How to start a restaurant in 11 steps

Owning a restaurant can be as satisfying as the butteriest chocolatiest croissant or the freshest farm-to-table salad. You get to delight your customers every day and be a staple in your community.

But as with any new business, starting a restaurant has challenges—which is exactly why we’ve created this guide to set you off on the right foot. Below, we break down every step for how to start a restaurant: 

1. Determine your restaurant concept
2. Create your menu
3. Write a business plan 
4. Select your legal structure
5. Register for state and local taxes
6. Secure necessary licenses, permits, and insurance 
7. Set up accounting processes
8. Consider how you’ll fund your restaurant 
9. Determine staffing needs
10. Order restaurant equipment
11. Market your restaurant 

While parts of the process can vary depending on your unique business venture, the steps below are essential for restaurants of all kinds.

1. Determine your restaurant concept

Your restaurant concept sets the foundation for your entire business venture, shaping the atmosphere, menu, and target audience. This step is where you can let your specific passions and creativity shine. 

To define your restaurant concept, start by choosing your niche. Research the local market to determine what types of restaurants—and restaurant gaps—already exist. Lean on your passions, culinary expertise, or cultural influences to help differentiate your concept and cater to a specific target audience. 

Your restaurant concept should also include the type of food you’ll serve and the ambiance you want for your establishment. Choose a culinary style and atmosphere that aligns with your target audience and showcases your expertise. 

If you’re feeling stuck, start by broadly defining the type of restaurant you want to open, such as: 

• Fast-casual 
• Fine dining 
• Fast food 
• Food truck 

When defining your restaurant concept, determine what will make your restaurant stand out and how you can offer a unique experience.

2. Create your menu

Your menu is a reflection of your restaurant concept and an extension of your brand. You’ll want to craft it based on your expertise, vision, and customer preferences. Thinking through the details of your menu early on will also help inform your ingredient selection, equipment, and supplies needed. 

Consider the following factors when developing your menu: 

• Concept alignment: Craft your menu based on your restaurant’s concept and overall theme. Consider how you can play up your unique differentiators. 
• Target market: Think about your target market’s preferences when selecting menu offerings. 
• Ingredient sourcing: Consider how you’ll source your ingredients and any suppliers you may need. 
• Pricing strategy: Set menu prices based on what’s comparable to the local market while staying competitive. 

Your menu plays a key role in the overall vision of your restaurant and your business structure. It can help to write your menu before your business plan so you can include menu prices in your financial projections. 

3. Write a business plan

A business plan outlines the details of your business, such as your customer base, mission, and competitors. According to the Small Business Association (SBA), these are the key elements you should include in a business plan:

• Executive summary: This is a brief overview of your restaurant. Include your mission statement, the type of cuisine you plan to serve, and basic information about your employees, target customers, and location. Also include your growth plans if you intend to ask for financing.
• Company description: This is a more detailed overview of your company, expanding on the points in your executive summary. Be specific about your customers, your restaurant’s organization, your value propositions, and the competitive advantages you have over other establishments. You should also explain why you choose your location, with data to back it up. List any experts on your team, such as a highly rated chef. Focus on your restaurant’s strengths.
• Menu and services: This is an overview of your menu and description of services. Include a sample menu with all the dishes you intend to serve, including prices based on a detailed cost analysis. Also include details on your service style. 
• Market and competitor analysis: This is a research-backed overview of the restaurant market in your area, including your target market demographics and local competitors. This section allows you to identify your strengths, explain why your restaurant will succeed in your area, and determine your pricing. It also allows you to analyze what your competitors are doing and what you can do better.
• Staffing and management: This is the structure of your restaurant, including the chefs, waiters, cashiers, general managers, line cooks, and so forth. 
• Marketing and advertising: This is an outline of how you plan to attract and retain customers through marketing and sales strategies, social media, and advertising. You can describe any in-house marketing plans or whether you intend to hire a PR/marketing firm to help generate attention.
• Revenue forecasting: This is a breakdown of your financial projections, including forecasted income statements, balance sheets, cash flow statements, and any graphs or charts that tell your financial story. Your financial forecasting will tell investors how you plan to grow your business and make it successful.

Choosing the right legal structure is crucial for establishing your business's legal and financial framework. Each structure carries its own considerations for taxation, liability, and management. 

