Business development · 14 September 2017

Things to remember when setting up a restaurant business

Interior of a contemporary coffee shophttp://195.154.178.81/DATA/i_collage/pu/shoots/799603.jpg
In the past three years, startup restaurant numbers have grown in almost every UK city

In spite of growing challenges to Britain’s hospitality entrepreneurs, the country’s micro restaurant community has shown considerable resilience. We’ve taken a look at how its resolve has been tested, before seeking the advice of some experienced founders to find out what is important to know when setting up a restaurant.

As the pound decreased in value after the Brexit vote in June 2016, restaurant owners serving food and wine from Europe were some of the first to struggle against rising import costs. According to one report, the increased financial burden of sourcing ingredients has given 5,570 UK restaurants at least a 30 per cent chance of folding within the next three years.

Meanwhile, business rates have contributed to a worrying environment for restaurant founders. The Association for Licensed Multiple Retailers (ALMR), which represents high street chains such as Pizza Express and Wagamama, wrote to the chancellor to appeal for special relief ahead of an alleged £336.5m extra to business rates bills.

To meet the rise, commercial rent agency CVS calculated that London’s restaurants needed to serve an extra 6.7m meals a year.

Nonetheless, ambitious entrepreneurs continue to demonstrate an appetite for hospitality, and British consumers are also hungry to support their local independent food scenes. In the last three years, startup restaurant numbers have grown in almost every UK city, with Leeds, Newcastle and Cardiff leading the way.

We spoke to two successful restaurateurs to find out the secrets to setting up a restaurant business that can succeed.

Identifying your market

According to Theodore Kyriakou, who founded and scaled The Real Greek and Livebait restaurant chains and now runs The Greek Larder in Kings’ Cross, targeting an overly niche concept is likely to restrict the success of a new restaurant business.

“The smaller the market size is for a new startup restaurant the less possibilities you have to grow in the sector,” he explained. “The more niche you are makes it more difficult to enjoy a happier profit margin.”

Rather than looking for a niche market from the outset, Kyriakou advised new founders to put a greater focus on understanding your target market, whether its creative freelancers, dog walkers or pregnant mothers, and combining it with your own unique service.

[Infographic] Everything you need to know about opening a pop-up restaurant

Premises

In terms of choosing the perfect restaurant location, bustling pedestrian areas do not always equate with footfall. Local parking is less important in urban areas, and even a lack of public visibility can be countered by word of mouth and effective marketing.

Martin Williams, founder and CEO of the M Restaurants chain, kept his two London venues away from the city’s busiest streets. He explained to us the thinking behind the approach.

“I think our success has come from having two restaurants which aren’t in very obvious locations but are surrounded by the right neighbours,” Williams said. “Whether that’s businesses or residential, people who are like minded and will appreciate our offering.”

Williams is gearing up for the opening of a new bar and grill in Twickenham, making the most of the area’s station-side redevelopment. He also revealed plans to offer residents living above his restaurant a delivery service through the VIVA app.

He added: “Prime high street location isn’t necessarily the right place, it’s almost sometimes better to be a hidden secret that people have to discover.”

In cities and urban areas in particular, competition has driven up unit rental costs, forcing entrepreneurs to stretch the definition of a traditional premises. Before Tyneside’s Cook House made its home in two converted shipping containers, Peckham’s The Crust Conductor had started serving pizza from the inside of a double-decker bus.

Regardless of budget, Kyriakou urged founders to put finding the right premises – creative or traditional – as a top priority. “If money is not an issue, then only location, location, location.”

How to get your startup restaurant listed on Google Maps

Hiring

Both of our experts agreed that a thought-out recruitment strategy was essential for early-stage restaurant businesses.

“There are several categories of personnel in the hospitality industry: managers, chefs, waiting, hosts, baristas, bartenders, and so on,” Kyriakou said. “Each has a specific job description to contribute to the operation of the restaurant.”

At a startup venture where roles will overlap, suitable team members should demonstrate their adaptability to different tasks.

“For that reason, early recruitment is very essential. Be sure to hire personnel who have a natural willingness to be flexible in their duties,” Kyriakou added.

Williams emphasised the importance in finding supportive recruits who bring “equal measures of passion and ambition and drive to the business that you do”, allowing you to run the rest of the business effectively.

For a more in-depth look at your legal requirements as a restaurateur, read our food expert’s guide

Delivery service apps

Technology has also boosted the micro restaurant sector. Delivery services apps, such as  Deliveroo and UberEats, have brought an additional revenue stream to owners struggling with footfall, with consumers looking for higher end takeaway options.

Recent research from the NPD Group was able to highlight how the growing value of delivery services. In 2016, visits to UK restaurants increased by just one per cent – in the meantime, the food delivery sector picked up some 599m visits. 

Expert takeaways

We asked both of our expert restaurant founders which one piece of advice they wish they had received when starting out.

Kyriakou: “A new startup restaurant needs a very positive cash flow after opening to manage any eventuality. At the beginning, you need to put all your energy into the operation – not the bank balance.”

Williams: “You can’t underestimate how much cash you need – everything costs more than you think. If you have enough cash flow in your business it will save you many sleepless nights. It’s the biggest challenge for any restaurateur is cash flow.”

Take a look back at some of our favourite micro restaurant businesses:

  1. Poptata is bringing a cheesy chip revolution to Boxpark Shoreditch
  2. The British street food vendors taking a unique approach – with inspiring success
  3. Big J’s Kitchen: The food entrepreneur who went from young offender to supermarket success

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ABOUT THE EXPERT

Simon Caldwell is a reporter for Business Advice. He has a BA in politics and communications from the University of Liverpool, and has previously worked as a content editor in local government and the ecommerce industry.

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