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Setting up a Restaurant Business

All you need to know about starting and running your business

Business guides » Setting up a Restaurant Business

What is a Restaurant Business?

The restaurant industry in the UK is thriving, with an annual turnover of £40 billion. In 2022, there were more than 35,000 full-service restaurants and more than 100,000 total restaurants (including full-service restaurants, cafés, takeaways and mobile food businesses). People in the UK eat out at restaurants an average of three times per month, although these statistics do increase for people under the age of 30 and people living in big cities, such as London.

A restaurant is a business that prepares, cooks and serves food and drinks to customers, usually in a sit-down capacity on the premises. However, the term restaurant can also encapsulate businesses that offer takeaway services. Restaurants typically tend to focus on a particular type of food or cuisine, although many restaurants choose not to specialise and offer a variety of food options.

The most popular restaurant foods and cuisines in the UK are:

Italian Indian Chinese Japanese
Thai Greek Mexican Lebanese
Vegan Fish and Chips Pub Grub English
Buffet Fast Food Street Food Vegetarian

If you are thinking of starting up a restaurant business, you will first need to decide the type of restaurant you want to set up. You will also need to determine the type of food you want to sell.

There are multiple types of restaurants you could choose to set up:

Full service

Fine dining

This is a type of restaurant that offers its customers an upscaled, more luxurious experience with more lavish food options. These restaurants usually create a stylish and exclusive atmosphere with high-end tablecloths, cutlery and tableware and stylish décor. Many fine-dining restaurants feature waiters in black tie and may also have special features, such as a live pianist or a valet service. The food often comprises multiple courses with elaborate dishes that are not typically found in other restaurants.

Casual dining

This type of restaurant still involves table dining, but the food is likely to be more moderately priced. The menu and service are likely to be less extravagant, with a more comfortable and laid-back atmosphere. There will be no expected dress code and the service is usually faster, meaning that customers typically stay for a shorter time. The décor will likely reflect the type of food that is being served or the restaurant’s brand.

Fast casual

These restaurants still offer a sit-down service but feature food that is relatively quick to prepare. The menu is likely to be more limited and may only feature foods that can be pre-prepared or feature many of the same ingredients, such as pizzas or burgers. Fast casual dining often offers a counter service as well as or instead of ordering at the table. They may also offer a takeaway service. The food is usually more affordable than in casual dining establishments. Popular fast casual dining franchises in the UK are Nando’s and Pizza Express. However, there are also many independent casual dining restaurants in operation.

Fast food

Also known as a quick service restaurant (QSR), this type of restaurant is specifically designed for takeaway food, whether from a drive-through window or an ordering counter. Many fast-food restaurants are made up of well-known chains and franchises (such as Mcdonald’s and Dominoes); however, there are also a lot of stand-alone QSRs in operation in the UK. Fast food is popular with consumers because of its convenience and (usually) lower prices.

Cafés

Many people don’t consider cafés to be a type of restaurant, especially if they’re more beverage-focused. However, if the café prepares and sells food, either for eating in or taking away, it is technically considered a restaurant.

Pop-up restaurants

A pop-up restaurant is a temporary restaurant that operates in a temporary location for a specified amount of time. They often pop up in locations such as former factories or warehouses, in an outdoor location, at an event (such as a festival) or even in another restaurant’s kitchen. Pop-up restaurants usually attract customers because of the novelty factor and the unique experience of this type of dining.

Buffet restaurants

A buffet restaurant offers a wide selection of food that customers can help themselves to at a set price. Customers can return to the buffet area as many times as they want and eat as much food as they choose. Buffet restaurants usually focus on a specific type of food, such as Chinese food, Indian food or breakfast food.

 

The type of restaurant you choose to open will have a significant impact on the types of food and beverages you serve, your décor and aesthetic, your typical customer base, your costs and your price points. When deciding the type of restaurant business to set up, consider your location, your local competition and the demand. For example, a harbourfront location may choose to operate as a fine-dining seafood restaurant, whereas a restaurant located in a retail park may choose to operate as a fast-casual establishment. You should also consider your own skills and experience and the skills and experience of your chef.

There are many different responsibilities associated with running a restaurant business. These responsibilities can vary, depending on the type of restaurant you set up, the size of your restaurant, the number of employees you manage, your menu and how involved you are in the day-to-day running of your business.

Some of the typical responsibilities you can expect include:

  • Sourcing and ordering stock and ingredients.
  • Planning and preparing your menu and pricing your food and beverages.
  • Purchasing, cleaning and maintaining equipment and machinery.
  • Preparing, cooking and serving food and beverages.
  • Implementing food safety and hygiene policies and ensuring they are followed by everyone in your restaurant.
  • Ensuring the cleanliness of your restaurant, including the kitchen area and front of house.
  • Complying with all legal guidelines and health and safety requirements.
  • Speaking to customers, taking orders and handling payments and receipts.
  • Serving customers and dealing with any requests.
  • Handling customer collections and deliveries (if applicable).
  • Managing staff.
  • Marketing and advertising.
  • Completing business and administrative tasks.

 

Although you do not need any formal qualifications to set up a restaurant business, you will need the necessary skills, knowledge and experience to plan your menu, implement food safety and hygiene policies and prepare and cook food. A high level of knowledge in the food industry and previous experience working in or managing a kitchen or restaurant is highly recommended. Strong interpersonal skills, a flair for business and a solid business plan can also be extremely beneficial. Starting up a restaurant business can be extremely rewarding, both personally and financially.

Types of Customers

Restaurants are frequented by people of all ages and demographics. However, multiple factors can influence the typical customers that visit your restaurant. Identifying your typical customer base can help you to plan your advertising and marketing strategies, focus your business and maximise your profits.

Some of the factors that can influence your typical customer base are:

The type of restaurant you set up

This is one of the most important factors in determining your typical customer base. A fine-dining restaurant is likely to attract different patrons than a fast-food restaurant or a café. Consider the type of restaurant you are opening and the typical customers who usually frequent this type of restaurant to help you determine your typical customer base and how best to appeal to them.

Your menu

Your menu is the first thing potential customers usually look at when choosing a restaurant. This could be the menu that is outside of your restaurant or an online menu. Customers will typically look at the types of food and beverages you sell and any special or dietary menus, such as the vegetarian/vegan and gluten-free menus or your children’s menu.

Your location

This will be another key determiner of your typical customer base. Although some people are willing to travel further for a restaurant, your customers will typically live within driving or taxi distance. For casual dining, fast food and cafés, customers typically choose a restaurant that is conveniently located near their home, place of work or study or an area they are visiting (such as a shopping area or a beach). Fine-dining restaurants tend to attract customers from further away, who travel specifically to visit the restaurant.

It is also important to consider whether your restaurant is located in an area with high footfall or that is typically frequented by certain types of people. For example, being located close to a popular tourist area, your typical customer base may be made up primarily of tourists and you may be unlikely to receive repeat customers. On the other hand, if you are located in a central business district, you may attract workers at the end of the working day and lunchtime business meetings.

Your business brand and aesthetic

Your brand and aesthetic are key factors in the types of customers you are likely to attract. Consider the style and design of your restaurant, including your décor, accessories, table settings and tableware. You should also consider the name of your restaurant and your restaurant front, including your sign and window display.

