It takes a special kind of madness to want to open a restaurant. It’s hard work, absurd hours, and there’s a pretty strong chance it’s all going to end in catastrophic failure.

How strong a chance you ask? Pretty strong.

Restaurants fail. Not all of them, of course. But a lot of them. And quickly too. According to the National Restaurant Association, 30% of new restaurants fail in the first year, and of those that survive, another 30% close in the next 2 years.

That should make for some sobering reading. Imagine for a second, that I offered you the chance to spend your life savings on your dream house. Now imagine that there’s a fifty-fifty chance of it burning to the ground within 2 years. Would you still buy it? Of course not! You’d run a mile.

That being said, life without risks would clearly suck, so here’s to the risk-takers among you! The restaurant business can provide a community-focused, family-oriented, empowering lifestyle that few other businesses offer. Plus, it’s inherently social – it’s your actual job to make people happy. That’s something worth considering.

So, if you think you’ve got enough crazy in you and you want to defy the odds, there are some key questions you’ll need to ask yourself before you get going.

What Is Going to Make You Stand Out?

In today’s market place, there is less and less space for the generic eatery. Customers are looking for a unique experience. They’re looking for authenticity, locally sourced foods, and artisanal quality. You have to find your own niche and figure out how you can do it better than anyone else in your area – and if you have multi-location or franchising dreams, you need to be doubly sure you’re building something singular.

The key here is to remember that your vision has to marry the market’s needs. The kind of restaurant you want must merge with the restaurant your local neighborhood needs in order to be successful. You may dream of opening a pizza place but if there are three established pizzerias in your neighborhood, you may need to reconsider your angle.

The first few months of business can be very hard as a new restaurant. There’s no reason to make them even more so by blindly going up against entrenched competition. Everything in business flows from your target customer, so take a moment and write down what they look like. Are they Baby-Boomers? Metrosexual Gen Y’ers? Mommy Bloggers? Once you know who you’re targeting, you can effectively assess the local competition for their attention.

What Kind of Restaurant Do You Want?

There are three main kinds of restaurants in today’s market – Quick Service Restaurant, Mid-Scale and Upscale.

A great way of standing out can be to defy the expectations of each section of the marketplace. For example, there’s a blooming quick-service industry across North America that’s focused on quality, local foods rather than the traditional ‘fast-food’ expectations. This is a great space to occupy as an independent entrepreneur. Equally, up-scale success can come from taking traditionally, ‘low-brow’ foods and turning them into gourmet treats, e.g. champagne-infused hot-dogs. Consider where you’ll fit very carefully, as your space in the market will define the business model that’s most appropriate.

How Will You Get Access to Capital?

The main reason new restaurants fail is a lack of working capital. If you’re looking to open a new food joint, do yourself a favor – take whatever operating float you had set aside for the first few months and triple it. The costs of kitchen equipment, regulations and permits, staff, raw goods, and good commercial space make opening a restaurant one of the most cash-intensive business types out there.

Raising capital for restaurants is unfortunately not easy. The high-failure rate has made lenders hesitant to support aspiring restaurateurs. If the bank won’t help, there are two key ways forward:

1) Get Networking

There are two main ways to bring capital into your business – debt and equity. Most first time business owners will struggle to secure lines of credit at acceptable and manageable rates (we’ve seen people paying upwards of 22% APR). As such, you’ll want to look into equity financing. This essentially involves offering partners a stake in your business in exchange for a cash investment. Many entrepreneurs will take on this funding from friends and family but there is a better source – industry insiders. You won’t find these guys on Google, or in your local newspaper but there are investors all across the U.S. and Canada with a portfolio of restaurants of all kinds. To find these people you’ll want to register with local bodies, industry associations, sign up for trade shows and generally get yourself out there. Practice your elevator pitch and buy some business cards. Taking on equity financing from someone like this not only gives you working capital, but will often give you the advice and connections you need to succeed.

2) Start, Lean, and Build a Track Record

Lenders, as a group, love numbers. They enjoy accounting and bookkeeping and probably play with abaci when they go home on an evening. So the best thing you can do is start generating real, meaningful sales numbers. You might be thinking that you’d need the restaurant to do this. You’re wrong. Get down to your local farmers market and prove your products will sell. Start a food truck and build a following.

You’d be surprised how many high-end establishments started out life as ‘hole-in-the-wall’ eateries.

Who Should You Hire?

Every member of your staff is going to play an important role within your business. The cooks, servers, bartenders and hosts are going to be representing your restaurant in every possible situation, so hire carefully.

Reliability, punctuality, courteousness, and a positive attitude are the qualities you should look for when building a staff. According to a recent survey we ran on over 1,000 ShopKeep Small Business Owners across the country, these attributes were significantly more important to success at an SMB than previous experience or qualifications.

Repeat customers are the lifeblood of a successful restaurant and this will only be secured if you have courteous, knowledgeable, and skilled staff at your disposal.


Once you answer all of these questions, start putting your business plan together. Don’t get me wrong, you’re still crazy and unfortunately still on the wrong side of the statistics but with an understanding of your customers, the right staff, and enough working capital, you might just defy the odds.

About the Author

Paul Nugent is a small business advocate, and Head of Marketing at ShopKeep point of sale’s UK headquarters. Paul uses his background in the startup space, along with his POS system expertise, to allow small business owners to make informed decisions within their specific budgets.