In starting a restaurant business in India you will need to register with several different registrations and licensing procedure with Government authorities. The food and beverages industry is one of the fastest growing industries in India. Hence, a restaurant business in India comes as one of the most profitable food retail business.
The Indian restaurant market is expected to grow at 15% in future, with organized players expected to grow more rapidly. The fine and casual dining segments are expected to register the market growth of more than 18%–20% and 15%–17%, respectively. In starting a restaurant business in India, it is important to create concepts that are approachable, fun, even quirky.
Before we get into the details on how to start a restaurant business, let us check whether restaurant business is profitable or not.
Is Restaurant Business Profitable?
- