by Jim Martin
Starting a food business is a challenge. Most fail within the first year. The restaurant business may be the toughest. Vision and ambition are important, but turning them into success requires research, planning, capital, business acumen, perseverance, more research and more planning (and even then you have to survive a complex set of laws and ordinances). Here are some tips that can help entrepreneurs start, operate, and grow a food business successfully and within the law.
Do Your Research. Since the food industry is very competitive, it is imperative that you do some research before you start. Business networking events (such as those held by SBDCs, SCORE, and local Chambers of Commerce) offer a great chance to meet fellow business people. Try to find out what works, what doesn’t, and what they would do differently. If you know of restaurants that have failed, try to identify why. Online community forums are a great way of gauging market need and customer opinion about local food service businesses. You also need to determine how many local restaurants already offer the cuisine and price range you plan. Research will help you to define your target market niche and identify your greatest risk factors, so you can build a strong business case and move forward.
Understand Your Market, Location and Equipment. Prospective diners usually decide on a cuisine and a price range before they decide which restaurant. You should target a cuisine and price range that is under served. You can see where your plans fit by checking the yellow pages and then visiting those who offer the cuisine you’re considering. Then pick a location that will work to your advantage. It must be well apart from possible competitors and in a spot with reasonably high traffic. People tend to go to restaurants they have seen, not those they look up on-line or in a phonebook. Make sure your chosen facility has ample space, not simply for stoves, ovens and dish-washing equipment, but storage of plates, tableware, linens, menus (you want different ones for lunch and dinner), cleaning equipment, spices and everything else you need on a day-to-day basis. You might consider visiting a restaurant with whom you won’t compete and see how they handle storage. Remember: you need to be able to get to everything easily. Also, as you put together the list of what you will need, cost it out. That’s what you’ll have to spend before you open the door. One last consideration: make sure your chosen site requires no excessive or unusual work to meet a restaurant’s cleanliness standards. Pest infestations or badly leaking pipes should be a warning sign. Heed that alarm!
Consider Starting Small. Testing your idea before you open a permanent (and expensive) location will give you an opportunity to test your idea with less risk. Many food businesses start at home, moving on to something bigger only when they outgrow that space. Going straight from a business plan to a storefront is a big step; testing gives you an opportunity to get the kinks out. You can rent a food truck for a month or try a local market to see how things go. When you finally make the move to a permanent location you will simply scale up what you’re already comfortable with. Fast-food franchises can be an option for entrepreneurs who are not quite ready to make the leap into full business ownership. (They raise other issues, however, which we will not cover here.)
Build a Business Plan. Everything we’ve talked about to this point needs to be in your business plan. Abusiness plan doesn’t have to be overly formalized, but going through the process of building and continually tweaking your plan will help you match the strengths of your business to the opportunities the market presents. It can also help you better deal with problems as they emerge. A business plan is essential for communicating with customers, partners, and investors. If you want them to believe in you, you must be able to convince them that you know what you say when it comes to your business.
Get Financing. Not all businesses need investors to get started, particularly if they start small. The financing options range from very small microloans that can help smaller fast food outlets get started, to more comprehensive programs like the popular SBA 7(a) and 504 loans. If you are seeking investment, plan it out. Use your business plan and the knowledge you’ve gained from your research as the basis for a loan proposal or investment plan. Investors and lenders will want to know everything about your business. Be realistic about how much money you need. You can save lots of capital just by buying local produce and purchasing surplus equipment.
Start Your Business the Right Way. Whatever your business type, you must take care of the basic regulatory and legal steps involved in starting a business. From tax ID numbers to licensing make sure everything is in order. The state of California has a web site that provides applicable state laws, and the local governments can provide you with information on the regulations they add. Make sure you are compliant with them, particularly the public health laws (as violations of those can allow inspectors to close your restaurant on short notice).
Know Your Food Laws and Regulations.. Yes, I’ve already said this twice, but it is my most important message. Know the state laws and regulations, from labor laws to food safety laws. Understanding and achieving compliance with legal and regulatory requirements can have a big effect on the success of a food operation big or small.
Find a Business Mentor. Contact your local SCORE chapter. A SCORE mentor can give you free and objective advice about the local market and the process of starting a successful business. SCORE also offers very inexpensive workshops on the process of starting a business. You might want to attend the business ownership workshop SCORE offers on October 19, 2017.