A complete guide to opening a restaurant, covering location scouting, permits, kitchen build-out, menu development, staff hiring, and grand opening preparation.
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Concept and Business Planning
Define your restaurant concept, cuisine, and service style
Your concept should be explainable in one sentence: 'A fast-casual Mediterranean restaurant targeting downtown lunch crowds.' The concept drives every other decision — menu, decor, pricing, and location. Visit 10-15 restaurants in your target category for research.
Define your target customer and their average spend
Decide on service style: fast-casual, casual, or fine dining
Write a restaurant business plan with financial projections
Restaurant startup costs range from $175,000 for a small casual spot to $750,000+ for a full-service restaurant. Include a 12-month cash flow projection and plan for 6 months of operating capital. The average restaurant takes 12-24 months to become profitable.
Secure financing for your startup costs
SBA 7(a) loans are the most common restaurant financing, with terms up to 10 years. Most lenders require 20-30% owner equity. Alternative options include equipment financing (equipment serves as collateral), and investor partnerships (typically 20-49% equity for $100K-$500K).
Form your business entity and register with the state
Most restaurants form as an LLC ($100-$800) or S-corp. Get your EIN immediately — you need it for your lease, bank account, liquor license application, and every other piece of paperwork. File your DBA if operating under a trade name.
Location and Lease
Scout 5-10 potential locations based on your concept
Count foot and vehicle traffic during your target service hours. A lunch-focused restaurant needs weekday foot traffic; a dinner spot needs evening accessibility and parking. Rent should not exceed 6-10% of your projected annual revenue.
Evaluate the existing infrastructure of each space
Converting a former restaurant saves $50,000-$150,000 versus building from scratch. Check for grease traps, ventilation hoods, gas lines, electrical capacity (200+ amp service minimum), and plumbing rough-ins. A space without these will cost $80,000-$200,000+ to build out.
Negotiate your lease with restaurant-specific terms
Negotiate a personal guarantee cap, a build-out period with free rent (2-4 months is common), and an option to renew. Restaurant leases typically run 5-10 years. Have a commercial real estate attorney review before signing — this costs $500-$1,500 and can save tens of thousands.
Verify zoning allows restaurant use at the location
Check your local zoning ordinance for the property's zone classification. Some zones restrict restaurant hours, outdoor seating, or alcohol service. A zoning variance can take 3-6 months to obtain and is not guaranteed. Verify before signing a lease.
Permits, Licenses, and Build-Out
Apply for your food service establishment permit
This is your primary operating permit from the health department. Applications require floor plans, equipment specifications, and a menu. Processing takes 2-8 weeks. Schedule your health inspection early — inspectors are often booked 3-4 weeks out.
Apply for a liquor license if serving alcohol
Liquor license costs vary wildly: $300 in some states to $300,000+ in others where licenses are limited. The application process takes 2-6 months. In many areas, you can start with a beer and wine license ($500-$5,000) while waiting for full liquor approval.
Get building permits for your kitchen and dining room build-out
Building permits cost $500-$5,000 depending on scope. You need separate permits for plumbing, electrical, mechanical (HVAC), and general construction. Hire a licensed contractor experienced with restaurant build-outs — they know the code requirements.
Submit floor plans and equipment layout for permit approval
Schedule inspections at each build-out milestone
Install and pass inspection on fire suppression systems
Commercial kitchen hoods require automatic fire suppression systems, fire extinguishers, and emergency exits. A hood suppression system costs $3,000-$7,000 installed. The fire marshal must inspect before you can receive your certificate of occupancy.
Complete the kitchen build-out with commercial equipment
Budget $75,000-$150,000 for a full kitchen: cooking line, refrigeration, dishwashing, prep tables, and storage. Used equipment saves 40-60% but check warranties carefully. Install a grease trap rated for your kitchen volume — undersized traps cause plumbing backups.
Menu and Supply Chain
Develop your full menu with food cost analysis
Target overall food costs of 28-35% of menu prices. Calculate the cost of every ingredient in every dish. Your most popular item will account for 15-20% of sales, so price it carefully. Test every recipe at least 5 times for consistency before launch.
Calculate food cost percentage for each menu item
Test and standardize all recipes with exact measurements
Establish accounts with food distributors
Set up accounts with at least 2 broadline distributors (for general supplies) and 1-2 specialty suppliers (for specific proteins, produce, or beverages). Most distributors require net-7 or net-14 payment terms for new restaurants.
Design and print your menus
Menu layout affects what customers order. Place your highest-margin items in the top-right corner and use boxes or borders to draw attention to them. Descriptions that include sensory words ('crispy,' 'slow-roasted,' 'house-made') increase orders by 27%.
