How to open a restaurant

If you love cooking and serving delicious food, why not turn that passion into a business?

Opening a restaurant could give you the freedom and independence of being your own boss while doing what you love.

In 2023, people in the UK spent £132.59 billion on eating out in cafes and restaurants, around 7% more than the previous year.

Whether you’re passionate about fine dining or interested in serving hearty home cooking, opening your own restaurant could be a profitable start-up business.

Read on to find out how to open a restaurant.

Do I buy a restaurant or start from scratch?

There are two ways you could run your own restaurant business – you could buy a franchise or existing restaurant business or start a new one from scratch.

Each choice has its pros and cons.

Franchises offer a proven business model with an established brand, which can quickly attract customers.

They also offer support in crucial areas like marketing, training, and operations, lowering the risk for new owners.

However, franchises may require initial fees and ongoing royalties, which could impact profits.

You must also adhere to strict franchisor guidelines, which might limit your creativity as an entrepreneur.

Read more on how to buy a franchise.

If you start your own restaurant from scratch, you have complete control over everything, like the brand, location, operations, menu, and concept.

This creative freedom could be rewarding but may come with more risk.

You’ll have to manage everything from branding to building a customer base, as well as challenges like marketing and managing supply chains.

Consider your goals, budget, and how much independence you want when choosing which path to take.

Conducting market research

Market research is about checking if there’s interest in the type of restaurant you want to open.

Without the demand, your eatery might struggle.

Doing this research could help you avoid costly mistakes and delays.

It provides valuable information about your target customers, competitors, pricing, and the best location for your restaurant.

There are two ways to do market research – desk research and field research – and combining the two may be the most beneficial.

Desk research involves reviewing industry data and using online tools to identify competitors and their prices.

Field research involves talking directly to your target customers through surveys, community networking, or focus groups to learn their preferences and opinions.

Read our complete guide on how to conduct market research.

Find the right location

Picking the right location could be crucial for your restaurant’s success.

When scouting for the best spot, think about the type of food you want to serve, the level of foot traffic, and nearby competitors.

Busy areas like shopping centres and high streets can attract more customers but usually have higher rent.

Setting up near a residential area could be a good idea, as that may provide a steady and loyal customer base.

Also, consider whether you would like outdoor space and access from main roads.

Think too about whether it’s better to find a site already set up as a restaurant or if you’d prefer to customise an empty space to suit your needs.

Renting an established restaurant space could save you time and money on renovations.

In contrast, fitting out an empty space offers the freedom to set it up as you want, but this may also involve higher costs and take longer.

Weigh these factors carefully when choosing your restaurant’s location.

Create a business plan

A good business plan could help your business to stay on track and support its growth.

A business plan is a working document that includes key details about your business.

Download our free business plan template.

Here’s what to include in your business plan:

• objectives – clearly state what you want to achieve, such as growth targets or market share goals
• timeframes – set specific timelines to track progress and stay focused
• financial projections – provide detailed forecasts of revenue, expenses, and profit, showing the business’s financial viability. This will include the number of daily covers – customers served – your business aims to handle.
• funding plan – details of the funding you would require, why you need it, and how it would be used
• marketing plan – outline how you’ll reach your target audience through advertising, promotions, and online marketing
• operational plan – describe daily operations, staffing needs, and logistics for smooth business operations
• SWOT analysis – identify strengths, weaknesses, opportunities, and threats to understand your market position.

Having a robust, comprehensive business plan could also help you secure funding.

Find out how to write a business plan for a Start Up Loans application.

Funding your restaurant

You may require some funding to make your dream of owning a restaurant business a reality.

You could have several funding options, such as taking out a bank loan, using your savings, or borrowing from friends and family.

If your restaurant focuses on new ideas or sustainability, you might apply for government grants that don’t need to be repaid.

Local councils might also offer grants for new businesses.

If you want your restaurant to serve a community purpose, you might consider crowdfunding as a financing option.

You might offer local investors benefits such as equity or perks in return.

Start-Up Loans provides personal loans for business purposes of up to £25,000 at a fixed interest rate of 6%.

The loan includes 12 months of free business mentorship.

Not every funding option will suit your needs, so research carefully before deciding.

It might be a good idea to seek independent, specialist financial advice.

Set up your business

When starting a business, you need to choose a business structure.

Options include:

• sole trader
• partnership
• limited company.

Each structure has different requirements and financial obligations, affecting your liability, taxes, and administrative tasks.

Research each option to find the best fit for your restaurant.

As a UK business, you must register with HMRC for tax purposes and with Companies House if you choose a limited company structure.

If your turnover is more than £90,000 per year, you must also register for VAT and charge VAT on sales.

VAT registration requires submitting regular tax returns and payments, which could affect your cash flow.

You may want to consult a financial expert to help you decide which business structure best fits your financial situation.

