price tag than opening a brick-and-mortar restaurant, but it’s still a significant investment of both money and time. Total startup costs can range from $40,000 to $250,000, depending largely on the choices you make. A used truck with basic equipment can keep expenses toward the lower end, while a new or custom-built truck, specialty equipment, and permitting fees in a stricter city can push costs toward the higher end.

Expenses can include purchasing your truck, outfitting it with the necessary equipment, and getting the necessary permits.

“People have this idea that food trucks are easier than running a brick and mortar,” says Nahika Hillery, an Escoffier graduate who built her food truck business while in culinary school. “Lower risk? Yes. Lower overhead costs? Yes. However, sometimes the inconvenience of the mobile model can be more difficult.”*

Operating costs might be lower, too, since you can use a tablet-based point of sale (POS) system, and you’ll have much lower utilities and staff costs. Hillery also notes that the mobility opens doors to a wider customer base, and the format can give owners creative freedom that a fixed location sometimes can’t match.

“It’s a beast to run but despite all the challenges, I truly enjoy it,”* she says.

 

2. Create a Business Plan

Now that you have an idea, it’s time to build a plan. Think of your business plan as a skeleton outline that details each important component of your foodservice business. You can leverage this business plan to pitch potential investors.

Fleshing out those operational and financial details takes a lot more than just knowing how to run a kitchen line.

“History, terminology, calculating COGS, profit margins, profit/loss, product waste,” says Lance McWhorter, an Escoffier graduate who went on to open his own restaurant and compete on Food Network’s Chopped. “There’s so much more to learn than just cooking.”*

To help bridge that gap, Escoffier’s food entrepreneurship curriculum is designed to walk students through the business lifecycle, from vetting an idea to forecasting revenue and pitching investors.

Devise a Marketing Plan

Investors will likely expect a clear marketing strategy in your business plan showing how you’ll attract customers, retain them, and balance paid media with organic outreach. Make sure your marketing plan is thorough and covers effective strategies such as social media marketing, branding, email marketing, SEO, and more.

 

3. Choose a Prime Location

Location can be one of the most powerful factors in a restaurant’s success, shaping how easily you reach your target audience. A spot on a busy street with steady foot traffic can put your restaurant in front of new customers before you’ve spent a dollar on marketing.

Think about the type of food you’re serving and how it might resonate in your location. For example, fine-dining Italian might do best in an upscale brick building next to boutique shops. But deli sandwiches and small bites could land better in a casual food truck environment. Also, think about leasing vs. buying a physical space, which can affect your costs and profits immediately.

4. Map out Your Menu

Once your business idea and plan are in place, you can move on to building out your menu. Consider high-quality, seasonal ingredients when conceptualizing dishes, along with associated costs and competitor pricing. Don’t forget a strong drink menu, too; in many restaurants, beverages drive much of the profit.

Culinary school coursework in this area often covers menu creation and design, from visual layout to price analysis to making the most of available resources.

5. Prepare for Restaurant Costs

Beyond your lease and food costs, understanding secondary expenses can help you budget accurately—and decide where to splurge versus where to save.

Here are some of the biggest expenses you may face.

Remodeling or Restaurant Improvements

Unlike a residential lease where tenants are expected to leave the space as they found it, it’s not uncommon to invest money into remodeling your commercial space when you rent.

For example, you may need to change the size of the kitchen or add a bar. Landlords sometimes provide a “tenant improvement allowance” to offset some of these costs. But the details will depend on your specific lease, so make your requirements clear before signing. And if it’s a property you own, you are typically responsible for all of the costs.

Restaurant Equipment

Ovens, refrigerators, stand mixers, fryers, and commercial dishwashers usually aren’t included with your restaurant space. You’ll probably be responsible for purchasing or leasing this equipment. An exception may be a commercial kitchen rental, which could come with some equipment already built in. When it’s time to buy, you may be able to find some of this equipment second-hand at a reseller or auction.

Restaurant Furniture, Supplies, and Technology

A full-service restaurant requires space for guests to sit and eat. So you’ll need tables, chairs, and barstools for any indoor and outdoor spaces. Plus, you may need a host stand and server stations. There will also be costs like plates, silverware, glassware, linens and towels, menus, and technology like your POS system and your payroll system.

6. Fund Your Restaurant

So, how do you raise the capital to cover these startup costs? Once your business plan and financial projections are locked in, it’s time to explore your funding options.