Your pricing strategy

Your price points will be a key determiner of your customer base. Restaurant patrons can typically be separated into three pricing categories:

  • Budget: This type of customer is looking for the lowest-priced food and is usually happier with a more limited menu and more basic service (e.g. counter service). Price will be a major factor when choosing a restaurant.
  • Mid-range: Mid-range customers are looking for a combination of quality and affordability. Although they don’t want to pay premium prices, they don’t look for the cheapest option and instead look for a less limited menu and quality service at a reasonable price.
  • Luxury: This type of customer wants the highest quality, best-tasting food and drink with a luxury experience and is willing to pay higher prices. These customers will look at your menu, the aesthetic and style of your restaurant and your reputation, rather than your prices.
Setting up a restaurant business
Meal from a restaurant business
Restaurant essentials

Equipment You Will Need

The type of equipment you require will depend on the type of restaurant business you set up, your menu and the size of your business. Choosing the right equipment is essential, as without it you will not be able to operate your business. Before purchasing your equipment, it may be beneficial to plan your menu, as certain types of meals may require specific equipment.

Although your equipment requirements can vary, below is a list of the equipment typically required by a restaurant business.

Kitchen Equipment

Stock and ingredients

This is an important ongoing purchase that can take up a larger percentage of your business’s running costs. Before ordering food stock and ingredients, you will first need to plan your menu. Try to include common ingredients in multiple dishes to reduce your food waste and create an ongoing ingredient inventory that makes it easier for you to create a stock order.

An industrial fridge and freezer

A fridge and freezer are essential in your restaurant. You will need to store any perishables and fresh stock or ingredients in your fridge or freezer. Consider how much you will need to store when considering what size you will need (many restaurant businesses opt for a walk-in fridge and freezer). Ensure both the fridge and freezer are set to the correct temperature.

Industrial ovens

Depending on the size of your kitchen and the number of patrons your business is able to serve at one time, you may require multiple ovens.

The type of ovens you need will depend on the food you are making. Some popular choices are:

  • A commercial oven.
  • A convection oven.
  • A pizza oven.
  • A combination oven.
  • A steam oven.
  • A fan oven.

 

Some ovens run on electricity and others run on gas. Consider what is favourable to you when purchasing your ovens.

A commercial range

This is an essential piece of cooking equipment that often includes an oven and hobs. A range can be used for many different types of cooking, including boiling, frying, stewing, baking and roasting. A commercial range is made from industrial materials and is built to be strong and long-lasting. They can handle heavy equipment and typically have a shorter cooking time, perfect for preparing high volumes of food or quick orders. You could opt for a stand-alone or inbuilt range. Depending on how many hobs your range comes with, you may also need to install an additional hob system. You can choose from a gas range or an electric range.

A grill

Some food items are cooked on a grill rather than an oven, for example, burgers, steaks, pancakes and grilled sandwiches. You could choose a grill that is inbuilt with your oven or range or opt for a stand-alone grill.

Deep fat fryer

A deep-fat fryer is used for cooking items such as chips, fried chicken, battered fish, churros and doughnuts. Consider your menu when deciding whether your restaurant requires a deep-fat fryer.

Microwaves

Many restaurants don’t cook everything from scratch and may pre-make some items or order some items already made. Microwaves can also be useful to steam cook, reheat, pre-cook or defrost any food or stock.

An ice maker

An ice machine is a necessity as it allows you to make a large amount of ice at one time. You will need ice to go in your customers’ drinks and to fill ice buckets and wine buckets.

An ice maker

An ice machine is a necessity as it allows you to make a large amount of ice at one time. You will need ice to go in your customers’ drinks and to fill ice buckets and wine buckets.

An industrial dishwasher

A dishwasher is a necessity, not only because it will help you to save time in the kitchen and reduce your kitchen duties, but also because it will demonstrate the hygiene standards and cleanliness of your restaurant. Choose an industrial-sized dishwasher to allow you to clean more dishes at the same time, helping your kitchen to run more efficiently.

Stainless steel worktops or worktables

You will use the worktops for all your food preparation tasks. Your worktables should be stainless steel as this material is non-porous, meaning it is resistant to most bacteria and germs. It is also easier to clean and will help you to maintain high standards of hygiene.

Ventilation

A restaurant kitchen requires more complex ventilation, as kitchens are commonly filled with smoke, steam, odours, high heat and potentially harmful gases.

Some ventilation you could install includes:

  • Ventilation hoods.
  • Exhaust fans.
  • Makeup air systems.
  • Fire suppression systems.

 

Cookware

Depending on what you cook in your kitchen, there are several different pots and pans and other cookware you may require, including:

  • Saucepans.
  • Frying pans.
  • Woks.
  • Grill pans.
  • Sauté pans.
  • Baking trays.
  • Roasting pans.
  • Skillets.

 

Bakeware

If you offer baked products on your menu, such as pizzas, sandwiches and cakes, you will need to purchase bakeware. This is the type of equipment you will use to bake your products. Investing in quality bakeware is recommended as it will likely be heavily used and can be susceptible to dents and warping.

Some pieces of bakeware you may need to purchase include:

  • Bread pans.
  • Baking trays.
  • Moulds.
  • Muffin tins.
  • Cake pans.
  • Pie pans.

 

A dough proofer

Dough is used in a variety of baked goods, including bread, pastries, pizzas and certain desserts. If your restaurant uses any dough, you will need a dough proofer. A dough proofer can help to simplify the dough-rising process, helping you to ensure your products are uniform in shape and size, and that the production process is streamlined.

A dough sheeter

This is a piece of industrial baking equipment that is used to make dough in large quantities at a much quicker rate. It rolls out pieces of dough to the desired thickness, whilst ensuring the dough is smooth and uniform. A dough sheeter is typically found in restaurants that make products such as pies, pastries and pizzas.

A heavy-duty food processor

A food processor can help to reduce prep time and your labour costs. They can be used for a variety of tasks, including pureeing soup, grinding meat and kneading dough. A food processor can shred, knead, dice and grind and combine ingredients into the required mixture using a multipurpose blade that rotates at a high speed.

A mixer

A mixer is used to combine ingredients in preparation for cooking or baking and is utilised for tasks such as stirring, whisking and beating. They are particularly popular for mixing the batter for cakes and cookies and for creating dough. You could opt for an industrial mixer, as they are more durable and more reliable. When deciding the type of mixers that are best for your business, consider the size and capacity of the mixer, the power and the type of mixing they are capable of (for example, mixing, kneading, blending and whipping).

The most common mixers are:

  • Planetary mixers.
  • Horizontal mixers.
  • Spiral mixers.

 

Sheet pan racks

If you are cooking or baking a large amount of food at one time, a sheet pan rack allows you to cool large amounts of products at the same time. You could also choose a tiered rack, allowing you to conserve space, and a rack that is on wheels, enabling you to transport your products around your kitchen more easily.

Storage racks and shelving

Shelving creates a safe and organised area for storing non-perishable ingredients (such as bread, seasoning and dried pasta), as well as equipment, accessories and utensils. Shelves also allow you to maximise the space in your kitchen. You will need enough shelving to keep stock separate and keep your kitchen well-organised.

Kitchen accessories

Some kitchen accessories you may require include:

  • Colour-coded chopping boards.
  • Kitchen knives and a sharpening stone.
  • Slicers.
  • Mixing bowls.
  • Food processors, mixers and blenders.
  • A toaster.
  • Temperature gauges.
  • A strainer and colander.
  • A timer.
  • Weighing scales, measuring cups and a measuring jug.
  • Oven gloves.
  • Baking paper, greaseproof paper and aluminium foil.

