How to Start a Home-Based Restaurant

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Do you love to cook? Do family and friends often say to you, "You should open a restaurant!" A home-based food service business might be right for you. First, familiarize yourself with the important things you need to know in order to get started.

Check Local Zoning Laws

Zoning laws are made at the local level. They specify allowable and prohibited use of land across the jurisdiction. Before going ahead with your plans for a home-based restaurant, check with your city or county government to determine whether your property is zoned for restaurant use.

Be sure to check the requirements for a home-based restaurant or food business. Many states require that you have food prep and storage areas as well as a restroom that is separate from areas for personal use.

Define Your Target Market and Fill a Niche

Do you want to create a friendly, comfortable place where customers can enjoy a homemade breakfast or lunch? Perhaps you want to offer a gourmet dining experience or maybe just coffee and desserts. Narrow your focus so you can provide customers with the best possible food and service.

Look at other restaurant offerings in your area and think about how you can provide a unique experience. Consider ethnic specialties, vegetarian and vegan fare, indulgent desserts or farm-to-table meals. Some small restaurants have been successful featuring simple classics with a twist, such as various varieties of mac and cheese or, believe it or not, peanut butter and jelly sandwiches.

Choose a Name

How many times have you seen a Chinese take-out restaurant named "Wok 'n' Roll?" You don't have to be overly clever, but you do want to choose a name that tells customers right away what they can expect. Simple names such as "Elm Street Bistro" and "Madeline's Bakery" make your offerings readily identifiable.

Start Small

It's easier to build on your success and expand your business than it is to recover when you find yourself in financial trouble because you went too big too fast. Focus on a few delicious offerings and excellent service to attract customers. Satisfied patrons will tell others about a great experience. Word of mouth is the best way to build a successful restaurant business.

Selling Food From Home

Starting small may mean that you test the waters with a cottage food business. States' cottage food laws were enacted to create income-earning opportunities for residents by eliminating some of the red tape that's usually involved in commercial food production. The laws also protect consumers, as they set safe food-handling standards and guidelines for product labelling.

The cottage food laws apply if you're selling items that don't require refrigeration, such as coffee, muffins, cookies and jams, and you're vending from your home or venues such as farmers' markets and roadside stands. Selling plate lunches from home may fit into the cottage food category as long as your wares don't require refrigeration (such as a peanut butter and jelly sandwich with a side of chips).

A local health department typically inspects a cottage food enterprise only when there's a complaint. Selling to third parties, such as restaurants and grocery stores, requires an inspection. You may also be required to invest in additional equipment, such as refrigerators, sinks and storage facilities, all at your own expense.

Push Carts, Food Trucks and Catering Services

Selling from a push cart or food truck is another way to start small. It's easier to begin building a following when you bring food to where the customers are rather than relying on them to come to you. Once they get hooked on your delicious food, they'll be more willing to travel to your home-based restaurant.

Another way to build awareness of your culinary talents is through a home-based meal prep or catering service. Again, find your niche. Is it healthy, upscale dinners for working professionals or party fare for receptions and special events?

Create a Business Plan

Being a great cook or baker isn't enough. If you're going to run a restaurant, you need to be a businessperson as well. Writing a business plan will help you organize the business side of your food enterprise. If you're looking for financial assistance from investors, banks or other lenders, you'll need to provide your business plan to show how you've thought through your plan for a home-based restaurant.

Look online for a business plan template. There are many from which to choose that are specifically made for small restaurant businesses. You can get help from a local office of the Small Business Administration, which can also answer questions about licensing, financing and other important aspects of business ownership.

Components of a Business Plan

A business plan should include the following sections:

  • Executive summary: As the name suggests, this section summarizes your plan in a sentence or two. It contains your mission statement, which briefly explains why you exist and what makes you unique. You'll summarize your concept and provide a quick overview of potential costs and returns.

  • Company description: Start this section with the name of your restaurant and location of your restaurant. Provide information about your experience and what qualifies you to open a restaurant. You'll need to identify the legal standing of your business (e.g., sole proprietorship, partnership or other entity).

  • Market analysis: There are three parts to this section: description of your target market, research on the competition and your marketing strategy. You need to explain how you will attract customers and why they'd choose your restaurant over other offerings in the area.

  • Menu: The menu is the most important part of your restaurant. It doesn't have to be the final version, but you should show your logo, menu items and prices.

  • Employees: If you'll have employees, you need to provide information on their qualifications and experience.

