Starting a food business is not as easy as it sounds. There are many things to consider before you invest in your idea. You need to consider the hours, budgets, and resources required to get your business going. This guide will tell you all you need to know about how to start a food business.
There are a lot of different kinds of food businesses you can start. Once you establish a plan and make the necessary investments, it’s time to think about what type of entrepreneurial direction you want your food startup to take and how it will fare in the marketplace.
Here are some tips for starting a new food business that best suits your needs.
Where can I open my restaurant?
The next question that might come after how to start a food business is where you should start it. Typically, opening a restaurant in a commercial area like a shopping mall or plaza is easier.
This type of restaurant is usually higher volume and they usually have more foot traffic, which makes it easier to get customers. In some cases, you might have to start your own food business by opening up around the highway if there are no other options available in your town.
If you are starting your own food business and decide to open up near a highway, you should be aware that the sound of cars driving by can affect your success. You may want to isolate yourself from the noise by investing in soundproofing or an enclosure that buffers the noise of cars speeding past.
If you choose not to do this, make sure you choose a location that isn’t too close to the road so customers can still hear themselves talk inside.
The startup costs
Starting your restaurant is a lot like any other business. The startup costs are usually the biggest expenditures before you even get started. This can include things like equipment, inventory, licenses, and fees. But don’t let that discourage you. There are various ways to keep your startup costs low.
For example, you could purchase some second-hand equipment from eBay or Craigslist instead of buying new kitchen equipment and furniture for the full retail price. When it comes to inventory, try buying food in bulk rather than purchasing items one at a time at a store.
Some of the costs include:
- Salaries of employees and team
- Equipment and supplies
- Food products’ cost
- Rent or cost of real estate
- Cost of designing the space
A well-crafted business budget will encompass examining all the costs associated with launching your business, the amount of money you’ll need to keep the business afloat in the short term, and a long-term projection of how your business will make money and how much profit you can expect to generate.
Each of these ways has its set of benefits and drawbacks, so it’s important to pick the one that suits your business model and long-term goals.
Analyze the market
As you put together your business plan, you should research your competitors. The food industry is extremely competitive, and there are many businesses in similar markets. It’s crucial to find out who your competition is and what they’re doing before you move any further in starting your small food business.
The first step to opening a restaurant should be researching industry trends. This will help you identify opportunities and threats in the industry that could affect your ability to turn a profit. The next thing is to understand market area demographics or economic statistics, which will determine the potential of how much money your restaurant can make with its sales in this specific area.
It is important to decide the target audience for your restaurant. You must understand the customer preferences to develop a concept appropriate for them.
If you’re opening a Quick Service Restaurant (QSR), you have to focus on younger generations and their food habits, while if you want to open a full-fledged dining restaurant, it’s better than the ambiance attract not only youth but also families.
The type of concept distinguishes your restaurant from others in its market area and attracts particular customer groups.
The existing restaurants in the market area can help you analyze demand and market opportunities. Assess their competitive strengths, and weaknesses and learn from their successes and failures.
This is crucial to your restaurant and its ability to draw customers. You need to ensure that the location of your restaurant is visible, accessible, convenient, and attractive in order for people who would like to come. The location should complement both market factors as well as a good location itself draws greater traffic from potential customers.
Ideally, you want to find a hole in the market- a place where there is customer desire that no one else is filling. To turn a profit, customers need to want it and be willing to buy it. Some niches you can choose from are:
- Bakeries
- Home-made food
- Healthy meals
- Special events catering
- Food trucks
To be successful in the restaurant industry, you must analyze your market and customer demand carefully. Doing so will help you execute a strong plan that can compete with other restaurants.
Financial considerations
The main thing you need to analyze is whether you’re financially able to start your own restaurant. It may sound like a good plan, but if you don’t have the resources to fund it, then you can’t get started.
Here are your funding options –
- Equipment loans
When you need to purchase expensive restaurant equipment or are looking at purchasing a food truck, an equipment loan is a great option. It’s simple: You receive the money for your purchase, and the purchased item serves as collateral- meaning if you don’t pay back the money, we can repossess it as payment.
- SBA microloans
SBA microloans are a great asset for food businesses. It is a loan up to $50,000 guaranteed by the SBA and has low-interest rates and flexible terms for repayment. This can be an amazing way to start up or get an extra cash boost from your business budget if you own a restaurant
- Crowdfunding
If you don’t have the money necessary to get started, another way is through crowdfunding websites such as Kickstarter. A benefit of using Kickstarter is that it can be used for all sorts of businesses- not just restaurants- and it can help raise funds from friends, family members, and even complete strangers who want to see your business succeed.
- Line of credit
A line of credit is a great option for someone who is starting a food business. It provides access to funds that you can borrow from and up to the limit of your fund anytime. This is perfect for those who need cash-strapped moments in time.
