How to Open a Restaurant with little money – To start a restaurant with little or no money,seems like a dream for most people.There are millions of food connoisseurs who can only wish of becoming restaurant owners but due to the large financial outlay that is needed,it never materializes.
What if i told you there were a few shortcuts,a few tweaks and some pointers that i could put down in the following paragraphs,that would give all of you a glimmer of hope and some ideas how to cost cut.
By following some of the points below,i hope it could turn your dreams of opening a restaurant into reality.
How to Open a Restaurant with little money
1.Buy used – The biggest capital cost that you will face when opening a new restaurant is buying of the kitchen equipment and furniture.If you want to do this without spending too much then go in for used equipment.
Look for classifieds advertisements of restaurants that have just closed shop.Believe me there will be plenty – not to scare you,but if you keep costs low,there is a good chance you wont up shutting down in the first 2 years.
Kitchen equipment,cutlery,crockery,cooking vessels,tables,chairs, side tables,chaffing dishes,burners,hot plates,ovens,deep freezers,coolers,fridges,grills,grinders,slicers,deep fat fryers.The list will be long – try to source in bulk.
Not only will the seller be happy to clear out everything at once – you will profit greatly.Give the seller a low lump sum offer to clear out the entire lot and negotiate upwards till you can settle on a reasonable offer.
2.Use Free Marketing - – Marketing is a HUGE cost and one that cannot be ignored.It s the most important tool you will need to kick start your new eating house venture.Only marketing can bring the initial cash flowing in and social media marketing is more effective than in today’s digital age.
You dont need to spend a dime on paper flyers and advertisements.If you create a free account on instagram and add followers using hashtags,you can easily reach out to thousands of potential customers.All you need to do is click pictures of your food presentations and share them often.
Other social media like facebook groups and also creating a website to post the menus,events,pictures and other promotional ideas can be done in under $25.
3.Skeletal staff – Talking about recurring expenses every month,to being with -start with a skeletal staff and then hire more when the sales go up.Rope in your entire family and close friends to help out during the first few months.Ironically,you will also do some great sales figures in the starting months.
Hiring staff can be expensive so keep this under a tight budget when you newly open the restaurant.
4.Keep overheads low – Other overheads besides staff salaries are electricity and rent.These are the other two huge expenses that can be detrimental if not kept in check.Power and utility bills need to be kept down by using energy saving appliances if possible.Heating and cooling equipment has to be used at a minimum.
5.Lease dont buy – Since it is a new business,it does not make sense to put down big money into a property.The restaurant business is a risky venture and should be approached cautiously.Taking a good amount to time in selecting a good property to lease for a year rather than take a loan to buy an existing restaurant is always a better idea.
For any reason the restaurant fails,it would be impossible to keep paying the monthly payments towards the property.If you lease,and it fails,that is all you will lose – a few months of the lease rental amount.Later on,if even after two years the restaurant still pulls in good sales,then you can consider buying a property.
7.Keep food cost low – When you start your new restaurant,one of the recurring expenses every single day would be that of food raw materials.These could include groceries,dairy,meats, vegetables,fruits and other condiments.
The trick is to buy low and sell “higher” and not high.No one wants to pay extra at a new restaurant.Start selling cheaper than the competition,but to do that you need to buy cheap as well.
Food costs all over the world at restaurants average at 25%-35%.The lower the food costs,the higher your profit-simple.While starting a new restaurant,we tend to over stock and this leads to blocking of funds that can be used for other expenses.
8.Low cost decor – With the urge to “show off” a little,new restaurateurs tend to go over the top while adding new decor to their restaurant.This can be a killer and eat up into the budget even before you begin operations.The interior decorator or contractor will show you designs which might tempt you.
Rather than starting a fancy cafe,go the minimalist approach and entice the diners with good wholesome food,Believe me,patrons remember the food and will not remember what you hung on the walls.
9.Location – The volumes of walk in customers you receive will be directly proportional to whether you are located on a busy street or in an alley off the main road.Remember that the rental price that you pay also will rise if its situated closer to downtown or in a business hub,So what do you do?
You have to understand one thing – the restaurant business is very volatile.Even the best chef and most delicious food served will not guarantee the future of an eatery.IF you rent on the main busy road you will pay double the rent with more walk ins – but the risk is still there.
IF you rent in an alley,the risk of losing money is lesser because you paid half the price in rent.Both ways,you need to do strong marketing to get targeted diners coming in.In the alley the visibility is less,so it will take a while longer to get noticed,but if you spread the word through social media fast enough you can catch up.
ALLEY vs MAIN ROAD
- While paying a higher rent to be on the main road,all your overheads will also increase so you will need to offset that by charging more per dish.This ultimately will put a burden on your customers,whereas in an alley you can sell cheaper since you will pay a small rent.
