A Complete Guide on How to Start a Restaurant Business

How to start a restaurant business in india

Let’s face it, almost every one of us have at some point in our lives proclaimed, “I should open a restaurant”. However, running a restaurant is far from easy, and requires much patience and skill to operate. This article will tell you about the top 11 challenges faced while running a restaurant business. Despite the heavy risks and the tough hours, the restaurant business is also rewarding. If you too have nurtured a lifelong ambition of starting up a restaurant, and don’t know how to go about it, or are currently in the middle of setting up your first restaurant, then this article is just for you and will tell you in detail, how to start a restaurant business.

How to Start a Restaurant Business

We have listed, and explained in detail, how to start a restaurant business below.

1. Deciding the Concept of the Restaurant Business

The first thing to consider to how to start a restaurant business is deciding the concept. You need to keep a number of things in mind before deciding a concept, the major one being the amount of capital you have for investment. The Average Price per Customer (APC) gives you a fair idea about the average amount of money a customer would spend in your restaurant. A Complete Guide on How to Start a Restaurant Business

Once you have decided the concept, you must decide the theme and cuisine of your restaurant. The interiors must be in sync with the theme of your restaurant. You should prepare a business plan for your restaurant as it would help you in planning the development of your restaurant plan and you can present it to any potential investor. Learn how you can write a winning restaurant business plan here.

2. Investment Needed to Start a Restaurant Business

Most aspiring restaurateurs’ dreams never see the light due to lack of funds and is one of the most important parts to consider when you think of how to start a restaurant.  Following is the investment required to start up different types of restaurant. There are three ways you can raise money for your restaurant dream.

1. Self-funding- If you have enough money in the bank, then congrats, you have crossed the first hurdle of opening a restaurant. It is also a good idea to open a restaurant in partnerships, as it reduces the risks of investment.

2. Loan- You can take a loan to fulfill your restaurant dream. However, securing a loan from a bank may include hassles as they look for collateral or someone who can underwrite the loan.

3. VC/Angel funding- Getting investors on board can be difficult, especially if yours is a first-time venture. Investors usually look for your restaurant venture’s growth potential, quality, and the scalability of your model. The performance of your first few outlets is considered before investing.

3. Restaurant Costs Involved in Running a Restaurant Business

Restaurant costs are a major part of running a restaurant and need to be evaluated and planned carefully when you think of how to start a restaurant business. Below are the major restaurant’s costs.

Food Costs- Food cost is the cost of all the raw materials used in preparing a dish. Ideally, the food cost should be around 30-40% of your menu price. Read how to control your restaurant food costs here.

Overhead Costs– Overhead costs are the other expenses that are not related to food or labour. These include-

  • Rent- The rent covers a major part of your restaurant costs, and is heavily affected by the location of the place. However, the rent should never exceed 10% of your total revenues.
  • Interiors- You can decide on the interior of the place based on your restaurant concept and theme, and your budget.
  • Kitchen equipment- Purchasing good quality equipment may seem like heavy on the pockets, but they always recover their costs in the long run.
  • License- Restaurant licenses are an important expense of your restaurant, and cannot be ignored. Based on your establishment type, the license fee varies. We have covered the topic of restaurant license in detail below.
  • POS- The new age, modern technology POS can smoothen your restaurant operations like never before. The price of POS depends on its features and functionalities, that should be chosen on the basis of your restaurant needs. We have covered the topic of POS below in detail.
  • Marketing- You should ideally spend 1-2% of your revenues on marketing your restaurant. There should be a perfect balance between offline and online marketing. Word of mouth marketing, along with digital marketing can do wonders for your restaurant.

4. Deciding the Location for the Restaurant

The location is an important factor to consider while discussing how to start a restaurant business, as it can determine the success of your restaurant. While choosing your restaurant’s location, it is a good idea to identify your competitor in that area and gauge their success. The competition needs to be gauged not just in terms of cuisine, but also the type-casual dining, fine dining, QSR, etc. This would help establish that a target customer base already exists in the area.

Other factors to be considered while deciding the location of the restaurant business-

  • Visibility and accessibility- The restaurant should be located at a place where it is easily visible as well as accessible. Upper floor locations are generally not considered good as their visibility is low, and customers also find them difficult to locate. A restaurant right in the front and at the ground floor has higher footfalls.
  • NOC- Before you open your restaurant, you would also need No Objection Certificate (NOC) from at least three of your neighbours.

Find out how to choose the perfect location for your restaurant here.

