Opening a restaurant in London can be challenging, even if you’re a celebrity chef or already have a successful first location. From finding your market niche to raising money and choosing the right spot, it won’t be easy.
That isn’t meant to put you off – just help you realise that being successful will require total commitment and lots of hard work. With thorough preparation, you can increase your chances of succeeding! Time spent properly preparing will be beneficial in the long run and save you money.
In this guide, we’ve broken down the preparation process into three key stages. Within each, we take you through the various actions you need to complete before moving on to the next.
At some point in your journey towards having your own restaurant, you’re going to need help. That may be from business partners, investors, lenders or consultants. The one thing they have in common is that they’ll all want to see your business plan.
Your business plan will include the following:
- An overview and description of your business.
- Analysis of the marketplace you will be competing in.
- How you intend to market your restaurant.
- The level of funding you will need to start your business.
- Your estimated turnover and profit for at least the first five years.
- Details of how the business will operate.
It might seem daunting at first, but without it, you won’t get very far. Remember, each step towards completing your business plan brings you closer to opening day. Let’s break it down and look at the things you will need to include in more detail:
At some point, you wondered to yourself what it would be like to run your own restaurant. For many people, that’s as far as it gets, but you’ve decided to take it further. Now it’s time to get serious and find out how to open a restaurant.
Every great venture starts with an idea. Explain what your restaurant will be like. What will it look like, what style of food will it serve, what will make it unique or different? Why should customers visit you and what will their experience be like? You want to explain with as much detail as you can, so people reading the business plan understand can clearly envision your idea.
The answers to these questions will help create your mission statement. A mission statement will help you to define what your goals are and act as a statement of your restaurant’s purpose. It will show stakeholders that you have a clear direction for your business and customers what to expect if they visit your restaurant. It can also act as a point of focus in making decisions and a benchmark by which to assess your progress.
You probably have ideas about the mood you want to create in your restaurant so add them to the plan. This could include lighting, décor, music, how the staff dress, how you greet your customers, anything that contributes to the ambience.
Think carefully about what you are aiming to achieve in the short and long-term – the journey doesn’t end when you open the doors for the first time. A restaurant has to evolve and adapt to changing market conditions. Think about where you want to be in one year, five years, 10 years and explain your strategy for achieving those goals. You might want your restaurant to be a chain that grows over time, or you might prefer to stick with one restaurant. Either way, you have to plan ahead.
All businesses are set up differently. You may want to run yours as a sole trader or perhaps you intend to have one or more partners. Given the potential risks involved if the business fails, you might prefer to operate as a limited company. In which case, who will the directors be? Will you own the shares in the company or are you offering a shareholding in return for investment? This should all be included in your plan.
Your plan must include realistic and up-to-date information on the current state of the market. From there, you can explain how you’ll position yourself in that market. How you use this information is absolutely vital to the success of your business. A lot of research will be needed, and it will take some time but skimping on it will come back to bite you later. The key questions for you to ask are:
- Who are my target customers?
- Who are my competitors?
- What is the current state of the market?
- What are the trends in the market?
You might decide that you don’t have the skills or time to do this properly and prefer to employ a market research company. If you do, you must ensure that they are properly briefed so that the research they do is correctly targeted. If you’re doing it yourself, here’s what you need to cover:
Proper customer research involves getting out and talking to people. You need to establish what the needs of your target market are and how you can meet those needs.
Look at the area you plan to operate in and list all of the restaurants that are already there. From there, you’ll want to break down the different restaurants into direct and indirect competitors. Direct competitors are offering something very similar to you whereas indirect competitors provide something different, but which can still be seen as competition. For example, two Indian restaurants in the same street are direct competitors, but a fish and chip shop and a kebab shop are indirect competitors because they both cater to the same target market.
This is very much an intelligence-gathering exercise. Visit restaurants you’ll be competing with and see what they offer in terms of customer experience, quality, and range of food, and value. See how busy they are at various times on different days of the week. Speak to as people who live in the area and ask what they think of the existing restaurants. See if they think there’s a demand for something new. Try to find out if anyone else is proposing to open a new restaurant locally. You don’t want to get caught out by unexpected competition.
