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How To Start A Restaurant or Food Business (step-by-step guide)

How To Start A Restaurant or Food Business (step-by-step guide)

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Looking to start a restaurant or food business?

This post will help YOU get started by sharing with you the playbook on how to start an F&B business.

For months, people have been constantly messaging me about their desire to get started, but they have no idea what to do.

Sit tight and consume each section as I go over a ton of information. Starting a restaurant is no easy task, so take the time to really think about each part of your business.

1.) WHY Do You Want To Start A Restaurant?

Is it because…you’re passionate about food and want to serve people great food?

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Have worked in the industry before and want to start something you can call yours? You see a gap or opportunity in the market? Or another reason?

For me, it’s a combination of these.

Ever since I left my dead-end job at a telecommunication company (which I got straight out of university), I’ve been dipping my toes in the service industry. I’ve built a tutoring business that I eventually sold. I started an artisanal cupcake business (which didn’t take off) and I was a manager at a Japanese restaurant.

I dabbled in the industry and seriously enjoyed it.

And it wasn’t until a particular trip to South Korea did I find a gap in the market. Specifically, a smoking ice cream that was attractive and innovative – something that Vancouver’s dessert scene was seriously lacking at the time. This became the last piece of the puzzle for me to eventually start my ice cream shop, which is now an international chain.

So for you – you need to look deep into your heart and discover the reason you want to start a restaurant/F&B shop.

It will be your driving force when things get tough.

And after you do some digging and self-reflection, if the reasons you end up with are:

  • money
  • fame
  • ease

then you’ll want to consider another industry.

2.) Pick A Food Concept That Fits YOU

Nailing down your food concept (business model) is super important. It gives you perspective on the size of the space you need, the number and skill level of staff required, the potential revenue and investment you’ll need.

Now before I cover each concept, you need to understand that each one comes with its own stress, risk, and work level.

For example, the stress and risk involved in a fine dining restaurant is wayyyy different than a neighbourhood coffee shop.

When I started my ice cream shop, I never even thought about the amount of work required to run it or the money it’ll generate. All I was focused on was this neat smoking ice cream idea and getting it started.

This tunnel vision is DANGEROUS.

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Why?

Regardless of how passionate I am and can see the gap in the market…if running the shop takes up too much of my time, it won’t work out for me. That’s because I personally want to be managing multiple businesses. But if my ice cream shop sucks all my time, I won’t be able to work on my other ones and is a poor match to what I truly want. My other businesses would essentially be on a decline if I were too pour my heart into the dessert shop.   

Thankfully, my ice cream shop is simple and doesn’t take that much work to operate. Much of it is set up to be running on automation and with minimal oversight – which is perfect for me.

So imagine starting a business that ends up clashing with your lifestyle and personality. It’s like a bad relationship that is doomed from the start.

You want to know as much as possible beforehand what you’re signing up for.

I’ve seen and heard of many horror stories of people starting a restaurant – which they thought was what they were super passionate about – but they failed to foresee the stress, work, or risk it involved.

So what you need to do is figure out what your threshold for:

1.) Stress Level; Some people love a chaotic environment. Some like a more laid back one. A small dessert shop would carry much less stress vs. a fast-paced bustling fine dining restaurant. Walk into any restaurant’s kitchen and you’ll understand what I mean by stress 😤

2.) Risk Level; the more fancy the concept, the more expensive and risky it is. A cafe has some risk involved, but requires less capital and experience to run compared to a fine dining spot. Imagine the difference between a $100,000 investment (fast food concept) from a $1,000,000 investment (fine dining) 😨

3.) Work Level; first 6 months you can expect to be working nonstop in your F&B shop. But once you have found and hired capable people on your team, what do you want your level of involvement to look like 🤔?

You need to think about each level that best fits your personality and the lifestyle you want to potentially live.

If you don’t take in account these 3 things, you’ll eventually be burnt out and completely miserable.