Read our guide to start-up business structures.

Start-up costs

Opening any restaurant involves similar costs.

These costs can be vital for launching and operating your business effectively and safely.

These include:

• restaurant premises – these may include expenses for leasing or purchasing space, renovations, and obtaining the necessary permits or licences
• inventory – initial costs for stock to meet customer demand plus equipment like kitchen appliances and point-of-sale systems
• marketing – this is a crucial expense, potentially involving promotions and advertising to make people aware of your brand and attract customers
• staff – ongoing costs for employee wages and benefits
• utilities – regular costs for electricity, water, and gas to keep things running smoothly
• insurance – business insurance is another ongoing cost to consider.

Licences and legal requirements

To run a food and drink business, you must follow specific legal rules and obtain the relevant licences.

If you want to make changes or repairs to your restaurant space, you may need to apply for planning permission from your local council.

If your location was used for something else before and needs to be changed, you will need to apply for a change-of-use permit.

If you plan on selling alcohol, you will need an alcohol licence.

This will include both a premises licence and a personal licence.

For more information, visit the government’s website.

If you want to have chairs and tables on the pavement outside your restaurant, you must apply for a pavement licence from your local authority.

Playing music in a restaurant can add to the customer experience, but you must get a music licence from PPL PRS and pay a small fee.

Joining the Food Hygiene Rating System can be a good way to gain customer trust.

A food safety officer from the local authority will inspect your restaurant to ensure that your operations comply with the law and the food you sell is safe to eat.

Displaying your rating isn’t a legal requirement in England, but it is in Wales and Northern Ireland.

Lastly, consider getting public liability and employer’s liability insurance (a legal requirement as soon as you become an employer) to protect your business in case of an accident.

Designing and fitting your restaurant

Designing your space can be one of the most enjoyable aspects of opening your own restaurant.

You will need to decide everything from the wall colour to the table layout and types of drinking glasses.

A welcoming design for your restaurant could greatly improve the customer experience and, therefore, your restaurant’s appeal.

Here are a few things you might consider when designing your restaurant:

• make the entrance space inviting and eye-catching
• decide how many tables you need and how to arrange them – this will reflect how many covers (customers) your restaurant aims to handle each day
• the size of your space and additional requirements, such as a coffee machine or bar area
• the colours that would suit the type of restaurant you are launching
• lighting – will it be bright and airy or soft and romantic?
• the type of decor that appeals to your target audience
• the location of your payment station.

To keep your restaurant welcoming, fix any issues quickly and establish a regular cleaning rota.

For example, you plan deep cleaning when the restaurant is closed and quick clean-ups during busy times.

Hiring and managing staff

Opening a restaurant typically means hiring a range of staff, including chefs, waiters, bartenders, front-of-house staff, and management.

Consider what qualities you want in your employees, like being friendly, proactive, good at working with others, and having excellent communication and organisational skills.

These traits are helpful for staff who serve many tables or cook multiple orders at once.

As an employer, you have legal responsibilities to your employees, such as paying at least the minimum wage, providing time off and breaks, giving employment contracts, and ensuring health and safety standards.

Creating a positive work environment could also be key to delivering a good customer experience, as happy employees may be more likely to provide better service for your customers.

To do this, you may want to offer competitive hourly rates, allow staff to keep tips, offer benefits like discounted meals when they’re not working, and provide health and safety training.

You must also pay National Insurance Contributions (NICs) for your employees.

You can save up to £5,000 on your NICs each year, which will increase to £10,500 in April 2025 with the Employment Allowance.

This can help ease financial pressure as you expand your team.

This relief can benefit start-ups worried about the additional expenses of hiring new employees.

Read employment allowance for start-ups explained.

Read about how to mitigate the National Insurance increase for employers.

Setting up payments and financial systems

Setting up efficient payment and financial systems could be crucial for your new restaurant’s success.

Consider using a reliable and easy-to-use point-of-sale (POS) system with online payment options to make payments faster and easier for customers.

Develop smart financial habits to keep your restaurant’s finances in good shape, like regularly checking cash flow and maintaining bookkeeping.

For extra support, you might want to consult an accountant or financial expert to help you understand tax obligations and optimise your financial strategies.

Read our guide to small business bookkeeping tips for success.

Attract customers with marketing and branding

Good branding and smart marketing could attract new customers to your restaurant.

Creating a strong brand identity and marketing plan can help bring in customers and keep them returning.

Develop a brand that reflects your values and connects with your target audience and use it consistently across all marketing efforts.

You might use local media advertising, social media, email campaigns, flyers, and community events to boost brand awareness and attract customers.

To build credibility, you could also encourage satisfied diners to leave positive reviews on platforms like Google and TripAdvisor.

Offering incentives, like a small discount on their first visit, can also help attract new customers.

Learn more with our guide on how to market on a shoestring budget.