How to start a restaurant business in India?

In recent times, Food business in India has witnessed a tremendous growth. Customers attracting towards mouth watering dishes and great ambience brings the possibilities to start your own restaurant. Many business owners have shown keen interest in setting up their own restaurant business along with getting good financial progression. A proper restaurant business plan is must before you plan to own a restaurant. However, make sure that you fulfill all the basic and legal formalities before starting a restaurant.

In this article, Legal Window will guide you to know about the procedure and important checklist which needs to be taken care of, for starting a restaurant in India.

Procedure to start a Restaurant Business in India

Before you start a restaurant, you need to be well aware that restaurant doesn’t simply includes casual dining. However, its definition also includes cafe, fine dining, club, bar, lounges and pubs also. Hence, first of all decide the type of restaurant business you wish to start. Further, note down the following steps:

• Once you have selected the type of restaurant, make sure to arrange capital or investment to finance your business.
• Secondly, evaluate various costs including Average Price per customer.
• Select a primary location for your restaurant
• Complete all the legal formalities by acquiring all kind of legal licenses which are compulsorily required
• Hire staff and workforce for your restaurant for its operational activities
• Finalize a unique menu with mouth watering dishes
• Select vendors and suppliers for the raw material or for any other important requirements
• Install good quality furniture and decide the theme for your restaurant

Now, since we have well understood the important steps for starting a restaurant business. Let’s now dig a little deeper and get updated as what exactly needs to be done to start your venture.

• Deciding the type and concept of Restaurant: You need to first decide the type of restaurant you wish to start and visualize the idea to decide the amount of capital, design, theme and cuisine for your restaurant. Along with it, make sure to calculate the Average Price per Customer (APCP). Further, draft a proper Restaurant Business Plan to include all the above important things and to acquire potential investor and customer for your restaurant.

• Arranging amount of Investment for your restaurant: Arranging investment is one of the most essential factor which needs to be considered when you plan to open restaurant business. There are various options which you can look upon while deciding to arrange capital for your business. It may include:
  • Self – Funding : In case you are financially strong, then this option seems most relevant. Make sure that you have enough amount in your bank account to fund your business.
  • Partnership : You can also make a partnership with any other individual so that the risk of investment can be shared and both can earn equal profit.
  • Taking a Loan : As restaurant requires a heavy investment, you can consider taking a loan from a financial institution including banks, to fulfill your capital requirement. However, you would be required to keep something as collateral or security with such financial institution.
  • Funding from Angel Investors and Venture Capitalist : You can obtain loan from angel and venture capitalist also. However, they consider the factors like potential growth of your restaurant, along with scalability and quality. Hence, getting loans from them can be a little difficult task.

• Evaluating various costs to be incurred into your restaurant: This is one of the most important step which needs to seek your attention. This includes evaluating the cost which needs to be incurred while operating your restaurant business. You need to assess and prepare a checklist of various costs involved along with proper planning. The important costs involved in a restaurant are:
  • Cost of Food: It includes costs of all the raw materials which will be required in preparing various dishes in the restaurant. Make sure that the of cost of food is around 30 to 40% of the price as mentioned in your menu card.
  • Overhead Costs: Apart from food and labour costs, there are other costs also which are called as Overhead Costs. It may include cost of interior, rent of the premises, kitchen equipment and marketing cost.
  • Costs of Licenses: Another costs include cost of obtaining various licenses which differs depending on the size of the restaurant. We will be discussing about various licenses later in this blog.

• Finalize the location of your restaurant
  • Choose a suitable location for your restaurant that perfectly fits the bill, as a perfect location has the power to decide the future of your restaurant.
  • Gather information about the customer base for such location and establish your restaurant accordingly.
  • Keep an eye on your competitors and their strategies in the same area where you wish to set up your restaurant
  • Most importantly, the location must be easily accessible and must have high visibility

• Obtain mandatory licenses for your restaurant: The various permits and government licenses are significantly required to start your restaurant. Depending on the size of your venture, costs of such licenses may differ from each other. Getting such licenses is a little tedious task. But worry not, as Legal Window helps in getting such licenses on behalf of you. Various licenses which are required to start your restaurant are as follows:

• Business Registration: First of all the business owner must decide whether he wants to register his business as Private Limited Company or a Partnership firm. Such registration is required to file your annual returns.
  Legal Window helps your business in registering as Private Company and Partnership Firm.
• GST Registration : Obtaining registration under GST is compulsory for all the food business owners in our country. Get your GSTIN (Goods and Service Tax Identification Number) through Legal Window at a reasonable cost.
• Trade License: Get your trade license from the local Municipal Office of your area where you wish to set up your restaurant.
• Liquor License: If you are planning to sell liquor in your restaurant, then don’t forget to obtain a liquor license from the Local Excise Commissioner of your area. Selling liquor without such license can attract considerable amount of penalty along with shutting down of your restaurant permanently.
• FSSAI License: Obtain an FSSAI License to start your restaurant as such license guarantees the quality and safety of the food which is served in your restaurant.

Apart from the above licenses, make sure to obtain Pollution Control License, Eating House License from Licensing Police Commissioner of your area, and Shop and Establishment License which needs to be obtained within 30 days of starting your restaurant business.

• Hiring staff for your Restaurant and planning a unique menu: You need to hire kitchen staff, service staff and management staff for your restaurant. At the time of hiring, make sure that you hire a capable staff which can be retained for a longer time. Hiring can be done through advertisement in newspaper, social media and through other job agencies..
  Apart from hiring the staff, you need to also plan a unique menu of dishes which you want to serve your customers. It should be smartly crafted and planned.

• Selecting Vendors and Suppliers for your restaurant: You should select at least three to four vendors and suppliers of each category and compare the prices before finalising one. Keep one of the vendors/supplier as back up in case of any mishap. The raw materials supplied by them must be in stock and must be delivered on time. Have a check on your supplier/vendor whether it has Trade Identification Number (TIN) before you give them the supply contract.

Final Words

If you are planning to start your own restaurant, then you must go for it as this is the best time to capture the market. You already have the right skill set along with delivering mouth watering delicacies. The only hurdle is fulfilling the legal formalities before you start your business. But don’t worry, as Legal Window is a single platform where you can consult to get all the registration certificates in addition to competing legal formalities.