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 restaurant supply 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 restaurant supply business?
When mapping out your business plan, consider the inventory you wish to carry and define your target audience. What is the community currently lacking? What do they have an immediate need for? This will assist you in determining your budget.
Regardless of the size of your store or the types of products you plan to sell, you will need to budget for the following items:
- Space - Make sure your store’s location is conveniently located for restaurant owners. There should be ample parking and enough space for customers to get in and out with very little hassle.
- Inventory - Conduct as much research as possible to ensure you do not invest in items your customers do not need. Your stock will grow and vary, as time goes on and you gain a better understanding of your regular clients’ needs.
- Point of Sale Software - This will help you track and manage inventory, ring up orders, and identify trends.
- Cash registers - Make sure you have multiple open lanes, so that customers aren’t waiting at the check-out area.
- Furniture and Fixtures
- Marketing materials
- Payroll and related expenses
If you wish to open a large establishment, much like Restaurant Depot, you will need a large warehouse, of approximately 15,000 square feet. Fixtures alone can cost upwards of $400,000. Entrepreneurs just starting out are urged to start small, expanding their business as they get to know the needs of restaurant owners in the area. This will minimize start-up costs and help ensure long-term success. The price to purchase an already established business averages approximately $1.4 million.
What are the ongoing expenses for a restaurant supply business?
There are a number of ongoing expenses you should budget for each month. These include: lease payment, facility and equipment maintenance, utilities, and marketing. Your two largest expenses will be payroll and inventory, which will fluctuate, based on you and your clients’ immediate needs. It’s important to remember that payroll costs go beyond paying each employee an hourly wage. Workman’s Comp, benefits packages, and taxes should also be factored in.
Who is the target market?
Your target market is limited to those within the culinary community. This includes: restaurant owners/managers, culinary schools, cafeterias (both medical and schools), bars, caterers, bakeries, and coffee shops. Since food is perishable, many of your clients will visit you several days per week, if not every day.
How does a restaurant supply business make money?
This type of business generates money through the sale of each item. Some supply companies choose to focus solely on kitchen equipment, while others focus on the sale of food and drink. The largest suppliers offer a combination of both.
How much can you charge customers?
Prices vary, depending upon the item and your initial investment.
How much profit can a restaurant supply business make?
Realizing a significant profit the first year can be a challenge for any business. With proper research and a well thought-out business plan, your restaurant supply business has the potential to earn up to $55,000 in profit the first year. Depending upon your region’s needs, many restaurant suppliers earn six to seven figures in profit after their third anniversary.
How can you make your business more profitable?
Many restaurant supply companies choose to carve out their niche in one area. Those who realize significant short and long-term success are able to identify and meet the local restaurant owner’s needs. Expand your goods and services to include: equipment installation and/or repair and kitchen design, restaurant furniture, and even cooking classes. A delivery service is also a great way to attract new customers and increase your organization’s profit margins.
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 restaurant supply 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 restaurant supply 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 restaurant supply business 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 restaurant supply 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 restaurant supply 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 restaurant supply business
When developing a marketing strategy, consider how you can directly appeal to those you are trying to reach. Advertisements in newsletters and magazines geared towards those in the food industry is an effective place to start. Those realizing the greatest success aren’t afraid to pound the pavement, visiting businesses within the community that you wish to cater to. An informative website with a strong social media presence is also a great way to expand your reach, potentially selling some of your products online.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Since the bulk of your business will be on a local level, delivering strong customer service should be an integral part of your customer retention strategy. If your business delivers quality products, with a friendly staff and short wait times, word of mouth will spread and your reputation within the community will blossom.
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 Restaurant Supply Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Are you passionate and knowledgeable about the food industry, but lack the desire to own your own restaurant? Do you get enjoyment from trying out the latest kitchen “gadget,” often feeling inspired to pass that enthusiasm on to others within the industry? If so, opening a restaurant supply store could be the change you have been seeking in your life.
What happens during a typical day at a restaurant supply business?
A restaurant supply store team handles a number of activities from day to day. Inventory must be closely watched to ensure your customers have the supplies they need, when they need them. Since the restaurant industry fluctuates seasonally, inventory should be closely monitored to meet these oscillating demands. To ensure your customers gain access to quality products regularly, the shelves must be stocked and inventory should be rotated on a daily basis. Additionally, relationships with distributors must be fostered, ensuring your clients have access to the very best product, at the very best price.
Since customer service is of the utmost importance, you and your staff should be on the floor, ringing up customer orders and meeting any direct questions and/or concerns. As part of your customer service strategy, your team should also consistently remain abreast of the latest food, libation, and equipment trends, passing this knowledge on to customers whenever relevant. Developing and maintaining a quality marketing strategy is also critical to your business’ success, as this ensures you consistently reach both current and prospective customers.
What are some skills and experiences that will help you build a successful restaurant supply business?
The key to long-term success in this industry is remaining abreast of the current trends. This includes everything from cooking techniques, to equipment and food trends. As the owner of a restaurant supply store, your goal should be to consistently learn and grow, encouraging others in related industries to do the same. Additionally, your role as the owner will require you to build and nurture relationships with both suppliers and the individuals with buying power at your local food establishments. This requires a personable demeanor and a deep understanding of their dynamic needs. Joining your state’s restaurant association is an effective way to develop relationships on a local level. Membership with the National Restaurant Association is an effective way to get involved on a larger scale.
What is the growth potential for a restaurant supply business?
While it is challenging to find long-term success in the restaurant industry, there will always be a great number of customers to cater to in the restaurant supply business. Provided you deliver consistent, quality products, there is the potential for significant growth, with many opening franchises across the country. The key to getting started and expanding quickly is to identify areas that have a direct need and furnishing those needs affordably.
TRUiC's YouTube Channel
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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 restaurant supply business?
Prior to opening your doors, start the process of building relationships with those in the community that could most use your service. By doing so, they will remember you when a need arises. Additionally, make sure your shop’s policies are clearly defined and posted for everyone to see.
How and when to build a team
Managing this type of establishment requires a team of employees prior to opening day. Make sure you have ample staff, qualified to stock shelves, run the cash registers, and assist customers with any questions or concerns they might have. Once the store is firmly established, you will want to consider hiring a store manager, as well as a marketing team and accounting specialist.