3 Tips on How to Start a Food Restaurant Smartly

None other than Maslow’s hierarchy of needs points out the vitality of food. It’s one of the basic needs of humans, and thus, we need to satisfy it first to achieve the others, including self-actualization.

It may also suggest that when in doubt on what to open as a business, food is a viable and profitable option. After all, everybody eats! The question is, how do you make such an opportunity truly winnable?

Here are three ideas:

1. Consider a Franchise

Contrary to popular belief, franchise restaurant investments can be more cost-effective in the long run:

  • The business already has tried-and-tested marketing methods and operations processes. The chances of failure significantly decrease.
  • Franchises consider location and demographics, two factors that drive sales.
  • The best franchisors provide tools and training.

Depending on the franchise, the initial capital investment may be around $550,000. This amount pales in comparison to that of McDonald’s, which already costs at least a million dollars. A diner like iHop can be worth up to $2 million.

Some franchises may waive franchising fees and royalties. Others may also extend financing options and incentives. It’s just a matter of selecting the franchise opportunity that best suits your budget, requirements, and goals.

2. Consider Opening a Restaurant in Rural Areas

It’s understandable why many food businesses are located in the cities. These places have some of the highest population densities. While the market is there, competition can also be fierce. Your new restaurant will be up against established brands.

Another thing to note is that although most people living in urban areas earn significantly, the cost of living is also high. It then reduces the buying capacity of consumers.

An alternative to the urban area is rural America. According to the Census Bureau, about 60 million people in the United States live here. That’s one in five Americans. Although their median income is lower than those who reside in the urban jungle, people in rural areas:

  • Are likely to own their homes and are not paying mortgage
  • Have a lower cost of living, including housing costs

The same survey also revealed that fewer children live in poverty in these areas, and communities are often tightly knit. They are the ones who may visit restaurants not only to eat but to bond and celebrate special occasions, as well.

Most of all, rural areas are underserved markets. In many places, residents need to travel for miles or even to a nearby city to enjoy good food or visit a restaurant, such as a diner.

Restaurant owner3. Apply for an SBA Loans

Whether you opt for a franchise or not, you need to have the capital to begin a food restaurant, and it can be worth thousands of dollars. You can rely on your savings or apply for a loan. For the latter, you can consider applying for an SBA loan.

The Small Business Administration (SBA) doesn’t extend debt programs to business owners directly. Instead, it creates programs and works with different lenders, who provide the loans. You can choose various schemes, such as:

  • SBA Express – It offers up to $350,000 loan with an SBA guarantee of 50%. Business owners may already receive the funds they need within 36 hours.
  • Standard 7(a) – Business owners can borrow up to $5 million, while the SBA guarantee is between 75% and 85%, depending on the actual value of the loan.

There’s money in a food restaurant business, but to maximize profits, a business owner also needs to get smart at it.