Starting a Small Restaurant

Small Restaurant Business

When starting a small restaurant, it's important to draw up a business plan, figure out whether or not you'll need a loan and if so, how much money you'll need to borrow.

Steps to Aid in Starting a Small Restaurant

Starting any business can overwhelm you once you start to seriously make plans. Starting a Small Restaurant by Daniel Miller is a great resource. Once you know more about what you want to do and how to do it, use a checklist to stay organized as you maneuver the challenges and obstacles that arise.

The following steps will help narrow your focus by providing specifics to organize your approach to starting a small restaurant:


Take a survey. It's a great way to learn pertinent details to aid in making informed decisions and better equip you to get your restaurant business off to a successful start. Survey answers offer insight into what to serve, popular price ranges for your targeted demographics because answers reflect behavior and attitudes toward eating out.Businesses like Claritas, which is a leader in demographics, offers assistance in conducting surveys designed to help restaurant entrepreneurs to:

  • Understand the frequency of visiting restaurant types by various market segments.
  • Gain a clearer understanding of characteristics of restaurant visits using detailed criterion.
  • Help to decide how, and if, mindsets impact restaurant selection.
  • Investigate distinctions among more than 60 individual markets.

Tax Laws

Before you open a business learn what local tax laws apply along with:

  • State tax
  • Sales tax
  • License(s)

Registration and Inspections

Research what inspections state and local health departments require and what regulations will apply to your restaurant. Check with your local courthouse. Ask about what laws and regulations will govern owning a restaurant business in your area.


Starting a small restaurant costs money and may be one of the single most prominent deterrents to opening a small business -- but it doesn't have to be. If you need to borrow money to fund your business start-up and plan to apply for a business loan, arm yourself with a written business plan. Even if you seek financing from a source other than a financial institution, a business plan is important. It will provide insight into your business and will serve as a financing proposal tool.

Financial Options

If you are looking for financing other than a conventional business loan, consider the following options:

  • Friends and family - This may sound like the best option, but borrowing from friends and family has its drawbacks. For instance, if your restaurant runs into financial difficulties and you need a little more money, will they be able to extend another loan? Also, if you aren't able to pay back the money as fast as you thought, it can lead to hard feelings. If you do choose this route for financing your business, be sure to discuss all the particulars up front and to get them in writing.
  • Using your personal savings - If you've saved for the purpose of starting a small restaurant business, good for you. It's a great way to keep your debt down. However, be sure to have a back up plan in the event your savings run out and you need more money.
  • Credit Cards - This is not a good option. If you use credit cards to buy items you need for your business, most often they charge a daily interest rate. Other factors that come into play include maximum limits (depends on your credit history) and paying a minimum amount each month.
  • Home Equity - This is a risky option because if you use the equity you've built up in your home and the business fails you risk the chance of losing your home.

Learn From Experience

Experience makes a great teacher. If you can it's best to gain restaurant experience first hand. Try to find work in a restaurant similar to the one you hope to open and work there for up to two years.

Another avenue to help you gain knowledge from experience is to take advantage of local resources. Talk with small restaurants in your area and learn what they had to go through to start their business. Try to find a mentor who is willing to help guide you through the process. One place to find such advice is through Successful Business Advisors at S.C.O.R.E where entrepreneurs are provided free, confidential business advice

Along with this, you may want to consider taking a course to help equip you with the tools you'll need to succeed. If time is an issue, take advantage of a free online course at that offers sessions on:

  • Evaluating Business Potential
  • The Business Plan
  • Computer Tools
  • Business Organization
  • Licenses & Permits
  • Business Insurance
  • Location and Leasing
  • Accounting and Cash Flow
  • How to Finance Your Business
  • E-Commerce Business
  • Buying a Business or Franchise
  • Opening and Marketing
  • Expanding and Problems

Pros and Cons to Buying a Franchise

Buying a franchise is a viable option when you dream of starting a small restaurant business. Franchises are regulated by the Federal Trade Commission and you'll also have to check with your particular state to see if they have regulations that apply.

Pros to Buying a Franchise

  • Product and service has been developed and tested
  • Instant name recognition
  • In many cases assistance is available in starting the business
  • Some franchises offer help in the form of consultants or trainers
  • Better prices for supplies and products
  • Advertising materials supplied

Cons to Buying a Franchise

  • Franchise fees can be quite costly
  • In some cases weekly royalties are paid on gross sales
  • Franchise advertising fees may apply
  • You might have to update in accordance with franchise standards which can result in costly remodels
  • A franchise can be ended if you are not in compliance with their standards
  • Franchisers can go out of business and your restaurant's success may depend on the success of the franchiser
  • Your reputation is linked to other franchisees. If others in you area may operate poorly it may cost you potential customers
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