- A secret cozy little eatery that serves tasty food by laid back warm hearted people is more enticing than a busy commercialized swanky eatery on the main road.
How to Open a Restaurant with NO MONEY
1.Approach Credit Unions – If you don’t have enough liquid cash to start your new restaurant,you could approach your neighborhood credit union for a soft loan.Unlike banks,credit unions are not traditionally profit driven and would extend a line of credit to you for a business loan at a low rate of interest.
This initial loan can be used as a buffer to make payments as well as equipment purchases.
2.Use Gofund me – One of the most popular crowdfunding apps today.It can be used to receive funds and donations for a variety of campaigns – both non profit as well as a small business.
All you need to do is create a page on the website/app and tell your story and why you need the funds.Adding pictures and other media to further your cause will bring the dollars rolling in.
I suggest using this method as a secondary way of getting in some extra funds.This is because for a commercial venture the “pity” factor will be limited, so don’t depend entirely on this service.
3.Get an investor – If you have plans for a large restaurant,nightclub or lounge then getting some extra funds pooled in from investors is the only way out.Investors are people who have more money than they need,and they don’t know where to put it.
Try to limit the investment to less than 50%,because there is always a possibility that the investor might try and take control of the business later.Also if the investor puts in too much money,they might try and interfere with operations.
Another negative aspect of bringing in an investor is that – if after a while the business is not doing well,they might ask to pull out the investment in an attempt to exit the venture.This will leave you in a lurch.
On the positive side,you will get quick,easy access to cash without any paperwork.
4.Borrow from relatives – As a last resort,you can crowdsource from family and friends if all other methods fail.This will get you only a limited amount of funds to start your venture and can be used as a secondary source of funds.
An advantage of this type of sourcing is that most people who will fund you will not expect the money back,and even if they do,you can repay it like a soft loan-at your own pace and in small increments.
how to start a restaurant with no money and bad credit
1.Use your home – IF you are in need of funds for your new restaurant but have a “not so good” credit score,it will hard to get a business loan.However you could approach a lending institution as home owner and use the equity in that property as collateral – it works like refinance or a second-mortgage.
You could get a Home Equity Line of credit or a Home equity fixed rate loan.the Home equity fixed rate loan will be long and cumbersome to pay back,but the HELOC is more manageable.In the HELOC you can use how much you need and pay it as and when you can.
The advantage of a HELOC is it is based on the value of your home,which in most cases would be above $150,000.This gives you access to a large pool of funds,if need be.
2.Get a personal unsecured loan – There are various financial institutions that provide unsecured small business loans without any collateral.Companies like Crestmont capital,Partners Capital group,Lending Tree etc give short term and regular microloans that you can repay in terms as early as 30 days upto a few years.
These loans can be pre qualify you online itself and approve you within 24 hours.hey also give you access to the funds as fast as possible,some even within 24 hours from the time of pre approval.
The drawback of these loans are the interest rates are extremely high and can go upto 35% per annum.
How to start a restaurant with no experience
First you didn’t have the money,now you dont have the experience.Assuming you got over the hurdle of “no money” and arranged some funds to start your own restaurant,here’s what you need to do if you know zit about the restaurant and hospitality industry.
1.Start small – Since this is your first venture opening a restaurant,its an even bigger risk (considering well funded restaurants started by celebrity chefs also sometimes shut shop in 2 years).
You need to rent a small space and keep the menu limited.Specialize only in one type of cuisine and keep those dishes simple but tasty.Don’t innovate,dont invent,dont elaborate too much on anything – the interior or the food.
Think small for two reasons – firstly the monetary loss you could face if you spend too much and the sales do not match up to those expenses and secondly – this is your first time trying your hada at something new,let it grow organically at its own pace,dont push too much.
2.Hire small – The center of your operation will be the kitchen.You cannot skimp on your chef as he/she would be the hole and soul of your restaurant.Since yours will be a small restaurant,you can hire another 2 kitchen helpers and 2 servers.Thats all.
You will man the cash register and also double up as a manager cum host who will welcome the guests in and let them know you are the owner.Your staff bill is the biggest overhead.Keep it low,but also hire a capable and sincere chef.
3.Mentor – In any business,you need someone to teach you the little things – the trade secrets and guide you from day one.Without a mentor,its almost impossible to start something from scratch.you need prodding,inspiration and most importantly – guidance.
Since this is something new for you,your mentor will be your talisman.Chose someone close to you – maybe a family friend or even better a relative.Someone who has the time and passion to share their knowledge and expertise with you.
4.Learn – there is no better way of gaining experience than learning.It is the only way.Learning and failing is the only way to go up in this business.Bad reviews on Yelp,complaints from diners and initial mishaps are all part of the restaurant life.
Learning from these mistakes is the best personal experience you can ever get.If you are tough enough after that,you will see your restaurant sales pick up.