Now that you have a good idea of the level of work and risk you’re looking for, let’s get into the 4 major food concepts:

1.) Fast Concept

  • These are your cafes and dessert shops.
  • Possible with small space (300 – 500 sq ft)
  • least amount of investment required
  • least amount of staff required (no server)
  • Recommended to be located at high traffic areas to capture volume.
  • Revenue not very high due to space, equipment, and staffing constraints.
  • Lowest stress, risk, and work involved

2.) Fast Food Concept

  • These are your burger and donair shops (grab n’ go style).
  • Possible with small space (500 – 900 sq ft)
  • low amount of investment required
  • low amount of staff required (no server)
  • Revenue potential higher than Fast Concepts

3.) Casual Dining Concept

  • These your informal sit down restaurants
  • Possible with 1000 sq ft
  • fulfilling to create more interesting items
  • higher revenue potential
  • higher investment required (more equipment and labour skill needed)

4.) Full-Service Dining Concept

  • These are your fancy fine dining spots
  • Requires larger space (1500 – 3000 sq ft)
  • Most amount of revenue potential
  • Requires most investment (top-quality equipment, labour, and decor)
  • Highest stress, risk, and work involved

I really encourage you to take the time to think about the reason you want to start a restaurant and the concept that best fits you.

common mistake I see people make is looking at other people’s success and copying it without any self-awareness. Just because you see another restaurant do super well, does not mean that is a good fit for you.

I know so many other restaurant owners who did not think about these things and are now MISERABLE. I was super lucky that my ice cream shop matched me perfectly.

Don’t skip these crucial first two steps and let it bite you back later.

3.) Creating Your Restaurant Business Plan

Now that we did some soul searching and figured out WHY we want to start a restaurant and deciding on the concept that matches our stress, risk, and work threshold…We’re now ready to move onto the next step, which relates to the most common questions I get:

1.) Is $X enough money to start?

2.) What do you think of X idea? Will it work?

And every time I get these question, instantly I say “it depends” in my head.

Why?

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1.) Each food concept is quite different. General ballpark numbers can be given, but once you put in all the bells & whistles, the costs quickly goes up 💸

2.) Each country has its own nuances in terms of investment required and whether an idea will work. For instance, a lot of people are having massive success with bubble tea shops in Vancouver, but may not in Malaysia or India.

Similarly, the labour costs to renovate and build out your restaurant mostly likely differs from Canada.

Bottom line: You need to do the research of your specific market.

Even though I know a lot of restaurant owners and have helped many others, there are so many specific nuances of your market that really really matters.

This is why a business plan can be the activity that helps YOU see whether your idea will work and also others, who may be willing to invest in your idea, see whether it works. 

So the solution to those burning questions above boils down to making a business plan.

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That’s because writing a business plan forces you to take the emotions out – that rush of excitement you get from having a neat idea – and put on your business hat 🤠.

It forces you to do the research on:

  • whether there is demand for your idea
  • what current competitors are doing
  • whether it makes financial sense
  • map out business milestones

And when you create this plan, you’ll have a higher chance to:

  • attract the right partners who believe in your vision 👁
  • get funding from investors, bank, or government because they see that you’ve done your homework ✅
  • be focused and confident on bringing your vision to reality by having this road map for the next 1 – 5 years ⭐️
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A lot of people make the mistake of not creating a business plan because they don’t know how to make one or think they can just wing it.

But that is DANGEROUS, especially in such a tough industry. ⚠️

The worst mistake you can make is skipping on making a business plan and winging it.

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Ok so you might be thinking…

“Ok I know why I want to start my restaurant, my restaurant concept, and that I need write a business plan…how much money do I need though?”

In my experience, the simplest way to calculate the cost to start a restaurant is by thinking in terms of square footage. On average in Canada, the range is $100 – $800/sq.ft. This range is dependent on:

  • the food concept (concept you choose ties into the standard of quality you need from each item below)
  • size of space
  • renovations required
  • equipment needed (ice cream shop needs less equipment than a fine dining restaurant)
  • build-out costs (less if you take over a location that already has a washroom or kitchen)
  • decor

The range slides closer to $800/sq.ft if you’re building a higher-end restaurant, which requires more expensive equipment, fancier decor and renovations.

