This profile guides you through the practicalities of starting up a restaurant. It looks at the training options, the regulatory requirements (including health and safety and employment law), and the likely costs involved. It also analyses trends currently affecting the catering industry, and suggests ways to promote this type of business. Finally, it recommends several sources of further information.
Over the past 20 years, eating out has become one of Americans most popular leisure activities. Overall the standard of food in restaurants has improved immeasurably, and the variety of cuisines has expanded to satisfy dozens of niche markets. In some respects, demand is driven by fashion, but there is a market for high-quality restaurant food regardless of whether or not it is currently fashionable.
Setting up a restaurant means deciding what type of food to serve. Exposure for new cuisines through television, and the improved range of ingredients available in supermarkets, means that ethnic restaurants of all types, particularly more unusual cuisines such as Turkish, Lebanese and African, are growing in popularity. Consideration must also be given to the ambience you plan to create. For example, a restaurant may be aimed at an upmarket clientele or special occasion dining (with higher prices reflecting the whole experience); or it may be an everyday, comfortable local bistro that people visit on a regular basis.
Are you suited to this type of business?
Experience of working in or managing a restaurant is by no means a prerequisite for this business, but there is no question it will be helpful when it comes to organising your supplies, budgeting and pricing your menus.
Good humor is essential. Restaurateurs must be able to communicate with a wide range of people, from staff to customers, and you should be able to cope with highly pressured and sometimes difficult working conditions without losing your head. A cheerful outlook despite setbacks will influence the atmosphere of your entire business and ensure customers enjoy their meals in friendly surroundings.
Stamina is essential; restaurants frequently begin preparations in the morning and work until late in the evening, and many new restaurateurs find themselves on duty for very long hours until the business is established and reliable staff can be taken on to allow them days off.
An interest in food and cookery will be important, and is often the reason entrepreneurs start up their own restaurants. Some choose to experiment with their own dishes, others specialise in their own regional or national cookery, while many decide to watch out for and respond to the evolving trends.
An aptitude for running a small business and some awareness of basic administrative skills will be useful. A talent for marketing and customer care, and a head for figures, will provide a good foundation for the administrative side of your business.
What formal training do you need?
The law does not specify particular training or qualifications needed to run a restaurant, but it does impose certain standards and most restaurateurs find it sensible to train themselves and their staff in order to comply.
Food hygiene and health and safety training are now easily available and basic courses are inexpensive. A basic food hygiene qualification is mandatory for anyone involved in preparing or handling food.
Training in cookery is available from a wide variety of sources and at many different levels. In addition, the need for other catering and front of house staff training will depend on the structure of the business you plan to develop.
There are numerous cookery schools offering short and longer professional courses, located across the US.
Who are your customers likely to be?
The customers attracted to your restaurant vary according to numerous factors, including the type of food served, your prices, your location and the market sector you are aiming at.
Customers might include:
High-earning individuals or families with a large amount of disposable income but little time in which to spend it. This customer group includes the growing number of single householders, as well as dual-income family groups.
In some urban locations, business people on expense accounts are an important customer group for lunchtime business and evening meals. The value of this market often tends to follow the wider fluctuations in business investment.
Tourists are important for many restaurants in the major tourist cities, but also in popular rural destinations. Bear in mind that outside major cities, visitor numbers fluctuate according to the seasons, and winter may see poorer trading.
Married women undertake more than 60% of all household chores, so easy access to meals is welcomed as one less task to undertake. Price tends to be a significant factor affecting the choice of this group, along with the quality of the food.
The influence of children has produced a significant market group that impacts on family choice for meals. This has been readily picked up on by the large conglomerates who, led by the burger chains, target children through their marketing.
As lifestyles have changed, the traditional three meals a day have been replaced by a tendency to 'graze' or 'eat on the hoof'. Convenience plays a large part in this group's choice of venue.
The emergence of a large group of retired people with a high level of disposable income and increased leisure time. Research indicates that this group tends to eat out during the day as a leisure activity.
Who will you be competing against?
Your competition will depend chiefly on your business location, and the proximity of other restaurants nearby. In many cities, however, restaurants tend to cluster together so as to take advantage of potential customers who might be looking at prices and menus before deciding where to eat. In addition, local authorities usually have policies on zoning for licensed premises in order to isolate businesses open in the evening from residential areas, with the result that certain streets are full of restaurants while others are empty.
The restaurant industry is dominated by major global conglomerates that have managed to establish an internationally recognised range of brands.
Medium-sized regional businesses that offer a similar service, although they may be targeting a different client base, will also be competitors. These may be local chains, started originally as a single outlet, which have grown along with the business' reputation and market share.
What are the key issues affecting the market?