Here are some common legal structures for restaurant owners: 

• Sole proprietorship: A sole proprietorship is when one person owns and runs the business. It offers complete control and easy setup, but your personal assets and liabilities aren't separate from your business assets. This structure may appeal to those who want to test a business idea before establishing a more formal business.
• Partnership: A partnership is formed when two or more individuals agree to share ownership of a business. It can be a general partnership, where all partners share in profits, losses, and liabilities, or a limited partnership, where there are both general partners and limited partners. Partnerships offer shared decision-making and flexibility, but partners are personally liable for the business's debts and legal obligations.
• Limited liability company (LLC): An LLC combines the flexibility of a partnership with the liability protection of a corporation. Owners have limited personal liability for business debts and obligations, which means your personal assets, such as your savings, home, and car, will be protected if your restaurant faces bankruptcy or lawsuits. Profits and losses can pass through to your personal income, which means you won’t face corporate taxes. 
• C corporation: A C corporation exists separately from its owners and offers the strongest protection from personal liability, but the cost to create one is much higher than the other structures. C corporations require formalities like holding shareholder meetings, and are subject to double taxation, where both the corporation's profits and shareholders' dividends are taxed.
• S corporation: S corporations are designed to avoid the double taxation of C corporations. They elect to pass corporate income, losses, deductions, and credits through to its shareholders. S corporations have certain eligibility requirements, including a limitation on the number and type of shareholders, and rules regarding shared ownership and allocation of profits and losses. 

It's crucial to weigh the benefits and drawbacks of each structure and select the one that aligns with your specific needs and long-term goals. LLCs are a common choice among restaurateurs, as they offer more flexibility in terms of taxation and profit allocation. Compare your options carefully, and consider partnering with a business attorney or accountant to help you make the best choice. 

5. Register for state and local taxes

Restaurants must pay taxes on a variety of things, such as their location, profitability, number of employees, the size of the property, and so forth. To ensure compliance with tax laws, you’ll need to register for state and local taxes.

To register, you’ll first need to obtain an Employer Identification Number (EIN) from the IRS. This number is necessary for various tasks, including filing your taxes and hiring employees. You can obtain an EIN online through the IRS website or by mail. 

Once you have your EIN, research the specific state tax requirements for your area. This typically includes sales tax, income tax, and possibly additional taxes like restaurant-specific taxes or local fees. Register with the appropriate state tax agency to ensure proper reporting and payment of state taxes. You can find your state obligations on the SBA website.

In addition to state taxes, you may also have local tax obligations depending on your restaurant's location. This can include local sales tax, occupancy tax, or other city or county-specific taxes. Contact your local tax authority to determine the specific requirements and register accordingly. 

6. Secure necessary licenses, permits, and insurance

To open and operate a restaurant, you’re required to have several permits and licenses. Failing to do so can result in penalties and fines and can even prevent you from opening your doors at all. The licenses and permits you’ll need will vary based on your city and state, but here’s a list of the ones you’ll likely need to consider: 

• Business license: This license legally allows you to run and operate a business and can be obtained through your city and state government. You can find more information on local and city licenses on the SBA website.
• Food service license: A food service license shows you’re up to date with food safety laws and that your restaurant meets all food preparation, storage, and safety guidelines. Food service licenses are typically obtained through city or county health departments.
• Liquor license: If you plan on selling liquor or other alcoholic beverages, you’re going to need a liquor license. In some cases, you may need a separate wine and beer license, depending on your state. Your local government typically distributes these licenses.
• Food handler’s permit: Employees in charge of handling food, such as chefs, will need a food handler’s permit. This permit states that the employee has had the proper education and training on health and safety practices in a commercial kitchen. 
• Building health permit: This permit is issued by your local government and states that the building where your restaurant operates passes sanitation regulations.
• Commercial property insurance: When looking at commercial property insurance, some coverage you might want to consider includes spoilage, sewer backup, business income, equipment breakdown, employee theft, and utility interruption.
• General liability insurance: This insurance coverage can help protect your restaurant from property damage and bodily injury claims that result from accidents. It also covers product liability, which means your restaurant will be protected from lawsuits resulting from food-borne illnesses. General liability insurance also includes coverage for any damages to the property you’re leasing, such as kitchen fires.

Depending on the type of restaurant you own, you may need additional licenses and permits, such as a music license, pool table permit, or valet parking permit. To determine which permits are right for your restaurant, make sure to consult with a business lawyer.

7. Set up accounting processes

Establishing effective accounting processes is essential for managing the financial aspects of your restaurant. Proper accounting helps you track revenue and expenses, employee payroll, and profitability. 

