How to create your first restaurant business plan

BusinessCategory
8 min read
Maneka Tanwani

Indians love their food, including a vast range of cuisines influenced by different cultures and traditions. From fast food and cafés to fine dining, all require restaurant business plans in order to succeed long term. In this post, we will explain how to write such a plan.

The sheer magnitude of the country’s population and its passion for food make opening a restaurant in India very lucrative.

This is why more and more young entrepreneurs are entering the restaurant business.

If you’re ready to learn how to start a restaurant business in India, keep reading to find out everything you’ll need to plan to open one.

1. Decide on a concept for your restaurant

A notepad with brainstorming doodles

The first step in writing your restaurant business plan is deciding the concept. Do you wish to open a:

  • Café
  • Casual dining place
  • Lounge
  • Elegant restaurant

Research to find out what is trending in your town or city to help you decide.

Pune has a prominent café culture, food trucks are popular in Surat, and Mumbai and Delhi are big on fine dining.

Once you have narrowed down on the concept, then figure what cuisine you want to serve. Here you need to decide whether you want to go with the popular choices (such as Indian and Chinese) or introduce a relatively new cuisine in India (like French or Spanish).

2. Choosing a business model that works for you

The next key decision is to choose between starting your own business or taking up a franchise. Both options come with their own set of advantages. Let’s discuss some of the differences here:

Setting up a franchise

A franchise set-up allows you to take advantage of the goodwill and name recognition of an established business. This is a good option for someone who wants to minimize their risk in exchange for a cash investment up-front.

It’s interesting to note that about 35% of Indian franchises are owned by first-time entrepreneurs.

Starting your own restaurant

On the other hand, starting your own brand gives you the absolute freedom for creativity and flexibility to make changes or improvements when required.

Starting your own restaurant also helps you save on the franchise fee, commission/royalties, and other fixed assets. These assets could include real estate or equipment that you would need to bring to the table before your franchisee application is considered.

The downside is that you have to create everything from the ground up — from planning to securing funding and negotiating lease agreements.

Related: Want to start a franchise business in India? Here’s how

3. Make location a top priority

Location plays a crucial role in the success (or failure) of any restaurant. You ideally should have a presence in a busy office district, a party hub or a bustling mall.

Close-up of dining utensils next to menu on table with street level views in background

Ensure you have the right visibility so that customers can easily spot the restaurant.

Ground floors with access to the main road are always better than something that is tucked in one corner of the building. Factor your cuisine and concept into your location decision-making.

For example, if you decide to serve Italian, opening a restaurant at a place where there are three other pizza joints is not a wise decision. You would probably spend most of your time vying for customers.

It is important to note that you do need a NOC (No Objection Certificate) from at least three of your neighbors to be able to open a restaurant business. So, choose your location wisely.

4. Consider the estimates of all operational costs

It’s important to understand your break-even point — in other words, how much you will have to earn to cover your expenses and start making a profit. Make sure you have a fair estimate of all significant expenditures for setting up and running a food and beverage business.

Let’s breakdown some notable costs to consider for each category:

Set-up costs

  • Rent/EMI
  • Interiors
  • Kitchen equipment
  • Licenses and more

Operational costs

  • Stock/ingredients
  • Utilities
  • Wages
  • Marketing
  • Website
Person chopping vegetables in a commercial kitchen

These costs will help you determine the price point for your services, as well as give you a good idea of how many sales you need to generate for profitability. A pro-tip is to earmark at least three months’ worth of operational costs from initial investment as contingency funds.

5. Managing capital investment

Having a ballpark figure to get the ball rolling and a breakdown of various costs can help strengthen your restaurant business plan, especially if you are seeking funds from an external source. The three common sources of funding are:

Personal capital

This includes investible funds from self, spouse, parents, relatives, or friends as an interest-free loan or partnership/profit-share. This helps spread out the risk and makes more people invested in the success of the business.

Loans

You can choose a loan product depending on the scale and capital requirements. For a smaller café setup, a personal loan may suffice.

Read this post for details on six funding options, from cash credit facility to the government’s Pradhan Mantri MUDRA Yojna scheme.

For most full-fledged restaurants, you may have to opt for a traditional commercial loan, for which you may require some sort of collateral. Banks such as SBI, Vijaya Bank, and Indian Bank have customized credit products exclusively for restaurant businesses.

VC Funding

For first time entrepreneurs, getting an investor on board can be challenging. However, if your restaurant business plan has potential and scalability, access to venture capital can open many doors for you.

Related: How to find VC funding

6. Licensing and regulatory norms

The list of regulations and licenses for restaurants will vary from one state to another.

To save time and streamline procedures, take the help of a consultant or local agent.

Licenses that you may need to acquire are:

  • Goods and Service Tax (GST) registration
  • Shops and establishment/Gumastha license
  • Trade license
  • FSSAI license
  • Eating house license
  • NOC from the fire department and environmental clearance

You also may need to include other requirements in your restaurant business plans like a liquor license, music, and insurance.

7. Invest in operations technology

Customer standing near register with cash in hand

Another thing you will need is the right technology to run your restaurant business smoothly.

A digital POS (Point Of Sale) system is crucial to organize, manage and track your operations. New-age POS solutions can take care of end-to-end restaurant management operations like:

  • Daily accounting
  • Automatic billing
  • Inventory management
  • Taxation
  • Analytics
  • Customer relationship management and more

Do your homework to understand which solution will work best for your unique needs. Compare vendors and do trial runs before committing, then pick a vendor that gives you the flexibility to customize the solution.

8. Building an online presence

We live in an increasingly digital world, and a strong online presence should be a vital part of your restaurant business plan.

When starting your business, it is crucial to have an official website. This will help you increase reach, get more customers and build credibility.

If you don’t have coding experience, Godaddy’s Website Builder allows you to easily get a restaurant website up and running yourself. Features include:

  • Ready-to-use templates
  • Hassle-free setup
  • Web traffic analytics
  • 24/7 customer support in Hindi, Tamil, Telugu, Marathi, and English

Websites + Marketing makes it easy to update your menu from anywhere (even the kitchen!) and includes easy integration with OpenTable’s reservation app.

Once you have your website ready, create buzz on social media platforms such as Facebook, Twitter, and Instagram. With Website Builder’s built-in content creation tool,  you can create scroll-stopping social media posts to cut through the noise and stand out to your customers.

9. Partnering with food aggregators

Food aggregators such as Zomato and Swiggy have taken over the restaurant scene, especially during the COVID-19 pandemic.

With more and more customers relying on these apps for their delivery needs, it is prudent to be present on the top food aggregator platforms. To understand the scope for growth, let’s take a look at how well Swiggy performs.

Swiggy is popular in over 500 cities and towns in India, connecting customers to 140,000 restaurants.

You need to take advantage of this rising trend and ensure you are where the customers are so that your restaurant business thrives and grows.

How to start a restaurant business in summary

While working in the hospitality industry is demanding, it is definitely a rewarding experience. If you have been nurturing a dream to open your very own eatery, you need to start by creating a restaurant business plan. This will help you decide how to:

  • Develop the concept
  • Understand cost estimates
  • Organize funding
  • Handle licenses
  • Create a digital presence and more

All of these decision-building exercises help set your business up for success. You increase the likelihood of a thriving restaurant with the more time, research and dedication you invest.

Now that you know where to start, go forward putting that restaurant business plan into action.

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