Start a carryout restaurant by following these 10 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your carryout restaurant. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Check out our How to Start a Business page.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a carryout restaurant?
You'll need a stove, cooking utensils and basic cooking equipment, a hood, countertops, and food and supplies. Even so, costs for a small carry out restaurant are minimal. A low-budget restaurant can be started for about $10,000 to $15,000 if you buy used equipment and find undervalued space you can rent cheaply in your town or city.
What are the ongoing expenses for a carryout restaurant?
Ongoing expenses include building rental, food, labor costs, insurance, utilities, and maintenance of your kitchen (cleaning, maintenance and repair of appliances, etc.). These costs may exceed several thousand dollars per month, or hundreds of thousands of dollars per month, depending on the size of your restaurant.
Who is the target market?
Target market for this business are busy professionals, families, elderly individuals, and people who either can't cook for themselves or don't want to.
How does a carryout restaurant make money?
Carry out restaurants make money by charging customers for food preparation and delivery.
How much can you charge customers?
What you charge clients depends entirely on what food you serve and where you're located. A sandwich shop will charge less than a take-out seafood restaurant.
How much profit can a carryout restaurant make?
Most restaurants operate on thin profit margins of between 2% and 8%. However, this depends entirely on your menu and pricing. If you generate good word of mouth, it's possible to have profit margins exceed 20%.
How can you make your business more profitable?
Make your restaurant more profitable by offering delivery options and by specializing in a particular kind of food. Instead of being a general cafeteria-style restaurant, niche down and offer only pizza or submarine sandwiches. Or, start a seafood, sushi, Thai, Mexican, or some other specialty take-out business.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Carryout Restaurant Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your carryout restaurant is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Open net-30 accounts
When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.
Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.
Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
Federal Business Licensing Requirements
There are federal regulations regarding what can and cannot be added to, sold as, and processed with food. Attached is a resource from the Food and Drug Administration detailing the process of starting a food business: How to Start a Food Business
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a carryout restaurant. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Certificate of Occupancy
A themed restaurant is generally run out of a storefront. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a themed restaurant.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your themed restaurant will be in compliance and able to obtain a CO.
When selling food, you will need licensing from a local health department; all establishments serving food are required to pass a health inspection. Tips for faring well on a health inspections
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
How to promote & market a carryout restaurant
Promote your restaurant primarily through word of mouth. Do a good job on each and every delivery, and encourage people to share their experience with friends and family. When first starting, you can send out flyers and business cards, and even run a few ads. However, restaurants usually thrive on word of mouth advertising which cannot be replicated with other, more traditional, advertising methods.
How to keep customers coming back
Create an experience for your customers. Go beyond just delivery or take-out. Make the buying experience memorable. For example, if most other restaurants in the area are older and established, be the hip, fresh restaurant that's fast and serves higher quality food than everyone else. Don't be afraid to charge higher prices, either. Just because you're a take-out restaurant doesn't mean you have to compete on price if the quality is there.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use.
Recommended: Find the best phone system for your business; check out our review of the Best Business Phone Systems 2021.
Start A Carryout Restaurant In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
This business is right for an individual who wants to open a restaurant but doesn't want the additional stress of managing a dining area. Since the focus is on cooking and delivery or take-out, there's less overhead and less to worry about. At the same time, the business owner needs to have a flexible work schedule and ability to adapt to stress. Just because there is no dining area doesn't mean it's a stress-free environment.
Business owners should also be passionate about cooking and food prep.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a carryout restaurant?
A typical day in this business is very busy. Orders come in and prep cooks need to stay on top of them. If the business delivers food, then a strict delivery schedule needs to be maintained. If the business is successful, expect orders to be non-stop from open until close.
Aside from order taking and fulfillment, managers must take stock/inventory in the morning and reorder supplies as necessary. Owners must oversee and manage the workforce and labor requirements based on business volume.
What are some skills and experiences that will help you build a successful carryout restaurant?
You must have good organizational skills. If you plan on preparing food, you must also be a good line or prep cook (or a trained chef) and have good communication skills. You should also have excellent managerial skills for a restaurant business, which includes expediting orders and managing a fast-paced working environment.
What is the growth potential for a carryout restaurant?
Growth potential is amazing. A small take out or delivery company can operate on a skeleton crew of between 3 and 5 people. However, the business can also grow into a franchise operation. Mello's Carry Out in Chicago is an example of a successful small carry out restaurant. Ando Food, in New York City, is an example of a larger restaurant.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a carryout restaurant?
Reach out to your local community. At the end of the day, people will come to your restaurant for the food, not the atmosphere — especially since this is a carry out/take-out restaurant. Focus on making high-quality food people can afford. Host some prominent members of your community for a special "grand opening", where you offer them samples of your menu. You might even rent out space at a local park or set up a table and a few chairs outside your establishment. Call the local T.V. and radio stations and invite them to your grand opening.
How and when to build a team
Build a small team to start of at least 5 people. You'll need several prep cooks and staff to manage the deliveries and expediting. You'll also want someone handling the paperwork (legal, HR work, payroll, etc.).