So basically we are talking about a billion dollar industry here and when I say that i can assure you that avenues and opportunities in this industry are immense. This said this is the widely disrupted industry that you will ever see. How many times have you walked down the city and found that some restaurants do not exist anymore. Many argue that customer reviews on the yelp or zomato killed them, many argue that food wasn’t good enough or may be the interior was too gloomy, whatever that was, it is hence very important to know that this industry requires you to be on your toes every single day. If you are not updated about what people in your city like, you’ve lost and that changes everyday. I won’t eat a burger every single day, even though burger might be my favourite food.
Before we proceed ahead without beating around the bush, this piece is absolutely free and you won’t be told to buy $2 How to thing. So keep reading and let me know if this was helpful to you in getting started.
I’m going to touch base few basics that need to be in place for starting a food business.
1) Working Capital or WC
What is working capital and why do we need it?
Working capital is the money that you should have before starting your food business. This money is basically sum of the lease amount for the location + The initial staff salary + operational expenses+licenses and permissions
Please note that you will have to procure the raw materials all by yourself at the beginning and that requires working capital. Working capital is also required for procuring the machinery required for you to operate the business. We will get into details of each of these.
It is very important to decide the location where you want to start the business. This basically determines whether or not you will stay in the long game. Lot of people decide to pick up the areas of city which have low rentals and end of paying high price for low customer entry as well. I’m not telling you to start your business in the most upscale mall of the city or the most busy part of the city, you have to pick up an area that has walk in flow of people and when I say walk in flow, it means a lot when we look at average earning ratio of the city. Okay, I won’t get into complexity of this for now, but let’s keep it simple, the most crowded area of the city doesn’t mean that spending power of people is also good in that crowd. It could just be a crowd, and yet you could be at some place where there are only ten walk ins and all of them have the purchasing power of buying the highest ticket size item on your menu.
Hence it is always recommended that you take a look at the spending power of the city, analyse three different locations before you pick one just on the basis of assumptions that joes restaurant did well in that area. And this isn’t really rocket science, all you have to do is to go to three different places that you’ve chosen in the city and visit the best doing food outlet and the worst doing. It’s the worst doing food place that you should be more interested in. Talk to the owners of that place or the people available there. Analyse why they suck, look at their menu. Is it the cliche mistakes that they are making? Or is it something more than that? Note down everything that “you don’t want to do” from that restaurant.
Now that you’ve sat down with your real estate agent. (Who has to be RERA certified for your safety), discuss your needs and requirements with him/her. There are few things that you should be clear about before you sit across the table with your real estate agent.
1) What is the average rent per square feet in that region? (Do your research)
2) What are the lease terms that normally operate in that region? ( these are different for all regions)
3) What are the commissions and hidden charges of your real estate agent?
Once you’ve established all these, you need to be clear about the area that you require
This includes the shop criteria
Do you need 100sqft or more?
Do you need the ground floor or the first?
Do you need one side open or three side open?
Once this is covered, the next step is to meet your landlord and discuss the following
•If you’re looking to start food business, you don’t need a dry shop. And when I say dry shop, I mean a shop without water connection. You need to establish what kind of water connection is available in the shop. Is it paid one? Is it water connection that needs further purification? Is it hard water?
• Second important thing you need to ask your landlord is about the sewage system. I’m sure you are aware about the wastes that a restaurant throws out on everyday basis, yes you could use trash outs and all but there is liquid waste that needs to be disposed off. Your chefs are going to wash down lot of water and that needs to go somewhere. Please know where it goes before the local authorities decide to tell you after you are operational.
• Third and most important part is the electricity supply of the shop. Is it a fixed line or a temporary connection. Is there a metre that shows consumption and if bills have been regularly paid upto the point of your takeover. Also important thing to figure out is that that if there are any electricity cuts in that region. This will help you narrow down your thoughts on diesel generator requirement.
Since you’ve eaten up brains of your real estate agent and landlord, if you find everything is in order and as per your requirement, throw in the ball of RENT FREE PERIOD.
What is rent free period?
Rent free period is the time for which you would not pay the rental as this is the tome required by you to get your shop done. This is the time that workers will spend on creating the interiors of your shop and all that.
Rent free period normally is between 15-20 days and if you’re lucky, it could be a month as well. Why should you ask for rent free period?
You should ask for rent free period because that is the protocol, and you cannot pay someone for the time you are making his ship worth something. You are spending an expense on interiors of your shop and after your lease period ends, you will not take down the wallpapers and flooring of that shop. That is an immovable asset that you will have to leave to the landlord after you leave. Rent free period is basically security for that. Most people fail to score on rent free period because of lack of knowledge and experience. Now that you know it, you should not.
