What You Should Consider Before Getting Involved in the Restaurant Business
You’ve likely heard that opening your own restaurant can be one of the most stressful business ventures, but it also comes with a bevy of rewards and potential for wealth-increasing revenue. If you’re considering a foray into the world of eateries and bars, be sure to take the following into consideration.
Restaurants Are Expensive to Start, Run
Depending on location and products sold, starting your restaurant business and maintaining it can cost a fortune. Estimates vary based on a variety of aspects, but generally, restaurant startup costs can reach at least half a million dollars. You’re tasked with leasing a commercial space, sourcing ingredients from vendors, hiring staff, purchasing furniture, paying for any necessary renovations—the list goes on and on. Take restaurant insurance; you’ll need to make sure your guests, employees, and personal assets are protected and restaurant insurance coverage doesn’t come cheap. Consider the cost of securing an alcohol permit alone—according to brokerage service License Locators, the average liquor license costs anywhere from thousands of dollars to hundreds of thousands of dollars. With so many costs to consider, it’s important to understand how much you’ll realistically need before approaching investors. There are numerous expenditures that you likely haven’t considered; with everything from music licensure to marketing costs, you’ll need to be realistically prepared for the costs you’re bound to encounter.
The Legal Requirements
In order to get your restaurant idea off the ground, you’ll need to jump through numerous hoops, and the legal stipulations can be endless. From zoning permits to building health permits, business license requirements to employee health permits, you’ll find the preparation for your restaurant can take months and cost hundreds of thousands of dollars. If you’ve never had experience in the restaurant industry, you’ll likely want to take on a partner who has, or work with a mentor of sorts who can guide you.
How Will You Afford It?
Unless you’re sitting on savings accounts filled to the brim with investable capital, you’ll need to approach a bevy of lenders. Banks have tightened the reins on loans; unless you have stellar credit and proven success in the restaurant industry, your chances of being approved by a local or national bank are slim to none. Don’t give up, however; there are plenty of alternative financing methods modern restauranteurs turn to. Some entrepreneur hopefuls have looked towards the future of crowdfunding- sites like Kickstarter and the restaurant-specific FoodStart provide platforms for restaurant hopefuls to campaign for money needed to get their business underway. Still others take on partners who gain half of the company in exchange for the capital necessary to get the restaurant up and running. Still others approach angel investors or hard money lenders. Be sure to speak with your financial advisor about the best options for you.
The Personal Costs
If you’re looking for a hands-off investment, a restaurant business probably isn’t the right venture—unless you’re willing to partner up with someone who has plenty of experience in the industry and the time to devote to such an endeavor. If you’re running the restaurant on your own, expect to be the first one there and the last to leave, at least for the first year or two of business. You’ll need to find employees you trust, and spend the time making sure every customer has a great experience. A restaurant business is a time-intensive endeavor, and you’ll find yourself playing a variety of roles, from manager to busser to host—you may even find yourself providing backup help in the kitchen. If these tasks don’t seem well-suited to your expectations for a restaurant investment, you may want to consider a different venture.
If you’re tempted by the glitz and glamor of the restaurant business, consider the realities of this venture. From capital requirements to time investment, there are a bevy of less-than-savory aspects to this business. As you begin your search for investors and locations for your restaurant, keep these considerations in mind.
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