How to Start a Restaurant in 12 Steps

Dreaming of your own restaurant? You're in good company. According to the National Restaurant Association, eating and drinking places contribute $1.4 trillion to the U.S. economy annually—that's roughly 6% of our total GDP.

But here's the reality check: Learning how to start a restaurant isn't just about amazing recipes and a great location. Restaurant ownership is brutal.

Approximately 60% of restaurants fail within the first year of operation, and 80% fail within the first five years. The culprits? Poor planning, underestimating costs, and team management chaos that burns out owners before they even hit their stride.

Don't let those numbers scare you off. The remaining 20% of restaurants find long-term success, and they're not just lucky, they're prepared.

They know that building a restaurant isn't just about the food (though that matters). It's about creating systems that work, building a team that shows up, and managing costs without losing your mind.

This guide breaks down exactly how to start a restaurant in 12 actionable steps. No fluff, no guesswork, just the practical roadmap you need to turn your restaurant dream into a profitable reality. 

Whether this is your first venture into entrepreneurship or you're expanding from another type of small business, the fundamentals remain the same.

Ready to get cooking?

TL;DR: How to Start a Restaurant in 12 Steps

Need the quick version? Here's your roadmap to restaurant success:

Planning & Money

1. Calculate startup costs and secure funding

2. Create a solid business plan

3. Choose your restaurant concept

Legal & Setup

4. Handle permits, licenses, and business registration

5. Find your perfect location

6. Design your space and order equipment

Team & Operations

7. Build and manage your team from day one

8. Set up scheduling and time tracking systems 

9. Create your menu and pricing strategy

Launch & Growth 

10. Develop your marketing plan 

11. Execute a successful soft opening 

12. Monitor operations and optimize for profit

The key? Don't skip the team management piece. You'll need reliable scheduling, clear communication, and labor cost control from day one. Many restaurant owners spend nights rebuilding schedules and chasing down no-shows—but it doesn't have to be that way.

Ready to dive deeper? Let's break down each step.

Restaurant Startup Costs and Funding

Let's talk money. The question "how much does it cost to open a restaurant?" doesn't have a simple answer. We'll give you the real numbers.

Restaurant Startup Costs by Type

Small restaurants typically need $175,000 to $375,000 to get off the ground. 

Full-service restaurants? You're looking at $500,000 to $2.5 million. 

Fast-casual and counter-service models fall somewhere in between at $300,000 to $1.9 million.

The biggest chunk goes to your location—whether you're buying or leasing. Kitchen equipment runs another $100,000 to $300,000. Don't forget furniture, which can hit $40,000 alone.

Hidden Costs That Crush Dreams

Most new owners miss these budget killers. First month's utilities before you're even open. Staff training costs before your first sale. Marketing to actually get customers through the door. Permits and legal fees that vary wildly by location.

Funding Your Restaurant

You've got options. Traditional bank loans work if you have solid credit and a bulletproof business plan. SBA loans offer better terms but stricter requirements. Angel investors want a piece of your business but bring expertise. Personal savings are common but risky—don't bet your house on your restaurant.

Equipment financing can help with kitchen costs. Some suppliers offer payment plans. Just don't stretch yourself so thin that one slow month kills your cash flow.

The Profit Reality Check

Here's what nobody tells you: Restaurant profit margins typically run 3-5% for full-service restaurants. Fast-casual does slightly better at 6-9%. That means if you bring in $500,000 in sales, you might clear $15,000-$25,000 in profit. Before taxes.

Those margins are razor-thin, which is why smart restaurant owners obsess over controlling costs from day one. You can't afford to guess at scheduling, waste food, or let labor costs spiral. Every dollar matters when your margins are this tight.

The bottom line? Start lean, track everything, and build systems that scale. Your bank account will thank you.

Create Your Restaurant Business Plan

Your restaurant business plan isn't just a document—it's your roadmap to success. Skip this step, and you're flying blind in an industry where 80% of restaurants fail within the first five years. Need help getting started? Check out our complete guide to writing a restaurant business plan.

Essential Components Every Restaurant Business Plan Needs

Start with an executive summary that hooks readers in the first paragraph. Nearly 80% of venture capitalists read the summary first, and 62% won't continue if it doesn't grab their attention. Include your restaurant concept, mission statement, target market, and projected ROI.