Restaurateurs are entering a highly competitive market sector. There are more restaurants trading in the US each day, providing food from most national and regional cuisines. The restaurant sector is extremely competitive - business failures within the first two years of start up are currently running at over 20%. But despite these numbers, eating out is increasingly popular. A third of all money spent on food in the US is spent in restaurants, and the market offers very attractive opportunities to new restaurants as long as they properly analyse and respond to a particular demand.
At the upper end of the scale, the industry is changing. All large metropolitan centres now have highly priced restaurants with national reputations, but many of the most talented chefs are leaving urban locations to set up businesses in smaller towns, depending on attracting a clientele from a much wider area. In addition, a number of highly profitable small chains have appeared during the past two decades, backed by venture capital and paying close attention to branding and strategy in much the same way as other businesses.
The restaurant industry is subject to the vagaries of fashion, whereby different styles and types of food become more popular than others. Areas where trend forecasters expect growth are specialist foods such as organic, vegetarian and raw, and products from known sources, such as locally caught fish.
Public confidence in the food and restaurant market is affected by outside influences, which include health and safety issues (cases of food poisoning) and production concerns such as BSE and avian flu. The somewhat superficial way in which food scares and fads are dealt with in the media can have an immediate effect on demand for particular dishes - as evidenced several years ago by the sudden craze for the Atkins diet and subsequent rejection of staples such as bread, rice and pasta - and restaurateurs need to be flexible enough to cope with the unexpected.
The catering industry has always found it difficult to recruit qualified and capable front of house staff, as service industries tend to be perceived as low skilled in the US. Staff turnover is high so training can often be a waste of resources; wages tend to be relatively low; and in rural areas the available labor pool can be very small. A number of qualifications are being developed to try to address this shortfall, and industry-specific trade associations are developing initiatives aimed at raising the status of restaurant staff.
How can you promote this enterprise?
Identify the best location in order to attract passing trade. Unless you are planning to rely on word of mouth and build up your business over a very long period, location will play a decisive part in the eventual success of your business.
Once you have settled into a working routine and your staff are familiar with their jobs, invite a reviewer from your local paper to conduct a restaurant review - a positive review is likely to boost local interest in your business.
Make sure you are listed in relevant food and restaurant guides. This may involve registering with free tourist guides or getting listed in speciality restaurant guides in exchange for a fee, and will help attract people from outside the immediate area to your restaurant.
Advertise in publications read by your target audience. Local newspapers and business magazines usually offer reasonably priced advertising space, but restaurants also frequently use theatre programmes, property guides and festival brochures to advertise.
In order to stand out from the crowd, restaurants often choose an exclusive image or theme and apply it to their décor, staff uniforms, crockery and cutlery, and menus.
Promotion could be directed at different audiences depending on the time of the day. Both daytime and evening menus could be provided, with daily specials offered to vary the routine bill of fare.
Special offers can be used to boost trade during slack times, with mid-afternoon discounts for students and pensioners, and special children's menus offered to attract families. Christmas is a crucial time for most restaurants, since it offers the opportunity to increase trade through corporate parties and can be an introduction to your restaurant for potential new customers who may return throughout the rest of the year.
As word-of-mouth publicity is of the utmost importance for restaurants, it is crucial that your customer service should always be attentive, prompt and polite.
What start up costs can you expect?
Start up costs will vary depending on the type and size of restaurant you plan to open, as some restaurants may require specialist equipment, and the amount of interior decoration or structural alterations will vary. Your local environmental health office will be able to advise you of any changes you need to make on health and safety grounds, and these may have cost implications.
Your premises will be one of the major early costs; business rates and rental costs will depend on the size of your restaurant and the area in which you locate. Utility charges - heating, fuel, telephone and electricity - will also be significant overheads.
When fitting out the kitchen area you will need to budget for non-porous work surfaces for food preparation (from $250 each), and at least one large industrial fridge-freezer for storing cold foods (from $1200). Industrial ovens and hobs are at least $3000, and an extractor system can be as much as $2000. Caterers' dishwashers start at $600. The cost of kitchen equipment such as knives, pans and chopping boards varies enormously according to quality, but you should allow for several hundred pounds. A caterers' coffee machine will be at least $200. Most of this equipment may be available second-hand – considering how many restaurants go bust – it’s strongly advisable to go down this route.
You will also need to budget for the costs associated with employing staff, including wages, uniforms, training and employers' liability insurance cover. Public liability cover is also a mandatory requirement.
What are the legal issues to consider?
This section is intended as a starting point only, and you should seek professional legal advice before making decisions that might have legal implications.
Food hygiene and health and safety regulations will be your chief concern. All food businesses are subject to various regulations.
The Regulations cover food hygiene, registration of premises, cleanliness, provision of equipment and facilities, temperature control, and so on.
If your restaurant will be providing alcohol, you will need an alcohol license.
You will also have to be aware of all relevant consumer, employment and health and safety legislation affecting your business.
It is also worth consulting your local authority regarding the planning or safety requirements in the area.