Having identified your competitors, spend some time analysing their strengths and weaknesses. Look at your own strengths and see if you can offer something they can’t. If you have weaknesses in certain areas, consider how you might address them. Maybe you need more training or some expert advice. Perhaps you need to change your concept to play more to your strengths.
This covers more than just your local area. Markets can reflect regional, national or even international trends. They may be influenced by social and economic factors or even fashion. Try to determine which trends are likely to be long-term and which are expected to come and go quite quickly. Once you have analysed the existing market, you need to determine what gaps there are and what you can offer that is different or better than the competition. Be honest with yourself about what shortcomings you have and where you might struggle to compete.
Finding the ideal location for opening a restaurant is never easy – finding it in London is harder still. Prime locations are extremely expensive and hard to come by, especially if you’re thinking of setting up in central London. You need to be realistic about what you can afford and where your best chances of success are likely to be. For each location you have in mind, ask these questions:
Will your concept work in this area?
Research the current restaurant scene and see what is doing well and what Isn’t. If there are already other restaurants with a similar concept to yours, is there room for another in the area? What prices are people paying for their meals? Opening a budget restaurant in an affluent area might not work any better than a fine dining establishment would in a deprived area.
What is the typical demographic of people living in the area?
You must be sure that enough people will want to eat in your restaurant. Income, age, ethnicity, education, religion, and employment will all have an effect on your target audience. For example, young professionals and retired couples may eat out more often than families, but not necessarily at the same time of day.
Does the local population meet your minimum target figure?
You will need to calculate the minimum number of target market consumers required in a given radius of your restaurant. Check that the area you are looking at meets those figures. In some parts of London, you will need to focus as much, if not more, on tourists or commuters rather than the resident population. Tourists are often more disposed to spend money on food than anyone else so finding a location near a tourist hot-spot can be a good move. There are also large numbers of people that commute into London everyday – you may want to concentrate almost exclusively on them.
Having decided on the area you want to be in, you need to start looking at what premises are available. The chances of finding the perfect building are slim. You will likely have to compromise and find somewhere that you can make work. There will, however, be certain criteria that are essential, and you should make a list of these to check off against each potential site. This might include:
- Space – Is the premises big enough to cope with your required turnover? You need room for sufficient tables and a kitchen big enough to service them.
- Accessibility – Can customers, staff and deliveries get to your restaurant easily? Is there parking or public transport nearby, or do enough people live, work or visit the area for you to rely on passing trade? Is there suitable access for people with disabilities to enter your restaurant and, if not, can it be installed?
- Services – Do the current gas, electric and water supplies meet your requirements, or do they need upgrading? Is the sewage system okay?
- HVAC – What will you need and what is there already? Does it need servicing or repairing before you can use it?
The final thing to do to complete your plan is to write an executive summary and position it at the beginning. The aim of an executive summary is to give a brief overview of the whole business plan. Somebody would be able to read the executive summary and get a basic understanding of your business plan, without combing through every page.
Once you open a restaurant, you’re not just a restaurateur – you’re an entrepreneur, too! No matter how good a chef or charming a host, you’ll be running a business first and – hopefully! – making money. Even if you hire an accountant to do the heavy lifting, you’ll still need to get your head around your business’s finances.
The old adage that ‘if you fail to plan, you plan to fail’ couldn’t be more accurate when it comes to business finance. Unless you’re very lucky, you’re not going to open your doors and start making profits straight away. You need to plan carefully, make realistic predictions of turnover and costs and be meticulous in recording income and expenditure.
Keeping on top of your finances enables you to spot financial trends early and take action if things aren’t going as well as they should. It allows you to make decisions about the future of your business, based on facts and not assumptions. This starts with accurate forecasts.
A forecast, by its very nature, cannot be 100% accurate. Unfortunately, the success of your business could depend on the accuracy of your forecasts so you need to make them as accurate as you possibly can. Here’s what to focus on within your forecast:
This covers everything you need to spend before you open your doors to the public and includes:
- Premises procurement – the cost of purchase or rent up to opening day
- Professional fees – solicitor, accountant, construction project team
- Fit-out – construction work
- Equipment and furniture – from cookers and fridges to tables and cutlery
- Marketing and advertising
- Working capital
Your running costs are your day to day costs. Here are some expenses you’ll want to consider as part of your running costs:
- Premises rental
- Professional fees – solicitor, accountant
- Services – gas, electricity, water
- Suppliers – food, drink, consumables etc.
