Starting a Restaurant – Do’s and Dont’s

Unbeknownst to many entrepreneurs-in-training, opening a restaurant is one of the riskiest endeavors one can undertake. From finding exactly the right locale to investing in the freshest of ingredients, a host of elements must be considered. From a restaurant consultant standpoint, the primary importance is to ensure enough capital is available for the venture – on average, anywhere from $50,000 to $150,000 is required to open the doors of a restaurant, that figure being reduced if existing kitchen equipment and the like is readily available. However, many costs go into that figure – food enough to last for that initial six months to a year, enough labor dollars to pay a staff (in that same six months-to-a-year time frame) and of course garden variety bills. All this must be considered very carefully by the prospective restaurateur beforehand because initially – and this is just fact – revenue won’t be streaming in with any sense of urgency; typically, restaurants just don’t turn a profit right away and clientele must be built to make this happen.

In what’s a rather alarming statistic, 75 to 80 percent of restaurants go out of business in their first year. As an increasingly difficult business to master and succeed in, owning a restaurant is a prospect that should be carefully researched, according to master restaurant consultants. Factors such as location, knowledge of PNL and control of laborers and food cost are really just the beginning of what needs to be taken into serious consideration. According to professional restaurant business consultants, most people fail in this arena because they feel they could open up a restaurant just because, say, they could cook or perhaps have simply eaten in a restaurant. To the contrary, this is more a science with only 20 to 25 percent of attempts actually succeeding due to the sheer fact that these folks actually did their homework.

Financing For Starting Up A Restaurant

When looking for a loan to start a restaurant, there are many things to consider. By following these steps, a business owner can greatly increase their chances of obtaining a large loan with a low-interest rate and the duration that the business owner wants.

Profits And Expenses
The first step to obtaining a loan is to create a detailed business plan that projects the restaurant’s future income, and banks will want to see a plan that includes all of the potential expenses and profits of the restaurant during the next several years.

Analyzing The Market
A loan officer will want to know whether or not there is a large amount of potential customers in the area in which the restaurant will be located, and if there are many competitors within a radius of twenty miles, the loan officer may not give the business owner a loan.

The Credit Score
A business owner should check their credit report and pay off any old debts before applying for a business loan. Since the financial crisis of 2008, most banks only give loans to business owners who have excellent credit.

The Purpose
A loan officer will ask the business owner many questions about the purpose of the funds of the loan before approving the business owner for financing. Typical expenses for a restaurant owner include opening a new location, paying employees, purchasing new equipment, advertising and adding new items to the menu.

The Duration
The larger the loan, the longer the duration of the loan will be, and sometimes, a business owner can alter the duration of the loan while the loan is being paid back.

The Terms And Conditions
The terms and conditions of the loan will contain vital information about paying off the loan early and making late payments.
When looking for a loan to start a restaurant, there are many things to consider. Some of these include creating a detailed business plan that contains the profits and the expenses of the restaurant, analyzing the market, the credit score of the business owner, the duration of the loan and the terms and conditions.