 

Cooking utensils

Some cooking utensils you could require are:.

  • Spatulas.
  • Tongs.
  • Stirring spoons.
  • Whisks.
  • Ladles.
  • Peelers and graters.
  • Tin openers.

 

Storage containers

Storage containers can be used for safely storing any opened stock, to prevent spoilage or contamination. You can also use the containers to store any cooked or pre-prepared food, such as salads, to keep them fresh for longer. Ensure your storage containers are strong and airtight.

Some storage containers you could opt for include:

  • Food storage containers in different shapes and sizes.
  • Dough containers.
  • Kitchen canisters.
  • Large ingredient bins (for storing larger amounts of dry ingredients).
  • Vegetable crispers (to keep your fruits and vegetables fresh and crisp).

 

Date labels

These are necessary to label when ingredients were opened and when certain items were cooked. It ensures that all stock, ingredients and food products are completely safe to use and that your kitchen is operating in line with food safety and hygiene guidelines.

Equipment sink

This sink should be used specifically for cleaning, disinfecting or drying food equipment and utensils and should not be used for handwashing. You must ensure the sink has both hot and cold running water. Depending on how big your restaurant’s kitchen is, you may require two sinks for equipment.

Handwashing sinks

You will need separate handwashing facilities and cannot use the same sink for handwashing and food preparation or equipment. This sink must be exclusively used for handwashing. A handwashing sink helps to encourage good hygiene practices in your business.

A Kitchen Display System (KDS)

This is a digital screen that is used instead of handwritten or printed orders. A KDS manages your orders and helps you to prioritise, edit and track your orders. It creates a more streamlined ordering system by ensuring that your kitchen gets orders in real time. It can help your restaurant to be more organised and efficient and reduces the risk of human error.

Rubbish bins and a waste disposal system

You will need rubbish bins in all food preparation areas. You will also need different bins for different items to ensure you are disposing of rubbish correctly and following recycling guidelines. Colour-coded bins are the easiest way to ensure your waste disposal system is operating correctly.

Personal Protective Equipment (PPE)

PPE is a necessary purchase for all food businesses, as it helps to protect your food from contamination. PPE can also protect you and your staff from harm (e.g. when using sharp instruments or hot equipment. Some PPE you may require includes hairnets, gloves, oven mitts, anti-slip footwear and aprons.

Cleaning equipment

Keeping all areas of your restaurant clean is imperative. Food preparation, cooking and storage areas are particular areas that should be cleaned regularly throughout the day, to avoid cross-contamination and the breeding of bacteria. You will likely need different cleaning materials for different parts of your restaurant. You may need to invest in cloths, sponges, antibacterial surface cleaners, bleach, sanitiser, dishwashing soap and a sweeping brush and mop.

Safety equipment

Some of the safety equipment your business may require includes:

  • Fire extinguishers.
  • Rubber floor mats.
  • Wet floor signs.
  • First aid kits.

 

Front-of-house Equipment

Tables and seating areas

Unless you operate a fast-food restaurant, you will need tables and chairs for your customers to enjoy their meals. You may opt for different-sized tables to suit different party numbers. Choose tables and chairs that fit the design and aesthetic of your business and reflect your restaurant’s brand. If your restaurant is child-friendly, you will also need high chairs for babies and toddlers.

Serving ware

You will need specific dishes for serving specific foods. For example:

  • Different shaped and sized bowls, e.g. soup bowls, finger bowls and ramekins.
  • Different-sized plates, e.g. for appetisers and mains and side plates.
  • Serving plates and bowls.
  • A variety of wine glasses.
  • A variety of cocktail glasses.
  • Other glass types, e.g. different-sized tumblers.
  • A variety of cups and mugs, e.g. for tea, cappuccinos and lattes.
  • Flatware, e.g. forks, knives, spoons and serving utensils in different sizes.
  • Dinnerware accessories, e.g. bread baskets, butter plates, plate covers, dessert dishes and sauce holders.
  • Linens e.g. reusable napkins and tablecloths.

 

You will need to purchase enough serving ware to stock your entire restaurant and additional items to account for damage and breakages. When purchasing serving ware, you should consider the number of seats in your restaurant, your estimated table turnover rate and the types of dishes you are serving.

Restaurant décor and accessories

Consider your restaurant’s brand when choosing your décor and accessories. Do you want your restaurant to be upmarket and elegant or welcoming and cosy? Do you want to choose a specific theme or design, e.g. botanical or rustic? There are many different accessories you can use to design your restaurant, including plants, flowers, pictures, candles, artwork and lights.

A Point of Sale (POS) system

This will be a key feature of your restaurant’s operations and will help you to keep track of orders and transactions. Choose a POS system that is easy to use, customisable, can be used offline and is mobile. This allows customers to make card payments at their table.

Tea and coffee making facilities

Many customers enjoy tea or coffee after their meal. Some of the equipment you may require includes:

  • Coffee machines.
  • A coffee bean grinder.
  • Flavoured syrups.
  • A milk frother.
  • A kettle.
  • Tea pots.
  • Tea strainers and tea baskets.
  • Milk jugs and sugar dispensers.

 

Menus and menu holders

You will likely need a large menu outside your restaurant that is weatherproof and smaller menus for each patron of your restaurant. Your menus should be attractive to potential customers and designed to fit in with the aesthetic of your business.

Ensure your menus include:

  • The name and an appropriate description of each dish.
  • Any allergen information.
  • The pricing of each dish or item.
  • Additional information, such as vegetarian or vegan.

 

A CCTV system

A CCTV system is necessary for protecting your restaurant from theft and burglaries. It can also help to protect you in the event of a threatening customer or an allegation against your business. A CCTV system can cost between £300 and £5,000 depending on the specification of the equipment, how many cameras you require, and the installation costs.

Wi-Fi

Your customers will expect you to provide Wi-Fi. Because multiple devices will be connecting at one time, you will need a Wi-Fi system that is reliable, fast and can handle a higher capacity. Depending on the size of your restaurant, you may require multiple routers or Wi-Fi boosters.

A music system

Unless you hire a live musician, restaurants generally play music as background noise. You may require a music player and multiple speakers, depending on the size of your restaurant.

Restaurant Business

Typical Costs

When you are setting up your restaurant, an important consideration you will need to make is the approximate costs associated with starting up and running this type of business. Calculating your typical costs allows you to estimate your initial investment requirements, any monthly and annual costs, your pricing strategy, your profit goals and your acceptable profit margins.

There are multiple costs associated with setting up and running a restaurant. Some of these costs will be one-off initial costs that you will need to pay when you are setting up your business. Other costs will be ongoing costs you will need to pay regularly – usually weekly, monthly, quarterly or annually.

Although typical costs can vary, depending on the type of restaurant business you set up and the size of your business, the typical costs you can expect to be responsible for include:

Your restaurant premises

Your business location will likely be your biggest expenditure. You will need to rent your premises on a monthly or annual basis. Rental prices can vary significantly, depending on the location and the size of the premises. City centre locations and locations close to a point of interest usually have the highest rental costs. Rental costs are often calculated per square metre. They can range significantly, from £500 to £15,000 per square metre annually. Your rental cost may be higher if you are renting an already established, refurbished or equipped restaurant.