- Staff – wages, national insurance, training
- Marketing and advertising
Keep in mind that some of these categories will be the same as your start-up costs.
Turnover and Profit
Your turnover is the amount of money you take from customers. Take that figure and subtract your running costs and you’ll have your profit. From your gross profit, you’ll have to pay off your start-up costs.
Every business needs some degree of funding. For restaurants especially, there are a lot of up-front costs and a need for substantial working capital to keep you going until profits start coming in. Most people will need to raise funds before starting their restaurant.
Investors are more likely to be interested in your business if you are investing in your restaurant yourself. That might be from savings, investments or from family and friends keen to help you on your way.
There are various sources of funding for businesses, but before you approach them, you must be properly prepared. The three things investors and lenders will want to see are your:
- Business plan
- Estimated start-up costs
- Financial forecasts
These will show that you have a thorough understanding of the market and are prepared for all eventualities. They also show – which is arguably more important to potential investors – how much money you will need and when you will be able to pay it back.
This is where things get exciting. You’ve got everything planned down to the last detail, and your funding is all in place. At last, you can start putting everything together!
If you haven’t already done so, prepare a programme taking you from the moment you take possession of your premises to the day you open your doors. Be realistic about it and build in a contingency for unexpected delays. Share your programme with anyone who has a key role in making it happen, like your architect, builder and equipment suppliers. As you progress, you can review and revise it.
You spent a lot of time looking for the right location, and now you’re in a position to complete your purchase or, more likely, sign the lease.
Make sure you are fully aware of what you are taking on. Have a surveyor inspect the building and produce a condition report. If you plan to make alterations to the building, ask the landlord for a copy of the latest asbestos survey and get a structural engineer to advise you.
Your solicitor should review the lease agreement and make it clear what you are committing to. If there’s anything you are not sure of, now is the time to ask. Be sure about what aspects of building maintenance you are responsible for and make provision for it in your budgeting.
Make sure you know what the renewal arrangements are. You don’t want to build up a booming business only to have to leave when your lease expires, Nor do you want to find that automatic rent increases are eating into your profits. Check what signage you’re allowed to display as well.
Once you’re sure you’ve got everything covered, you can sign on the dotted line, pick up the keys and get started.
There are various insurance options available, some of which are optional and others. Below are some that you will absolutely need at your restaurant:
Building and Contents
You need to have this in place from the day you purchase the property or start your lease. If you are renting, check what the landlord’s insurance covers.
You must have this to protect your business against claims from members of the public for personal injury or damage to property.
It is a legal requirement to have employers’ liability insurance if you employ anyone, whether they are full-time employees, temporary staff, agency workers or contractors.
In your business plan, you will have identified what work will be required to fit-out your premises and how much you want to spend. If you’re lucky, and the building was used as a restaurant before, you might not need to change very much. If you’re converting a building to a restaurant, you will have a lot of work to do, particularly regarding the kitchen and welfare facilities.
If you’re planning anything other than a basic refurbishment, you will need professional help. These are some of the people you may need and what they can do for you:
- Architect – take your concept and come up with a design, prepare plans for planning permission, working drawings and specifications for construction work, liaise with contractors
- Interior Designer – develop the look of your restaurant and help source materials and furniture
- Structural Engineer – advise on any structural alterations to the building
- Quantity Surveyor – prepare tender documents including pricing schedule to send out to tender, assess progress to determine stage payments
- Health and Safety Consultant – advise on legal requirements in relation to fire safety, workplace health and safety, and more.
Some professionals combine one or more of these roles, or you might find a single practice that covers some or all of them.
You might have a good relationship with a builder you know you can trust. Otherwise, you’ll need to find companies to outsource this work to. The tender list should include at least three contractors who have experience in restaurant fit-outs and can show you examples of their work. Try to get some feedback from their previous clients.