Your company description dives deeper into what makes you different. Define your restaurant type—fast-casual, fine dining, food truck. Explain your unique selling proposition. What gap are you filling in the market?

Don't forget your menu and pricing strategy. This isn't just about listing dishes. Explain how your pricing reflects your concept and target profit margins.

Financial Projections Based On Real Data

Your financials section makes or breaks investor interest. Include detailed startup costs, operating expenses, and revenue projections for at least three years.

Be realistic about the timeline to profitability. Show monthly cash flow projections for your first year. This proves you understand the seasonal nature of restaurant business.

Include break-even analysis showing exactly how many customers you need daily to cover costs. If you need 150 customers spending $25 each to break even, say so.

Market Analysis Framework

Research your competition ruthlessly. Visit them, analyze their menus, pricing, and service style. Identify what they're doing wrong. That's your opportunity.

Create specific customer personas with demographics, dining habits, and spending patterns.

Study your location's foot traffic patterns, local events, and seasonal fluctuations. Your business plan should show you understand exactly who you're serving and when they'll show up.

Plan Your Dream Team

Last but not least, don't forget to plan for team management from day one. Even your dream team needs the right management tools to work at their best. 

With Homebase, you can share schedules with team-mates in a few clicks, set up auto-scheduling to build your schedule for you, and shift swap without the hassle. As Theresa Fouquette, Owner of Bliss Small Batch Creamery, puts it: 

"Schedule communication with the employees works flawlessly with Homebase and that's a big plus. We publish the schedule and the employee gets the information on their phone straight away."

Ready to give easy employee scheduling a go? Try Homebase for free right now.

Choose Your Restaurant Concept

Your restaurant concept is everything. It's not just what you serve—it's the entire experience you create. Get this wrong, and even the best food won't save you.

Restaurant Type Comparison

Small restaurants and fast-casual are your sweet spot if you're starting lean:

• Fast-casual restaurants emphasize high-quality, fresh ingredients with counter service
• Lower startup costs and fewer staff needed
• 69% of consumers want casual atmosphere with high-quality food
• Better profit margins than full-service restaurants

Full-service casual dining offers more but costs more:

• Table service and broader menus
• Higher investment and more complex operations
• Casual dining restaurants occupy over 30% of the US market share—popular but competitive

Fine dining demands the most:

• Highest investment and expertise required
• Exceptional staff, premium ingredients, intimate setting
• Better profit margins possible, but steep barrier to entry

Market Gap Analysis That Matters

Don't just pick what you love. Find what your area needs.

• Visit every restaurant within five miles
• What cuisines are missing? What service styles are underrepresented?
• Look for gaps in price points too

Target Audience Identification

Define your customer beyond "people who eat."

• Busy professionals needing quick lunches?
• Families wanting affordable dinners?
• Young adults seeking Instagram-worthy brunch?
• Create specific personas: "Sarah, 28, marketing manager, orders lunch 3x/week, budget $12-15, values healthy options and speed."

Handle Legal Requirements and Permits

The paperwork might not be glamorous, but getting your legal foundation right is non-negotiable. Skip these requirements to start a restaurant, and you'll face fines, shutdowns, or worse.

Essential Permits and Licenses

Wondering what you need to open a restaurant legally? Here are the essential permits:

Business license: Every restaurant needs one to operate legally. This legitimizes your business as a legal entity and varies by location.

Food service license: Issued by your city or county health department to prove you meet food safety regulations.

• Requires health department inspection before approval
• Ongoing inspections required to maintain license
• Costs typically range from $100-1,000

Food handler's permits: Required for all employees who prepare or serve food.

• Must be obtained within 30 days of hiring
• Covers chefs, cooks, servers, baristas, and bartenders
• Most states cap costs at $15 per employee

Seller's permit: Allows you to collect sales tax from customers. Usually no application fee, but you may need a security deposit.