Refurbishment and installation costs

Unless your premises previously operated as a restaurant or another similar food business, you will likely need to refurbish or convert your venue to install the equipment and furniture you need for your business and make the area fit for purpose. You will also want to refurbish and decorate your premises to fit the aesthetic of your business and make it attractive to customers. If your premises doesn’t have an established kitchen, you will need to set one up, which may include installing the necessary water, electricity and gas lines. Renovation costs can vary, from £5,000 to £50,000 depending on the level and scale of work required. As part of your renovation costs, consider how you can make your restaurant attractive and easy to clean and ensure it is safe and in line with health and safety regulations.

Equipment

Your equipment is an important purchase, as without it you will not be able to run your restaurant. The cost of equipment can vary based on how large your restaurant is and the type of equipment you require. The bigger your premises and the more customers you want to accommodate at one time, the more equipment you will require. You may choose to purchase less equipment initially and expand your equipment as your business grows. Equipment for your restaurant business can cost between £10,000 and £100,000.

Stock and ingredients

This is an ongoing cost you will need to factor into your budget and will be a major monthly expenditure. Much of your stock and ingredients will be perishables, such as fresh meat, seafood, dairy, fruits and vegetables. These ingredients will need to be purchased regularly and you may need to take deliveries several times a week (or daily). Other dry, non-perishable ingredients, such as flour and dried rice and pasta, can be ordered in bulk. You can reduce the cost of your stock by buying wholesale, buying in bulk and shopping around. To maximise your profits, your food stock cost should be no more than 30% of your food sale price. The higher the return, the higher your profits will be. Some stock will be more expensive, for example meat and seafood, but this can be reflected in your menu pricing.

Maintaining, repairing and replacing equipment

Repairs, maintenance and replacements are ongoing costs you will need to factor into your budget. Although some of your equipment and machinery will come with warranties, repairs and replacements are inevitable – particularly because you will be using the equipment continuously. Correctly cleaning and maintaining equipment and ensuring it is used correctly can extend its life, but potential repairs and replacements should still be factored into your budget.

Licensing fees

There are a number of different licences you will need to apply for when setting up and running your business. These can include a Premises Licence, a Food Premises Licence and a Personal Licence to Sell Alcohol. Licence costs can vary depending on your local council but you can expect to pay between £100 and £1,000 in licensing fees.

Running costs

These are the day-to-day costs associated with running your business. Some running costs are paid monthly, and others are paid quarterly or annually. Your running costs can include electricity, gas, water, council tax and insurance. To maximise your profits, try to keep your running costs as low as possible.

Staff

You will need to hire staff such as chefs and other kitchen staff, front-of-house staff and cleaners. You will need to pay any staff you employ at least the national minimum wage of £9.50 per hour and account for other expenses such as holiday pay, sick pay, maternity/paternity pay, National Insurance and any company pension contributions.

Branding

When creating your brand identity, consider how you want your restaurant to be perceived by potential customers. When creating your brand, consider the type of restaurant business you are setting up (e.g. fine dining or casual dining), your menu and your typical customer base. Branding can include creating your business’s visual identity, design and aesthetic, your business name and logo, your signage and your website. You could hire a professional to help you with branding or do some or all of the work yourself. Branding can cost between £500 and £10,000, depending on the level of work required.

Advertising and marketing

To ensure your restaurant attracts customers and creates maximum profits, you will need to spend money on advertising and marketing. It is recommended that you spend between 1%-3% of your annual turnover on marketing. For example, if your annual turnover (or your desired annual turnover) is £200,000, you should spend between £2,000 and £6,000 on advertising and marketing. You may need to invest more money when you initially set up your business or when you are trying to grow your business. To reduce your costs, capitalise on free marketing strategies, such as on social media or in your local community. Once your business is established, you should be able to reduce your advertising costs.

Training

You and your employees will need to obtain food hygiene training before you open your business. You will also need to refresh your training regularly (at least every three years). You may also opt to undertake other training courses, such as manual handling, first aid and electrical safety. You can expect to pay approximately £20 + VAT per training course per person.

Business insurance

There are multiple coverage options available for a restaurant business. Some coverage is optional, whereas others are mandatory.

Your coverage options include:

  • Public Liability Insurance.
  • Employers’ Liability Insurance.
  • Product Liability Insurance.
  • Building and Contents Cover.
  • Business Interruption.
  • Liquor Liability Insurance.
  • Equipment Cover.
  • Food Contamination Insurance.

 

Prices can vary depending on your insurance provider and the level of coverage you choose. Prices typically start at £20 per month.

Typical Pricing for Customers

Once you have calculated the typical costs associated with setting up and running a restaurant business, you can then price your menu. Each item on your menu will be priced differently.

There are multiple factors that will influence your pricing, including:

  • The type of restaurant business you set up.
  • The type of food you serve.
  • The cost of your food stock and ingredients.
  • The complexity of each meal and how long it will take you to prepare and cook.
  • Your location.
  • Your restaurant’s design and aesthetic, including your furnishings and décor.
  • The number of employees you hire.
  • The pricing of other similar restaurants in your area.

Safely Running a Restaurant Business

Safe practices in your restaurant can help to protect the health, safety and well-being of you, your staff and your customers.

Some ways you can safely run your restaurant business include:

Ensure proper ventilation

To reduce exposure to smoke, steam, high heat and harmful gases, you will need to install a proper ventilation system.

A ventilation system can:

  • Improve your indoor air quality.
  • Reduce the temperature of your kitchen.
  • Reduce odours.
  • Remove grease from the air, your surfaces and equipment.
  • Reduce your energy bills.

 

Your ventilation system will likely also include fire suppression equipment, which can help reduce the likelihood of a fire occurring in your kitchen.

Ensure you have safety equipment

Safety equipment is a necessity to help your restaurant run more safely and to ensure you have the correct equipment available in the event of an incident or emergency. Ensure safety equipment (such as fire extinguishers and first aid kits) is easily accessible and that all employees are trained to use it. Implementing a system for regularly checking your safety equipment is also recommended.

Safely store food

All food must be stored safely to prevent contamination and to ensure it is of good quality and safe to consume.

Some safe storage practices you should follow include:

  • Keep storage areas clean and tidy.
  • Check food deliveries are safe and of good quality before accepting them.
  • Follow the First In First Out (FIFO) stock rotation system.
  • Pay attention to use-by and best-before dates.
  • Ensure fridges and freezers are set to the correct temperature.
  • Follow the storage instruction on pre-packaged food.
  • Store raw food and high-risk food correctly (e.g. below ready-to-eat foods).
  • Keep foods that contain allergens separate.
  • Store any chemicals away from food.
  • Label any chilled or frozen food with the date.
  • Ensure hot hold food is kept at the correct temperature (63°C and above).

 

Keep your floors clean

Slips and falls are one of the most frequent causes of injuries in food businesses. Slipping or falling on a floor that is wet or slippery can lead to an injury and could result in your business being sued. Implement a policy that any spills are mopped up immediately and ensure your restaurant has enough ‘Wet Floor’ and ‘Caution’ signs and that these are used when necessary. You should also perform regular inspections of your kitchen and restaurant floor to check for any hazards that haven’t been reported.

Provide uniform and PPE

Not only does a uniform make your employees appear more professional, but it can also help to protect them from injury. For example, by ensuring all staff wear closed-toe, slip-resistant shoes and long-sleeved shirts. PPE such as latex gloves, protective aprons and hair coverings can also help to prevent cross-contamination.