Examine and discuss the submitted tenders with your team. Remember – going with the cheapest option isn’t always the best option. More critical is a fixed price and a commitment to your programme.
Before you get too far into designing the layout of the restaurant, you need to consider what equipment you will need and where it will go. That includes large items like fridges, freezers, cookers and sinks; appliances like food processors, coffee machines and toasters; and the small items like pots and pans, knives and all the tools and accessories necessary for a restaurant kitchen. Then there’s the crockery, cutlery, glassware, tablecloths… the list can seem to go on and on!
Get together with your chef and look at all of the possible scenarios you might face, especially at the busiest times. Make a list of what your minimum requirements are and a separate list of items that you would like to have but might not be able to afford straight away. The second list is important because, if you don’t allow space for these items now, you won’t have anywhere to put them when you need them.
Every restaurateur would love to have a kitchen full of shiny new equipment but in reality, the costs might be prohibitive. There’s plenty of second-hand equipment available, and this could be a good route to go down to help you stick to your budget. You do have to take some precautions before purchasing second-hand equipment. Before committing to any purchases, find out the history of the item and see if it is still under warranty.
Realistically, you’ll probably want to buy a mixture of new and used equipment. Some used items are a safer bet than others. Fridges and freezers are best purchased new because they are expensive to repair. Used gas cookers are better than electric for the same reason.
An alternative option is to lease your equipment. There are various types of leases, some of which allow you to buy the equipment when the lease ends. Some have early termination fees which can be costly if you want to upgrade during the lease period. It pays to look into any leasing arrangement carefully before committing.
There are restaurant equipment financing loans available. These can enable you to start out with better equipment and free up cash for other areas of the business.
Electronic point of sale (EPOS) systems are rapidly taking over from the old cash register system. They are computerised systems that process customer transactions, monitor sales and track inventory. Some communicate between front and back of the house, control inventories and manage staff scheduling. Others offer financial reporting and analysis. Many are moving away from fixed terminals and using tablets instead.
The market is continually changing, so you need to think about what you actually need rather than whether you fancy the latest tech. The more sophisticated systems are expensive, and there’s a licence fee and maintenance costs to consider too. You might think it worth the cost for the ability to generate reports quickly. Being able to make informed decisions based on accurate data could save you money.
It can be difficult knowing what the right system for your restaurant is. Here are some things to consider:
- Think about your staff and finding a system that is easy for them to use.
- Look for a system that allows customisation to your needs and the possibility of expanding or upgrading in the future.
- Make sure your data will be adequately protected.
- Check the level of training and support offered by your supplier.
If you know other restaurateurs, ask around and see what information you can find. Invite several companies to pitch for your business and look for the best fit rather than the best price.
As if opening a restaurant wasn’t hard enough, there are a lot of licences and permissions you’ll need before you can get up and running. In London, most of these will be granted by your local authority of which there are 33 covering the whole capital. The legislation may be the same, but each one will have their own way of doing things. It’s a good idea to get in touch with the relevant people as soon as you can so you know what is required. The following are some of the things you may need permissions for:
- Building regulations
- Food Hygiene
- Premises licence
- Music licence
- Pavement licence
- Gaming machines
Planning permission covers the use of the building and alterations you make to it. Most restaurants are classified as either class A3 or A4. If the building you propose to use doesn’t have the correct classification, you will have to apply for a change of use. It’s best to discuss this with the planning department before going too far, in case there are objections.
Alterations to the building may or may not require planning permission. Again, you should discuss your ideas with the planners as soon as possible. This is also where building regulations come in. Their purpose is to ensure that building design, construction and alterations are carried out to approved standards. You will need building regulations approval for the work you do, and you can only get this from a Building Control Body (BCB). Local authorities have their own BCBs, or you can use an approved private BCB.
