How to open a restaurant: a step-by-step guide

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1. Step 1: Decide what kind of restaurant you are opening
2. Step 2: Research the market and choose the location
3. Step 3: Write the plan and work out the numbers
4. Step 4: Form the business and register it
5. Step 5: Get your permits and licenses
6. Step 6: Design the kitchen and the dining room
7. Step 7: Build the menu and cost every item
8. Step 8: Set up suppliers
9. Step 9: Hire and train your team
10. Step 10: Set up the register, payments and back office
11. Step 11: Check everything before opening day
12. Step 12: Run the first three months
13. Where Advantage fits

Opening a restaurant takes a long list of decisions, and many depend on each other. The health department may want to see your kitchen plans before you build. Suppliers may want a tax number before they open an account. The menu decides the equipment, and the equipment decides the gas and electrical work. Doing things in the right order saves months and money.

This guide puts the work in order for an independent owner opening one restaurant. If you are opening a bar or a coffee shop, read our guides on how to open a bar and how to open a coffee shop too.

One warning applies to every step. Permits, health rules, liquor licenses, taxes and labor laws are set by your state, county and city, and they differ from place to place. Treat every rule named here as a reminder to ask, not as the law where you are. Have an accountant and an attorney who know your state and city review your plans.

Step 1: Decide what kind of restaurant you are opening

Write down how the restaurant will work before you look at a single space. These choices decide the size of the kitchen, the permits, the staff and the money you need:

• Counter service, table service, or both?
• How many seats, and how much of your sales will come from takeout, delivery and catering?
• What will a guest usually spend? This is your average check, and every forecast starts from it.
• Will you serve beer, wine or spirits? A liquor license can take longer than anything else here.
• Which days and hours will you open, and what cooking will the menu need?

If you are buying a restaurant that is already open, ask the seller for at least 12 months of sales reports from the register, supplier invoices for the same months, the last few health inspection reports, an equipment list, the lease, and every license and permit. Ask each issuing office whether its license transfers to you. A liquor license may need a new application in your name.

Step 2: Research the market and choose the location

The SBA’s guide to market research explains how to size up customers and competitors. The Census Bureau’s free Census Business Builder shows demographic, consumer spending and business data for an area you pick.

Then visit each site at the hours you plan to be open, including a weekend night, and count people and cars yourself. On each visit:

• List nearby restaurants, their prices for dishes like yours, how busy they are, and what none of them offer.
• Check parking, the view of your sign, and where delivery trucks and trash pickup will go.
• Ask the planning office whether a restaurant is allowed at the address. Zoning can restrict or ban some businesses in an area. Ask about parking, outdoor seating, signs, hours and alcohol too.
• Look up the address on the FCC’s National Broadband Map to see which internet providers report service there. Your register and card readers depend on it.

A space that was a restaurant before may already have a hood, a grease trap and the right plumbing. It may also have equipment that no longer meets code. Ask the health and building departments what they will require before you count on reusing anything.

Have an attorney review the lease. Look at the length and renewal options, who pays for the build-out and for repairs to the roof, hood and heating and cooling, and whether the permitted use covers alcohol, music, late hours and outdoor seating. Ask for rent to start after your permits are approved.

Step 3: Write the plan and work out the numbers

Lenders will ask for a business plan, and you need one for yourself. The SBA’s business plan guide explains the parts, and its guide to startup costs helps you list them.

One-time costs include deposits, design, construction, kitchen equipment, the hood and fire suppression, furniture, smallwares, the register, permits, opening inventory, training before opening, and cash for the first months. Monthly costs include rent, payroll, food and drink, utilities, insurance, card fees, software, repairs and loan payments. Get real quotes for every line.

Work out your break-even

Here is the math with made-up numbers, only to show how it works.

Some costs stay the same whatever you sell: rent, insurance, salaries, loan payments. Say those come to $30,000 a month. Other costs rise and fall with sales: food and drink, hourly wages, card fees. Say those take 60 cents of every sales dollar, which leaves 40 cents to pay the fixed costs.

Divide the fixed costs by what each dollar leaves: $30,000 divided by 0.40 is $75,000 a month, or $2,500 a day over 30 days. If the average guest spends $20, the restaurant needs 125 guests a day just to break even. Our break-even calculator does the division for you. If 125 guests a day looks out of reach for the location, find out before you sign the lease.