Ensure the personal hygiene of all staff

Good personal hygiene is essential when working in the food industry.

Good personal hygiene can include:

  • Following handwashing procedures.
  • Tying back hair or covering hair.
  • Not wearing false nails or nail varnish on your fingernails.
  • Not wearing jewellery or watches when preparing or cooking food.
  • Not wearing strong perfume or other chemical products that could contaminate the food.
  • Wearing Personal Protective Equipment (PPE).
  • Following good habits, such as not coughing or sneezing near food and refraining from touching your hair or face.

 

You should also be aware of staff illnesses and ensure no employee is near food if they are displaying signs of illness or have recently experienced vomiting or diarrhoea.

Restaurant
Successful Restaurant Business

Use a chemical safety data sheet (SDS)

If you store any chemicals, you should create safety data sheets to list the properties of each chemical, any potential physical, health and environmental hazards and any safety precautions for handling, storing and transporting the chemicals. An SDS can help to prevent exposure and reduce hazards and prepare emergency responses and procedures in the event that someone is exposed to a chemical.

Implement pest prevention and control methods

Pests can be a major issue for food businesses and can result in contaminated food and your restaurant being shut down by an Environmental Health Officer (EHO).

Some ways you can prevent pests are:

  • Fill any gaps or holes in your building.
  • Keep your external areas free from food, rubbish or vegetation.
  • Dispose of food properly in closed bins.
  • Keep your premises clean and tidy.
  • Store food in sealed containers.
  • Use fly screens on open windows or doors.
  • Check your deliveries for signs of pest damage.

 

Ensure correct cooking temperatures

All food businesses, including restaurants, must ensure they are cooking and baking at the correct temperature. This is to reduce or eliminate the risk of food poisoning. Ensure your oven or other cooking equipment is set to the correct temperature and use a food thermometer to ensure food is thoroughly cooked. Any food must also be cooled in line with the guidelines and hot-hold food must be kept at the correct temperature and kept for no longer than two to four hours.

Pay attention to the Hazard Analysis and Critical Control Point (HACCP) principles

The HACCP principles help you to manage food safety hazards that could arise when storing, preparing, cooking and handling food. You can identify potential risks and implement measures to ensure these risks are reduced or removed. You should also keep records of any actions you take in line with HACCP.

Implement cleaning procedures

Having effective cleaning procedures is essential to any food business. It is recommended that a cleaning schedule or cleaning policies are in place that cover the cleaning of equipment, surfaces, and food preparation and storage areas. You will also need to clean each table thoroughly between customers and ensure your front of house is clean and well-maintained.

Keep clear and accurate records

When you are inspected by the EHO, they will likely request to see up-to-date records of your business’s cleaning schedules, risk assessments, health and safety policies, allergen information, and temperature checks. Keeping such records not only helps to protect your business and improve the likelihood of you receiving a higher score, but it also ensures procedures are followed at all times.

Conduct risk assessments

Although not a legal requirement for businesses with fewer than five employees, risk assessments can help to eliminate risks and ensure safe practices in your restaurant.

As part of your risk assessments, you should:

  • Identify hazards.
  • Determine who could be at risk.
  • Evaluate any potential risks.
  • Implement relevant safety measures.
  • Record the results of the risk assessment.
  • Review the risk assessment regularly.

 

You should keep physical records of your risk assessments as evidence of your commitment to safe practices.

Implement security measures

Security measures can be implemented to protect your business. Your restaurant will likely store a lot of expensive equipment and may keep cash on site. Some ways you can protect your business include installing a CCTV system, using secure and reliable locks and installing an alarm system.

Legal Requirements

Complying with legal requirements is essential when setting up and running your restaurant business. Legal guidelines can vary, depending on the type of restaurant you set up and where your business is located.

Some of the legal requirements you should be aware of include:

Register as a food business

Any business in the UK that sells food must apply for a food business registration with their local council. You must apply for your food business registration at least 28 days before you begin trading. Once you have registered, you may be inspected by your local council.

Apply for a Premises Licence

If you intend to sell alcohol or provide ‘licensable activities’ you will need to apply for a Premises Licence from your local council.

You will need this licence if you intend to:

  • Sell alcohol.
  • Serve hot food or drinks between 11 pm and 5 am.
  • Provide entertainment such as a theatrical performance, an indoor sporting event, live or recorded music, dancing or showing a film.

 

When you apply for this licence, you must appoint a designated premises supervisor (DPS) who has a personal licence to sell alcohol.

Apply for a Personal Licence to Sell Alcohol

If you intend to sell alcohol on your premises, you (or a member of your staff) will need to apply for a Personal Licence. This means that every sale or supply of alcohol is authorised by your personal licence holder.

To qualify for a Personal Licence, you (or your employee) will need to obtain a qualification such as:

  • The APLH Level 2 Award for Personal Licence Holders.
  • BIIAB Level 2 Award for Personal Licence Holders.
  • BTEC Level 2 Award for Personal Licence Holders.

 

This qualification teaches you about your responsibilities regarding alcohol sales, specific prohibitions, the strength of alcoholic drinks and protecting children from harm. Without this qualification, you cannot apply for your Personal Licence.

Apply for a Food Premises Licence

If your restaurant plans to serve meat, fish, eggs or dairy products, you will need to apply for a Food Premises Licence with your local council. Depending on your local council, you may need to display your licence clearly on your premises. Before you open your business, your local council may require your premises to undergo an inspection.

Comply with the Food Safety Act (1990)

The Food Safety Act applies to any business that sells food. It covers food safety, consumer protection and food information. It makes it an offence to make or sell any food which could be harmful to health and lays out hygiene practices you should follow.

There are several legal requirements listed in the Food Safety Act, including:

  • Do not include anything from food, remove anything from food or treat food in any way which could make it damaging to the consumer.
  • Ensure that all food practices are carried out in a hygienic way.
  • Comply with food hygiene and safety practices when cleaning, cooking, chilling and handling food.

 

Comply with the Food Safety and Hygiene Regulations

These regulations specify the standards relating to the control and management of the steps that are critical to food safety, including the cleanliness of your restaurant and equipment and temperature control in food preparation, storage and serving.

The regulations differ depending on where in the UK your business is located:

  • England: The Food Safety and Hygiene (England) Regulations 2013.
  • Scotland: The Food Hygiene (Scotland) Regulations 2006.
  • Wales: The Food Hygiene (Wales) Regulations 2006.
  • Northern Ireland: The Food Hygiene Regulations (Northern Ireland).

 

Comply with The Food Information (Amendment) Regulations 2019

These regulations set out the responsibilities of food businesses, including restaurants, to provide information regarding the 14 allergens (celery, cereals, crustaceans, eggs, fish, lupin, cows’ milk, molluscs, mustard, nuts, peanuts, sesame seeds, soya and sulphur dioxide). The regulations were updated in 2019 to include Natasha’s Law. You must ensure that any packaging, menus, signs or labels clearly state if any of these allergens are present.

Obtain Food Hygiene training

Any employees who prepare, handle or sell food must be supervised, instructed and trained in food hygiene. Although a food hygiene certificate isn’t a legal requirement, it is the easiest way to demonstrate your compliance to the Environmental Health Officer (EHO) that will inspect your business. Training will need to be refreshed regularly.