To operate any food-related business, you must be registered with the local authority. An inspector will carry out regular inspections and give you a rating under the Food Hygiene Rating Scheme. You’ll be given a rating from 0-5 and advised if and what you need to do to improve. The ratings are:
5 – hygiene standards are very good
4 – hygiene standards are good
3 – hygiene standards are generally satisfactory
2 – some improvement is necessary
1 – major improvement is necessary
0 – urgent improvement is required
A premises licence will be needed if you plan to offer any ‘licensable activities’ in your restaurant. These include:
- Sale of alcohol
- Live music performances
- Indoor sports events
- Film or theatre performances
- Selling hot food or drink between 11 pm and 5 am
To apply for a premises licence, you or one of your staff must be a ‘Designated Premises Supervisor’ (DPS). To sell alcohol, the DPS must have a ‘Personal Licence to Sell Alcohol’. You can’t hold a licence unless you, or a staff member, have a licensing qualification, such as The Award for Personal Licence Holders (APLH) Level 2.
If you think some ambient music would add to the atmosphere in your restaurant, be sure to get a music licence first. This license is called TheMusicLicence and is issued on behalf of PPL and PRS for Music, the two bodies protecting the rights of everyone in the music business.
In the right location, putting chairs and tables on the pavement in front of your restaurant can be an excellent way to increase capacity. To do so, you’ll have to apply for a pavement licence from your local authority.
If you want to have gaming machines on your premises, you will have to register for Machine Games Duty (MGD) with HM Revenue and Customs.
You’ve probably had an idea of what will be on your menu ever since you started thinking about your restaurant. Now is the time to narrow those ideas down and focus on precisely what’s going to be on it. If your restaurant is dedicated to a particular cuisine – like Chinese, Mexican, vegan, or burgers– you’re halfway there already. If not, you’ll need to come up with a menu that is balanced and offers a variety of food with dishes that complement one another.
It’s important to give customers what they want. You either have to find a location where there’s a demand for your style of food or tailor your menu to suit local tastes. Your menu needs to fit with the concept laid out in your business plan. If you’ve set out a particular price range and profit margin for your menu items, the cost of ingredients will have to reflect this.
You also need to bear in mind how easy or difficult each dish is to prepare. If you have too many complicated dishes, you’ll need more staff to prepare them. You’ll also want to consider the ingredients needed for your dishes. The wider range of ingredients you use across your menu, the more stock you’ll have to keep. If you serve a lot of food with a short shelf-life, you’ll need to be careful that you don’t end up throwing too much away.
Trying out your dishes on a select group of tasters – whether family, friends or employees – is an important part of the process. Choose people you know will give an honest opinion. If recipes need adjusting, carry out more rounds of testing until you’re happy you’ve got it right. Remember that not everyone has the same tastes and you won’t make each dish perfect for everyone.
Deciding where to source your food supplies can be difficult. Do you go with a national wholesaler who can supply everything in one order, or do you use local specialist suppliers? This partly depends on what type of restaurant you are running, how you want to market yourself, and what your core values are. You might, for example, specialise in organic food, local produce or a particular style of cooking that requires ingredients that are specially imported.
The more suppliers you have, the more time you’ll spend dealing with them. On the other hand, building relationships with small-scale specialists can be rewarding both in terms of quality of food and service. A lot of people take an interest in where their food comes from and how it is produced so you could use it as a selling point.
You might have the perfect premises serving fabulous food at great prices but, if no one comes through your door, it’ll count for nothing. Getting customers is key to success, and is where marketing comes in.
Your marketing plan should be just as carefully thought out as any other part of your business plan. There needs to be a clear strategy aimed at reaching your target market. It’s easy to waste money on marketing if it isn’t correctly targeted or effective. It’s also tempting to think that the money could be better spent on nicer furniture, fancy menus or posh décor. Avoid falling into either trap by setting a realistic budget specific to marketing and make it work for you most productively.
There are many ways you can promote your business, and you’ll need to find the combination that works best for you. Here are some ideas:
If your restaurant is in a busy London location, you can get out in the street and interact with people. Hand out leaflets, vouchers or, better still, have samples of food for them to try. You can do this in a week or two before you open.
In this day and age, you have to have a website. It doesn’t have to cost a lot and customers will expect one. They want to see when you’re open and what your menu looks like before coming in. They’ll also draw conclusions about what your restaurant is like by how the website looks, so it’s essential that your website is a reflection of your business.