Here are the key accounting documents you’ll need to maintain: 

• Balance sheet: A balance sheet provides a clear view of your restaurant’s finances. It shows how much your restaurant owns (assets), owes (liabilities), and the residual value of the business (equity). Regularly analyzing your balance sheet can help you assess your restaurant's financial health and liquidity.
• Income statement (profit and loss statement): An income statement summarizes your restaurant's revenue, costs, and expenses over a specific period, typically monthly, quarterly, or annually. It shows your restaurant's profitability by calculating net income or loss. Regularly reviewing your income statement helps you identify trends, assess performance, and make informed financial decisions.
• Cash flow statement: A cash flow statement tracks the flow of cash in and out of your restaurant. It categorizes cash inflows and outflows into operating activities (like sales and expenses), investing activities (like  equipment purchases), and financing activities (like loans and capital injections). Monitoring your cash flow statement helps ensure sufficient cash availability to cover expenses, plan for investments, and manage working capital effectively.

You’ll also need to implement a bookkeeping system to record and track financial transactions accurately. This includes maintaining records of sales, purchases, expenses, payroll, and inventory. 

Consider hiring a professional accountant with experience in the restaurant industry to help you navigate your restaurant’s financial requirements. They can provide guidance on setting up accounting processes, help with financial analysis, assist with tax planning, and ensure compliance with accounting standards and regulations.

8. Consider how you’ll fund your restaurant 

Unless you have the capital needed to fully fund your business, you’ll need to evaluate different funding options to get your restaurant up and running. Start by estimating the total amount needed to cover your restaurant’s startup costs, including equipment purchases, lease or property expenses, initial inventory, marketing, and any other operating costs. Once you have a working budget, determine your projected revenue and expenses for the next year. 

Once you’ve run the numbers, compare your overall cost to the amount of capital you have on hand. This will give you an idea of how much funding you’ll need to secure from outside sources. There are a variety of funding options commonly available to restaurant owners, including: 

• Small business loans: Apply for loans from banks, credit unions, or online lenders that specialize in small business financing. Prepare a solid business plan, financial projections, and supporting documents to increase your chances of approval. Keep in mind that you’ll need to provide collateral and that the approval process can be lengthy. 
• Line of credit: A line of credit is a flexible funding option that allows you to access funds when needed and repay them over time. It functions similarly to a credit card but typically with lower interest rates. With a line of credit, you have the freedom to withdraw funds as necessary and only pay interest on the amount borrowed.
• Crowdfunding: Launch a crowdfunding campaign on platforms like Kickstarter or Indiegogo to raise funds from people who believe in your restaurant concept. Offer rewards or incentives to encourage contributions.
• Investors: Attract potential investors who are interested in your restaurant concept and willing to provide financial support in exchange for equity or a return on investment. Prepare a comprehensive business plan and pitch to showcase the potential profitability of your restaurant.
• Grants and government programs: Research grants, loans, or government programs specifically designed to support small businesses or the restaurant industry. Check with local, state, and federal agencies as well as industry associations for potential funding opportunities.
• Equipment financing: Explore equipment financing options offered by suppliers or financial institutions. This allows you to acquire necessary equipment while spreading payments over time.

Thoroughly research each funding option to understand the costs and risks involved. A financial advisor or business consultant can help evaluate your options to ensure you make an informed decision.

9. Determine staffing needs

Your staffing needs will vary based on the size and concept of your restaurant. Assess what’s required to operate based on your restaurant’s size, service style, and expected customer traffic. Make a list of the different roles you need to fill for both front of house (servers, hosts, bartenders) and back of house (chefs, line cooks, dishwashers, bussers). Also consider your hours of operation and how many shifts are needed to fill them each day. 

Once you know your staffing needs, you can begin the hiring process. You can find potential hires by posting job openings on career sites and job boards. Consider what qualifications are needed to fill your positions and the level of training you’ll need to provide. From there, you can develop training programs that align with your skill requirements and desired company culture.

10. Order restaurant equipment

Before you open for business, you’ll want to stock up on the necessary equipment for your kitchen. This will depend largely on your menu and specific offerings, but be sure to consider the basics such as refrigeration units, ovens, and cooking utensils. 