Implement a waste management system

Restaurants in the UK should have appropriate provisions for the separation, storage and removal of waste.

Some guidelines you should abide by include:

  • Have appropriate bins which are sufficient in number and specified for different types of waste.
  • Do not allow waste to accumulate
  • Use bins that have fitted lids and foot pedals.
  • Have a specific waste disposal area.
  • Do not dispose of food waste in the sink.
  • Use commercial sink strainers to prevent fat, oil, grease and small bits of food from entering the sewer network.
  • Apply for a waste carrier registration if you transport any waste.

 

It is also recommended that you clean and disinfect bins regularly.

Comply with premises regulations

When choosing or refurbishing a commercial location, there are some guidelines and regulations you should comply with. These guidelines ensure your restaurant is in good condition, clean and maintained and encourages good hygiene practices.

  • Handwashing facilities: You will need separate handwashing facilities that have hot and cold running water and appropriate materials to allow hands to be washed and dried hygienically.
  • Changing facilities: Your premises should have adequate changing facilities if a member of staff needs to change their clothes.
  • Ventilation, lighting and drainage: Your premises must have adequate ventilation, lighting and drainage in all relevant areas.
  • Food preparation areas:
    – Floors and walls must be in good condition, easy to clean and frequently disinfected.
    – Ceilings must be in good condition, easy to clean, free from condensation and mould and free from flaking paint or plaster.
    – Windows and doors must be easy to clean and disinfect and if they open to the outside, fitted with removable insect-proof screens.
    – Surfaces should be maintained in good condition, easy to clean and frequently disinfected.
  • Facilities for washing food: Your restaurant will need separate sinks for washing food and cleaning equipment. These sinks should have hot and cold running water that is of drinking quality.
  • Equipment: Any equipment that comes into contact with food must be in good condition and cleaned and disinfected frequently.

 

Implement a Food Safety Management System (FSMS)

Food businesses in the UK must implement a Food Safety Management System. An FSMS is a systematic approach to controlling food safety hazards. It ensures that your business is following safety protocols and will influence your food hygiene rating.

Comply with the Reporting of Injuries, Diseases and Dangerous Occurrences Regulations (RIDDOR) 2013

RIDDOR states that you must report all injuries, diseases and dangerous events that occur in your business. Reports must be made to the Health and Safety Executive (HSE) using an appropriate recording document. These regulations apply to any incidents that involve employees or customers, including food poisoning.

Comply with the Control of Substances Hazardous to Health (COSHH) Regulations 2002

The COSHH regulations state that you must control any potentially hazardous substances. You should also assess, control and reduce any risks or potential hazards and protect people from harm.

Some hazardous substances you should be aware of are:

  • Flour dust.
  • Concentrates of flavour, citrus oils and spices.
  • Cleaning substances.

 

Comply with the Provision and Use of Work Equipment Regulations (PUWER) 1998

PUWER regulations apply to you and any employees you hire. You must ensure any equipment in your restaurant is fit for purpose and is maintained and inspected regularly. You must also ensure that health and safety risks are minimised to an acceptable level, that you have the correct knowledge and training to use the equipment, and that protective measures are put into place. Equipment should also be used under appropriate conditions. These regulations apply to your kitchen equipment and other equipment in your restaurant, such as furniture.

Comply with the Electricity at Work Regulations 1989

The Electricity at Work Regulations state that any workplaces that use electricals must construct electrical systems in a way that prevents danger. You must also maintain electrical systems to ensure they are safe, ensure electrical equipment is checked by a competent person annually and conduct Portable Appliance Tests (PAT).

Comply with gas safety regulations

If you have a gas boiler you will need to have it and any equipment that uses gas inspected by a gas safe engineer. If your equipment is deemed safe to use and complies with government requirements, you will be issued a Gas Safety Certificate. You will need to display your gas certificate clearly for your guests and other visitors to your business to see.

Comply with fire regulations

As the business owner, you are responsible for fire safety measures in your restaurant.

There are multiple fire regulations you must ensure you comply with, including:

  • Conducting a fire risk assessment.
  • Complying with the Regulatory Reform (Fire Safety) Order 2005.
  • Implementing any necessary fire safety measures.
  • Implementing emergency procedures and ensuring these are clearly displayed.

 

Comply with the Manual Handling Operations Regulations 1992

Manual handling regulations can help to protect you and your employees from sustaining an injury or illness as a result of manual handling tasks. The regulations apply to the lifting or moving of any objects, bending down and reaching high and repetitive movements. You will likely be performing manual handling activities when carrying out tasks such as preparing food (e.g. chopping vegetables) and carrying plates of food.

Prepare a health and safety policy

The law states that every business in the UK must have a specific policy for managing health and safety. Your policy should state exactly how you will manage health and safety in your restaurant, who is responsible for specific tasks and how and when these tasks are completed.

Appoint a competent person

A competent person should be appointed to help your business meet your health and safety legal duties. You can act in this role yourself or appoint another person to fulfil this role. The competent person should have the skills, knowledge and experience to identify any hazards in your business and put controls in place to protect people from harm.

Comply with employment legislation

You must ensure you follow employment legislation, including the Employment Rights Act (1996) and the National Minimum Wage Act (1998). You must also comply with legislation relating to recruitment, working hours, sickness, discrimination, dismissals, and maternity or paternity pay.

Register your business

You must register your business with HMRC before you begin operating. You can register as a sole trader or as a limited company. You will need to register your business name and any other relevant information. You will also need to register for self-assessment tax.

Busy restaurant setup

Positives of Owning a Restaurant Business

Owning a restaurant business can be rewarding in many ways. Some of the main positives associated with this type of business are:

Restaurants are in high demand

Even with many other types of businesses (such as high street shops) failing following the Covid-19 lockdown, the restaurant industry is thriving. People love going out to eat and with so many different types of foods and cuisine being popular in the UK, there is the potential for many different types of restaurants to successfully co-exist and make a profit. Having high demand for your services makes it more likely that your restaurant business will succeed.

Every day is different

Running a restaurant business will never get boring. Every day will be different and will present new challenges and different customers. You could be managing different staff every day, preparing different daily specials and taking responsibility for different tasks. A varied workday helps to keep your job interesting.

A rewarding career choice

Running a restaurant can be rewarding in many ways. You can have a positive impact on your community, connect with other people and see your business grow and succeed. If you love food and have a passion for cooking and the restaurant industry, running a successful business will not only be financially rewarding, but also personally rewarding.

Be a part of special occasions

Many people visit restaurants for special occasions, such as birthdays, graduations and anniversaries. Being a part of these special occasions, particularly if you know the customers or help to arrange something special for their occasion, can be extremely rewarding. Restaurants also frequently witness proposals and the sharing of special news, such as a new baby or job. Knowing that your restaurant will hold a special place in your customers’ hearts for being part of the important times of their lives can be very rewarding.

Be part of your local community

Restaurants are an important staple of local communities and make up part of an area’s identity. Running a restaurant allows you to connect with people from your local community, both personally and professionally. You can also give back to the community, by donating to charity, hosting community events and hosting fundraisers. Some restaurants help their communities further, for example, by hosting a free Christmas dinner for elderly people living alone.

High profit margin

You can plan your menu to maximise your profits, for example, by using the same ingredients in multiple dishes. You can also mark up your dishes, meaning the price of the dish will significantly exceed the cost of the ingredients. A high profit margin can help you to increase your profits and your business’s income.

