Setting up your restaurant business for success starts by understanding what type of business model you’re looking to create.
We’re going to dive into the four F&B business models so you can properly choose which one would fit your specific lifestyle.
Whether you want to build an ice cream shop, bubble tea, banh mi, burger joint, or you have an amazing recipe that you want to bring to the world, you need to understand the nuance of each model. Each model has its pros, its cons, and the amount of money that it’s going to be able to make.
When I first started out my ice cream business, I never thought about the amount of work and money that is needed. This was a big mistake.
You do not want to make that mistake and then realize the model you chose is not what you expected. But by that time you’ve already spent the money and time.
Let’s dive right in.
1.) Fast Concept
The first type of restaurant concept that we’re going to be talking about is the fast concept type.
We’re talking about something like an ice cream shop, a dessert shop, or something that’s more of a specialty, a coffee shop. These are the fast concept types, which have an average order value of roughly $6.
A typical space, we’re looking around 300 to 500 square foot place. Not too big, but just enough for you to be able to operate a tiny shop. You need to situate these locations at high-traffic places because of the volume that you need to be able to generate the profit that you’re looking for.
The amount of servers and talent that you need at the space is quite limited. You might even choose to have no server and stick with one or two baristas.
Now, in terms of projection of how much you’re going to be able to make at a location like this, given the fact of a $6 average for an item, you’re looking at around and aiming at 300 orders per day. That would net you around $50,000 per month, which itself is an amazing business if you’re looking a business that is relatively low in stress, low in investment, and low in workload.
For example, our ice cream shop, 720 Sweets, is a fast concept business. We serve ice cream, we serve bubble tea, and these are really high-generating items. It only took us three months to be able to open up the shop.
The major equipment that we needed was the ice cream machine and fridges.
The investment to open up this place was only $100,000.
I talk about in this video, how we made more than $36,000 in our first month, and this itself is an amazing location for something simple. Staffing wise, we only have five employees per location, and that’s on a rotating basis. On really busy days, we may have 2 – 3 staff in the store at one time, but most of the time we have one.
The shop is completely hands-off for me, which is the reason why I love this model because it’s profitable when you can make it profitable when you look at all the different numbers, and when you can actually control them and know what to do with them.
- Low investment
- Easier set up
- Low amount of labour required
- Do not need skilled labour
We’re talking about a low-investment model. Because you have such a small place, the amount of equipment that you can purchase is completely minimal. You’re not looking at a full-on scale kitchen.
The set up is a lot simpler, which means city permits and licenses is going to be a lot easier for you to get.
The amount of labour you need is also substantially lower than a full-service restaurant, which is why this type of concept is so popular because it’s so hard to be able to find talent out there. These are the pros.
- Limited offering for customers
- Lower revenue
Now, the cons of running a business like that it has a limited amount of offering that you have for your customers. You only have so much space and so much equipment that restricts your menu.
This also affects your revenue because you’re only able to offer certain types of food and drinks. Your average ticket price will be limited.
2.) Fast Food
The second type of food concept that you’re going to be looking at is the fast-food type. I’m talking about something like a donair shop, a burger joint, or a banh mi shop. These are food items that are quick grab-and-go.
Average prices we’re looking at is around 8 to 15 bucks, so we’re going to put it at $11, our average pricing for projections.
For a place like this, we’re looking at around 500 to 900 square feet. You don’t need that big of a space and don’t need front of the house staffing since it’s more of a grab-and-go or cafeteria-style. People are not expecting full service, which is beneficial for you because it keeps the cost much lower.
For a projection we’re looking at $11 average pricing. That nets around $2,750 at 250 servings per day. In a month, you’re going to be able to generate around $77,000 for a concept like this. Not too shabby. Once again, this is a little bit better than the fast concept places.
- Lower investment required
- Do not need skilled labour
- Low amount of labour required
- Higher revenue potential than fast concept
Now, some of the pros of a fast concept place is that the investment is also relatively lower than comparing to a full-service diner because the equipment you need is a little bit less.
The skill level to produce these items is, once again, a lot lower than a full-service diner. As mentioned, the amount of staff needed is quite low since you don’t need servers.
The revenue that it can actually potentially bring in is a little bit higher than a fast concept place.
- Higher investment needed than fast concept
- Lower revenue
Now, the cons of running a fast-food joint is that the equipment costs more, meaning that your investment will be higher for this concept compared to a fast concept.
You’re going to be able to cap your revenue based on you’re offerings. At 11 bucks, you can’t really offer too much, right? For example, if you look at a donair shop, they can only offer so much. People only come in to grab-and-go for lunch or for a quick dinner.
That itself is limiting the different revenue streams that you can generate.
3.) Casual Dining
The third type of restaurant that you can build is casual dining business. For casual dining, you do need front of the house staffing because there is an expectation of some service at these establishments.
Average pricing we’re looking at around $16. You can expect average tickets to go up with drinks and desserts being added to the mix. That’s the type of places that people actually go in, and it’s like a hole-in-the-wall shop that is offering grandma’s a recipe.
For a place like this, you’re looking at roughly around a thousand square feet. That gives people enough space to actually soak in the ambiance and actually enjoy the food. The location of a casual dining shop could be at a high-traffic or even a destination location because people don’t mind driving to a specific place just so then they can have like the best spaghetti in town.
For projection, we’re looking at roughly $3,200 per day, given an average value of $16 per meal. You’re looking at roughly $90,000 per month. This is your million dollar business if you’re looking to create a business. A casual dining experience would be able to help you get there.
