It is without saying, the restaurant business is a profitable opportunity in India. Also, it is one of the most preferred businesses for young entrepreneurs. However, it’s not an easy business. Find in this article, a step-by-step guide to starting a new restaurant in India with valuable inputs like market demand, costs, location, interior, staffing, and more.
Depending on the menu style, preparation methods, and pricing there are different types of restaurants you can find. These are ethnic, fast food, fast casual, casual dining, fine dining, quick service, family style, barbeque, cafe, pub, tabletop cooking, etc.
The restaurant business comes under the food retail segment. Currently, it is a Rs 75000 crore industry according to industry experts. Also, it is growing at an annual rate of 7%. Some of the highest-growing segments are quick-service restaurants, casual dining, cafe, and fine dining. Apart from these the pub, bars, lounges, and clubs are getting popular these days.
Although the restaurant business is a highly lucrative opportunity for young entrepreneurs, it takes a lot of effort to make it successful. It needs a lot of dedication, long hard work, proper planning, and the willingness to face startup challenges.
13 Steps to Start a Restaurant Business in India
Step 1: Check if the Restaurant Business is for You or Not
The brick-and-mortar restaurant business can be difficult to scale successfully. It requires upfront capital expenditure, operating expenses (especially rent), and the different other issues. Additionally, keeping a restaurant alive and relevant for four or five years is extremely challenging.
You need to constantly analyze the good habit, buying nature, and pricing strategy of your restaurant. Also, you need to be extremely good at accounting. So, check whether it is a business for you or not. And if you find the answer NO, then the rest of the article is purely a waste of time for you.
Step 2: Decide the Restaurant Style
This is the first step you need to consider very carefully. Because the other following steps depend on this particular decision. Determining the specific restaurant style depends on your investment capacity and the eating habits or preference of the local demographics. After deciding on the concept, you can determine the menu, interior theme, sitting style, etc.
Step 3: Franchise or Own Brand
Currently, you can find a lot of national and international brands that are offering franchise opportunities on a pan-India basis. Certainly, initiating a franchise business is an easier option than starting your own. However, opening own brand ensures certain advantages.
If you start your own brand, you don’t need to share the profit. Additionally, you don’t need to spend money on the franchise fee. However, you will need to form the SOP of your own and you need to take care of the entire promotion responsibility.
Step 4: Craft the Business Plan including Startup Cost
In initiating a franchise outlet, the parent company will provide you with a cost structure. However, if you are opening your own brand, you will need to craft a project report. In this business, financial analysis plays the most pivotal role. Here we have listed some of the major costs.
a) Cost of the Venue
It is the highest expense in this business. You have to calculate the rent of the place with electricity, water bills, and maintenance cost (if any).
b) Interior Cost
You will need to decorate the interior according to the restaurant theme. Broadly, it includes flooring, wall decoration, ceiling, air conditioner, lighting, music, and finally furniture.
c) Kitchen Equipment Cost
You will need to arrange the kitchen equipment and tools. It may include different crockery sets, burners, storage, refrigerators, microwave, and other gadgets or utensils.
d) Licensing, Permission & other Pre-operative Expenses
You will need to calculate the pre-operative expense including the licensing and permissions. Also, it includes consultancy fees and Govt. fees.
e) Technology Cost
You won’t be able to run the restaurant successfully without the help of technology. You will need a customized POS software solution for keeping the daily accounting, stock inventory, etc. So, you need to calculate the cost of procuring the POS.
f) Manpower Cost
The restaurant needs different types of personnel including a chef, water, counter staff, etc. So, you need to calculate the manpower resource you need and the approximate cost of the salary overhead.
f) Marketing Expenses
You need to invest some money in marketing and promotion. So, you need to prepare a marketing plan and calculate the promotional activity cost.
Step 5: Arrange the Finance for the Restaurant Business
After calculating the startup budget, you will need to get finance ready for opening the restaurant. If you are a first-generation entrepreneur, then it’s better to start the restaurant with your own fund. However, you can also apply for a bank loan or venture capital investment. Usually, banks ask for collateral security.
So, you need to arrange that. On the other hand, angel investors look for profit potential, expansion plans, and business models. And after satisfying these factors, you can avail yourself of finance. Also, you can open the restaurant on a partnership basis to get financial help.
