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Starting a restaurant

27 April 2005
Starting a restaurant

You have the perfect idea for a new restaurant and are desperate to start it up. Before you dive in, there are many things to consider, from the location of the property and financing the business to finding staff and the nitty gritty of day-to-day running.

Here's our guide on the basic things to consider and links to more comprehensive articles that contain the detail you need to get started.

Before you take even the first step it's good to know what you're letting yourself in for. There's plenty of advice about starting up, courtesy of the Government's own business website - well worth a look: http://www.businesslink.gov.uk/bdotg/action/home?furlparam=mkt1_home&tc=mkt1_home

The big picture

Location, location, location

Everyone will tell you that this is the key to success. Restaurants, particularly, need to be visible to the passer-by. Yes, there are a few restaurants that build a reputation and can survive in the middle of nowhere, but don't assume you'll be one of them. Aim to find a location that puts your restaurant on a busy road where there are train, bus or tram stops near by and/or good parking and plenty of people walking past your front door.

There are many other considerations, such as whether the building is freehold or leasehold, and whether the area is populated by the sort of people you envisage dining at your restaurant. Perhaps there is an existing business for sale - is it worth paying for a going concern? Spend some time in the area, and do your homework.

Don't forget to check whether planning permission is required for your intended use of the building or for alterations you wish to make.

For further advice on location and how to find the right property follow this link Link to property advice section on How to buy a restaurant]

If you're thinking of taking on an existing business click here for our advice [Link to Buying a Business]

Here's a brief guide to planning permission considerations [Link to planning permission]

Check out http://[www.eversheds.com for further advice on planning permission.

The big idea

Coming up with your idea, concept or theme may be easy or may take you several months of refining an original idea. Simon Woodroffe, founder of Yo! Sushi, recommends that time, money and 1% of idea development a day gets 100% improvement in three months.

See if your idea has what it takes to become reality by road testing it at http://www.channel4.com/life/microsites/R/realdeal/road_test/index.html

Financing your dream

Most would-be entrepreneurs find this the most daunting aspect of opening a new business. Trying to convince anyone, either a bank manager or venture capitalist, to lend you the money to embark on your scheme is going to take more than a hazy idea sketched on the back of a pub napkin. You need to be prepared, with a business plan, a presentation of your idea of how the business will work, and a realistic breakdown of costs. Only then will any investor take you seriously.

There are plenty of sites that will help you build a business plan and you should look at a few before starting.

Channel 4's website offers a good step-by-step on how to write a business plan. It's even got templates to download to help you get started http://www.channel4.com/life/microsites/R/realdeal/make_it/intro.html

Many of the high-street banks have useful guides on their sites. NatWest is just one of many: http://www.natwest.com/smallbusiness/guides/marketing/index.asp?navid=SBS/FINANCIAL_GUIDES/MARKETING/BUSINESS_WEBSITES&pid=6

Who is going to cough up for it?

You've got little to no money available to put into this great idea and now, armed with a business plan, you've got to convince others to lend you their money instead. There are plenty of options, from family, friends and banks to business angels and venture capitalists.

The key to convincing most to part with their hard-earned cash is that YOU know what you're doing, have the skills and team to pull off the Big Idea and are capable of paying them back in a realistic time scale - anywhere from three to five years is the norm.

What type of finance are you looking for - equity capital or debt finance? See our brief guide to each and who offers what under Starting Your Business.

Again, this site offers an HONEST look at where you can lay your hands on cash for starting up and what the ultimate cost to you and the business could be. Pay particular attention to the section on sharks. http://www.channel4.com/life/microsites/R/realdeal/make_it/intro.html

If you're still struggling for financial assistance, there are grants and advice from a variety of bodies, see Grants, Information and Advice

Down to the detail

You've got the building, the idea and the finance and now all you have to do is open the restaurant. Don't think you're even halfway there, because there's plenty to consider.

Money matters

Whether you've got outside investors, a bank loan or just a handout from Mum and Dad, you're still going to need to keep track of all things financial in the business - or hire someone to do it for you.

An accountant is an absolute must. Find one on your wavelength who understands the restaurant game and readily offers you advice, rather than waiting for you to ask specific questions. Ask fellow caterers, or other local businesses for recommendations.

Depending on the size of your business, you particularly need to know about VAT registration and all the paperwork involved - although you can now do VAT returns online as well as pay an annual flat fee if your business turnover is less than £150,000.

If you are hiring staff or, indeed, taking salaries out of the business for yourself and partners, you need to ensure you set up a PAYE (pay as you earn) system and ensure national insurance contributions are being met.

In addition, you may want to find a part-time bookkeeper to tally the invoices coming in with your daily or nightly totals of the restaurant's takings.

Making it look pretty

Refurbishing your property, even if it's just a paint job over the previous owner's tasteless colours, is important to defining your look, your product, your restaurant. You don't have to have a design consultant in, but what you do will speak volumes to your customers, so do give it some consideration.

