Navigating the rules and regulations surrounding restaurants can seem intimidating but with the right preparation and planning your business can be a success. In this article, we provide an overview of the key considerations for restaurant entrepreneurs to keep in mind when starting their new venture.
Preparation
When searching for the right premises, ensure that you have an easy to follow business plan ready. This will help landlords and property owners believe in you and your business and will also tighten up your financial budget and your key concept proposals.
You should also carefully think about the average spend per head as well as the menu and offering that your restaurant will provide. By having these key things in place it will help you to cover costs and handle cash flow.
Talking to fit out contractors, recruitment agents and web designers at an early stage can also help assess set up costs.
Market research
Identify your target market and consider what will attract them to your restaurant. It is a good idea to carry out your own market research in the area at different times of the day to get an understanding of the footfall for passing customers.
Don't be afraid to talk to other restaurants in the area and get their opinions and insight. The restaurant sector is a small world and most restaurant people are friendly and happy to help.
Hidden costs
Don't be caught out by hidden costs. Make sure that you consider these hidden costs in your budget:
- Business Rates. These can often be equivalent to an additional 50% of the rent.
- Landlord's Fees. Under your lease you are likely to be responsible for any costs the landlord incurs, including repairs, licence fees etc.
- Employee Costs. You'll need to cover the staff benefits and employer tax contributions as well as maternity leave and agency costs.
- This can often be a huge cost in a commercial kitchen, equating to 6-8% of restaurant overheads, and so make sure you shop around.
- Brand development. Marketing is important and you will need to spend on rewarding loyalty and making sure your website and overall brand continues to be positively developed.
Expert advice
Investing and relying on a few key experts can be crucial for a restaurants success. Having a good accountant, lawyer, property agent and operations/HR consultant can be extremely valuable and can put you in touch with other important people in the sector.
Talking to Health and Safety consultants should be one of your top priorities, as strict standards will need to be in place. Make sure to consider the Food Safety Act and Hygiene Regulations as well as the Health and Safety Work Act to protect your employees.
Licensing
Licensing requirements can vary depending on the locations and type of establishment. The following key licences are typically required to operate a restaurant:
- Food Business Registration. This is a basic requirement for establishments looking to prepare, store, supply and sell food. If you plan to operate more than one site, you will need to register each property individually.
- Music Licence. If you plan to offer live music or entertainment, you may need a separate licence. Playing music without the appropriate licence is a copyright infringement.
- Pavement Licence. If you intend to have outdoor seating, a licence may be required. It typically includes guidelines for the use of public space, safety measures, and noise restrictions.
- Premises Licence. Frequently required for most pubs, restaurants and cafes a premises licence authorises the buying and selling of alcohol, offering entertainment, and serving food between 11am-5am. It is also worth remembering that alcohol cannot be consumed by persons under the age of 16 as part of a meal in a restaurant. Licensed premises are also required to have in place age verification policies.
Exit plan
Be ready in case you need to exit. It's always been a fickle industry and so it is worth planning for a worst-case scenario where the business doesn't take off or customers don't get the concept.
When you negotiate the lease make sure you include a right to break the lease upon written notice. Ideally you want this at any time but often the landlord will only agree one after a few years of trading (e.g. on a 10 year lease at year 5 of the term).
Also make sure the lease provisions allow you to easily assign the lease to another party or grant a lease to a third party out of your leasehold interest. This way you can pass on the financial burden of the lease terms and also vacate the property.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.