The initial costs can vary greatly based on your establishment’s quality, size, and location. You need to plan well with the capital available and endeavor to keep operational costs in check while growing revenue. This ensures a positive cash flow for your restaurant business otherwise you may have to close it down if things go out of hand.
Food safety regulations and permits
One of the essential things before opening your restaurant is getting a permit. The permit will allow you to operate your restaurant legally. If you’re serious about starting a food business, it’s important to plan and know what permits are required in your area.
It is worth discussing your product and facility with the FDA District Office as well as state and local regulatory agencies.
Here is a concise list of licenses you will need:
- A food handling permit
- A Certificate of Occupancy or CO
- Liquor license if you are planning to sell alcohol
- A food license
- A resale license
If you wish to serve alcoholic beverages or pork products, you may need additional licensing or approval from the Alcohol and Tobacco Tax Trade Bureau and Department of Agriculture, respectively.
The Center for Food Safety and Applied Nutrition (CFSAN) works with FDA field offices to ensure food safety in America, except for meat, poultry, and some egg products that the USDA regulates. CFSAN ensures that these foods are properly labeled with safe, sanitary, wholesome, honest-labeled cosmetics.
In addition to getting a permit, make sure that your food safety regulations are up-to-date. Find out what kinds of licenses you need to put in place and how long it will take to process them.
You should also know if any changes have been proposed at the federal level for businesses like yours. Permits take time and money, so it’s important that you plan when seeking them. You can find out how much it will cost by researching the permitting process for your city or county on sites like USDA’s Food Safety and Inspection Service (FSIS).
The number of people you will need to hire
You’ll need servers, bartenders, bussers, food runners, hostesses, dishwashers, cooks, and managers. The number of people you will need to hire depends on how big your establishment is and what type it is.
Hiring is one of the most significant expenses in starting a food business, so it’s essential to know how many staff members you will require before starting your startup costs. For instance, if you are opening a small casual restaurant with only 40 seats, you’ll need 3-5 employees at the most.
However, if you are opening up a large sit-down restaurant with 150 seats or more, you would need approximately 10-20 employees.
Restaurant Equipment and supplies
A startup restaurant is a new establishment that will serve food or beverages to customers. To serve food and beverages, you’ll need some basics like a stove, refrigerator, oven, and dishwasher.
You should also invest in other items like utensils, plates, bowls, glasses, napkins, coffee mugs, ashtrays, outdoor tables and chairs (if applicable), a cash register, etc.
It’s important to consider what type of cuisine your restaurant will be serving because this may dictate the type of kitchenware you’ll need. For example, if you’re going to be cooking traditionally prepared foods from scratch, you’ll need more expensive supplies than if your menu includes microwavable meals.
Here are some other investments that could enhance your business:
- POS system
Many restaurant systems offer enhanced usability on the market today to make it easier for staff to use. The point of sale system, or POS, is a modern version of the cash register. The POS is how your waitstaff takes down orders and charges customers and receives payments from them.
POS systems are a great way to facilitate the ordering process at your restaurant. The right POS system fits your food business’s needs best. Some systems offer customer and floor planning management tools, which might be more useful in full-service restaurants.
- Good suppliers
If there’s an abandoned restaurant in your area, you can buy their equipment or furnishings for cheap. Alternatively, they may have extra stock they want to get rid of that we can take on too. Your food can be locally sourced and trade publications or organizations like the National Restaurant Association can provide help too.
Seek out suppliers you can depend on and trust to ensure your supply needs are met. Finding a sustainable supplier also gives you another selling point, as they have recently become more attractive to customers.
Marketing your business
Marketing your business is one of the most important things you need to do how to start a food business if you’re going to have success with your restaurant. Doing this is by investing in a good marketing plan before opening your doors.
You can start by creating an advertising campaign to market your restaurant and let people know it’s coming soon. The aim here is to create a buzz around the restaurant before you even open, so people are excited about it and interested when it finally opens.
What can help you with marketing? Marketing experts may be able to help you out by advising on how to get the word out about your new business or helping design a marketing plan for your startup restaurant.
You can also use social media, like Facebook or Instagram, or blogs like Yelp or WordPress, to market your new food business and share what you’ve been up to.
Additionally, don’t forget about traditional marketing methods like radio ads and TV commercials. They might not seem as effective anymore because we live in the digital age but they still reach large audiences!
One other thing that’s important when it comes to marketing? Your menu! Figure out what type of food you want to serve and offer relevant dishes and speak to what your target audience wants.
Conclusion
Starting a food business is a big undertaking, but the rewards can be great. When you’re thinking about starting a small food business, the most important thing is what kind of food you want to cook, how it might taste to your diners, and whether or not there will be any seasonal changes.
Owning a business can be hard, though; this includes operating and managing the kitchen. Study up for everything to go smoothly.
You can start a wide range of food businesses, and competition will be challenging; if you have a solid business plan and register for all licenses, your success chances increase exponentially. Now that you know everything you need about how to start a food business, it is time to get cooking.