Evaluate your menu, kitchen layout, and production requirements to determine the specific equipment you'll need. Consider things like cooking methods, food volume, storage needs, and any specialized equipment you may require, along with the following factors: 

• Quality and durability: Invest in high-quality equipment by searching for reputable brands known for reliable and efficient performance. Poor-quality equipment can lead to food quality issues and impede your workflow. 
• Energy efficiency: Opt for energy-efficient equipment that can help reduce utility costs and minimize your environmental footprint. Look for equipment with Energy Star ratings or other energy-efficient certifications.
• Safety and compliance: Ensure that the equipment you order meets all safety and health regulations. Look for eco-certifications such as NSF (National Sanitation Foundation) approval, which ensures that the equipment meets industry standards for cleanliness and food safety.
• Size and capacity: Choose equipment that fits seamlessly within your kitchen layout. Pay attention to each piece of equipment's dimensions, weight, and ventilation requirements to ensure proper installation and operation. 
• Warranty and service: Check the warranty terms offered by the equipment manufacturer or supplier. Understand the warranty coverage and available service options in the event of malfunctions or repairs.
• Price and budget: While quality and functionality are essential, also consider your budget when ordering equipment. Compare prices from different suppliers and explore financing options if needed.

If you’re on a tight budget, consider looking for lightly used equipment to cut costs—just be sure it still meets all safety requirements.

11. Market your restaurant 

The success of your restaurant goes beyond having a solid business plan, a stunning interior, and a mouthwatering menu. To truly make your restaurant thrive, it’s crucial to market it effectively. Without a strong marketing plan, even the most exceptional restaurants can go unnoticed. 

Before diving into elaborate campaigns, prioritize creating a website and updating your local online listings with key information prospective customers are looking for. You can start with platforms like Google My Business, a Facebook Business page, Yelp, Tripadvisor, and OpenTable. These websites can boost your restaurant’s visibility and allow you to reach new customers. 

Be sure to include the following key information across all platforms: 

• Menu
• Address
• Price range
• Website
• Opening hours
• Contact information 

Once your restaurant has gained some traction, you can consider investing in additional marketing techniques to foster customer loyalty and further build your reputation, including: 

• Local SEO (search engine optimization): Utilize SEO to rank on relevant search engine results pages like Google for certain terms your target audience is searching for. 
• Paid advertising: Utilize advertising platforms like Google Ads and Instagram Ads to target specific demographics and locations related to your target audience. 
• Local partnerships and events: Collaborate with local businesses, organizations, or influencers to expand your reach in your community. Sponsoring local initiatives, partnering with neighboring businesses, and participating in community events are all great ways to do this. 
• Email marketing: Build an email list of interested customers and send regular newsletters or promotions to keep them engaged. Provide exclusive offers, updates on seasonal menus, or upcoming events to entice repeat visits.
• Loyalty programs: Implement a loyalty program to reward frequent customers and encourage repeat visits. Offer incentives such as discounts, freebies, or exclusive access to special events to foster customer loyalty.

Be sure to thoroughly research any given marketing strategy based on your target audience’s preferences, interests, and habits. Word-of-mouth marketing is arguably the most effective, so continue to focus on delivering exceptional service and experiences for your guests to create a loyal customer base.

Tips for starting your restaurant

Starting your own restaurant can be thrilling and overwhelming at the same time, and there’s a lot to keep in mind. No matter what type of restaurant you’re opening, there are a few things to keep in mind to ensure its success. The tips below offer examples of actions you can take to help set your restaurant apart: 

• Elevate your atmosphere: Craft a unique atmosphere that customers want to come back to. 
• Establish a strong brand presence: Turn your vision into a strong personal brand that goes beyond the restaurant, attracting loyal customers who align with your values.
• Pay attention to the little things: Ensure meticulous attention to detail, from decor to impeccable service, to create exceptional and unforgettable customer experiences.
• Stay innovative: Push culinary boundaries, offering unique flavor combinations that guests won't find elsewhere.
• Strive for culinary excellence: Continually refine your menu and source high-quality ingredients to elevate the dining experience for your guests.
• Foster valuable industry relationships: Build a network of fellow chefs, suppliers, and industry professionals to gain valuable insights and collaboration opportunities.
• Engage your community: Be actively involved with your community and guests, turning your restaurant into a welcoming gathering place.
• Foster positive social impact: Use your restaurant as a platform for promoting causes you believe in, making a difference in your community.

Success in the restaurant business is a journey of continuous improvement, adaptation, and a commitment to providing outstanding experiences to your guests. By consistently delivering exceptional quality, engaging with your customers, and staying attuned to industry trends, you can cultivate a loyal following and foster positive word-of-mouth.

Start your business with confidence 

​​From developing a standout menu to selecting the right legal structure, the steps above all play an important role in starting a successful restaurant. Not to mention the importance of leveraging technology to streamline operations—investing in the right accounting software can help you manage finances, track expenses, and optimize profitability, allowing you to focus on bringing your restaurant dreams to life.