Unlimited income potential

There is no fixed income or limit on how much money your restaurant can make. If you operate at maximum capacity, this allows you to increase your profits. As your business grows in popularity, you can also raise your prices, extend your premises, improve your menu and even open additional franchises of your business in other areas. A restaurant business has a high-income potential and with a solid business plan, can be extremely lucrative.

Customer loyalty

If your customers enjoy your food and drinks and the atmosphere of your restaurant, they are likely to return time and time again. Many customers, particularly families, return to the same restaurants for years. Not only does this give you the opportunity to get to know your customers, but customer loyalty can also help you to grow your profits. Loyal customers may even recommend your restaurant to other people or write a positive review, which can help you to grow your customer base.

Be creative

You can be creative with your menu. You have the opportunity to be creative with your ingredients, flavours, textures and the presentation of your dishes to create the perfect products. If you love being creative in the kitchen, running a restaurant can be enjoyable and rewarding. Creativity can even happen in other ways, such as designing the aesthetic of your business or creating a new cocktail.

Do something you are passionate about

If you are passionate about cooking and food, setting up your own restaurant business can be extremely rewarding. You can do something you love every day and will have the opportunity to create your own recipes and designs and be creative with your cooking. Profiting from your passion can be very rewarding.

Capitalise on seasonal opportunities

Certain times of the year, such as the lead-up to Christmas and Valentine’s Day, always result in a huge increase in business. You can capitalise on these opportunities by decorating your restaurant, creating a specific menu and planning special events. You could also offer set menus for events such as Christmas, helping you to attract large groups of customers, such as work Christmas parties. Capitalising on special occasions can help you to attract new customers and increase your profits.

Create a positive work environment

You will be responsible for hiring staff and creating staff policies. This gives you the opportunity to create a positive work environment. You could hire staff that you know will bring positivity to your restaurant and will be an asset to your business. Your staff will also likely be like-minded people who are also passionate about food and beverages and also enjoy talking to customers.

Face-to-face interaction

If you are an outgoing person and you enjoy speaking to people from all different walks of life, you will likely enjoy working in a customer-facing business. You can get to know your customers and spend time talking to them every day. Because restaurants usually experience a lot of repeat business, you can really get to know your customers.

Free advertising on social media

Set up social media accounts (such as Facebook and Instagram) for your business to easily gain exposure, by posting photos or videos of your restaurant and arty or appealing pictures of your food and beverages. Your customers may also post pictures to their own social media accounts which will be seen by their followers. This can help you to gain exposure and be noticed online. Social media is a form of free advertising which can help you to grow your customer base and increase your income.

Choose your own schedule

You can choose which days your restaurant opens and the hours you want to work. You can choose the opening hours based on your busiest days and your own preferences. As your business grows, you can also work fewer hours and allow your employees to handle the day-to-day running of your business.

Be your own boss

You can make all key decisions yourself and steer your business in whichever direction you choose. You can choose how involved you want to be, the type of restaurant you open, the food and beverages you sell and how you want to run your business. You can make the best decisions for you and your business.

Busy Restaurant

Negatives of Owning a Restaurant Business

Although there are many benefits associated with owning a restaurant, there are some potentially negative aspects of this type of business that you should be aware of.

High competition

Not only are you competing with other restaurants, but you are also competing with cafés, pubs, bars and other food businesses. Even supermarkets offer sit-down meals. A high level of competition, particularly with well-known restaurant chains (such as Pizza Hut and Nando’s) and popular fast-food and takeaway options (such as McDonald’s and KFC) that typically have low price points, can make it more difficult for your business to succeed.

Long working hours

Many restaurants open 6 or 7 days a week and try to maximise their profits by opening for longer hours. You may try to attract both lunchtime and dinnertime customers, meaning your business will need to be open for most of the day. You will also need to account for the hours you will be working before and after your opening hours, to accept deliveries, prepare food and clean your premises. You may find yourself working more than 60 hours per week (particularly when your business is growing), which can be extremely tiring, both mentally and physically.

High start-up costs

The equipment needed for a restaurant business can be expensive. You will also be responsible for the rent and renovation costs. The high start-up costs mean you may need to source outside investment. It will also take longer for you to begin turning a profit. High start-up costs also make your business high risk, as you could potentially lose your investment if the business fails.

Unsociable working hours

As well as a long working week, you may also be expected to work unsociable working hours. Restaurants tend to be busiest in the evening and at the weekend. To help your business succeed, you may have to be available at these peak times (particularly while your restaurant is starting out and growing). This can impact your family life and personal life.

Physically demanding

Working in a restaurant can be physically demanding. You will be spending long hours on your feet every day and will be engaged in many physically demanding tasks, such as reaching high and bending low and carrying heavy items.

This can cause multiple health concerns, such as:

  • Neck or back pain or strain.
  • Pain, strain or injuries to your fingers, hands and wrists.
  • Pain in your feet or legs.

 

It can be difficult to grow your business

It can be more difficult for a new restaurant business to grow and succeed because of the high competition. People often choose a restaurant they have visited before or that has been recommended to them, or they choose a restaurant that has a high number of positive reviews online. It can be difficult to grow your customer base and you may experience slow business at first. This can have a detrimental effect on your income and profits. You may experience a lack of profitability in your first year of operation.

Staffing challenges

There are many staffing challenges you could face, such as a lack of staff motivation, customer complaints about staff and staff not fulfilling their expected duties. It can be difficult to create and maintain a positive work environment when working in such a busy, high-pressure environment. You will also have lots of responsibilities related to your staff, such as the hiring process, staff training, day-to-day management, staff rotas and staff payroll. While your business and your profits are growing, you may have to undertake many of these responsibilities yourself. Restaurants also typically have a high staff turnover, which can waste a lot of time in hiring and training.

Accountability and liability

The food industry is highly regulated with many laws and regulations you must be aware of. You need to ensure you follow all policies and procedures, particularly those relating to health and safety. Not only can it be time-consuming (and sometimes expensive) to ensure compliance, but failure to comply, even unintentionally, could have serious consequences. If a customer contracts food poisoning after eating at your restaurant you could be held liable.

Complying with legislation

There are many different pieces of legislation and legal guidelines you will need to comply with. Not only can this be complicated and time-consuming, but any non-compliance (even if this is accidental) can be punished with a fine or the forced closure of your business. Some types of legislation also require you to go through specific training and/or gain a qualification, which can be costly and arduous. A restaurant business can have high liability which can be a lot of stress and pressure on a business owner.

High responsibility

As the business owner, you will have a lot of responsibility, including ensuring the financial well-being, positive public opinion and the health, safety and hygiene of your establishment. Although other employees can handle the day-to-day running of your business, you may wish to take on these responsibilities to ensure the success of your business. A lot of responsibility can be time-consuming and stressful.

Inconsistent profits

Some days are likely to be busier than others and sometimes this can be difficult to predict. It could also be that you receive more business at certain times of the year. This can make it difficult for you to predict your profits, order your ingredients and plan how many of each product you should pre-prepare every day.

Ingredients and stock can be expensive

Depending on your menu, you may require expensive ingredients, such as meats, seafood and expensive cheeses. Although you can price your menu accordingly, prices that are too high will deter customers. Expensive stock and ingredients can affect your profit margin and your overall income.