Money can come from your own savings, bank loans including loans backed by the SBA, equipment financing, and partners or investors with written agreements. Small Business Development Centers and other SBA partners offer free or low-cost counseling on plans and loan applications.

Step 4: Form the business and register it

Do these in order, because later steps ask for numbers from earlier ones:

1. Choose a business structure, such as an LLC or a corporation, with your accountant and attorney.
2. Register the business with your state.
3. Get an Employer Identification Number (EIN) from the IRS. You need it to hire, to bank and to open supplier accounts.
4. Open a business bank account and keep restaurant money apart from personal money.
5. Register for sales and payroll taxes. Tax rules differ by state and city, so ask your state revenue department how it taxes meals, drinks, delivery fees and service charges.
6. Buy business insurance before you take over the space. Laws requiring insurance vary by state. Ask your agent about general liability, property, workers’ compensation and, if you serve alcohol, liquor liability.

Step 5: Get your permits and licenses

The licenses and permits you need depend on what you do and where you do it. The table is a starting point, not a complete list. Call each office, ask what applies at your address and how long it takes, and start the slow ones first.

Permit or registration	Where to ask
Business license	City or county licensing office
Zoning, building permits, certificate of occupancy	City or county planning and building departments
Plan review and food service permit	Local or state health department
Fire inspection, hood suppression, occupancy limit	Local fire marshal
Sign and outdoor seating permits	City or county
Grease trap or interceptor	Local sewer authority
Liquor license	State alcohol control board, often with a local approval step

The health department

Oversight of restaurants is typically handled at the state and local level. Regulators use the FDA Food Code as a model for their own rules, but they adopt different editions and make their own changes. Ask your health department which code it uses and get a copy.

Ask too whether it reviews plans before you build. The FDA’s plan review guide explains why: problems with sinks, surfaces, storage and equipment are cheaper to fix on paper than after installation. Do not order equipment until the plans are approved.

The Food Code also calls for at least one manager with authority over food preparation to be a certified food protection manager. Ask which exams your health department accepts, and whether other staff need food handler training.

Alcohol and music

If you plan to serve alcohol, start on the license early. Our guide to opening a bar lists the questions to ask. Every business that sells alcohol must also register with the Alcohol and Tobacco Tax and Trade Bureau (TTB) before it starts selling.

Under federal law, copyright owners control the public performance of their music, so playing music for guests can need licenses. Ask an attorney which apply to you.

Step 6: Design the kitchen and the dining room

Hire a designer or architect who has done restaurants before. Plan the kitchen around the path food takes: the back door, storage, prep, the line, the pass, the dining room, then dirty dishes back to the dish area. Keep raw foods away from ready-to-eat foods, and put handwashing sinks where your code requires them.

Settle these early, because they are expensive to change later: the hood, fire suppression and makeup air; gas and electrical capacity for every piece of equipment; refrigeration sized to your deliveries; and the dish area your health department requires. Store cleaning chemicals away from food. OSHA’s hazard communication rules call for labels, safety data sheets and training for hazardous chemicals at work.

Restaurants are public accommodations under the ADA. New construction and alterations must be accessible, and barriers in existing buildings must be removed when that is readily achievable. Ask your architect to check the entrance, restrooms and routes between tables, and ask your city about its own accessibility rules.

Step 7: Build the menu and cost every item

Start with a short menu you can cook well every time. Every item needs a written recipe with exact amounts, and a cost built from what you actually pay. With made-up numbers, a burger plate whose ingredients cost $3.35 and that sells for $13 has a food cost of about 26% of the price. Our markup and margin calculator shows the margin on any price.

Our food cost guide shows how to cost recipes, and our menu design guide shows how to price and lay out the menu. A few rules touch the menu itself:

• Allergens. The FDA lists nine major food allergens: milk, eggs, fish, crustacean shellfish, tree nuts, peanuts, wheat, soybeans and sesame. The 2022 Food Code added written notice to guests about major allergens in unpackaged food. Ask your health department what your menu must say.
• Raw or undercooked food. The Food Code calls for a consumer advisory when you serve animal foods raw or undercooked, such as rare burgers or runny eggs. Ask how your health department wants it worded.
• Calories. The FDA’s menu labeling rules apply to chains with 20 or more locations. If you plan to grow, read them early, and ask whether your state or city has its own rules.

Step 8: Set up suppliers

Plan on a few kinds of suppliers: a broadline distributor for most food, paper goods and cleaning supplies; specialty suppliers for produce, meat, seafood or bread; and beverage distributors. Ask your state alcohol board how you may buy alcohol.

