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 step guide to starting your family style 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 family style restaurant?
Standard costs include health inspection fees, rent or mortgage bills, cost of supplies/equipment, and employee salaries. If you hope to start a franchise, your costs will be all-inclusive, and the headquarters will typically supply what you need.
What are the ongoing expenses for a family style restaurant?
Family style owners may have the following ongoing expenses:
- Rent costs
- Advertising material
- Employee salaries
- Equipment maintenance/replacement
Who is the target market?
Generally family style restaurants market to people who want to get out of the house more than they want to eat gourmet food. The average family is looking for dishes with which they are familiar. Parents especially have to make a lot of decisions throughout the day, and may not want a challenge when they walk into the restaurant. The decor should not be upscale. Families will be bringing in children who may not always be on their best behavior.
How does a family style restaurant make money?
Family style restaurants will mark up the cost of their food and beverages to turn a profit. Profit margins on checks are generally low, between 2 and 3% regardless of the type of restaurant you run. Generally, family style restaurants will serve alcohol though, which is an excellent way to make additional profit off each check.
How much can you charge customers?
Meals at family style restaurants are generally kept as affordable as possible. A single entree may cost between $12 and $18. Those that offer organic, farm-to-table options can charge between $20 to $30, depending on the type of food being offered. Specialty alcoholic drinks are generally sold at between $8 to $10 at family style restaurants.
How much profit can a family style restaurant make?
Profits are generally low. Assuming you make 2.5% profit per check, your profits will be $5,000 for every $100,000 worth of business you do. However, you will likely make enough to cover your costs (and your own yearly salary).
How can you make your business more profitable?
Owners can consider offering catering options for families and businesses who have special events. Owners can also consider participating in community events, or even opening up their own food truck with scaled-down offerings.
What will you name your business?
Choosing the right name is very important. 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.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your family style restaurant is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
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.
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 family style 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 family style 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 family style 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 family style 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
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
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 family style restaurant
Restaurant owners can use social media, print, television, and radio ads to get the word out. Your goal is to show (and tell) customers that they can get their favorite comfort foods in a quality setting. If you choose to offer something slightly less conventional, your mission is still the same, but you can throw in a little more flair. Show your customers why you’re not just the standard casual restaurant, but how you can still accommodate the youngest members of the family. For example, you can show long, rustic wood tables where multiple families can sit and eat. It's a slightly more eclectic decor with the same vibe as a regular family style restaurant.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Customers will come back when they start to associate your restaurant with comfort and quality. Your ideal customer should be able to walk in on a Friday night to a bustling enterprise and see at least one or two people they already know (even if it’s just the wait staff). The most successful family style restaurants are ones that offer warmth and community every day of the year.
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 Family Style Restaurant In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Owners should have a deep understanding and respect for what American families want today. They should also have a knack for bringing people together, and a desire to create a strong sense of community in the restaurant.
What happens during a typical day at a family style restaurant?
An owner of a family style restaurant has the following responsibilities:
- Managing employees
- Checking/ordering supplies
- Selecting menu items
- Performing quality control/safety inspections
What are some skills and experiences that will help you build a successful family style restaurant?
The owner should have experience in the restaurant industry, preferably participating in operations management of a family style restaurant. It takes organizational skills to be able to keep everything in order, and people skills to let others help when they can.
What is the growth potential for a family style restaurant?
Restaurants like Applebee’s and Buca di Beppo grow because they serve good food in a clean, friendly setting for reasonable prices. Trendier places may be more fashionable, but they tend to attract a far more fickle crowd. A trendy restaurant will need constant innovation to hold customers’ attention, but a family style restaurant can grow big by delivering consistent quality to busy families.
TRUiC's YouTube Channel
For fun informative videos about starting a busines visit the TRUiC YouTube Channel or subscribe below to view later.
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.
What are some insider tips for jump starting a family style restaurant?
Your budget is going to be extremely important—especially if you choose to franchise. You'll need to open in a fairly busy area of a city if you want to succeed, but it will cost you. A single TGI Friday’s can cost up to $6 million to get it up and running. The good news is that you’re already starting with a trusted name that needs very little outside advertising to get people to come try.
There are ways to keep your budget low if you know where to look. Small restaurants can be opened for as little as $13,000 with the right ingenuity. There is plenty of space available across the US that can be snapped up at a lower price. Used or leased equipment can cut costs down as well, as can buying the raw materials on your own (e.g., tile, wood, etc). Also, consider foregoing certain costs, like a fancy coffee maker or even a soda machine until you know you’ll definitely need them.
Ensure that you have kid-friendly choices on the menu, and don't skimp on the quality of these dishes. Children tend to adopt their favorites from a young age, and have an influence on where their parents take them. In addition, if you choose to open up a family style restaurant with large, sharable portions, remember that profits can be extremely small on these particular offerings. For example, a whole chicken generally takes a long time to cook, and yields very little in the way of profit margins. Many owners offer these dishes in hopes of hooking customers and creating a loyal clientele rather than making money (at least at first).
How and when to build a team
Family style restaurants rely on creating real relationships with their customers, so look for people who intend to invest in the restaurant, and who want to be an integral part of their neighbor’s lives. You’ll need to build a team as soon as possible to ensure your restaurant has a cohesive vibe.