Set up your point-of-sale system with the full menu
A restaurant POS system costs $50-$200 per month plus hardware ($500-$2,000 per terminal). Program every menu item with modifiers (no onions, extra cheese) and categories. Test every item and modifier combination before training staff.
Staffing and Training
Hire your key positions first: chef, manager, and lead server
Start hiring 6-8 weeks before opening. A head chef costs $45,000-$75,000 per year depending on your market. Post on industry-specific job boards and ask your network for referrals. Industry referrals produce hires that stay 2x longer than job board candidates.
Hire remaining front-of-house and back-of-house staff
For a 60-seat restaurant, plan for 2-3 cooks, 4-6 servers, 1-2 hosts, 1-2 dishwashers, and 1-2 bussers. Hire 10-15% more than you think you need — restaurant turnover averages 75% per year, and some hires will not work out.
Conduct 2 weeks of training before opening
Train front-of-house staff on every menu item (ingredients, allergens, preparation method, and pairing suggestions). Run 2-3 mock services with friends and family acting as guests. Kitchen staff should practice every dish until they can make it within time standards.
Create a training manual for front-of-house and back-of-house
Schedule 2-3 friends-and-family practice dinner services
Set up payroll and comply with labor law requirements
Restaurant payroll must account for tip credits, overtime, and tip pooling rules, which vary by state. A payroll service costs $50-$150 per month for a 15-person staff. Post all required federal and state labor law posters in the break area.
Grand Opening
Run a soft opening for 1-2 weeks before the grand opening
Start with a limited menu and reduced hours to work out operational issues. Invite friends, family, and local business owners. Offer a 20% discount and ask for honest feedback. Most restaurants discover 10-20 operational issues during soft opening that they fix before going public.
Set up your online presence and listings
Claim your profiles on mapping platforms, review sites, and reservation systems at least 2 weeks before opening. Upload your menu, hours, and 15-20 professional photos. Set up a simple website with your menu, hours, location, and reservation link.
Invite local media and food bloggers to a pre-opening event
Host a complimentary tasting event 3-5 days before your public opening. Invite local food writers, bloggers with 5,000+ followers, and neighborhood leaders. Provide press kits with your story, menu, and high-quality photos.
Execute your grand opening day plan
Staff at 150% of normal levels for your first 3 days. Have a manager focused solely on guest experience, not operations. Offer a small complimentary item (amuse-bouche or dessert) to create a memorable first impression. Collect email addresses for future marketing.
Frequently Asked Questions
How much does it cost to open a restaurant?
The median cost to open a restaurant in the U.S. is $275,000-$425,000, but the range spans from $175,000 for a small counter-service spot to $750,000+ for a full-service restaurant with a liquor license. The biggest expenses are the build-out ($100-$350 per square foot), kitchen equipment ($50,000-$150,000), initial inventory ($5,000-$15,000), and pre-opening labor and training ($10,000-$25,000). A liquor license alone can cost $3,000-$400,000 depending on the state and license type.
How long does it take to open a restaurant from scratch?
Plan for 12-18 months from concept to grand opening. Lease negotiation takes 1-3 months, permits and licensing 2-4 months, build-out and renovation 3-6 months, and hiring and training 4-8 weeks. Liquor license applications can add 2-6 months in some states. The build-out phase almost always takes longer than expected — budget an extra 4-6 weeks as contingency. Starting the permit process before signing your lease can save 2-3 months.
What is the failure rate for new restaurants?
About 60% of restaurants close within the first year and 80% within five years, according to industry data. The leading causes are undercapitalization (running out of cash before reaching profitability, which typically takes 6-18 months), poor location choice, and lack of restaurant management experience. Restaurants that open with at least 6 months of operating reserves and operators with prior industry experience have significantly better survival rates.
What food cost percentage should a restaurant target?
The industry standard is 28-35% of menu price for food cost. Fast-casual restaurants target 25-30%, while fine dining typically runs 30-40% due to premium ingredients. Calculate food cost for every menu item: (cost of ingredients / menu price) x 100. If a dish costs $4 to make and sells for $14, the food cost is 28.6%. Labor should run 25-35% of revenue, and combined food + labor (prime cost) should stay under 60-65% of total revenue.
Do I need a liquor license to serve alcohol in my restaurant?
Yes, in every state. Liquor license costs and processes vary enormously: some states issue new licenses for $300-$5,000, while others have a fixed number of licenses that must be purchased from existing holders at market rates ($50,000-$400,000 in states like New Jersey, California, and Florida). A beer-and-wine-only license is typically 50-75% cheaper and faster to obtain than a full liquor license. The application process takes 2-6 months, so apply early in your build-out timeline.