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Now, I know some people will become demotivated when they hear how much money they actually need to start. Not everyone is fortunate to have buckets of money in their bank account.

I was also in the same boat for many years. It took me years of saving up from my other businesses for it to eventually happen.

4.) Finding Your Perfect Restaurant Location

You may have heard other business owners (me included) shout this phrase before “Location, location, location!

A common phrase we like to sing to signify just how crucial your business’ location is.

In a perfect world, we’d all choose to open our shops in the heart of downtown, where the foot traffic and potential for sales is the highest, right?

But sadly, we don’t live in such fantasy land.

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The reality is that the rent is sky-high in those spots. Which is the reason why you see only the big names like the Starbucks or McDonald’s in those super high traffic areas because they can afford it and have a proven formula.

High Traffic vs. Destination Location

Those spots with a ton of foot traffic (usually in downtown, malls, and financial districts), but come with a heavy price tag are called High Traffic Locations.

On the flip-side, spots that have minimal foot traffic (usually inside streets, residential areas) and are more affordable, are called Destination Locations.

For instance, my ice cream shop can be considered a Destination Location because is located quite far from the high traffic areas and tucked away from the main street. We get moderate foot traffic and the rent is very reasonable.

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Now, understand that those categories: High Traffic and Destination location are at opposite ends of the spectrum.

In reality, each location is a hybrid that slides closer to one side depending on several factors that affect its traffic and price:

Visibility; would your shop be hard to find or see? IE. signage is blocked by a tree; the road angles in a way that your shop is hard to see or notice.

Low visibility = less traffic & lower price

Crime Rate; does it push people away from potentially going to your location or area?

More crime rate = less traffic & lower cost

Accessibility; is it transit-friendly? Is there parking spots? Depending on your target demographic, this can push them away. IE. if you cater to students and younger crowd, not being near a bus stop or subway may cause them to go elsewhere.

More transit friendly/have parking spots = higher traffic & higher price

Community; the people in the area you serve is super important; the foundation of your regulars and advocates; you’ll be serving these people for the next couple of years so you need to comfortable with them.

Let’s again use my ice cream shop, 720 Sweets as an example…

So when I was driving around Vancouver, looking around for a spot for our first location, I knew that I wanted to find something that would yield ok traffic and would match the young millennial market I was targeting.

I was able to stumble upon our now West Broadway location.

Let’s see why it was perfect by looking at each factor:

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Visibility: No tree blocking the storefront. A simple sandwich board in front (not all spots allow this) helps with increasing visibility of our shop and what we offer. Some shops next to us are closed in the evening so their lights are off – meaning we stand out. Overall very little visibility issues here.

Crime Rate: Clean area in the west side. The area is free of homeless and violence. Doesn’t make someone feel uncomfortable visiting this area.

Accessibility: Bus stop is 100 metres away from our doors. Students and workers from the nearby university has can easily stop by. Bus runs until late at night and quite frequent. Paid street parking in front of our shop and those who are willing to risk it…can park in Sleep Country’s parking lot for free in the back of our store. Overall this is perfect for our target demographic to stop by our store.

Community: Even though millennials are our core target, the shop is located in a residential area where a lot of young families and middle-aged couples live. This expands our customer audience. Our product offering is also attractive for parents to purchase for their kids and couples to enjoy for date night. Across the street, there are multiple restaurants and bars that are frequented by university students and millennials during the evening. This gives us traffic at night time as people are looking for dessert. However, during the day it is quieter because of students being in school and parents being at work.

Now, this sounds like THE perfect location for my ice cream shop right?

It is!

I was super lucky to find something like this. But it did take me a while to scope it out. I had to look around for months until this spot popped up on my radar.