Business Structure Basics

LLC (recommended for most restaurants):

• Strong liability protection shields personal assets from business debts
• Flexible tax options
• Easier access to business financing
• Optimal choice for most restaurant startups

Sole proprietorship:

• Works for food trucks or pop-up restaurants
• Simplest to set up but offers no liability protection
• Your personal assets are at risk for business debts

Corporation:

• Best for larger operations seeking investors
• More complex setup and ongoing compliance requirements

State Requirement Variations

Requirements vary significantly by location. Some states require additional registrations, while others have different fee structures and timelines.

Pro tip: Start your permit applications early—some can take months to process. Your dream menu won't matter if you can't legally serve it.

Find your location and design your space

Your location can make or break your restaurant before you even serve your first dish. Get this wrong, and even the best food won't save you.

Location Selection Criteria

Visibility matters most. Customers need to see your restaurant from the street. If they can't spot you easily while walking or driving by, you're already fighting an uphill battle.

Demographics drive decisions. Don't just look at foot traffic—understand who's walking by. Restaurant location matters. A pizza slice shop targeting young adults should be near nightlife spots, while family restaurants need suburban areas with parking.

Accessibility is everything. Your customers need easy parking and simple entry. It’s why location is so important. If it's difficult to access your parking lot or customers have to cross multiple lanes of traffic, they'll choose somewhere easier.

Competition analysis counts. Don't open next to identical concepts, but being near complementary businesses can help. Restaurant clusters often work because they create dining destinations.

Small Restaurant Space Optimization

Follow the 60/40 rule. Allocate 60% of your space for dining and 40% for kitchen, prep, and storage. This balance maximizes revenue without sacrificing operations.

Smart seating choices: Tables for two can be pushed together for larger groups but work perfectly for couples. Restaurant booths make customers spend an average of $2 more per visit.

Design Basics

Keep pathways clear. Maintain 24-30 inches between tables so servers can move efficiently and customers feel comfortable.

Plan for kitchen efficiency. You need roughly 5 square feet of kitchen space per dining seat. Cramped kitchens create accidents and slow service.

Your space should work as hard as you do.

Build Your Team and Manage Operations

Your team makes or breaks your restaurant. You can have the perfect location and amazing food, but if your staff doesn't show up or work well together, you're toast.

Hiring Essentials

Start with key roles first:

• Reliable kitchen manager or head chef
• Experienced servers
• At least one person for opening and closing procedures
• Don't hire everyone at once—build your core team, then add as you grow

Look for attitude over experience. Someone with a great work ethic can learn your systems. Someone with a bad attitude will poison your entire team, no matter how skilled.

Plan for turnover from day one. Always be recruiting, even when fully staffed.

Restaurant Scheduling & Team Management

Here's where most restaurant owners lose their minds—and their weekends. You'll spend hours building schedules, only to have someone call out Sunday morning. Learning how to run a restaurant effectively starts with solid team management.

Smart restaurant owners use Homebase for restaurants from day one:

Homebase scheduling features

• Create schedules in minutes using templates
• Publish schedules with instant notifications
• Let team request time off and trade shifts
• No more playing middleman

"As a wedding venue, there are a lot of roles to coordinate in order to execute a seamless event and Homebase helps us verify that the right staff is showing up at the right time each and every day," explains Abbey Brown, Managing Director of The Brownstone Wedding & Event Venue.

Daily Operations Basics

Create opening and closing checklists. Nothing gets forgotten when everything's written down. Your staff should know exactly what needs to happen before the first customer arrives and after the last one leaves.

Track your numbers daily:

• Sales
• Food costs
• Labor hours
• Customer counts

You need to know where you stand every single day, not just at the end of the month.

Labor Cost Control

Track labor costs daily, not weekly. When you see costs creeping up, adjust schedules before it kills your profits.

Homebase employee scheduling benefits:

• Early clock-in prevention tools
• Overtime alerts
• Prevents extra minutes from adding up to budget-busting surprises

Set clear boundaries with auto clock-out features and break reminders. Digital time tracking keeps your team compliant, and your labor costs controlled.

"Before Homebase, we were printing out timesheets and manually calculating hours. To keep up with the times, we have switched to Homebase, and it has made our lives so much more efficient!" says Ashley Ortiz, Owner of Antique Taco.

Your team is your restaurant's backbone. Build it right from day one with the right restaurant scheduling tools.

