How to Start a Small Restaurant with No Money [5 Simple Steps]

If you’re at that time of life when you’re looking for new meaning, you might be wondering how to start a small restaurant with no money. 

Perhaps you’ve always wanted to be a small business owner and now that you’re empty-nesting, you have the time to reinvent yourself. Or, maybe you’re part of the great resignation movement and you’re ready to try running your own business for a change.

In any case, these 5 steps below will help guide you on an exciting new restaurant venture!

how to start a small restaurant with no money - dining tables

CONTENTS – In this article, you’ll learn how to start a small restaurant with no money, including

Common Pitfalls of Starting a Restaurant

Opening a restaurant can be an exciting and challenging endeavor. 

It takes careful planning and preparation to ensure the best chances of success, but it’s well worth it when you see your business thrive. 

Going into it, though, you must be aware that the odds are stacked against you. 

According to the National Restaurant Association, more than 60% of restaurants (2 out of 3) fail their first year. Furthermore, an Ohio State study (2005) reports 80% fail in their first five years.

Ugh! 

But the 20% that do make it enjoy growth and success in the long-term. Carefully consider whether you are up for these odds, and if so – read on.

Aside from the financial pitfall, other factors for restaurant failure include:

  • Not enough or poorly trained staff
  • Too-complicated menus
  • No marketing/social media strategy
  • Overlooking licensing, permits, and tax requirements

The best way to overcome these challenges is to know that they exist, and take steps to make sure your small restaurant does not become a statistic.

Here’s how.

How to Start a Small Restaurant: Step-by-Step Guide

To help you get started on the right foot, here is a step-by-step guide that will walk you through all of the things that need to happen before opening day arrives.

1. Choose a Restaurant Concept and Brand

The first step in starting a restaurant is to choose a concept and brand. This will determine the:

  • Style of your restaurant
  • Type of food you serve
  • Atmosphere

Your restaurant concept is limited only by your imagination, but popular ideas include Italian, Mexican, Indian, American, and Asian cuisine. You can also choose a specific cuisine such as barbecue or Japanese sushi once you decide on a concept. 

Take some time to research your idea, and find one that fits your vision for your restaurant. You’ll want to make sure your restaurant offers a unique concept that differentiates you from competitors.

2. Choose A Location and Lease A Commercial Space

The location of your restaurant is one of the most important decisions you will make. 

First, you ideally want to find a space that is in a high-traffic area with ample parking

You also need to lease a commercial space, as restaurants cannot operate out of homes. 

Be sure to read your lease agreement carefully and ask for help from an attorney if needed. Storage prices range from $0.50 to $12 per square foot, so be sure to factor that into things. 

Unlike leasing an apartment, you most likely won’t need to put down a downpayment to lease business property. However, you might have to pay for:

  • An attorney
  • Broker fees
  • A pre-lease Inspection
  • Security deposit

Commercial leases vary so if you are starting a small restaurant with no money, you’ll need to keep that in mind while you’re searching for the perfect location..

Even better is if your restaurant will be in an area with a high population density and plenty of tourists. You’ll pay a higher rent, but it will give you more of an opportunity for your restaurant to succeed.

3. Create Your Menu

Your menu is an essential part of your business. It is what will make or break you, so take the time to create a great one.

If you are not a skilled Chef yourself, now is a good time to get one on board to help you plan your culinary offerings.

Make sure that each item on your menu can be executed quickly and easily by anyone in your kitchen staff. If it takes too long, customers may get frustrated waiting for their food and leave before it is served.(Remember when you’re ready to hire staff, a good restaurant offers both delicious food and good service.)  

Choose a limited number of ingredients – It helps limit the number of dishes you need to prepare if there are only four to six ingredients in each dish.

Menu prices should be competitive and profitable for you, but also reasonable enough that customers don’t feel cheated when ordering from them. 

A safe bet is to come up with items that are under $20 per person since this tends to work best at most restaurants – but this will vary based on the type of restaurant and what the market will bear in your region. If you’re opening an exclusive, upscale dining experience, price matters less.

4. Write a Restaurant Business Plan

With the preliminary investigation behind you, a restaurant business plan is the next crucial step in your restaurant startup process. This is especially true if you are starting a small restaurant with no money because it allows you to see (and present) what financial resources will be required. 

A restaurant business plan will answer questions like:

  • How much profit is needed?
  • What are my start up costs?
  • How long can the business continue to operate based on its current cash flow?
  • How will you reach your customers?
  • What is the long term vision for the business?

Developing a solid business model enables both you, as the entrepreneur, and future investors of the company to make an informed decision about investing. 

A restaurant business plan ensures you and your backers do not undertake something that cannot be sustained financially over time. You’ll reasonably determine if initial investments will yield returns within a reasonable timeframe.

Plus, it gives you a roadmap to follow. The costs of starting a restaurant can be significant, and you don’t want to be “winging it” with so much at stake.

You should update your business plan at least annually based on any new data and information you’ve discovered through experience.

5. Obtaining Funding for A Small Restaurant

One of the most important aspects of starting a small restaurant with no money is obtaining funding

You will need to produce a solid business plan that shows potential investors your concept is viable and has the potential for success. (Even if your business is self-funded, this is important.) 

Explore various ways to obtain funding when you’re figuring out how to start a small restaurant with no money. Here are 5 popular options: 

  • Bank loans: a small business loan allows you to maintain complete control of the restaurant. These may be term loans, lines of credit, equipment or invoice financing, or cash advances, that you pay back with interest over time.
  • Venture capital (VC) or Angel investors: in exchange for a percentage of the profit, investment banks, investors, and any other financial institutions provide funding to your promising business.
  • Private equity: in exchange for shares in the business, high-net-worth individual or an investment firm buys a percentage of ownership in your restaurant. 
  • Crowd-funding: this method seeds your business with small amounts of funding from many investors; it also helps build awareness and a buzz about your restaurant and helps you gauge interest.
  • Grants to start a restaurant: if you qualify, you can receive money you won’t need to pay back from federal, state, or private grants.

Final Thoughts on How to Start a Small Restaurant with No Money

Starting a small restaurant with no money is a challenging but rewarding ordeal. You must consider many factors when creating your own restaurant business, but if you’re up for the challenge, there is no better time than right now to start moving ahead on your vision.

Continue reading about how to open a restaurant.

Photo credit: Kaboompics .com (Pexels)

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Jackie Gately

Jackie Gately is a seasoned travel writer, photographer, and marketing consultant who is passionate about travel. She loves casual-luxury experiences, coastal getaways, cultural attractions, and local, wholesome food and wine pairings. A perfect day ends with her toes in the sand or by chasing the sunset with her camera--ideally both.

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