- Fulfilling to run
- Higher revenue potential
First of all, it is super fulfilling because now you can actually create your grandma’s recipe and you can actually bring it to the world and for everyone to enjoy this recipe. It also gives you a lot more room for creativity and provide different offerings.
Also, the revenue that you’re able to generate is much more. This is your seven-figure business.
- Higher investment required
- Skill of labour is higher
The cons of running a casual dining experience is the investment is much higher than a fast-concept and fast-food business. From more expensive equipment, to a bigger space, to more expensive ingredients, to city permits and extra labour, they all are required for a casual dining spot.
Not only that, the staff you hire need to be more skilled as well. This is because they need to actually prepare a dish, which has much more variables that can go wrong.
If you don’t manage all the moving parts in a casual dining business properly, even though you’re making a million dollars, you could still be making way less than someone that’s running a fast-concept shop. That’s because you don’t control your costs of goods sold or staffing effectively.
4.) Full Service
Last but not least, a full-service dining experience.
We’re talking about this as like full-on front of the house staffing. You have food service. You have wine. You have dessert. Everything. People are coming to greet you by your first name.
Average item cost is around $50. For a location like this, you need it to be a bigger place. We’re talking about 1,500 square foot to 3,000 square foot.
Now, the average ticket, we’re looking around $50 because there’s wine, there’s a full meal, appetizer, dessert, everything. We’re looking around $6,500 per day and $180,000 each month in revenue.
But, just because the revenue is there, it does not mean the stress, the risk, and the work level is worth it. It is the reason why I always, always stay away from concepts like this.
- Fulfilling and allows for creativity
- High revenue potential
One of the pros of running fine dining experience is that you have your creation out there for the world to experience. You’re basically creating art for your customers, and that fulfillment is definitely irreplaceable.
If you can manage your restaurant properly, this fine dining experience properly, and you have line up out the door all the time, the financial reward that is going to give you, it’s much, much higher. We were talking about millions of dollars in revenue.
- High investment required
- Skilled and specialized labour required
- Higher expectations involved
The investment to create a fine dining experience is well over a million dollars. We’re talking about a full-on ambiance with a full-on makeover of a unit. We’re talking about alcohol license. We’re talking about full-on kitchen with all the state of the art equipment and accessories.
The labour that is involved to run a fine dining experience needs to be well-trained and experienced. The expectation is much higher for both the service and the food. This means your front-of-house and back-of-house staff needs to be top-notch.
A lot of people have trouble finding talent to create good food for them and controlling your food costs to make sure that you have a business that is profitable.
There you go.
The food money-making models for your food and beverage shop.
Just because someone else is running a bubble tea joint that is super successful, it doesn’t mean it’s suitable for you.
If you have dreams of bringing your grandma’s recipe and showing it to the world, then that’s not the place for you. That’s not the model you want to choose. You want to choose a casual dining experience that you can provide your customers.
Now, I’m going to be covering the three different elements to consider when choosing the different models that you would be best suitable for your needs.
3 Elements To Consider When Choosing Your Business Model
1.) Stress Level
The number one thing that you want to consider is the stress level. Are you signing up for being super stressed out every single day for years to come, or do you want to just have a coffee shop that you would want to go to?
You don’t mind it not making that much money to begin with, and you have time to spend with it, and you meet all the customers there, and you just have this really homey place?
It’s really coming down to the stress level that you want to take on.
For some people, they like that chaotic environment. They like being in that stressful environment because that’s how they thrive.
With different types of business models, they have different types of stress levels, so know what you’re signing up for before you choose that type of vehicle.
2.) Risk Level
The second element to consider is the risk level. We’re talking about if you’re wanting to open a fine dining experience full-on with alcohol license, you’re talking about over millions of dollars in investment.
Are you up for that type of risk?
Are you going to put your house on refinancing just so then that way, you can create this fine dining experience with no experience, or do you have a hundred thousand dollars saved, and you just want something that is your own?
You want to escape your nine-to-five and you just want to have a coffee shop that you feel good about and that you can actually just be there, and you’re completely fine with it.
Well, the risk level of a hundred-thousand-dollar investment and a million-dollar investment, that’s completely different.
So at the end of the day, consider the risk level for your needs because everyone’s needs are different.
3.) Work Level
The third type of element to consider is the work level. In the food and beverage industry, the work is always going to be crazy.
For those first six months, you’re going to be working in the business all day long until you have a process in place, until you figured out how to hire people that can help you out.
So after the fact that you are working there for six months, everything is already on automation. Do you want to continue to be working in there, your business? Do you want to be in the kitchen cooking up your grandma’s recipe and showing the world how great it is?
That’s a casual dining experience, or just like, “Hey, I want this as an investment. I have a bubble tea shop. i hired people to build, run it from me on automation, and I’m just going to go there once a week just to check it up.”
That, for me, is the work level that I chose, which is the reason why I chose a fast concept because it’s very easy for me to be able to monitor the type of work and the type of quality that people are churning out.
It really comes back down to your work level that you’re choosing to meet your needs.
So there you go.
At the end of the day, just because someone is successful with a taco shop, it doesn’t mean it suits your needs.
Choose the one vehicle that brings you to your destination.
Choose the one that is the most fitting for you (risk level, the work level, and stress level).
Do not be tempted to follow what other people are doing. Choose one that is the most fitting for you.