Launch and Market Your Restaurant

The moment of truth is coming. You've got your location, your team, and your permits. Now you need to create a menu people will crave and get customers through your doors.

Menu Development

Start simple and focused. Don't try to be everything to everyone on day one. Pick a manageable number of items you can execute perfectly rather than an overwhelming menu you'll struggle with.

Cost every single dish. Know your food costs before you open. Test your pricing to ensure profitability while staying competitive in your market.

Test everything multiple times. Your family saying "it's good" isn't enough. Cook each dish during your busiest prep times to make sure your kitchen can handle it under pressure.

Marketing Strategy

Start building buzz before you open. Social media costs nothing but time. Post behind-the-scenes content, introduce your team, share your story. People want to support businesses they feel connected to.

Target your immediate neighborhood first. The customers in your local area will make or break your first year. Focus on local community groups, neighborhood apps, and nearby businesses.

Email marketing still works. Collect emails from day one and send regular updates about specials, events, and menu additions. Personal connection beats flashy ads.

Grand Opening Tactics

Soft opening comes first. Run limited hours with friends, family, and neighbors before your official launch. Work out the kinks when the stakes are lower.

Partner with local businesses. Cross-promote with nearby shops, offer catering to local offices, and sponsor community events. Your success helps the whole neighborhood.

Focus on consistency over perfection. Better to serve fewer customers well than disappoint a crowd. Your reputation builds one meal at a time.

Word of mouth remains your most powerful marketing tool. Deliver great food and service consistently, and customers will do your marketing for you. For more detailed strategies, check out our complete guide to restaurant marketing.

Your Restaurant Opening Checklist

Ready to turn your restaurant dream into reality? Here's your actionable roadmap to opening day.

Your 12-Step Restaurant Opening Checklist

Planning phase (6-12 months before opening):

1. Create your restaurant business plan

2. Secure funding and calculate startup costs

3. Choose your restaurant concept and target market

4. Find your location and negotiate lease terms

Legal and setup phase (3-6 months before opening): 

5. Obtain all required permits and licenses 

6. Set up your business structure (LLC recommended) 

7. Design your space and order equipment 

8. Build your team and implement management systems

Pre-launch phase (1-3 months before opening): 

9. Develop and test your menu thoroughly 

10. Launch your marketing strategy and build local buzz 

11. Train your staff and run practice services 

12. Execute soft opening, then grand opening

Timeline Considerations

Start early. Permit approvals can take months, not weeks. Begin your applications as soon as you sign your lease.

Build in buffer time. Equipment delays, construction issues, and permit holdups are common. Plan for setbacks.

Don't rush your team. Great staff training takes time. Your team's performance on day one sets the tone for everything that follows.

The right systems make all the difference. Homebase helps restaurant owners manage scheduling, time tracking, and team communication from day one—so you can focus on creating amazing food and experiences instead of drowning in administrative chaos.

Ready to make your team unstoppable? Try Homebase for free and start your restaurant journey right now.

Frequently Asked Questions About How to Start a Restaurant

How much money do I need to start a restaurant?

Small restaurants typically need $175,000 to $375,000 to start. Your major expenses include location costs, kitchen equipment, permits, initial inventory, and working capital for the first few months. 

Create a detailed budget covering all startup expenses plus several months of operating costs as a safety buffer. For more funding options, explore our guide to small business loans.

Can I start a restaurant with no experience?

Yes, but it's challenging. Many successful restaurant owners started without industry experience but invested heavily in learning the business. 

Consider working in restaurants first, taking culinary or business courses, or partnering with experienced professionals. Focus on building strong systems for operations, hiring reliable staff, and learning from other restaurant owners in your area.

What permits do I need to open a restaurant?

Every restaurant needs a business license, food service license, and seller's permit at minimum. Your employees need food handler's permits. 

Additional requirements vary by location and may include liquor licenses, signage permits, and health department approvals. Contact your local health department and business licensing office for specific requirements.

How long does it take to open a restaurant?

Plan for up to a year before opening day. The timeline depends on permit approval speed, construction complexity, and equipment availability. Starting the permit process early while handling other preparations can help compress your timeline.