In this blog, you will learn in detail about How to Start a Restaurant Business in India.
In recent years, India’s restaurant industry has seen phenomenal growth. Disposable incomes, urbanisation, and a growing young population continuously fuel this progress.
Interestingly, the sector serves different tastes and budgets. Be it humble street food stalls or top-notch fine dining establishments, it has something for everyone.
This diversity, however, triggers cut-throat competition. Given this, if you are considering starting a restaurant venture, you must have a thorough plan ready.
As such, you should learn about each step on the way. This detailed guide breaks them down for you. Keep scrolling!
How to Start a Restaurant Business in India?
Here is a snapshot of all the processes that we will discuss below.
- Conduct Market Research and Feasibility Study
- Concept and Theme Development
- Location and Premises
- Business Plan and Investment
- Funding and Investment Options
- Legal Requirements and Licensing
- Becoming a Franchisor
- Interior Design and Ambience
- Equipment and Supplies
- Staffing and Human Resources
- Marketing and Branding
- Technology and Innovation
- Customer Service and Experience
- Revenue Streams and Profitability
- Challenges and Solutions
Now, lets dig deep into all these important processes which helps in starting a restaurant business in India.
Conduct Market Research and Feasibility Study
It would be best to start by learning what’s happening in the market. Keep a close eye on top food trends, consumer behaviour, and dining experiences.
This way, you can understand how to capitalise on opportunities. For instance, organic food or farm-to-table concepts are popular these days.
You may include such offerings to attract the crowd. Likewise, you should always set your target audience before launching your business.
When setting your target audience, you should consider the following factors:
- Demographics (Age, gender, income)
- Psychographic (lifestyle, values, interests)
- Behaviour (dining habits and occasions)
This lets you understand what to offer and how to market your business.
It would be best if you also analysed the local competition. To do that, you must conduct a detailed assessment of your competitor’s weaknesses, strengths, pricing, marketing strategies, etc.
Once you successfully analyse these data, you can create your unique selling point (USP). Remember, this can go a long way.
Concept and Theme Development
Once you finish market research and feasibility study, develop a concept and theme for your restaurant. Remember, the idea is the heart and soul of your business.
When drafting it, you should consider the overall atmosphere, style, and experience you want to give your guests. You can also include unique ideas to make your concept more lively.
Some of the trendiest ones include:
- Casual dining (Small prices, simple environment, compact menu)
- Thematic (hardcore theme-based, i.e., Mexican, Italian, etc.)
- Fine dining (top-notch service, exotic menu, upscale ambience)
- Fast casual (convenient, quick service, avant-garde ingredients)
- Niche (vegan, gluten-free, organic, etc.)
Once the concept is decided, you must return to the USP point. USP refers to the element, concept, or offering that sets your restaurant ahead in the race.
This unique value proposition results in customer satisfaction. So, how would you like it to come up? Is it exceptional food quality, outstanding service, distinctive ambience, or a blend?
After deciding on the USP, move straight to the menu. Your menu should keep with the theme you choose and the target audience.
Consider cuisine, pricing, restrictions, and everything that influences your audiences’ dietary choices.
Location and Premises
Location is critical when it comes to starting a restaurant. In general, you should consider a few factors when selecting your site :
- First, ensure that your chosen location fits your target market’s demographics well.
- Next, it should be easily accessible to your guests.
- You should also consider the footfall, rent, and local laws and permits.
- Most importantly, when selecting the location, you should check on all utilities (gas, electricity, water).
P.S: When selecting a location, essentially decide on the ownership structure. Do you want to lease a property, or do you want to own it?
Whatever it is, before making the decision, consider your budget, long-term plans, risk appetite, and market conditions.
Business Plan and Investment
Once the venue is ready, it’s time for some calculation.
Initial Investment: Start with estimating the initial investment. There will be pre-opening expenses (licences, market research, legal fees, permits, etc). Then, there are supplies and equipment. You must also allocate some money for renovation, fixtures, and installations.
Technology: It’s also essential to invest in technology (Point of Sale system, software, computers, etc.) and marketing. Plus, you will have to manage funds for daily operations, payroll, and emergency expenses.
But how will you manage all this? Well, it’s simple –follow the below steps —
- Create a detailed budget and craft sensible financial planning.
- When making the budget, consider financial obligations like interest, taxes, loan payments, etc.