  • Restaurant design: What will your restaurant look like? Make sketches, create a mood board or find photos of similarly themed restaurants that you plan to emulate. Remember that restaurant design is more than aesthetics for the customers. You need to think about equipment, food-prep areas and storage.

  • Location: Be sure you can explain that your home is zoned appropriately for a restaurant. Describe the area and why it is perfect for the type of restaurant you plan to open. Detail square footage of the restaurant space and typical demographics of the surrounding neighborhood.

  • Market overview: In this section, you'll demonstrate your understanding of current economic conditions and the restaurant market in your area. Describe your plan to deal with less-than-favorable economic conditions, should they occur. Discuss how you'll set yourself apart from the competition.

  • Marketing: How will customers find out about your restaurant? How will you market before and after opening? Describe your strategies to build your home-based restaurant business.

  • Financial analysis: Since this is the most important part of your business plan, it pays to hire an accountant to help you make realistic estimates of startup and operations costs. To calculate these costs, you must know the number of seats in the restaurant, the average check per table and how many customers you'll serve in an average day. Use a free food-cost calculator, which you can find online, to figure out the cost and profit margin for everything you serve.

Register Your Business

Visit the website of the IRS to obtain a tax ID number, also called an employer identification number. The application process is free, and you should obtain your unique number immediately if you apply online. You also need to register your business with your local government authority.

Food Safety

Nothing will shut down your restaurant quicker than reports that you're responsible for a foodborne illness. Preventing problems by using best practices is far less expensive in the long run than dealing with the fallout after customers have gotten sick.

Many adult education programs, community colleges and culinary schools offer courses in safe food handling. ServSafe's certification program was developed by food service professionals and is nationally recognized. You can earn certificates with successful completion of one or more ServSafe courses, available in classrooms and online.

Startup Costs

Startup costs will vary depending on factors such as types of foods and beverages prepared, number of customers served and health department requirements for equipment. If you've done your research and developed a detailed financial plan, it will be easier to figure your startup costs. It's much better to overestimate than underestimate the money you need to launch your home-based restaurant.

Some of the most common pieces of restaurant equipment include:

  • Commercial oven: $1,000 and up

  • Commercial range: $1,000 and up

  • Vent hood: $1,000 and up

  • Food warmer: $650 and up

  • Dishwasher: $700 and up

  • Sinks: $275 and up

  • Refrigerator: $1,000 and up

  • Walk-in/freezer: $1,800 and up

  • Small appliances (mixers, food processors): prices vary, but figure at least $100 to $200 each)

  • Coffeemaker: $190 and up

  • Cappuccino/espresso machine: $1,200 and up

  • Chef's knives (set): $60 and up

  • A variety of pots and pans: prices vary

  • Tables and chairs or other seating for patrons: depends on style and materials

Don't forget supplies. In addition to food and beverage items, you may need:

  • Dishes, glassware and cutlery. Decide how you'll package any leftovers for customers and whether your menu will feature to-go items. You may want both washable and disposable service items.

  • Food storage containers, foil and plastic wrap

  • Paper goods such as napkins and paper towels

  • Cleaning supplies, including mops, brooms, wet vac, soaps, cleansers and disinfectants

Purchasing Used Equipment

You may be able to save a considerable amount of money by purchasing equipment and furniture in good used condition. In addition to checking out local classified ads, look online. There are a number of reputable companies that sell both new and used restaurant equipment.

Figure in the Cost of Contractors

If you need to install large appliances, reconfigure a space or make changes to the plumbing, you'll need to hire licensed contractors for these jobs. You may also want to use the services of a professional interior designer, a website designer, a print shop for menus and advertising and a uniform service if you and any employees want specialized apparel.

Creating a Public Restroom

State and local laws govern when a restroom is required and who can use it. In New York City, for example, a restroom is required when there are at least 19 designated customer seats. Small businesses can allow customers and employees to use the same facilities, but larger establishments require separate restrooms for customers. In most states, it is perfectly legal for a business owner to restrict the use of a restroom to customers only.

Getting a Liquor License

If you want to serve alcohol to the public or allow your restaurant patrons to bring their own, you must have a liquor license. Insurance companies will not cover claims related to alcohol if a business does not have a valid liquor license, so don't ignore this important step if you're planning on serving adult beverages.

Regulations vary nationwide, so check with your state's alcoholic beverage control agency (every state has one). Many municipalities also have their own rules in addition to state laws, so visit city or county offices to find out what's required for your home-based restaurant.

References

About the Author

Denise Dayton, M.S., M.Ed. is a freelance writer specializing in careers, education and technology. In addition to writing for corporate clients, she has published articles in Library Journal and The Searcher.