Spoilage can affect your profits

You will be dealing with a lot of perishable ingredients which spoil quickly. Some of the products you make or purchase will need to be used the same day to prevent them from spoiling or going stale and becoming food waste. This can have a significant impact on your profits, as the ingredients and time required to make them are wasted. Additionally, to save time your chef may pre-prepare and batch-cook many items on your menu and if these are not sold, the wasted ingredients can affect your profits.

Issues out of your control

This can be one of the most frustrating aspects of running a restaurant, as things that are outside of your control can have a negative impact on your business and your profits. For example, your supplier raising their prices, your stock delivery being cancelled or your equipment breaking can prevent you from properly running your business, which could not only affect your profits but also result in negative customer reviews.

It can be stressful

There are many responsibilities associated with running a restaurant which can be stressful. Not only will you be responsible for the day-to-day running of your business, but you will also need to ensure your customers are satisfied. You are also responsible for your business’s success, which can be stress-inducing.

A lot of skill, knowledge and experience are required

To help your business succeed, you will need to be highly proficient in a variety of skills and will need to have a lot of experience with different foods and beverages. You will also need to have extensive experience working in a restaurant and have a high level of knowledge about health, safety and hygiene legislation. It can be time-consuming to gain the appropriate skills, knowledge and experience to make your business succeed.

Bad reviews

Although the majority of customers leave honest reviews, some customers are difficult to please and will leave a negative review because of the smallest complaint (even if it is something outside of your control, such as a long wait time or other customers being too loud). Sometimes a fake customer also leaves a fake review, which can be extremely difficult to disprove and remove. Negative reviews can be extremely damaging to your business, particularly if your business is new or you’ve had relatively few reviews.

No benefits

As you are self-employed, you won’t receive benefits such as pension contributions. You will also be responsible for doing your own taxes and organising your National Insurance contributions. You will also have a lack of job security.

Planning Your Restaurant Business

An effective and well-designed business plan is essential to the success of your restaurant. A business plan can help you to focus on the specific steps that will help your business succeed, plan your short-term and long-term goals, determine your financial needs and help your business to grow.

When creating your business plan, ensure it contains information such as:

  • Your company information.
  • Your company description.
  • The services you will provide.
  • Your branding, marketing and advertising plan.
  • The structure of your business.
  • The operational plan for your business.
  • The financial plan for your business.

 

Some of the factors you will need to consider when creating your business plan are:

Your business summary

Your business plan should include a detailed overview of your business, including your location, the size of your business, the type of restaurant you run, your proposed menu (or the food or cuisine you will focus on), your staffing requirements, your equipment and your business goals.

The type of restaurant you are going to set up

Deciding what type of restaurant you are going to set up is the first step in planning your business. For example, will you operate a fine-dining restaurant or a fast-casual restaurant? Will you offer a takeaway service or operate within a specific niche? The type of restaurant you set up will impact your premises, staff requirements, your target customers, and your menu. Consider your local competition, your budget, and your own skills when deciding what type of restaurant you will run. You should also ensure the design and aesthetic of your premises fit in with your vision.

Your menu

Creating a menu is a process that can take time and if you are not working as the main chef, you may want to create your menu in partnership with them. You may choose to offer a wide and varied menu or focus on a specific type of cuisine or niche (such as Greek food or vegan food). Your menu may change over time, but ensure it reflects your brand and the type of restaurant you want to operate.

Your business location

Your location will have a significant impact on the types of customers you are likely to attract. It will also impact your premises’ rental costs. If your business is located in an area with high footfall or a place popular with your target market, the increased custom and higher profits will be extremely beneficial to your business. Consider your rental budget and your size requirements when choosing your premises.

Your target market

Determining your target market is a key step to helping your business succeed. Different types of restaurants, different menus and different designs and aesthetics are likely to attract different customers. Your pricing strategy will also be a key factor in determining your target market. Once you have identified your typical customers, you can then focus on how to attract them to your business.

Your local competition

Being aware of other restaurants in your area can help you decide what type of business to run and how much to charge your customers. If your local area already has several successful restaurants, you may want to focus on an untapped niche and target different customers; for example, if there is already a successful Italian restaurant operating within close proximity, you may want to open a different type of restaurant or consider how to make your Italian restaurant stand out.

Your equipment and stock requirements

Consult the list above to determine your equipment requirements. The equipment you require will depend on the type of restaurant you set up and how big your premises is. Once you have determined your equipment requirements, you can then calculate the initial costs of purchasing the equipment and the monthly replenishment costs, e.g. for stock and ingredients.

Your start-up costs and running costs

Consult the list above to help you calculate the approximate costs of setting up and running your business. Determine what equipment you need and the amount of equipment, as well as the cost of your premises, to help you determine your start-up costs and what your initial investment requirements will be. You can then calculate whether you can finance your business yourself or whether you need to source outside investment, for example, from a bank or an independent investor. Determining your start-up costs and running costs can also help you to create a budget and predict when you will begin to turn a profit.

Financing your business

Consult the list of start-up costs and running costs above to determine what capital you will require. Can you finance the business yourself or will you need to source outside investment? You will also need to calculate when you are likely to begin turning a profit. If you require outside investment, you could consider a bank or other financial institution, a business loan or an investment partner.

Your price points

When determining the pricing of your menu, consider the cost of your stock and ingredients and the time it will take to make each dish. You should also take into account the pricing of your competitors.

Your brand

Creating your brand is a key way to ensure you stand out from your local competition. Branding can help you to focus on your target customers, attract clients and concentrate your marketing and advertising strategies. Some ways you can create your brand are by focusing on your business’s visual identity, designing your menu and creating a brand story. Your business name and logo are also part of your branding so ensure you consider these when creating your business plan.

Your marketing and advertising strategies

Marketing and advertising are especially important when you first open your restaurant. Your marketing strategy needs to be effective and budget friendly. Consider your target customers and the best way to reach them.

Some ways you can market and advertise your business are:

  • Build a functional and attractive website.
  • Advertise in your local community.
  • Offer special deals and introductory offers to build your customer base.
  • Ask your customers to review your restaurant online.

 

Your sales forecast

How many customers can your restaurant seat at one time? What is your average table turnover rate? Are certain days likely to be busier than others? As your business and reputation grow, your sales forecast is likely to change. You should also consider whether certain times of the year are likely to have increased sales, for example, if you are located close to the seafront you will likely be busier during Spring and Summer.

Your strategy for growth

Your strategy for growth is the actions you will take to realise your goals for expansion and any potential challenges your business could face and how you will avoid or overcome them. Being aware of any potential challenges can help you to prepare for them and hopefully avoid them. This can help to make your business more successful. Challenges could include a failure to attract new customers and a high level of competition in your chosen niche.

Some potential strategies for growth include:

  • Expand your menu.
  • Apply for Michelin star status.
  • Open another restaurant location.

 

Your business goals

Determining your business goals is an essential part of creating your business plan. Your business objectives highlight the targets and goals of your restaurant business and help you to create a one-year, three-year and five-year business plan.

Your business objectives should be SMART:

  • S = Specific
  • M = Measurable
  • A = Achievable
  • R = Realistic
  • T = Time-bound

 

Legal requirements

Consult the list of legal requirements above to check you have complied with all requirements and regulations and that all your paperwork is accurate. Failure to comply with legal requirements could have a detrimental effect on your business or could result in a fine, the forced closure of your business or, in serious cases, prosecution.

 

Download our business plan