Start up your restaurant

With the food industry on a boom, starting and running a restaurant is increasingly appearing to be on the bucket-list of astoundingly large number of people. In reality, running a restaurant is far from the romantic, glamorous, cool pursuit it’s frequently made out to be. It is exciting, but a lot of hard work and strategy goes into making it a success. Authors of ‘Start Up Your Restaurant’ Jayanth Narayanan (restaurateur and blogger) and Priya Bala (food writer) share what they learnt from their combined experience.

The book published by HarperCollins India, in addition to handholding the reader through the various stages of setting up a restaurant, also has insights from successful restaurateurs, in the form of success mantras.

Finding the ideal space location for your restaurant is one of the biggest challenges you will face. Even for big companies and brands, finding the right real-estate remains a challenge. This challenge gets compounded when you are on a budget.

Your concept will also determine your choice of location to a great extent. If you are planning a casual restaurant serving affordable biryani, you would want it to be within easy reach of several offices. A takeaway only restaurant will do best on a busy thoroughfare. If a home-delivery service is your plan, you would want to be located amidst a large number of apartment blocks. A fine-dining restaurant needs a ritzy address.

Once you have you homed in on the area, it’s very important to find a ground-floor space, preferably on a street or stretch that already has some successful restaurant businesses, offering products at a price point similar to what you plan to offer.

A 500 sq.ft ground floor space on the right street is a far better choice than a 1,500 sq. ft first-floor space on the same street or even a 2,500 sq. ft ground space on a street off the main road –-- even if it is no more than 200–-300 metres from the main road. Essentially, if your restaurant business is not visible to enough people, you will not be able to generate the traffic and footfalls to justify the numbers.

Most first-time restaurateurs will not appreciate the reasoning behind this very firm guideline. But consider this: have you ever seen a McDonald’'s in a location different from the one described above? Even in a mall, McDonald’'s is present right at the front, on the ground floor, where it gets maximum visibility.

If a brand such as McDonald’'s is so particular about the location, shouldn’t you be, too?
When they first enter into the business, many people tend to compromise on the location, being unable to afford the rents or because they want a larger space at the same rent.

We’re going to go ahead and state this quite emphatically here: if you do not get a location at a rental that meets your exact requirements,, it may not be worth investing in and you should reconsider getting into this business.

This begs the question – as a restaurant business, how much rental can you really afford to pay? For most restaurant businesses to be profitable and sustainable, the rental will need to be less than 15% of the estimated revenues.

So if you are planning a budget restaurant that can generate revenues of about Rs 15,000 per day, the maximum rental you can afford is Rs. 67,500. Do remember that you need to pay service tax of 10.3% on the rental amount. So, realistically, you can afford a place that costs approximately Rs 60,000 a month.

Similarly, if you are planning a fine-dining restaurant that can generate Rs 30,000–-40,000 in revenues every day, you can afford a rental of about Rs. 1.5 lakhs per month. To generate these revenues, you would probably need an 80-cover restaurant, which means you are looking at a 3,500–4000 sq. ft space in a prime location. You will appreciate that it’s not easy to find this at a rental of Rs1.5 lakhs.

What this really means is that in most cities in India, starting and running a viable restaurant business is not easy, given the obnoxious real-estate prices. Still, if you have the means, you will be ready for the next step in setting up your restaurant.