A HUGE mistake I see new restaurant owners make is rushing this search and falling in love with a location.

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It takes TIME to find that perfect location. Sometimes a whole year!

But think about it – you’re going to be spending a ton of money on the build-out cost, the renos, the interior, the plumbing, everything! You’ll most likely be there for years. That is a massive commitment. You don’t want to rush into it.

And when you go location hunting, it is easy to fall in love with a location. You think it is perfect and become blinded to the faults. You ignore the visibility problem. You ignore the accessibility problem.

Don’t do this. Stick to the facts. Or you’ll pay for it heavily in the future.

Finding the perfect location takes time. If you take the process slow and meticulously, you’ll be rewarded in the end.

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Download this FREE step-by-step guide that will show you how to build a profitable AND successful restaurant food business.

5.) Create A Menu That Works

Before you begin writing down all your product ideas, you need to understand who your ideal target audience is.

Is it young office workers who need a quick healthy bite during lunch?

Or is it another group?

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When you do pinpoint who it is, you need to study their goalsdesires, and struggles. This gives you the basis for how you do your marketing, messaging, your designs, and food offerings.

This may sound basic (like business 101), but this step should not be skipped. Some people fall into the trap of thinking they DO know a lot about their target audience. Whether it be because they fit it themselves or their wife does or they know someone who does…that is NOT good enough 🙅

What you need to do is have a concrete customer AVATAR that you can refer to. Companies like Banana Republic, Pepsi, Burger King, Barkbox all have specific avatars for their target audiences. They didn’t spring into massive success (and continue to be) by doing things blind and without data.

You need to be strategic if you want to build a successful business. You need to know exactly what your customers are looking for.

For example, for my ice cream shop, we have a customer avatar that is based on our ideal target audience: female university students. We named our avatar, Michelle.

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With this information, we can purposely create offerings that Michelle would enjoy and like.

At 720 Sweets, we created a cool smoking ice cream that is visually appealing and unique – something that Michelle would want to share with her friends on Snapchat and Instagram.

The best way to truly understand your target audience is to:

1.) Do online research

  • look at data from Facebook Insights
  • look at consumer data from other research firms
  • look at what similar competitors are doing
  • discover sites and forums your target market frequents

2.) Talk to them in person

  • this will give you the most information
  • Use all that information to create your initial avatar. Throughout the lifespan of your business, you’ll be refining it and creating sub-avatars.

Once you have some initial findings and understanding of your ideal target audience, you can begin to create your menu offerings that would be a good fit for them. This is important because many people make the mistake of offering items that they THEMSELVES want, rather thinking about what the customer would want.

You’d end up having a menu that is catered to you and not who you’re actually looking to serve.

Remember: we don’t sell what we want, we sell what people want/need.

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When you have a list of potential menu items that you could offer, you can begin to shortlist them. Shortlist them by asking yourself:

“Why would my ideal target audience like this? Why does it match them?”

If we think back to my smoking ice cream, we knew that our target audience (Michelle) would like it because it is unique (new experience) and would give HER attention if she did share it on social media. She loves sharing cool things on social media.

There was an alignment between the menu offering and what our target market is looking for.

You need to go through each of your menu items in that same manner.

And once you do have that shortlist, it is time to go deeper into engineering a menu that will actually be profitable.

When you’re building your menu, you need to think about several factors:

  • how profitable is the item? (food cost)
  • how long does it take to make? (I wouldn’t put an ice cream that takes 4 minutes to make)
  • how popular is the item? (ask your target market whether they’d buy it)
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Our goal is to have as 2 -5 Stars and Cash Cows on your menu.

Stars ⭐️: High profitability & high popularity; Doesn’t take that long to make

Cash Cows 🐄: Low profitability & high popularity; Doesn’t take that long to make

Other items that can boost the appeal of these items are great too. (ie. Combos)

6.) Create An All-Star Team

The number one problem I hear from other restaurant owners is about…

Staffing.

