Owning and operating your own restaurant is a labor of love. Having a passion for food and bringing it to your community can be a rewarding project to take on. When it comes to the nitty-gritty of running a restaurant, however, there’s a lot logistically that has to happen just to get the doors open. We’re going to cover the most frequently asked questions prospective and current restaurant owners should ask when taking on their own restaurant.
Questions of Future and Current Restaurant Owners
Aside from all the fun that goes into creating your own menu and coming up with interesting ways to advertise, a restaurant is still a business at its core.
What is My Operating Budget?
Your operating budget is going to be how much money you expect to make and how much money you expect to spend on your restaurant. Your budget should include inventory costs, labor costs, utilities, rent, and anything you need to spend to stay open. This is a great way to see if there are places you can improve your profit margins and keep track of your money.
What are My Start-Up Costs?
This is any money you pay to get your restaurant started. Equipment, taxes, insurance, permits, leases, and anything you spend to get your restaurant off the ground. These costs will vary greatly depending on where you live, where you’re operating, and what you’ll be serving, so it’s important to look all of that up based on what your individual needs are.
How Much Investment Do I Need?
Just to get going and start making money, you’ll be looking at an average of $300,000 to $500,000 in startup costs. This can look much different if you’re buying a pre-existing restaurant, or if you’re building one from the ground up. It’s all based on your needs as a restaurant owner.
How Much Can a Small Restaurant Make in a Day?
The first year of a restaurant’s life is always the most difficult. You’ll see lower profit margins than you would years down the line. Depending on where you’re at, the national average is around $1,400 - $2,000 per day.
What Should My Management Labor Costs Look Like?
This’ll depend on the needs of your individual restaurant, but there’s some basic roles every restaurant has.
- Head Chef. Your head chef uses their expertise, often gained through higher education or years of experience, to create new dishes, menus, and set the standard for how things should be prepared. They’ll also be doing ordering and acting as a kitchen manager. Basically, this person will be the heart and soul of your restaurant. The average head chef’s pay is around $50,000-$80,000 annually. This varies on your location, so check around to see what the average pay is for your area.
- Bar Manager. Someone who’s experienced in how bars work behind the scenes is important when you have a bar in your restaurant. This person’s roll is usually to do inventory, create new drinks and menus, and hiring on new employees. They’ll be scheduling bartenders as well. You should expect to pay them anywhere from $35,000 to $50,000 annually. Remember, these numbers vary based on location, so be sure to check out what people are getting paid in your area.
- Front of House Manager. This manager will be overseeing most customer complaints and server scheduling. They’ll be responsible for customer service standards, hiring on new servers, and ensuring that the front is well-kept and clean. Front of house managers typically get paid anywhere from $35,000 to $50,000 annually like the bar managers do.
- General Manager. Sometimes you’ll want to hire on a general manager to help keep things organized. Hiring someone for this position is great if you manage other businesses or want to consolidate your hierarchy of responsibility. General managers usually check in on all other management, essentially this person is everyone’s boss. They’ll be overseeing management complaints, getting things fixed as needed, and hiring on new managers. They’ll be the biggest help to you with handling responsibilities that are above everyone else. The average pay range for this position is anywhere from $50,000 to $80,000.
Is This the Right Concept for This Location?
Think about what you want, do you think the people in your community want that too? It’s important to consider whether or not there’s a market for what you want to sell. If you want to have a high end restaurant with lots of fusion dishes at a luxury price point and decide to open in your small hometown, you might not do as well as you would if you were in a big city area. It makes more sense to think about what interests people around you or you’ll end up not selling anything.
How Can I Reduce My Costs?
There’s several ways to cut costs and maximize profits. You don’t have to dip into the quality of your food and drinks either.
- Ingredients. Break down the price of your food and drinks, is there anything you could source cheaper? Is there a menu item that just isn’t selling that you could remove? Make sure you’re shopping around with vendors for the cheapest prices too to make sure you’re getting the best deal possible.
- Labor. Overstaffing is costly. It’s a good idea to make sure you always have enough people on staff so there’s no quality control issues and that service is running smoothly, but overstaffing can end up costing you. You can adjust things based on feedback from your staff. Cross-training your staff on multiple positions can be helpful too so you don’t have to have specific staff for each position.
- Portion Control. Having scales is a great way to not only maintain consistency in your dishes, but it makes portioning more accurate and cost effective. Everyone’s a little different when it comes to building a plate, so it takes the guess work out of portioning.
What Legal Permits and Responsibilities Do I Have?
While it would be nice, you can’t legally just buy a building and open up a restaurant. Here’s a list of some of the main permits (and cost estimates) you’ll have to be in compliance with to operate your restaurant. If you still feel unsure, it never hurts to consult with a business lawyer to get all your ducks in a row to prevent problems later on.
- Certificate of Occupancy ($100). This tells your local government that you’ve had a successful building inspection and you’re up to code for safety standards. Before this was a law, many businesses were cutting corners and, when an eventual fire or other tragedy would occur, it would be much worse for whoever ended up in the crossfire since no one was checking for safety standards. This is why we have occupancy limits on buildings as well, and proves you’re keeping everyone safe.
- Business License and Employee Identification Number ($50 - $5,000). Any business operating within the United States needs to have a business license and an Employee Identification Number (EIN) for tax purposes. This makes your restaurant an official legal entity! The wide price range on the license is because you’ll have to pay to apply, and when you’re accepted, you’ll end up having to pay a percentage of your expected income as well. This is an annual fee you’ll have to pay every so often depending on your state. Your EIN comes free with this, and it’ll be used for taxes for your employees as well. If you’ve looked at a W2 when filing your taxes, you’ve seen a business’s EIN listed on it!
- Food Service License ($100-$1000). Registering as a restaurant means you’re registering with the health department. You’ll have to ensure that your food is stored properly and is being prepared in a safe, cleanly environment. Don’t get too comfortable after one visit, they’ll be stopping by periodically when there’s customer complaints or for your yearly checkup.
- Liquor License ($300 - $14,000). That price range is pretty intense, so let’s jump right into it. You need a license to be able to serve alcohol, this comes as no surprise, but why the insane amount of money? Depending on the state you’re in and what exactly you plan on serving, you’re facing a huge amount of differences in jurisdiction. It’s not likely you’ll have to pay the high end of that range unless you’re serving in a big city, but there’s a lot of specific types of licensing you might need. Make sure you look up what exactly you need so you can properly price things out.
- Employee Health Permit ($100-$500). Some states require a food handler’s permit for employees to be hired at an establishment that handles food. They have to take an FDA approved course on how to prevent cross contamination and properly store food, and then purchase a food handler’s card that has to be stored at the restaurant. It’s meant to lessen instances of food-borne illness and failure to comply with this law can lead to hefty fines or even getting shut down. Make sure you check to see if your state requires this.
How Provi Can Help Your Business
Provi is an all-in-one beverage ordering solution that can help you maximize your efficiency and save money while you’re doing it. Running a restaurant and bar can become chaotic fast when you’re dealing with multiple vendors and managing your inventory, but Provi can help. Our hub allows you to keep track of your current inventory, manage and pay your invoices with flexibility, and stay connected with representatives that can help you find exactly what you’re looking for. If you’re interested in learning more about what Provi can do for your restaurant or bar, sign up at www.provi.com – it’s free!
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