Financial Tips for Aspiring Restaurant OwnersOn May 14, 2021 by Aston Fowler
Aspiring restaurant owners dream of entering the foodservice industry and reaping the benefits of creating an establishment that fits their vision for food service. Restaurant owners also enjoy the financial benefits if they launch a successful restaurant.
Restaurants are expensive to launch. In addition to the salaries of chefs and wait staff, restaurateurs must secure a suitable venue, expensive restaurant equipment, supplies, and insurance. Aspiring restaurateurs can use the financial tips outlined here to secure the capital needed to launch their restaurant and generate the revenue required to stay in business for years to come.
Prepare a comprehensive business plan.
A business plan contains crucial information needed to launch your restaurant. Preparing a business plan involves extensive research. You should familiarize yourself with competitors and identify ways to distinguish your restaurant from the competition. Developing a unique restaurant will help you market your business and attract clientele. It’s also essential to identify your ideal customers to ensure you make sound business decisions that will appeal to them. If you plan to focus on fine dining, you won’t want to open in a low-income neighborhood.
A detailed business plan identifies what equipment and resources you need to launch, how much money you need to operate for your first year of business, and how you’ll earn income. A comprehensive revenue generation plan can enable you to secure financing for your restaurant, which is why you must spend time completing each part of your business plan.
Research your suppliers.
Google “restaurant equipment Seattle” (if you are operating in the Seattle area) to find restaurant equipment suppliers who serve your area. In addition to pots, pans, and glassware, your restaurant will need food prep tables and food storage equipment, including refrigerators and freezers. You must know how much the restaurant equipment you need for your commercial kitchen costs to ensure you create an accurate budget for your business plan. You may find a company that sells restaurant supplies and offers direct financing, allowing you to secure the equipment you need and make monthly payments to lease or own that equipment. You’ll also need to investigate the cost of supplies for your dining room, including tables, chairs, dishes, and disposables, such as napkins.
Explore all of your financing options.
Most people are familiar with traditional lenders, such as banks and credit unions. You may be able to obtain a traditional loan with a clear business plan. The potential lenders will review your credit score and credit history to determine if you qualify. If approved, you’ll make monthly payments to repay the loan over the life of the loan term. Another option, however, is to turn to a private lender.
Private money lenders offer private money loans financed by private lenders. Private money loans are short-term loans. Borrowers are required to have collateral to secure the loan. These loans usually have higher interest rates than traditional loans, which is why people don’t use private lending companies for long-term loans.
Aspiring restaurateurs may also apply for small business loans. Microloans, 7(a) loans, and 504 loans are available to small businesses. The U.S. Small Business Administration (SBA) helps new and established business owners apply for financing to launch, maintain, and expand businesses. Some loan programs offer up to $50,000 in financing, while others offer up to $5 million in funds. 504 loans are long-term loans with a fixed interest rate. 7(a) loans include long-term and short-term loans. Like 504 loans, 7(a) loans can provide up to $5 million in financing. The type of loan you apply for will depend on how much financing you need and how you intend to use the money. For example, you can use a 7(a) loan to refinance existing debt while using a 504 loan to purchase new equipment or facilities.
Restaurateurs can also benefit from applying for a line of credit. A line of credit may not be enough to launch your restaurant, but it’s an excellent backup plan for emergency funding. You only make payments on a line of credit when you use funds. Otherwise, the funds are available for you to use when needed. A line of credit is a low-cost way of securing fast funds to cover unexpected expenses or short-term costs.
Have a comprehensive marketing plan.
When you’re borrowing large sums of money to launch a business, you must generate revenue immediately. A detailed marketing plan is a critical part of any comprehensive business plan. Hire marketing experts who use a combination of traditional marketing methods, such as billboards and contemporary marketing strategies, such as search engine optimization (SEO) marketing, to promote your restaurant and attract clientele.
Aspiring restaurateurs can prepare to launch their business by developing a robust and comprehensive business plan, researching their potential suppliers, and investigating their loan options. An effective marketing plan will help you attract clients and generate revenue, enabling you to cover your operating expenses and repay loans.