Now that rent free period is decided, you are required to sign up an agreement. Please know that your real estate agent (if not RERA certified), has no clue about laws of real estate and he is doing this thing because he knows people in that area and since your middle man doesn’t know real estate laws, get your lease documents checked by a real estate lawyer. (Where to find these..we will discuss that we well)
Always keep a copy of signed agreement with you, and make sure you define the limits of landlord on the property after signing the agreement. You don’t want the landlord to be coming to your property for free food. (That happens too).
Second most important part and the detailed one is about the feel and look of the restaurant you are about to create which brings me to the important heading of discussion
Interiors of restaurant
Now it is very important to decide the theme of the restaurant that you are starting. You cannot have a Chinese restaurant with an Indian theme, that doesn’t make sense. Lot of people ignore what theme can do to sales and regret it later. If you are not aware of the impact that colours have on our brains then you might well need to look and dive deep in to research about it. Bright colours are good for customer retention and joyous environment, people tend to order more in bright theme restaurant, whereas the dark theme ones are about alcohol and people tend to order more of dark theme goes with good music. It’s a task, and if you thought you could just create a restaurant by paying some interior designer a cheque, then you might need to rethink over it. Here is what I recommend with immense experience of getting so many people into food business.
1) Know what you want-
Look for the theme you want. Go to Pinterest, find the related theme. Find the colour combinations around it. And get at least print outs of ten different themes that you pick up.
2) Sitting with the Interior designer
This is an important meeting that decides how your baby restaurant would shape up. The key points to remember before you hand over the cheque to Interior Designer are
1) Time Frame- Whatever theme you and the interior designer agree to work on, its very important that you set a time frame around it. Remember that you will only get around 20 days of rent free period. Your time frame with interior designer has to be within that time frame.
2) Bill of quantity- There are two ways to go about it. If you don’t want to get tricked into paying extra and you value your hard earned money, please ask for bill of quantity. Now what is meant by bill of quantity. Bill of quantity is the list of all the materials required in building up the interior of your restaurant. It includes cement, tiles, and everything.
Once you have the bill of quantity, it is recommended that you get that cross checked with the market price and this way you would not pay extra money to the designer. Or the other way to work around this is to offer a whole contract to the interior designer after making an estimate around bill of quantity. In other words, you are telling him to buy everything from his sources and you’d pay him up. This eliminates your involvement and getting your hands dirty in the market. Most of people, and about 80% go with this approach.
3) Drawings and 3D view
Almost every first meeting with designer ends with the conclusion that you’d meet again with the 3D design that he would prepare as per the theme and size of restaurant. Do not ignore this part. Always have a roadmap that designer will give you before the work starts on shop. This will give you a guide map and also won’t let the designer go astray from the basic
4) Electrical and Plumbing discussion
Most of the times designers take the job and prepare the shop way before the electrical and plumbing job is done in the shop. This gives them extra money as electrician and plumber dig into walls and flooring again. It is always recommended that you get the plumbing and electrical job done first, right after you get the 3D design of restaurant. If you do not know, the design will include the position of lights, switch boards and every pipe that would move in and around restaurant.
There is always someone who can do job in a dollar less than what you pay. This applies very much to everything. I recommend having three meetings and then deciding on the quotation that you should pay to the designer. Also it is important to note that you should be aware of pet square feet price for the interior design. Once that is known, and that is standard in most of the places. If your designer is charging you extra, you should know what you are getting for that extra five rupees. Paying extra five rupees won’t hurt you for one square feet, but imagine an area of 500sqft. Every rupee matters now? Right?
Last and the most important part is the post building services that you get from your interior designer. It’s like buying a software and getting the upgrades every year and major bug fixes, yes it might come for free or you might have to pay for it. I recommend that you discuss that you are associating for long term. This builds trust with the interior designer and yes let’s look at the bigger version, you are not settling at one restaurant, are you?
We have discussed the major parts and now we head to the inventory and Human Resources
What is meant by inventory?
How do I know what I need?
Where do I get all the equipment from?
Wouldn’t it be expensive to buy it all from different sources?
I have included a sample snapshot of how things look like. This is to give you a basic idea of what things you might need. The prices given in the snapshot are high end and should not be taken into account.
Let’s talk about kitchen equipment. You are setting up a restaurant and obviously kitchen is the most important part of it. Have you observed how we keep on piling up things in our homes until we die, and that’s because we move forward with technology. Restaurant however needs the equipment all together, you cannot do without certain equipment as it will affect the quality of food that you serve in the restaurant. I am discussing the equipment part here and it is very mandatory to know what kind of restaurant you are setting up, the needs of equipment change as per that. For example the equipment needed for a tea cafe is completely different that what is needed for a Chinese restaurant. I am summing up the basics (common things) needed in all restaurants.
1) Deep freezers (commercial)
2) Refrigerators (industrial)
3) Mixers /grinders (commercial)
4) ovens (commercial)
5) Other equipment includes basics catering to the industry you are starting your restaurant in. For example if it’s a bakery, you might need baking equipment, coffee machines, chocolate dispensers, and all.
