Key Non Product/Concept Components to starting a Restaurant Business

Posted by fshsfhsfh on Monday, December 12, 2011

I have already provided the below information as a combination in a few posts, but I keep getting several email queries asking the same questions. So I have tried to summarize the key activities involved in starting a restaurant - here I am talking about the activities outside of the main concept, interiors and the product/menu design etc. 
  1. Company Registration - Any accountant/accounting firm will help you with this. You can register the company as a propreitership (easiest, but the firm and you are the same from a legal perspective), Partnership firm (minimal paperwork and minimal ongoing statutory requirements) or a as a Private limited company (reasonable paperwork and costs to set-up and reasonable ongoing activities). LLP is also a new option you can consider. Out of the lot, I would recommend the "Partnership Firm" approach - delinks you (the individual) from the company, gives it a more formal feel and the paperwork/costs involved are minimal both during set-up and on an ongoing basis. Plus if you accountant can help you plan your taxes creatively, you may be able to save some money by paying lower taxes on the profits you make through the presumptive income based model available for small businesses with revenues upto 50 lakhs per annum. Again, I am not a CA or a tax/accounting expert. I would recommend that you talk to your trusted accountant and if you don;t have one talk to 2 or 3 accountants and pick the one you are comfortable with. 
  2. Permits / Licence Procurement - Once you find your location, these are not as difficult as it seems - it will just cost you money. So don't worry too much about it, unless you want to serve alcohol, in which case you will need to figure out the way to get the permits/licenses for this earlier. For the standard licenses, your local corporation office and your accountant can help you get all of those. See my post on licenses required for a restaurant business for details. 
  3. Financials / Funding - For a restaurant business startup, it will have to be your own money with some support from friends/family. You can get a loan from a bank for property as collateral - Loan Against Property - most banks have a scheme for this. Here you mortgage your property for the loan - in the event you cannot repay the loan, the property will become the bank's and they will dispose it off to recover the loan amount. Working Capital Loans are not typically not available for new businesses. Let's say you have 3 restaurants operational for the last 4 years and your bank has a record of all your business transactions for the last 4 years with them. Based on this history, they may give a working capital loan / overdraft facility. The interest rates for commercial loans are currently in the 14-18% per annum range. I would suggest that you go and talk to the branch manager at the bank where you have your personal account - they will be able to provide you specific details on what options you can avail of in your situation. When you determine the total investment you need, I would strongly urge you to include working capital requirements for the first 3-6 months in your total investment figure, as you will need that time to build your business to an operational break-even level. So you need to have the funds ready to sustain your operational expenses for the start-up period. 
  4. Location Search - It is worth hiring a good broker for this once you determine the kind of place you are looking at. You can also drive around, call the numbers from the To Let boards. 
  5. Staff Hiring / Training - Staff hiring will be a painful part. The main guys you hire should be able to bring in the rest of the team, but getting the main guys will be the challenge. You can request an existing restaurant business owner to help you find someone good. If you are looking at a reasonable investment (say 25K per month + salary), then, Monster etc. may be a potential source for finding the key staff. Training is not established in this space - There are some consultants who can do some form of training. The main guy you hire should be able to help you train the staff initially.

{ 0 comments... read them below or add one }

Post a Comment