They’ll say how the turnover is crazy or how it’s impossible to find people with common sense and talent.

While I don’t completely agree with that, I can recognize how staffing is a massive problem.

When I first started, I also struggled with it. After getting more experience under my belt, I realized something:

The problem isn’t about finding good talent, but more about building a good culture so your all-star talent stays and having the right awareness to weed out bad hires.

It was something I eventually learned after being burned several times and not seeing the signs of a poor hire.

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Let’s unpackage that a bit…

Why Work Culture Matters

A good work culture results in:

your best staff staying because they feel a sense of camaraderie

your staff saying natural and positive comments when asked about their work

your staff is motivated, efficient, and happy – which trickles down to all your staff and customers

other people wanting to work with you because of that culture
A bad culture results in:

your best staff leaving cause they don’t feel any attachment

your staff gossiping and putting down your business when asked about their work

your staff is demotivated, unproductive, and unhappy – which trickles down to all your staff and customers

other people unwilling to work with you or apply because of things they hear
See the big difference?

It’s night and day.

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A big mistake I see other people make is not taking the TIME and RESOURCES to constantly develop that “good” culture. If you choose to ignore it, you’re setting yourself up for massive business implications.

So what is “good” culture?

To me, it is based on how apparent your defined values are.

  • What are your values?
  • What are things you believe in?
  • What are the parameters of how you function as a human being and business?

Weeding Out Bad Hires

When you are aware of your defined values, it becomes your measuring stick during the hiring process. You know that in order for your restaurant’s culture to thrive, they must possess similar values as you do.

If the applicant doesn’t believe in the same things as you do (doesn’t mean they are a bad person), it is a huge risk to hire them.

This alignment is the most important thing you should be focusing on when you are hiring.

This means trusting your gut and asking specific questions that relate to your values in the interview process. That way you’ll bring out their perspective.

Another way is to encourage referrals amongst your team. That way, the applicant is slightly filtered.

But there will be many instances where you think the applicant is a perfect fit for the team, but they end up as a dud later.

It happens.

I still remember that one staff, who was beaming with energy at the interview and all the way until the second month on the job.

But things started to go downhill when we started noticing discrepancies in our food costs during his shifts. I learned that he was spreading absurd rumours among our team, which was detrimental to the culture.

He was a bad apple. One that tried to poison our good apples.

As you get more experienced, you’ll get better at spotting these bad apples.

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Hold on to your All-Stars Talent

To me, an All-Star talent isn’t about how skillful they are, but how aligned they are with the defined values and characteristics I look for.

Characteristics like:

  • Communication
  • Collaborativeness
  • Positive can-do attitude
  • Problem-solving skills

People who have these qualities and are aligned with your values are much more important than having the most skilled server or line cook. You need these individuals on your team if you want to be successful on your journey.

For my ice cream shop, I’m rarely there. It did take a while for this to happen, but now it is hands-off for me. That’s thanks to the time and resources my partners and I put in at the very beginning.

This allows me to step away from my business, travel if I want to, and work on my other projects.

I know this isn’t the path that everyone wants to take, but the prospect of this is for the serial entrepreneurs in the room.

7.) Go Get Seen

Now you have the foundations in place, you have to get found. There are a ton of ways to do that. Below are some videos I’ve created that go over marketing, your website, and branding that will be helpful to get the ball rolling.

Now, like I said, starting a restaurant or food business is NOT easy. 60% of restaurants fail in their first year for a reason.

It is DARN HARD.

It requires a lot of late nights, stress, and headache. Which is the reason why at the very beginning I had you ask WHY you wanted to start in the first place. There will many situations that will want you to throw in the towel, but is your WHY that will keep you going.

Asking for help is one thing I recommend you do. My Facebook group filled with hundreds of upcoming restaurant and food business owners would be on place that I recommend joining. There you can ask questions, get help, and see what other similar individuals are doing to build a successful food business. Join here.

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