As with any business, setting up a fast food restaurant comes with long hours and substantial risks. To mitigate the risks, it is essential to understand and plan all the facets of starting and owning a fast-food restaurant. The following is an elaborate guide to starting your own fast food restaurant.
There are several things to keep in mind while deciding your fast food restaurant concept, starting with how much money you need for your capital investment. What do you think the average customer would be willing to spend at your restaurant? This is known as the Average Price per Customer or APC. Ensure that the restaurant theme matches your cuisine and attracts your target market.
Understand The Costs
Running a fast-food restaurant involves managing the various costs, which are usually significant and varied. They include:
Food Costs – Managing food costs, the cost of food ingredients effectively is key to making your restaurant business a success. The ideal food cost should be between 30% to 40% depending on your cuisine and location.
Overhead Costs – Except for food and staffing costs, all other costs fall under this category, including:
- Rent – This will probably be the single largest recurring cost for your restaurant and can vary significantly based on your location. It is important to keep this as low as possible, preferably less than 10% of your sales revenue.
- Interiors – Make sure that your interior theme syncs with your cuisine and target market, and most importantly, stays within budget. It is very easy to go overboard.
- Kitchen equipment – Procuring the right mix and quality of kitchen equipment is essential for the long-term success of your restaurant. Choose carefully and ensure that you get the right quality even if you pay more upfront.
- POS – Point of Sale systems (POS) are must-have tools in today’s day and age. A good POS will help you manage your restaurant operations efficiently. Costs can vary depending on the functionalities and features that you opt for. Think carefully as this is a long-term investment.
- Marketing – This is essential to drive customers through your doors. Use a combination of offline and online marketing to reach your target customers. Keep in mind that in the age of social media, word of mouth combined with digital marketing can go a long way towards capturing new customers. Budget at least 1% to 2% of your sales towards marketing.
Location, Location, Location
Probably the single most important factor for a restaurant’s success is location. Your restaurant should be visible and accessible to your target customers. Upper floors are not conducive for fast food operations as they offer limited visibility.
Check out the local competition to understand the area. Read up on the local regulations and get No Objection Certificates from your proposed neighbors to ensure you don’t have issues down the line.
Starting a restaurant business requires many licenses and clearances. Some of the major ones are:
- Business Entity Registration– All businesses must be registered either as a Firm, a Partnership, A Limited Liability Partnership, or as a Private Limited by Shares. This can be a complex decision, and it is best to hire a CA to help you through this process.
- GST Registration – All restaurants are required to register for goods and service tax and get a GSTIN. If you are starting a new business, you must apply for a new gst registration. If you plan to have multiple restaurants in different states, you must get a separate GSTIN for each restaurant.
- Restaurant License – Municipal authorities issue a Restaurant license with a one-year validity, and these need to be renewed every march. They typically cost between Rs 5,000 to Rs 10,000 depending on the type of restaurant and the location.
- FSSAI – You need to obtain a license from the Food Safety and Standards Authority of India (FSSAI) to operate a food business. The turnover, installed capacity, location, etc. are some of the factors in obtaining an FSSAI license and costs around Rs 5000 to Rs 10000.
- Professional Tax – A professional tax license is required for salaried staff and is payable monthly for all staff earning more than Rs 10,000.
Funding Your Restaurant Business
Funding is the lifeblood of starting any business. It is critical to ensure that you have all your bases covered financially before you take the leap to open a fast-food restaurant. There are several options for funding your business.
- Self-Finance – If you can, self-financing is a good option. This gives you more freedom as an owner and helps you get off the ground without incurring any debt.
- Loans – Bank loans take time, and the process can be very involved. You will need to provide some sort of security and probably a third-party guarantee.
- Outside Investors – Angel or VC investors can be a good option if you can convince them to sign on. This is difficult, especially for new businesses.
Staffing Your Restaurant
You need to decide the staffing for your restaurant. You will need kitchen staff, service staff, and management. Have a look at staffing models at similar restaurants to get an idea of what you need.
Menu planning is the key. The menu should be varied enough with a short service time to ensure that customers keep coming back. At the same time, the menu should be designed to minimize your food cost. This is critical for a fast-food restaurant.
Suppliers And Vendors
Finally, you need to arrange the right suppliers for the right products to provide your restaurant with daily essentials. Find suppliers who give you consistent products at consistent prices. Ask them for referrals to ensure that they are reliable.
Starting and owning your own fast food restaurant can be one of the most fulfilling and rewarding experiences that you will have. It’s not easy, but nothing worth having ever is. Enjoy your new venture.