Please note that all these equipments should be taken from one vendor and not individually. The reason for that is to save the time and money. It also guarantees you that your product will be repaired as the vendor knows the repairs and all. With over years of experience we specialise in providing you quote as well as procuring the equipment for you.
Let’s talk about Human Resources now.
Human Resource is the basic in hospitality industry. Depending on the type of restaurant you are starting, Hunan Resources used can vary. For example if you are running a live kitchen model, you don’t need lot of people. You can do without an extra pair of hands by using the self service model of working. The overall Human Resource combination for restaurants works this way
One plus two- One manager and two helpers. One of them can be at cash point.
One plus three
The best thing you can do is to train each guy on the billing software and that way you won’t suffer if the only cashier decides to not come on a rainy day.
If you think you are using an extra chef, you can make that chef as the manager for your cafe and ditch the extra position of manager. You can also hire a guard if you need one. Below is the attached format for the standard salaries of HR in Delhi Mumbai
Please note that these are incremented every year.
The whole staffing thing is something that you need to take care of. You can choose staffing services but majorly none of them would provide people you need. You need to establish certain ground rules for what you need and then go on looking for these people.
I always believe in killing the middle and hence I have never used the middle men for hiring people, it’s bullshit. Technically you want me to pay middle man jack for getting someone to work for me, the whole point of internet is to eliminate the middle.
How do you do it?
Eat dirt. You cannot start a restaurant with a keyboard and a credit card. That doesn’t happen in real world. You have to go out there and meet people and establish what you need. It’s not a game of one month or two months, If you don’t want your staff to run away every single week, eat dirt for a month. Please! For some good clients, I have searched the whole staff and handpicked them, and they are happy folks today!
We come to the last remaining parts of
Launch and Marketting
I am going to take up these steps one by one.
1) Paper cups and other materials
Ever fancy those Starbucks cups that Startbucks sells for 1.5$
Well, you cannot copy the design but paper cups (take away) come in handy. There are around 56 paper cup manufacturers in and around Delhi. All you need to do is to tell them what kind of cups you need. They would need your logo and the design you want on the cup. If you are not done with your logo and design yet, there is nothing to worry, this task of logo and design is not a heavy one and doesn’t take more than a day to be accomplished. There are however some key things that you need to keep in mind.
Always choose the design and logo as per your restaurant.
Don’t choose something that is already existing, you obviously don’t want to get into copyright infringement issues.
The end to end services on logo and design can be provided to you on request.
Consumables like Food, flour, rice, sauces etc.
Like inventory, it is recommended that you pick up these consumables in bulk from a vendor that you trust. Food is major and spending and extra coin on consumables would be great.
Okay, let’s be honest here, there are very few formalities that you need to do for licensing and you can do these online. Instead of paying the middleman for these, I recommend you to just procure these licensee yourself
You need the following licenses for running food restaurants
1) FSSAI or food licence
The cost can be around 5-15k depending on the state where you belong. And if you need to give a top up to the Muncipal inspector, you might need to add another 10k to it
2) Fire licence
Can be procured online. Is not very expensive.
3)child labour certification
This is a small certificate that certifies that you are not carrying out child labour in your restaurant
4) Liquor licence
Liquor licence varies from state to state.
Launch and Marketing
Launch of your restaurant is an important ceremony. It is like a birthday of your baby.
Imagine this. No one in your area knows about the launch and you launch on a Monday evening. Well the chances are that you and your staff will stare at each other for whole evening with an occasional walk in.
In order to make launch a successful one. Here is what I recommend
1) Create buzz!
With the whole infinity stones in your hand by means of that smart phone, it is recommended that your restaurant takes its birth online way before it does in brick and mortar. Your Instagram and facebook page should announce the give away for the launch I recommend using Instagram influencers, and local ones.
2) Choose an occasion
India is land of festivals. Please don’t choose a mundane Monday for a lunch. Choose a day, it could be Holi, Diwali, Christmas. Eid or whatever. People are more likely to accept new things into system in festive mood.
3) Shoot emails
Over the period of your existence on earth, I’m sure you’ve some email contacts. Shoot an email to all of them about your launch
4) Buy one major bill board of your city
I know it’s not the age of bill boards but just buying one at 3000/- per day in Delhi Ona major ITO highway would give you some eyes. You could be in a different city and decide which board to pick up.
5) Distribute pamphlets
68% people still read physical Newspapers and in smaller cities, the percentage might be higher and there is your chance of putting a fancy pamphlet in newspaper about your launch
6) Allign with zomato and the local delivery players.
Zomato offers you services to promote your restaurant on its app. Please spend on ads in these platforms rather than putting money in the middleman’s pocket.
Now that you have followed steps, and reached launch ceremony. I wish you a happy life. Put in the work, the process has just started.
For details on vendors and all please hit me up on twitter at @amaanbali