The Complete Guide to Starting a Restaurant Business in India

Guide to Starting a Restaurant Business in India

Given the substantial challenges and the difficult hours, running a restaurant company is one of life’s most satisfying experiences. If you have always nurtured a lifetime dream to open a restaurant and don’t know how to do it, or are actually in the process of setting up your first restaurant, this article will teach you how to open a restaurant in great depth.


Restaurant Industry in India

The Indian restaurant sector is one of the fastest rising markets in the world. In 2021 it is estimated that the foodservice industry should cross over INR 23000 crores. More Indians are dining out in restaurants due to growing wages, increase in urbanization, rising populations and technical advancements.


How To Start A Restaurant Business In India

Seeing the tremendous potential that the Indian F&B industry has for both future & current restaurant companies, you must not lose any more time and plunge into this lucrative realm, very quickly. What are you waiting for, then? Follow this step-by-step tutorial, which will address all your restaurant opening queries in India:

  • Decide the concept of your restaurant.
  • Get investment to fund your restaurant business.
  • Evaluate restaurant costs involved.
  • Decide the location of your restaurant.
  • Get all the licenses required to launch your restaurant.
  • Get the workforce for your restaurant business.
  • Design a stellar menu.
  • Arrange vendors and suppliers for your restaurant.
  • Install the right technology at your restaurant.

Now, once you have acquired the awareness of the measures that are necessary for you to start a restaurant business in India, let’s dig deeper and learn precisely what needs to be accomplished to help you open up a profitable restaurant business in India.


1. Decide The Concept Of Your Restaurant

The first thing to remember before creating a restaurant is to determine the concept. Until settling on a plan, you have to bear a number of factors in mind, the biggest one is the sum of money you have for investment. The Average Cost per Customer (APC) offers you a good estimate of how much money a customer will pay in your restaurant on average.

Once you’ve decided on the concept, you need to ponder your restaurant’s theme and cuisine. The interior has to be in tune with the theme of your restaurant. Once that is done, then you will need to draft a restaurant business plan because it will enable you to anticipate the future growth of your restaurant and introduce it to every prospective investor.


2. Get Investment To Fund Your Restaurant Business

Thanks to lack of funding, most ambitious restaurateurs’ aspirations never see the sun, so that is one of the most critical aspects to remember as you think of starting a restaurant venture. First, depending on the concept of your restaurant, you have to finalize how much capital you need to start a restaurant in India and when you have the numbers, you can raise money through these avenues:

  • Self-funding – You’ve passed the first obstacle to starting a restaurant because you have enough funds in the bank so congrats. Opening a restaurant in partnerships is also a good idea since it reduces investment risks.
  • Loan – You should take a loan to make your restaurant dream come true. Securing a loan from a bank, though, may entail hassles when they search collateral or someone else who can underwrite the loan, is a viable option.
  • VC/Angel Funding – It can be challenging to get investors on board, particularly because it is a first-time venture. Investors typically search for the growth opportunities, quality, and scalability of the business model of your restaurant plan. Investors do take into account the success of the first few outlets before they decide to invest in your company.


3. Evaluate All Restaurant Costs Involved

Restaurant costs are an important part of running a restaurant and must be carefully evaluated and planned. Below are the major costs associated with starting a restaurant business:

Food cost – The cost of food is the sum of all the raw ingredients that are used to make a meal. The food expense will preferably be about 30% – 40% of the menu level.

Overhead cost – Overhead costs are the other expenses that are not related to food or labour. These include:

  • Rent – The rent covers a significant portion of the cost of your restaurant, and is deeply affected by the restaurant location. The rent should never, though, reach 10 per cent of your gross revenue.
  • Interiors – You can select the interiors depending on the design and style of your restaurant, and your budget.
  • Kitchen equipment – Buying the right quality equipment may sound like heavy on the pockets, but in the long run, they always recover their costs.
  • License – Restaurant licenses are an essential restaurant expense, and can not be ignored. The license fee varies, depending on the form of the business.
  • POS – The new age, modern POS technology can make your restaurant operations smoother than ever before. The price of POS depends on its features and functionality, which should be chosen taking into account the needs of your restaurant.
  • Marketing – Ideally, you should invest 1-2 per cent of your sales on your restaurant’s advertising. Offline and online marketing should strike a perfect balance. Word of mouth marketing can do wonders for your restaurant alongside digital marketing.


