August 30, 2019 | Last Updated on: August 3, 2023
The concept of the modern restaurant has been around since 1782 when Boulanger opened Grande Taverne de Londres, and since then many a chef have invested in bringing their own creations to the public stage. In the USA alone, there are approximately 660,755 restaurants, and the revenue they pull in equates to $766 billion and counting. Though restaurants do get hit the hardest during a recession, the industry as a whole has steadily been growing year after year. It is cutthroat. It has a very narrow profit margin. Yet, for those who love food and want to open up their own establishment, there is no better goal in the world. There are a few things that will set you back, like how to find a restaurant loan, but this should never deter you. With the right strategy and plan, you can acquire the funding and launch on the world stage in no time.
Knowing how much you need is one of the best ways to start. You can easily acquire a restaurant loan, but how much do you apply for? How much will it cost to build a restaurant or even to convert an old one? There are so many costs that you need to account for, and be able to pay for, in the first few months of opening:
These costs add up, which is why it’s no wonder that there is such a slim profit margin when it comes to running a restaurant. With the right management, you can absolutely do it. You could even make a lot of money, but only when your restaurant works perfectly, your staff is efficient, and you bring a lot of people into that door.
How to apply for a small business loan is relatively simple, but going in without considering your options can put you at a disadvantage. Backing from the Small Business Administration can help you get the money you need to open up a five star restaurant, but it isn’t that straightforward or fast to achieve. Also, the SBA will require you to show experience and a solid track record of successful restaurant management success. In any case, you will first need to create a great business plan, then go through your funding options.
Every lender will want to know you have done your research and have a reasonable strategy to make a profit. The best place to start with this is to commit to conducting market research. Know who your demographic is, how much they make (so you can price your services or products accordingly), what jargon they use, and what their values are. This way you can effectively market and position yourself where they are with regard to their dining preferences.
Be objective about how much running your restaurant will cost. There is the cost of the lease, cost of utilities, cost of overhead, cost of food, cost of cleaning, cost of damages, cost of marketing, and so much more. By outlining your full budget, you can explain how you intend to keep it as low as possible and how many customers you would need to cover those costs.
Another great way to get a loan for your new restaurant is to create the full menu, and if need be, even make the food for your potential lender. A venture capitalist or angel investor, in particular, might be interested in this, as a restaurant’s main pull will be their food. If it’s good, they are more likely to buy into your business idea.
With all this information you will then want to create your business plan. Your business plan should include all of your market research and financial analysis. In addition, your business plan should include competitive analysis and a marketing plan. Be realistic in your assumptions. Professional investors have likely seen many business plans and investment pitches. They are likely to be highly familiar with costs and revenue potential. Do not exaggerate your financial assumptions, it will work against you.
It can be difficult to get business loans as a first-time business owner. Having a great business plan that covers all your bases will help, but it isn’t the only way you can achieve funding.
Working with the Small Business Administration means that a portion of your loan would be covered. They are guaranteeing your business. Lenders like banks will then be far more willing to give you the full amount you need to open your restaurant. As a bonus, it’s one of the best ways to achieve the most competitive interest rates for business loans. The downside, however, is that it can take a long time for your application to go through, and there is no guarantee you will get your backing at the end of it.
With the right credit score and business acumen, you can obtain your acquisition loans right from a bank or other lender. Banks will have more hoops to jump through, whereas third-party lenders typically offer their money with a high interest rate. Weigh the pros and cons before you commit, and always shop around for lenders before you choose.
Venture capitalists and angel investors are another way you can acquire the money you need, but it is rare for them to provide money for a restaurant. Choose this option only if you intend to give a groundbreaking experience, like an entirely artistic sensory exploration. The costs are much higher, but due to the publicity and the chance of obtaining celebrity-status guests, these investors might be interested.
You can crowdfund through internet platforms or through your friends and family. For small restaurant ideas like opening up a food truck, this can be an excellent way to go about it. You will be able to acquire the money without interest in most cases and can open up your business without debt and interest loans bringing you down.
Running a restaurant is difficult, which is why you want to get it right from the start. This means going through the process of getting all the necessary information so you won’t be surprised at any stage, and it means shopping around for your loan options. Combine all this with a great launch, great service, and you should succeed.