Just having a website is not enough. People need to be able to find it when they’re looking for somewhere to eat. Search engine optimisation (SEO) helps to ensure that your business shows up in searches. It can be complicated, but you won’t get many visitors to your site if you don’t do it. It’s worth getting professional assistance to optimise your website.
This is another must-have. Few restaurants these days don’t have a Facebook page. Many businesses also use other platforms, like Twitter and Instagram. These are great ways to interact with your customers and to notify them of events and special offers.
Order and Delivery Apps
If you offer a takeaway service, you should consider joining sites like JustEat and UberEATS. The number of people ordering food online for delivery or collection is increasing, so not being onboard could cost you sales. The apps display your menu, take orders and process payments.
Sites such as TripAdvisor are popular with people looking for somewhere to dine, so it’s worth having a presence on at least one of them. The cost of using these sites varies, so you’ll have to do your homework as to which one is right for your restaurant.
It can take a while to build up your customer database for email and text messaging marketing, but it is worth it. It’s a great way to keep in touch with existing customers or people who have expressed an interest in you.
This is basically a way of blitzing an area based on proximity to your restaurant. With direct mail, you pay the Royal Mail to deliver your advertising material to every property in a given area.
Leafletting is similar, but you pay a private company to deliver leaflets for you. They often get delivered together with other leaflets and can get lost in a bundle of junk mail. If you have the time, you can deliver them yourself. Direct mail and leaflets are a great opportunity to include promotions, such as discount vouchers, as an incentive to get people to give you a try.
The Grand Opening
This is it – the big event, the launch of your restaurant and, hopefully, the beginning of something big! Preparation is crucial. If it goes well, you’ll be off to a flying start. Your guest list will comprise anyone who has influence in your local area, including media, celebrities, politicians and business people. Work hard to get as many of them to attend as possible and fill any gaps with friends.
If time and budget allow, it’s a good idea to have a ‘soft’ opening a week or so before the grand opening. This is an invitation-only event designed to ensure that all of your systems and equipment operate properly in a live situation. Ask your ‘customers’ to give feedback on all aspects of their experience and use it to tweak things ahead of the big day.
Recruiting and retaining staff is one of the biggest problems for restaurateurs. Ideally, you want people who share your vision and commitment to the future of the restaurant. In the real world, that isn’t always going to happen. Most catering jobs are low-paid, meaning staff turnover is high. Waiting staff in particular often see their work as short-term, filling in the gaps between other employment or allowing them to save for trips abroad.
Your staff can be divided into the front of house and back of the house. How many staff you need for each area depends on several factors, including the type of restaurant you are running, the number of tables you have and your opening hours.
Front of House
Your front of house staff will be dealing with people all the time. They will influence your customers’ experience and perception of your restaurant. They need to be confident, friendly, and able to deal with any situation thrown at them. They also must be happy working as part of a team.
In charge of the team, you need a restaurant manager who can manage them effectively, keep everything running smoothly and deal with any crisis quickly and effectively. The manager needs to be experienced, especially if the rest of the team are not.
Back of House
The key person in the kitchen is the head chef. If that’s not you, you’ll be looking for someone who can realise your vision. He or she will also need to be able to manage the kitchen staff effectively. Once the head chef is appointed, you can work with them in recruiting the rest of the kitchen staff.
There are various ways to resource staff, and you’ll probably need to use several. If you have contacts in the trade, try to get referrals for key personnel, or use a head-hunter if you’re looking for someone with particular experience. Job sites, such as Totaljobs and Indeed, can be good at reaching people looking for new positions. For lower level staff, use local recruitment agencies, advertise locally or post vacancies on your website and social media accounts.
If you had any doubts about how much work is involved in opening a restaurant, you won’t now. It’s a huge commitment in time, energy and money and is not something to be taken on lightly. Having said that, there’s absolutely no reason why you shouldn’t succeed with the right team be able to make a success of it.
Few people will be able to do it all on their own though. You’d need to be a mix of entrepreneur, project manager, designer, accountant, marketer and more. If you’re planning on going into partnership, find people whose skills complement yours and divide the work between you. If you are going it alone, look for advice wherever you can get it and employ professionals to cover the areas you’re weak on.
It will be a long journey, and it won’t always be easy, but when the first customer walks through your door, it will all be worth it.