Secure Grants

Grants can be a great resource to help you start a restaurant. Auguste Escoffier School of Culinary Arts alumna Tiffany Moore won two grants to get her startup capital.* One was through StreetShares (now known as MeridianLink), which awards grants to military veteran entrepreneurs. The other was through Fiserv, a financial services tech provider that also provides some grants to small businesses.

Many grants have specific criteria, so it may take some time to find one that you’re eligible for. These financial gifts usually don’t have to be repaid, and even a small grant of a few thousand dollars could help you to get closer to your funding goals.

 

Obtain a Business Loan

Some banks and credit unions provide small business loans, especially if you already have a relationship with those institutions. As long as you carefully manage your expenses and don’t overborrow, outside financing can be a great way to find startup capital.

Some restaurateurs qualify for an SBA 504 loan, which is designed for major purchases like real estate or equipment. Because these government-backed loans are managed locally through Certified Development Companies (CDCs), your first step is finding a qualified CDC lender in your area to get things started.

No matter what type of business loan you choose, realize it can take anywhere from a few weeks to a few months to receive funding. So start the application process early to ensure you have your funds when you need them.

Bring On Private Investors

Private investors can invest in your small business in exchange for a portion of the profits. You can bring them on as partners to handle some of the workloads, or they can be “angel investors” who take a hands-off approach and instead let you run the business on your own—as long as they’re receiving their share of the profits.

Explore Crowdfunding

If you already have a group of people supporting your restaurant concept, crowdfunding may be a fruitful funding option. By pitching your restaurant on platforms like Indiegogo and Kickstarter, you can gain financial support from individuals. And if you’d like, you can encourage donations by offering future rewards like discounted meals or invitations to a soft opening.

7. Obtain Restaurant Licenses and Permits

You’ll need licenses and permits pertinent to the city and state where your restaurant is located. Licenses and permits will also be specific to your restaurant type and whether you plan to sell liquor.

Be aware that some of these can take a long time to obtain (generally two to six months), so try to get a head start on this process. Because this process can be complicated, sometimes it’s best to hire a specialized lawyer to help you.

8. Hire Qualified Staff

Running any restaurant takes a whole crew of dedicated kitchen staff who have the proper training and experience. Labor can be one of the highest operating expenses a restaurant owner faces, so building your staffing plan early and factoring those costs into your financial projections can save you from significant budget surprises down the road.

When hiring, consider the entire brigade de cuisine system, which covers the front and back of the house.

To help avoid frequent turnover, consider implementing a thorough interview process, check references, and look for chef and management candidates who have completed an accredited culinary curriculum. Putting the time into thorough staff training and building a positive work culture can also go a long way toward boosting employee retention.

You Opened! Now What?

You made it past the planning stages and maneuvered through the maze of details to make it to opening day. Congratulations, you’re a business owner! Now what?

Now, you work to execute on your business plan and keep improving. This can take a mix of creativity and hard-nosed business acumen as you continually evaluate and tweak your business model. Remember to regularly evaluate your menu offerings, know your profit margin, keep abreast of what the competition is up to, stay on top of any staffing issues, and make sure your guests are enjoying themselves.

Marketing often means social media engagement and keeping on top of reviews, whether solicited or unsolicited. Customers not only appreciate a good meal, but they often seek a relationship or sense of community as well. If this sounds daunting, you might consider hiring a social media manager as part of your marketing and advertising budget.

Looking further ahead, you might find yourself in a position to expand. It’s never too early to consider your strategy for that scenario, including franchising. When you become a franchisor, you allow others to buy licenses to operate under your brand name and business model; this helps you expand into new locations without having to manage each location yourself.

Begin Your Food Startup Journey

When it comes to starting your own restaurant, make sure you have a comprehensive business plan in place. This may take a thorough understanding of culinary fundamentals, plus business and marketing skills to execute your food startup idea.

If you’re looking for guidance on how to launch your own restaurant, consider Escoffier’s Food Entrepreneurship program to get your business idea in motion. Contact us to find out more about programs that may help you reach your goals.

IF YOU FOUND THIS FOOD ENTREPRENEURSHIP ARTICLE HELPFUL, HERE ARE MORE YOU MIGHT ENJOY:

• How to Start a Bakery Business From Home
• What Is Hospitality & Restaurant Operations Management?
• How to Attract the Best Employees for Your Restaurant

This article was originally published on June 18, 2021, and has since been updated.

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