Got a great idea for a food business but not sure how to get started? Find out what to consider, and how to make it happen with our practical 8-step guide to sucessfully launching a food business.
Are you a passionate entrepreneur with an innovative idea for a restaurant, a skilled baker ready to take your talents to the next level, or someone with dreams of hitting the road with a food truck, offering your vibrant street food creations to people anywhere? Starting a new food business can be an exhilarating adventure, but it can also be a daunting journey filled with unexpected challenges and bureaucratic hurdles that require a combination of business expertise and determination to overcome.
Is now a good time to launch a food business?
Well, it turns out that now might be a great time to take the plunge. Research shows that the food service industry is projected to grow from $2,646.99 billion in 2023 to $5,423.59 billion by 2030, at a CAGR of 10.79% during the forecast period.
But the idea of starting up your own F&B business may seem daunting, especially when the outlook for start-ups is bleak. Research shows that as many as 90% of new restaurants fail. What's more, restauranteurs and other hospitality business owners have voiced their concerns lately about the affect of the rising cost of labor, energy and inflation on produce on the market. These rising overheads are making for a very challenging market, even for seasoned professionals to navigate.
In the world of business, there is never a perfect time to start. Even in ideal conditions, a business may not survive. However, some of the most successful businesses have emerged from challenging circumstances and economic hardship. It's logical, really. If a business can thrive during tough times, it demonstrates resilience and the ability to overcome future difficulties. So, don't wait for the perfect moment. Take the leap and give your business every chance at success.
So to help you get started, we’ve pulled together an 8-step beginner’s guide, with insider tips to give you a head start.
1. Make a solid Business Plan
The first thing you’ll want to do before making any investment is do your research, diligently. Spend a few weeks (or even months) getting a deeper understanding of the broader food service landscape, your customer target, latest trends, and competitors, and start writing a business plan for your investors. Think of it as exploring your 4C’s: customer, consumer, channel, and context.
For this, you’ll want to:
- Define your target market: Who is your new business targeting – baby boomers, Gen X, Gen Z, empty nesters, seniors? Once you’ve defined your target segment, make sure you understand what they buy, why they buy, where they buy from, and what makes them tick. This will help you create a relevant, targeted offering.
- Define your USP: Find what sets you apart from the rest of the herd. Have a look at what your direct (and indirect) competitors are doing, and establish your point of competitive difference. Now here, it doesn’t have to be radical, but it does have to be relevant. For example, if you’re targeting young families, creating a child-friendly establishment with nutritious children’s meals could be enough to give you a leg up on the competition.
- Define your restaurant style: Are you thinking of opening a bakery, coffee shop, quick-service, fast-casual, or full-service dining restaurant? Each one of these channels requires its unique approach, operating hours, and investment, so make sure to pick one that suits you as an individual and the work schedule that you’ll want to have.
- Select your food type/menu offering: Think carefully about your menu and the type of food you’ll want to offer – and do so early on in the process. Find out what the latest menu trends are (especially for your target market) and tailor your offering to them. Some of the hottest trends right now include vegetarian/vegan diets, allergy-friendly & gluten-free menu options, and sourcing your produce locally.
- Define your brand: Your branding – from your logo and the imagery you use, to the design of your menu, the music you play, and even and uniforms of your staff – define what your business is all about, and what you stand for. It sets the tone for your restaurant and lets your customers know what they can expect. Think carefully about how you want to position yourself and what you want your identity to be.
Once you have your business plan in place, go out into the world – and test it. Find some of your target customers and ask them for their thoughts and impressions. This could be as simple as polling a handful of people off the street to a full-blown market research study.
2. Secure your financing
Now it’s time to sort your finances. However not everyone who wants to start a restaurant has the personal funding to do so. In fact, most don’t.
Thankfully, there are lots of other ways that you can find funding for your new venture:
- Get a business loan
- Turn to family/friends
- Find outside investors or bring in a partner
- Venture Capitalists and angels
- Use crowdfunding
- Get government aid
Just remember that it’s likely to take years before you turn your first profit, and money will be tight at first. So think about starting small (with a strategy to scale up) and choose your business partners wisely, because they’ll be around for a good while.
3. Choose your location
You know what they say: “location, location, location”. Well, as it turns out, that’s not always the case. The location you choose for your establishment will depend on several factors, and unless you’re relying heavily on foot traffic, you don’t necessarily need to be in the hottest new retail location.
Here are a few factors you’ll want to consider:
- Cost: based on your sales and profit projections, what can you afford to spend on rent?
- Accessibility to potential customers: how are your customers getting to your restaurant, by foot, by car, or by public transport?