Do some market research. Look at what the big chain restaurants do, particularly because they spend a fortune on expensive market research and then implement it. For example, red is a colour that stimulates the appetite, and blue shades suppress it.

Above all, keep a tight rein on the financial side of any refurbishment. Problems seem to arise that are rarely predicted - although having a decent survey during the purchase process can help avoid this. Make sure builders submit new quotes if the job changes, and be certain the work is necessary before giving the go-ahead.

Legal eagle

Whatever you do, don't fall foul of the law by being ignorant of legal requirements for the business.

Your solicitor has probably already been involved with the purchase or leasing of your premises. They can also guide you - and represent you - on licensing matters. Don't forget, you'll need to apply for an on-licence to sell alcohol with your food

While you're thinking about licences, you'll also need two licences if you play music in public - one from the Performing Right Society http://www.prs.co.uk/ and the other from Phonographic Performance http://www.ppluk.com/ . Expect to pay about £90 for the former and £42 for the latter.

Government advice on intellectual property licences http://www.intellectual-property.gov.uk/std/faq/copyright/licence_music.htm

Insurance. Dull, maybe, but essential. Think buildings, contents, fire and liability insurances - and that's just to get you started. Don't forget to think about the conditions of your kitchen equipment insurance. There's also business interruption insurance to consider just in case you find yourself unable to trade for any reason.

There are also plenty of other legal matters that fall into different categories:

Health and safety

Once you have a plan for the kitchen and restaurant, or if you've taken on an exisiting one, call the environmental health officer to come in for a chat and tell you what work needs to be done before you meet the appropriate standards. EHOs are there to help before a situation gets out of hand. [LINK TO HEALTH AND SAFETY SECTION]

The Food Standards Agency produces a downloadable booklet on things to be considered when opening a new catering business. Click on http://cleanup.food.gov.uk/data/starting-up.htm

There are health and safety requirements for anyone handling food, and you must make sure any staff you employ are trained to the correct standard - basic food hygiene for waiters and junior kitchen staff and advanced food hygiene for anyone involved in sensitive food preparation.

By 2006 it will be a legal requirement to demonstrate tangible systems - ie, documentation, rotas and schedules - for HACCP (hazard analysis, critical control points) procedures. So it's best to put the systems in place while setting up the business.

If you're opening a restaurant in Scotland, follow this link to find out about food hygiene regulations there http://www.food.gov.uk/scotland/regulations/scotlandfoodlawguide/

Any premises open to the public need to conform to fire regulations so contact the local fire officer for advice and to arrange the final inspection.

And don't forget there is now the Disability Discrimination Act, which affects access to all public buildings by the disabled, so be sure that any plans for alterations take these new requirements into account.

For more information click on the following: http://www.disability.gov.uk/dda/

Disability Rights Commission http://www.drc-gb.org/

Hiring staff

Don't fall foul of employment laws - eg, discrimination. This is an area that is constantly evolving. From 2006 it will be illegal to discriminate on the basis of age. Candidates can take you to an industrial tribunal if they feel they've been discriminated against at the recruitment stage, so be aware of your obligations and their rights. And if the employee isn't working out, know the correct way to go about firing them.

For more info on writing job ads, writing a job description, hiring staff, writing job offer letters, setting up employee appraisal schemes and, if it all goes wrong, firing them, click on HR.

Shout about it

Marketing your restaurant is vital to pull in customers. This isn't just about advertising, which can be expensive and may not target your market accurately. You'll need a marketing plan to help you budget for expenditure.

Here are just a few ideas for marketing your new restaurant:

Even if you can't afford someone to do publicity for you, know the basics yourself and put them into action.

Network locally, joining business associations and local chambers of commerce. This includes supporting local activities, which can win you valuable publicity and goodwill.

Try to find an unusual angle to get your restaurant featured in the local newspaper's editorial section. Whether you're supporting a charity, doing something for the local school or you have a novel theme, it could be enough for them to send their reporter to interview you.

Think of promotional offers - two for ones; happy hours; buy a meal, get a free bottle of wine - as incentives to bring in the punters.

If you have the money to have a brochure with menus printed and want to leaflet the local area, try to target roads that are most likely to contain your key market. Ask a local estate agent to give you an idea about the social demographics of your area. [Link to Direct mail: junk mail with a purpose]

Create your own website to showcase your menus, themes, special events and evenings, or to highlight your star chef - it's a relatively inexpensive way of advertising.

Make sure you're listed on guides such as www.restaurant-guide.com, which you can register with free, giving a link to your own website as well as offering statistics on traffic to the page.

Having an official opening can help generate local interest and awareness of your restaurant. Invite any of your financial supporters, friends, family, local journalists, dignitaries, and anyone who has helped out in the start-up process. In addition to being a good way of thanking them for their help, they are all potential customers and are also likely to tell their friends about your restaurant.

Write to the food critics of the local and national press. While not everyone wants their comments, a review is likely to bring you to the attention of far more people than you could possibly reach otherwise. Be prepared to take the criticisms on board, however.

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