4. Decide The Location For Your Restaurant

When considering ways to establish a restaurant company, the location is an important aspect to remember, because it will decide the restaurant’s performance. When selecting the location of your restaurant, recognizing your rival in that area and gauging their success and knowing their business model is a smart idea. The competition needs to be analyzed not just in terms of food, but also in terms of the style of dining experience they provide their clients – fast dining, fine dining, QSR, etc. Evaluating the competition would help you understand the area’s customer base, their pocket size and preferences.

Other considerations to remember when determining where a restaurant is based in India are-

Visibility and accessibility – The restaurant should be located in a place that is both easy to see and accessible. Upper floor locations are generally not considered appropriate as their visibility is low and customers also find it hard to locate them. There are higher footfalls in a restaurant right in front of the road and at ground level.

NOC – Before you open your restaurant, you would also need a No Objection Certificate (NOC) from at least three of your neighbours.


5. Get the Licenses to Start a Restaurant

To run a restaurant business in India you need to get government licenses. The expense of acquiring such licenses ranges due to the scale of the undertaking. It is advisable to apply early for the permits, as it may take a long time to get approved. Here is a list of essential licenses required to start a restaurant company in India:

  • Trade license from the municipal corporation – The expense expended ranges from Rs 10,000 to 1 lakh, depending on the scale of the restaurant. But for a small restaurant, the actual license fee ranges from Rs 5000 to 10,000. The licenses are issued for a financial year, which must be updated periodically in March.
  • FSSAI – One has to get a license from India’s Food Health and Standards Authority (FSSAI) to operate a food business. The company scale, profitability, installed capacity, location etc. are considerations in securing an FSSAI license and cost between Rs 5000 to 10000.
  • GST Registration – Restaurants must register with GST to get their GSTIN number. GST registration is state-specific, so you need a separate registration for each state if your restaurant has outlets in different states.
  • Professional Tax License – To hire salaried workers, you require a qualified tax permit. For all restaurant staff earning more than Rs 10,000, this is payable on a monthly basis.
  • Liquor license – It is the trickiest of all to receive a liquor license and it is still pretty costly. It is advisable to apply early for the liquor license, as this permit also takes a great deal of time.
  • Business registration – You need to sign the business as a joint corporation, or as a Pvt Ltd. You are going to have to make tax reports, check the accounts etc. Hire a CA to assist with the economics of your business.

A few other licenses are required, such as fire safety certificates, pollution control licenses etc.


6. Get Manpower For Your Restaurant Business

Hiring and retaining the right talent is one of the greatest obstacles when operating a restaurant business in India. It is very well known to recruit through recommendation, with current workers referring to their friends and relatives. You can hire, as a first-time restaurateur in the traditional way: set up an advertisement in the newspaper, put up ‘we’re hiring’ posters or hire through agencies. There are still a number of popular communities on Facebook and Linkedin, where you can source talent from.


7. Arrange Suppliers & Vendors For Your Restaurant

A stable partnership with your manufacturer and vendor is necessary if your restaurant is to work smoothly. Every section must have at least two-three vendors. It will help to evaluate rates, which would also act as a substitute in the case that an issue occurs.

In case of emergency, you also have to have two days worth of stock in your warehouse. The products are often to be shipped in the morning and reviewed regularly. You must perform both quality and quantity checks at your restaurant’s closing time. Getting long-lasting terms with the manufacturer is also preferable because it tends to ensure the quality of the raw materials. You would also need to test the vendor ‘s Trade Identity Number (TIN) before issuing him the supply contract for your restaurant.


8. Install Right Technology At Your Restaurant

A restaurant’s digital infrastructure is perhaps the most neglected yet also the most critical aspect of operating and maintaining a restaurant. A versatile POS system with a range of new-age digital technologies has significantly simplified the restaurant operations today.

It’s an excellent decision to operate a restaurant. It is, therefore, a massive challenge to operate a restaurant from scratch and run it successfully. Through this article, we hope that we’ve been able to tell you how to launch a restaurant business in India.

If you still have any doubts or questions regarding opening or managing your restaurant, do let us know and we will do our best to assist you.

Note: The figures and facts mentioned in this page content are in accordance with the Indian restaurant space.

For more information on Starting a Restaurant Business in India in India, contact us today.

Guide to Starting a Restaurant Business in India