- Restrictive ordinances: some neighborhoods have strict noise regulations or restrictions on the times when your suppliers can deliver your produce
- Proximity to other businesses: competitors and other businesses can influence your traffic, so map out what’s happening around you, and how it could affect your business
- Plans for the future: consider what the neighborhood will look like in 2, 5, or 10 years, and if there are any major development projects underway that could change the local landscape
4. Design the layout of your space
Once you have a venue, it’s time to start working on the layout and design your space.
Of course, this will depend on the type of establishment you’re running, but typically restaurants dedicate about 45-60% of their space to the dining area, about 35% to the kitchen area and the remainder to storage and office space.
Think carefully about the layout of your kitchen and dining areas, and make sure there’s a smooth flow between the two. Prep space is also critical, so make sure your chefs have enough room to plate, garnish, and decorate their dishes.
This might also be the right time to think about what technology will be required in your food business, be it the POS system, kiosks, tablets, or audiovidual elements that contribute to the atmosphere as well as promoting specific products, technology must integrate within the design of your space.
And most importantly: don’t cut corners in your dining area. This is the stage of the show – literally where all of the magic happens – so finding the right ambiance and decor to make your customers feel welcome is critical to success.
5. Choose your suppliers
As a restaurateur, you’ll be working with several different suppliers – from furnishings to POS systems, bar equipment, kitchen appliances, and of course, food. Make your wish list, scope out your short and long-term budget, and go on the hunt for your partners. But remember that while you don’t want to cut corners when it comes to quality, over-priced suppliers can minimize your margins and run your business into the ground. So make sure to negotiate, hard.
But where do you start looking? Try going to wholesale retailers, local farmer’s markets, F&B conventions, ask for recommendations from fellow restaurateurs, or just do a simple Google search.
You’ll be looking for a trustworthy supplier, who has a good track record of providing quality products and a roster of successful partnerships. For food suppliers, be sure to about their delivery schedules and food safety management practices. And go local – they usually offer fresher ingredients whilst also being better for the planet.
6. Get your licenses and permits
When it comes to regulations, every country, county, and city is different. But make sure that you check in with your local regulatory office, and consider getting legal counsel to make sure you adhere to all of your local health & safety codes and food regulations. Another important license is an alcohol license if you plan on serving alcoholic drinks at your eatery.
Just be aware that some licenses can take months to acquire, so make sure to get started on this process well before opening day.
7. Start hiring your employees
First, think about what staff you need to hire for your restaurant type. Based on the scale of your restaurant, this may include HR managers, purchasing experts, accountants, marketing & sales managers, chefs and sommeliers, waiters, hosts, bartenders, and cleaning and dish-washing staff. Make sure to hire enough staff for each job, and anticipate shift planning and back-ups in case of illnesses and vacations.
Look for candidates with sufficient experience and a successful track record, who are quick on their feet, can multi-task, and are efficient. All of your employees should work well under pressure, and customer-facing staff should have exceptional social skills.
And when it comes to hiring staff, you can never be too careful – so do your due diligence. Make sure to do background checks, conduct several face-to-face interviews, and call their references.
8. Advertise your business
Before opening your restaurant, you’ll want to do a fair amount of advertising to alert your local community that there’s a new eatery on the block.
And while word of mouth is still the best form of publicity, here are a few other ways you might like to consider announcing your new venture:
- Build a great website: make sure that it’s easy to navigate and includes all of the key information, including your opening times, menu, booking engine, and if/how you cater to special requests
- Use social media: create accounts on Facebook, Twitter, Linkedin, and Instagram, and share relevant news and high-quality photos of your restaurant and the behind-the-scenes process as you’re getting ready for opening day
- Run some paid media ads: use ad buying platforms to get your restaurant ads seen and heard by thousands of food-loving people who match your target customer on social media sites, search engines, website ads, streaming services, radio and podcasts. A word of caution though, it's best to leave this to the professionals unless you're confident in you own ability to manage digital ads - using a specialist agency of freelancer will ensure you don't accidentally overspend on your ads.
- Host a soft opening: this is not only a great practice-run before opening day, but will also help create some buzz about your restaurant within your local community. Make the guest list small, and consider having a soft opening for family & friends, followed by one for local businesses and partners.
- Offer promotions to new guests: offer a free drink or dessert for the first 10, 50, or 100 customers – you’ll be remembered for your hospitality and generosity. After all, who doesn’t love free stuff?
And with that, we leave you with one last tip for success: work hard, don’t give up, and be prepared to break the mould. The measure of success is ultimately found in the bottom line, however it's important to measure, track and review performance across a range of metrics to continuarlly reassess and tweak your business model as you go.
Starting any new venture will be a challenge and most likely an uphill battle, but in the end, nothing tastes sweeter than victory.