5. Licenses Needed to Start a Restaurant Business

You need to acquire licenses from the government to run a restaurant business. The cost of obtaining these licenses varies, depending on the size of your venture. It is advisable to apply for the licenses early, as they may take a lot of time to be approved.

Licenses required for a restaurant

  • Trade license from the municipal corporation- Depending on the size of the restaurant, the cost incurred is from Rs 10,000 to 1 lakh. However, the actual license fee ranges from Rs 5000 to 10,000 for a small restaurant. The licenses are issued for the financial year and need to be renewed in March every year.
  • FSSAI-You need to get a license from the Food Safety and Standards Authority of India (FSSAI) to operate a food business. The size of your venture, turnover, installed capacity, location etc are factors in obtaining an FSSAI license and costs around Rs 5000 to 10000. For more help on FSSAI Registration, you can refer to this guide.
  • GST Registration- Restaurants are required to register under GST and get their GSTIN Number. GST registration is state specific so if your restaurants have outlets in different states, then you need to have a separate registration for each state. You can read more about GST Registration for Restaurants here.
  • Professional Tax license- You need a professional tax license for employing salaried staff. This is payable on a monthly basis for all staff earning above Rs 10,000.
  • Liquor License- Obtaining a liquor license is the trickiest of all and is also pretty expensive. It is advisable to apply for them early, as they take a lot of time as well.
  • Business Registration- You need to register your business as a partnership firm or a Pvt Ltd company. You’ll need to file annual returns, audit your finances etc. Hire a CA to help you with the finance of your business.

There are a few other licenses required as well such as fire safety certificate, pollution control license etc. Learn more about all the important licenses required to open a restaurant here.

6. Manpower Needed to Start a Restaurant Business

Hiring the right talent and retaining them is one of the biggest challenges while running a restaurant business. Hiring through referral is the most common form of hiring, with existing employees referring their friends and family. As a first-time restaurateur, you can hire through the traditional way: set up an advertisement in the newspaper, put up ‘We’re hiring’ posters, or hire through agencies. There are also a number of active groups on Facebook and Linkedin, from where you can source talent. The number of employees needed in different types of restaurants.

There are basically three types of staff required in your restaurant-

  • Kitchen staff- Your kitchen staff comprises of the cooks, food preparation staff, support staff etc. This is mostly unskilled labour.
  • Service staff- The waiters, housekeeping staff, busboys etc are your service staff. Since they have to interact with customers, they need to be good in communication, and etiquette trained.
  • Management staff- Your restaurant’s manager, chef, cashier, store manager etc comprise the management staff, and they need to be educated as well as experienced.

Hiring the right chef is extremely important for your restaurant as your food is what’s going to attract your customers. Apart from cooking, your chef also designs your menu, keeping in mind the ingredients that are easily available, and train and lead the staff to prepare and present the dish. Therefore, an experienced chef is a must for your restaurant.Before you start a restaurant business, you must also remember to train your staff not only about their job but also in communication and etiquette. Find out how to create a Human Resource Structure for your restaurant here.

7. Designing the Menu

The next part of how to start a restaurant is designing a menu. A smartly designed menu can make a huge impact on your restaurant food costs. The menu should comprise of items that can be prepared easily and use local or easily available ingredients. It is advisable to serve dishes that use similar ingredients, thus reducing wastage.

The menu also needs to be designed in a way that lures customer to spend more. Find out how you can design an attractive menu that would boost sales in your restaurant. 

8. Supplier and Vendor Management 

A healthy relationship with your supplier and vendor is important for the smooth functioning of your restaurant. You must have at least two-three vendors in each category. This would help compare prices, and also serve as a backup in case some problem comes up with one.

You must always have two days worth of stock in your inventory in case of unexpected emergency situations. The items must always be delivered in the morning and checked every day. Both quality and quantity check must be done at the closing time of your restaurant.  It is always preferable to have long duration contracts with the vendor as it helps maintain consistency. You also need to check the Trade Identification Number (TIN) of the vendor before you give him your restaurant’s supply contract.

9. Technology Needed to Start a Restaurant Business

Restaurant technology is often the most ignored part of running and managing a restaurant, though perhaps the most important. With new age modern technology, there are a number of integrated features in the POS that have smoothened restaurant operations to a great extent. Niche restaurant technology solutions are available for different types of restaurants. Read a detailed guide on how to choose the perfect POS for your restaurant here.