Open accounts as soon as you have your tax registrations. Ask each supplier about minimum orders, delivery days, order cutoff times, payment terms for a new business, credits for short or damaged deliveries, and electronic invoices. To tell a market move from a supplier’s markup, check USDA’s Market News, which publishes wholesale price reports for produce, meat, dairy and more.

Train everyone who signs for deliveries to check each one against the invoice before the driver leaves, write any shortage or damage on the invoice, put cold and frozen food away first, and follow each credit until it arrives. Our article on catching vendor invoice mistakes has a routine.

Step 9: Hire and train your team

List every position for every shift, and add cover for days off and call-outs. To budget pay, the Bureau of Labor Statistics publishes wage estimates by job for each state and for metro areas.

For every hire, complete Form I-9 to verify identity and permission to work, collect a Form W-4 for withholding, and report the new hire to your state, which federal law requires within 20 days. Display the workplace posters that apply to you.

Tipped staff

Federal law lets an employer pay tipped staff a lower cash wage and count part of their tips toward the minimum wage, under strict rules. Employers, managers and supervisors may not keep employees’ tips, and tip pools have rules about who can share. Many states set their own tipped wages, and some require the full state minimum wage before tips. When state and federal law differ, you must follow the one that protects the employee more.

Staff must report tips of $20 or more in a month to you, and you withhold and pay taxes on them, as the IRS explains. Larger restaurants where tipping is customary may also have to file Form 8027 each year, and certain food and beverage businesses can claim a credit for part of the employer’s Social Security and Medicare taxes on tips. Ask your accountant which apply to you.

Young workers, safety and training

Federal law limits the hours and tasks of restaurant workers under 18. For example, 14- and 15-year-olds may not bake or use power-driven slicers. Your state may be stricter. OSHA’s restaurant safety guide for young workers covers burns, cuts, slips and lifting.

Write your training down so every new hire learns the same way: food safety and handwashing, allergens, the register, cash handling and the shift close, alcohol service and ID checks, and what to do in an emergency.

Step 10: Set up the register, payments and back office

The register, or POS (point of sale), takes orders, sends them to the kitchen and takes payments. The back office is where you change the menu, close shifts and read reports. Choose them together, using our restaurant technology guide. At a minimum, confirm that:

• The menu, with sizes, add-ons and combos, is built once and used everywhere you take orders.
• Orders reach the kitchen on a screen or printer the moment they are sent.
• Checks can be split, tabs kept open, and tips added on the card reader or the receipt.
• Each shift closes with the cash counted, tips recorded and the over or short shown.
• You can export your sales and your menu at any time.

Get card processing pricing, the contract length and any early termination fee in writing. Follow the FTC’s cybersecurity guide for small business: strong passwords, updates and backups. Give every employee their own login.

Step 11: Check everything before opening day

Do not open until each line is done:

• Health, fire and building inspections passed, and permits posted where required.
• Refrigeration holding temperature for several days.
• Every recipe cooked and plated by the cooks who will make it, with a photo of the finished plate.
• The register tested end to end: order, kitchen ticket, payment, tip, refund, void and shift close.
• Staff trained and scheduled for the first two weeks, and opening inventory counted.
• A contact list for refrigeration repair, the hood company, the plumber, the card processor and register support.

Hold one or two practice services for friends and family. They show you where orders get stuck while the stakes are low.

Step 12: Run the first three months

The routines you start in the first weeks tend to become the way the restaurant runs.

• Every shift: count the drawer, record tips and the over or short, look over voids and comps, and keep a waste log in the kitchen.
• Every week: count inventory, work out food cost, compare labor with sales using our labor cost calculator, and read sales by item and by hour.
• Every month: go over the profit and loss statement with your accountant, file sales tax on time, and compare the month with your plan.

Change one thing at a time and watch the numbers. Our restaurant revenue guide shows which numbers to watch and how to move them.

Where Advantage fits

Advantage POS for restaurants takes dine-in, takeout and delivery orders from a menu built once with modifiers and combos, keeps tabs open, splits checks and sends each order to the kitchen screen or printer. The kitchen display shows orders by station, with a timer that changes color as each order waits. Recipes and food cost prices each recipe from your vendor invoices, shows the cost and margin of every menu item, and alerts you when an ingredient’s cost moves.