- For precise financial projections, you can get help from a professional accountant. They can prepare detailed documents, including critical financial metrics like revenue, gross profit, break-even point, and net profit.
Cost estimation and smart fund allocation are fundamental to starting your restaurant smoothly.
Funding and Investment Options
So, finally, you have the cost estimation handy. Now, how do you arrange the money? Here are a few good options.
Self Funding and Bootstrapping
Self-funding or bootstrapping is about using your money to start your business. Many restaurant owners in India prefer this method because it provides a different degree of control.
For instance, you hold complete ownership and become the sole decision-maker. Moreover, you won’t have any debt.
Most importantly, when you invest your hard-earned funds, your commitment to your business becomes stronger.
If you don’t have that money ready, you can implement a few bootstrapping strategies to build the fund:
- You can join a part-time job for extra income
- Liquidate a few of your assets (car, gold, etc.)
- Ask for help from your friends and families.
Statutory warning: While bootstrapping is a favourable alternative, it has challenges. Since there will be limited external funding, you won’t be able to expand your business faster.
Moreover, limited capital may sometimes stop you from securing better opportunities.
Loans
Now, you can’t manage funds on your own. Won’t you launch your restaurant? Of course, you will. Look for external funds:
- These days, many investors offer business loans to aspiring entrepreneurs.
- You can also go for traditional bank loans.
- Lastly, you can look for equipment-specific loans for kitchen equipment and dining decoration.
Fund Raising
If loans don’t work, you can host fundraisers. The idea is simple – you must reach out to angel investors, convince them to lend you money and return the money in small portions when your business starts generating profits.
However, to onboard a good investor, you will have to prove the potential of your business.
Legal Requirements and Licensing
The next step is all about sailing through the legal waters.
Firstly, you will have to register your business. The most common restaurant structures are:
- Limited liability partnerships (LLPs)
- Partnerships
- Sole proprietorships.
Each structure has different legal implications:
Sole proprietorship: This concept is as simple as it sounds. You will be the sole owner of your restaurant business.
You will be responsible for all business debt and obligations, and your business income will be taxed as personal income.
Partnership: Your restaurant will become a partnership business when you share ownership with your friends or family. Here, taxes will be calculated based on the partners’ joint income.
LLP: It is a hybrid form of business organisation. It will require a company registration. The control will be equal for all partners, and the profit and losses will be based on the partners’ income.
Choose what suits you the best and register your business. You must register with the Registrar of Companies (RoC) for LLPs.
On the other hand, local trade licences are enough for sole proprietorship. Also, for tax compliance, a goods and service tax registration.
But that’s not all. You still need to manage:
- FSSAI
- Fire safety licence
- Pollution control certificate
- Shop and establishment licence
If you have planned to serve alcohol, you will have to get a licence from the state excise department. And yes, if you plan to play copyrighted music, you must also manage a music license.
*Note: These are the common. However, you may need some state-specific papers as well. Ideally, you should consult a legal expert or local authorities to get a clear idea about them.
Becoming a Franchisor
This step is not a mandatory one. However, if you plan to launch a chain of restaurants, you may go for franchising. This alternative is lucrative. Why? Because:
- You can keep earning money without investing an active physical effort.
- More people will know your restaurant.
To franchise, you need to :
- Make a plan
- Invest vigorously in advertising
- Make a few rules
- Select people who show interest in taking up the franchise
Also, you must create a detailed franchise disclosure document to franchise your restaurant that provides essential information about your offer.
Note: Regarding the legal aspect, India has no dedicated franchise law. The government controls everything with a combination of different regulations. Therefore, talk with a legal expert to understand how things work.
Interior Design and Ambience
After you handle the complex paperwork, pay attention to the design part. Remember, the more beautiful the ambience is, the better ROI you can expect.
When planning your layout, consider the following:
- Kitchen Placement
- Sitting areas
- Storage
- Table arrangement
Next, to design the interior –
- Choose colours carefully
- Use comfortable lighting
- Select durable and consistent furniture
But it would be best if you didn’t stop there. Use artwork and signage that perfectly aligns with your restaurant’s concept to boost the appeal.
This way, you can build up customers who will always return to you for more.
Equipment and Supplies
All that culinary magic happens here in a well-equipped kitchen. Therefore, choose your supplies carefully.
- For cooking, get quality stoves, ovens, steamers, grills, and fryers.