The idea of owning a restaurant is great. However, starting a restaurant from the scratch and running it is a humongous task. With this article, we hope we were able to educate you about how to start a restaurant business.  If you still have any doubts or questions regarding opening or managing your restaurant, do let us know in the comments below, and we promise we’ll help you out 🙂

Note: The figures and facts mentioned in this article are in accordance with the Indian restaurant space.

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47 COMMENTS

  1. If a plan a family Restro in a good location in Delhi without liquor ..how much space and investment do I needed ..and what will be the running cost for the project ..as per ur experience or advice ..

  2. This was definitely a great piece of info. However, I am wondering as to if you can suggest me various ways to hire a good chef and the source of finding a chef in details.

  3. Nice article it help to develop thought process
    but something is missing there may be innovation in restaurant because these is the driving factors of restaurant now a days.

  4. I want to be the richest chef pls tell how nd where to open my restaurant …nd if one reataurant is already working very well ..then can i open multiple restaurants or hotels

  5. It was an amazing experience to find your site this morning. I found your information very essential. Your ideas are very advanced and always highlight the important aspects of the topic. Thanks a ton for giving your precious time in writing this excellent blog.

  6. Interesting read. Glad I reached this page. Will start reading posts here going forward. Also, would be helpful if there are some services to mentor people interested in starting up restaurants.

  7. Thank you! It’s been a pleasure to read your article throughout, each and every single detail is mentioned step by step. It’s just what I needed 🙂 you have been of tremendous help. Need more such information and knowledge so keep writing, you do a great job! Thanks a ton once again ☺️

  8. Much appreciate your detailed information. As an entrepreneur, I have acquired knowledge from you on the key requirements and in a very strategic manner. Thanks for that 😃

    • Hi Anjali,

      I am interested. Could you please share your ideas so that we can discuss further? Also, what is budget you are looking for?

      Regards,
      Hemant

    • hey are you still looking for partnership? i have 11 yrs of work experience in hotels.
      plz connect with me on whatsapp +974-31212520

    • Hello Anjali,

      If you are still looking for a partner in your business then I would love to join. Kindly share your idea and budget requirements.

      Contact @ 8448319138

      Thanks

  9. Amazing and very informative article. As i am planning to open a restaurant myself so might need your expert assistance in this regard soon in future. God bless.

  10. i am 19 yrs & i am from kanpur me and one of my friend don’t want to study further & start a restaurant business our budget is 20-30 lakhs ……please suggest me some good ideas…

  11. Very nice and useful information for beginners. I want to open restaurant in Kolkata, any one interested for partnership please contact me.

  12. Hi very nice and useful article for beginners. I want open restaurant in pune any one intersted for partnership, can anyone is intrested in kitchen department like chef ,or any other department plz contact me Thank you.

  13. Very Helpful Article. I am going to start a small restaurant along with my friends. Can anyone Suggest me a different Menu and theme in-order to attract the customers? Please suggest me some ideas since i am beginner in starting of Business. thank you.

  14. Thanks for the Great Article!!
    Let’s say I am still doing graduation and i have entirely no relation to the restaurant business.
    But I have had a idea for a cafe since last one year.
    I live in kanpur.
    How should I go about it?
    How should I convince people?
    Whom should I talk to?
    Though I have just joined my family business.

  15. hi,
    I am Vanita, from Coimbatore
    I too want to open a small restaurant in Coimbatore . If some one interested to join with me pls come forward and can contact me through mail along with the details.

  16. Hi,
    I am Shiva from Bangalore. I am into IT by profession. I am thinking to Quit IT and Start a small restaurant.
    Request for suggestions, kindly let me know the best ways so I won’t go into loss….

  17. Nice article. Can someone give information where i will find tips for running small snacks cum lunch home?
    Rohan, you operate in which part of India?

  18. I’m Sachin Kadiwal From Bagalkot, I have start for small family restaurant business so what is expected in capital of money plz inform me sir.

  19. Amazing article, gives a lot of information by keeping it simple. Thanks a lot you wonderful people 🙂

    Way to go, all the very best!

  20. Hi, I am planning to open small eatery unit in kolkata with small budget. can anyone share the minimum capital requirement and how to start single handedly. Regards,

  21. Hi. Thanks for putting up very useful article for beginners. I want to open a Restro Cafe in Jagatpura Jaipur. If any one is interested for partnership, funding, let me know.

  22. Hi all…. Myself Siva
    nice to meet u all.Am planning to start a restaurant.Any one intersted for partnership???
    MY NO:9995526664

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