Starting a restaurant or any food business can be very exciting. However, it’s not as easy as it may seem. There are many challenges that every restaurant owner needs to surpass. Proper planning is essential, as well as knowing your market and choosing the right partners. You should also know how to calculate your risks if you want to run a successful food business.
To help, here are 3 important things to do before starting a restaurant business:
1. Conduct Market Research
The food industry can become very competitive so it’s necessary to do your market research first, before anything else.
What are the things that you need to know?
- Niche – What is your preferred niche? The term “food business” can be very broad – it can be a cafe, fast food, snack bar, fine dining, pizza place, and so on. It’s important to decide what kind of food you want to serve.
- Location – where do you plan to set-up your food business? Will you have a brick-and-mortar restaurant, or do you consider doing a home-based food business (i.e. delivery/catering)? You should, however, remember to create a competitive analysis before you choose a location. You can use heat mapping software like Maptive to aid you in the analysis. The heat map tool, in conjunction with other tools, will help you quickly gain insight into your competition. It can help you determine neighborhoods with a market gap which your restaurant can fill.
- Target market – What is your target market? Do you plan to cater to students, family/children, young professionals, business clients, or the higher-end market? It’s equally important to identify your target market while doing your research to ensure that your location and niche are compatible with it.
- Challenges and risks – After identifying your niche, preferred location, and target market, it’s time to do your research on possible challenges and risks. By knowing these, you will be able to make the necessary planning to help you surpass the challenges and calculate your risks.
2. Make a Business Plan
Constructing a realistic and feasible business plan is another important step in starting a food business. Aside from your business name, make sure to also include the following information:
The business entity – Your restaurant can be a sole proprietorship, partnership, limited liability company (LLC), or a corporation.
- The business structure – Include how many employees you plan to employ and who will be part of the management team.
- A realistic budget – How much capital do you need? What are your expected income and expenses? How do you plan to finance your business? If you decide to take a loan, ensure to include your proposal on how you plan to pay off the loan based on your projected income and expenses. Include all possible expenses, such as renovation, rent, licensing, the salary of employees, equipment, marketing, utilities.
- Contingency plan – It’s also essential to include a back-up plan in case something goes wrong. For instance, if your business won’t get an ROI within the projected period, how do you plan to cover the expenses and other financial obligations? Your creditors and business partners would surely want to know that you are prepared for anything.
3. Find the Right Partners
Working with the right business partners is very crucial to your success. The term partners are not only limited to your partners in running the business – your creditors, suppliers, vendors are also considered as your “partners”.
Choose the right type of financing. If you decide to take a loan to finance your food business, make sure to choose the right type of financing and work with a trusted financial institution.
Choose the right suppliers.
A restaurant or food business needs quality supplies. Research the available suppliers within your area and make sure to choose the one that best suits your needs and preferences. You can also find food suppliers online, like GoCheetah.com, that provide a delivery service if you prefer a more accessible and convenient transaction.
Choose your service providers. Aside from suppliers, you will also need to work with service providers. Do you need a POS for your business? Find the right IT company who can understand your business’ needs. Do you prefer to outsource your bookkeeping tasks? Choose a bookkeeper or accounting firm whom you can trust. It’s also best to work with a lawyer who is familiar with this type of business to ensure that everything (e.g. business licenses, employment contracts, lease agreements) is in order.
While it may sound tedious and daunting, running a food business can be so much fun, especially if this is in line with your passion. Understand your market, be prepared, and enjoy what you’re doing – with a clear vision and the right attitude, your hard work will pay off.