- For preparation, purchase chopping boards, mixers, peelers, blenders, food processors, etc.
- Likewise, bring refrigerators, freezers, and suitable containers for storage.
- Lastly, don’t ignore the cleaning aspect. You will need heavyweight dishwashers, cleaning supplies, and sinks.
However, if you have thought of a humble street-side food joint, you don’t need all this hefty equipment. Instead, invest in one or two good workers. That’s it!
But wait. Where will you source the raw materials and supplies from? And how will you manage your stocks? When it comes to supplies, you should always choose local suppliers.
You will get fresh produce while supporting local farmers and businesses. You can contact the area wholesaler or distributor for a few specific ingredients.
About inventory management, go technical. Get a system to manage stock levels, receive and place orders, and stock rotation.
Staffing and Human Resources
To run a business, you will need staff and human resources. It’s essential to have the right people in place. So start hiring people according to your requirements.
To make the job hassle-free, follow a step-by-step process.
- First, post jobs online
- Then, go through the submitted applications
- Finally, arrange one-on-one interviews
Once you hire staff members, provide them with detailed training. Also, promote a positive work culture.
Marketing and Branding
The definition of marketing and advertising has changed now. Today, to make people remember your restaurant’s name, consider the following ideas:
- Create a brand image: You must create a unique brand image that resonates with your target audience.
- Start from scratch: Write a compelling brand story, prepare an excellent logo, and your brand identity is set.
- Don’t miss on the colour schemes and typography: Everything should have that ever-desired catch. After creating your identity, build practical strategies to attract customers.
- Varied channels: Consider traditional marketing channels and combine them with digital ones. Use print media, radio, social media – whatever looks affordable.
This way, you will be able to let people know that you have stepped into the market and have been looking to serve it for a long time.
Technology and Innovation
You should plan and integrate important technology to manage your restaurant better to keep up with the pace. There are several restaurant management software available. They can help you:
- Control inventory
- Manage customer relationships
- Monitor overall operations
Using them can boost your new business’s efficacy and Excel data management. Moreover, you can use such software to track online orders, mobile payments, and even customer feedback.
What else could define convenience?
Customer Service and Experience
Your new food business will thrive only if you make your customers happy. They will come back, refer, and give you new business.
Therefore, do everything that you can to offer an out-of-the-world customer experience. Here’s what you can do:
- Onboard attentive staff
- Create a hearty atmosphere
- Exceed your customers’ experience
However, practically, this is not as easy as it sounds. You must develop soft skills like problem-solving, empathy, communication, etc.
Tip: Always handle customer feedback professionally. Listen to what they say and try implementing solutions.
This effort shouldn’t be limited to your restaurant’s initial days; it should exist as long as it thrives.
Revenue Streams and Profitability
Knock! Come out of the future – you have yet to cut the ribbons for your new restaurant, and this step is crucial to achieving your dream.
Let’s talk money! Before you start, work on figuring out your revenue streams and profitability. They primarily come from food and beverage sales.
You can upscale it by:
- Introducing new services
- Serving alcohol or imposing delivery or takeout fees
- Working hard to find new revenue opportunities
It would be best if you also managed operational costs sensibly. How much energy could your restaurant consume? Have you calculated the inventory waste?
Labour costs – missed, right? Rethink and calculate again. Understand long-term profitability before moving forward with the investment.
Challenges and Solutions
You have the plan ready now. But it would be best if you prepared for not-so-good days beforehand. Therefore, learn the challenges and accept that it’s not all rosy.
You must overcome a few challenges to start a restaurant business and make it thrive and grow. However, at the end of the day, they will turn you into the best businessman.
- During economic fluctuations, you will see how your consumers change habits. Once you know that, you will have a strategy ready to deal with the problem the next time such a situation arises.
- Another significant challenge is labour shortages. Only discernment and behaviour can save you from this issue. You may have to look for workers from other states.
- Plus, you should always keep your workers’ payment handy if you have trusted and efficient ones.
- Also, you can experience tough competition. To overcome this peer pressure, you can launch different customer loyalty programs, rewards, etc.
How to Start a Restaurant Business? – Conclusion
And it ends here! You have learned the basics of starting a restaurant in India by now. Initially, things may look way more complicated than you expect.
But, if you have the right strategies and are dedicated and smart, your business will thrive and flourish.
So, don’t let the time flow away – kickstart your venture as soon as possible. May fortune be yours!