Step 6: Select a Restaurant Name & Logo
It is another important aspect you need to consider carefully. At the time of business registration and licensing, you will need to provide the restaurant name and logo. Actually, the name and logo give the first impression to the customers of your brand. So, keep your name simple, relevant, and catchy.
Additionally, ensure that the restaurant name is marketable and has domain availability. Before finalizing the name, check whether the domain is available or not. Because you are surely going to launch a website for your restaurant.
Step 7: License & Permission for Restaurant Business
First of all, the specific license required depends on the specific location where you operate the restaurant. However, in India, you will find some of the requirements are common. Here we have listed the basic licensing and permit requirements.
a) Business Registration
If you are planning to run a legally-compliant restaurant business, registering your company is mandatory. Based on your scale of operation, select a business structure. The popular business formations in India are sole proprietorship, partnership, or Private Limited Companies.
b) Professional Tax Registration
Professional Tax registration is also a must. You can pay the tax either quarterly or yearly basis.
c) GST Registration
You will need to register with GST to get the GSTIN number. If you have more outlets in different states, then you need to apply state-wise.
d) Trade License
Obtain the Trade License from the local Municipal Authority. It is a must. And only the local corporation can issue this license.
e) FSSAI Registration
FSSAI stands for Food Safety and Standards Authority of India. For a restaurant or eatery operation, FSSAI registration is a must.
f) Liquor License
If you serve alcohol, then you will need to obtain a liquor license for your restaurant. Obtaining a liquor license requires a lot of time. Also, it is expensive.
g) Trademark Registration
Secure the logo with Trademark Registration. Initially, you can use the TM mark. And after getting the final registration, you can use the R sign.
Step 8: Select a Proper Location
The overall success of a restaurant depends immensely on the location. In India, the metro city areas are the best places to start this business. Some of the most potential cities are Mumbai, Bangalore, Delhi NCR, Pune, Kolkata, Chennai, Hyderabad, Goa, Ahmedabad, Indore, etc. However, at present, restaurant businesses are performing well in almost all cities and towns in the country.
Good visibility is a crucial factor in the restaurant business. Also, try to occupy a space on the ground floor. However, it is not applicable to the find dine or food court restaurants. Providing a parking facility is a must these days. Finally, you must acquire a commercial property and NOC from your immediate neighbors.
Step 9: Establish the Brick & Mortar Restaurant
Now it’s time to decorate the venue. Try to have a floor plan before you start working on it. Hire an experienced interior designer to get to job done rightfully. Depending on the concept, you will need to provide the ambiance. Color combination and lights play the most vital role in the interior. Procure the furniture and fixtures according to the theme of the restaurant. Decorate the outer wall also. A good quality sign is a must on the outer wall.
Step 10: Get the Resources
First of all, craft an HR plan. You need skilled and experienced employees to run the restaurant properly. Broadly, you need kitchen staff, service staff, and management staff. Also, you can think about keeping a manager.
Get the right POS (point of sale) software for your restaurant business. You need it even if you run a niche restaurant. Ask the company for a demo presentation. Before, procuring the software, check if it is effective and beneficial for your business.
Step 11. Buy Equipment
You will need to buy a range of tools and equipment to properly run a restaurant. Some of the basic types of equipment that need to be arranged are the following:
- Refrigerators/ Freezers
- Cutting Surfaces
- Racks & Shelves
In addition, you will also need to buy chairs and tables as per sitting arrangement, condiment dispensers, salt and paper shakers, utensils, etc.
Step 12: Create the Menu and Tariff
Depending on the restaurant concept, style, and taste of the local demographics, you have to craft a menu and fix a pricing chart. Try to keep some basic food items with designer items. Also, you can offer a combo or Thali-type menu which is very popular in India. Try to keep the foods that need similar ingredients to cook. It helps in reducing inventory costs. Also, provide the foods that need ingredients that are available in the local market easily.
Step 13: Choose Quality Suppliers
Getting fresh ingredients at your doorstep on the regular basis is crucial for smooth operation. Ensure, that the suppliers provide quality and up-to-the-mark materials for restaurant use. Also, check the price for the bulk purchase. Try to have at least more than one vendor in each segment.
The restaurant business is definitely a self-rewarding career for passionate individuals. However, it requires proper planning and dedicated implementation to get long-term success.
Rupak is the founder of MUVSI. He is a small business consultant by profession. His mission is to make people know how to make money and understand personal finance for a better living.