Start a carryout restaurant by following these 9 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.
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 long it will take you to break even?
- 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 very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your carryout restaurant is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
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?.
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.
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: Find the right bank for you, read our review of the Top 5 Banks for Your Small Business
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.
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.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
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.
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.
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.).