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 pop-up restaurant business. 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 pop-up restaurant business?
Costs to open can be relatively low because pop-up restaurants can technically open in any spot that’s safe to cook. However, the owner will still have to pay the staff, purchase the food, and potentially purchase or rent temporary equipment. It’s not unusual to spend several thousand dollars or more when all is said and done.
What are the ongoing expenses for a pop-up restaurant business?
Ongoing expenses can include staff salaries, raw cost of ingredients, and costs to rent out the space.
Who is the target market?
Pop-up restaurants are often frequented by younger people (e.g., twenties, thirties, and forties) who are looking for something new and innovative in their area. They are the ones who are constantly looking for what's new and exciting, and they tend to have a good deal of disposable income. Middle-aged or elderly people in particularly well-off neighborhoods may also round out a businesses customer base.
How does a pop-up restaurant business make money?
Owners can set the price of their dishes based on the demand in their area, but standard pricing models call for between 3 – 4 times the cost of the raw ingredients.
How much can you charge customers?
Customers are generally willing to pay normal restaurant prices for pop-up restaurants. This is true even if they’re being served in the middle of an abandoned alleyway that’s been dressed up with elaborate lighting and table decorations.
How much profit can a pop-up restaurant business make?
Pop-up restaurants can make a good deal of profits if they’re willing to think outside the box. If they can seat 50 people a night at a prix fixe meal of $150, they can generate up to $7,500 a night of revenue. Considering a pop-up restaurant may only cost $3,000 or less to begin, it’s conceivable to turn a profit on the first night!
How can you make your business more profitable?
Businesses looking to become more profitable should capitalize on the momentum of their initial success by branching out to more cities. Owners can also consider selling merchandise to further help establish and cement their brand.
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 pop-up restaurant business 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 pop-up restaurant business. 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 pop-up restaurant business is generally run out of a restaurant or small vacant space. 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 pop-up restaurant business.
- 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 pop-up restaurant business 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 pop-up restaurant business
The beauty of a pop-up business is that people tend to become instantly excited about something that’s only around for a limited time. Word can get out quickly — especially if a restaurant tries to keep it secret. An already recognized chef with a following could probably put out a single notice on a social media page and still generate some buzz. Otherwise, owners may want to choose a more traditional form of bulletin-board marketing in hip places around town (e.g., popular coffee shops, city sidewalks, etc.)
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Most people who go to a pop-up restaurant will likely only go once. They’re there to get a meal that they wouldn’t be able to get in a restaurant around town in an unusual or otherwise trendy space. However, the better that meal is, the more likely they are to tell their own friends or social media followers about it.
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 Pop-Up Restaurant Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Pop-ups are generally started by chefs, though it’s also possible for a restaurant manager to assemble the talent and coordinate the schedules. But no matter what, all decision-makers will have to be creative in order to generate enough customer interest in the limited-time only restaurant. For those planning to open in several cities around the world, they'll also need to have a very flexible schedule.
What happens during a typical day at a pop-up restaurant business?
A pop-up restaurant will function very much like a regular restaurant, though the routine is likely to be more intense. Owners will need to create the menus, manage the staff, and plan out the next stop of the tour. The increased demand may mean that every table is constantly booked. Owners will have to ensure that all food is cooked properly and served to patrons in a timely manner.
What are some skills and experiences that will help you build a successful pop-up restaurant business?
It takes more than a culinary background to open up a successful pop-up restaurant. Owners should have some flair or experience with marketing to build public expectation, as well as general people and managerial skills to keep the restaurant running smoothly.
What is the growth potential for a pop-up restaurant business?
Pop-up restaurants can be a lucrative investment for owners because they can build up their reputation and momentum as they go from city to city. While each neighborhood will have their own response to the food, chefs also have the option to alter their menus to appeal to different demographics and tastes.
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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 pop-up restaurant business?
Patrons of a pop-up restaurant will be far more forgiving of the decor of a restaurant, so the emphasis has to be on the food and the service. Owners may want to practice a little spin to traditional foods in order to differentiate their restaurant from others in the area. For example, a restaurant may serve mostly American food, but the chef can also put their own twist on dishes depending on the location.
It’s also crucial that a pop-up restaurant identify their core purpose at the beginning of the venture. Whether it’s to make money, test out new dishes, or just to have some fun, a pop-up restaurant should be defined for both staff and customers alike. This doesn’t mean the purpose can’t change or grow over time, but it should give a business owner a much clearer vision of how to get from Point A to Point B.
Chefs should also think outside the box when it comes to where the set up. An old barn just outside the city being converted into a pop-up restaurant is not only romantic, it's also a unique idea that's easy to tell other people about. In addition to abandoned barns or alleyways, owners could also rent out existing restaurants that may sit empty sometimes. For example, renting out a spot for dinner at a breakfast-only place. Owners could even host midnight meals at practically any permanent restaurant in the area!
How and when to build a team
Pop-up restaurants will need to start building a team immediately. Most owners will already have some type of network in place to pull qualify waiters, managers, and assistant chefs from. It is possible to build a traveling team as well, so workers can both see the world and make a living.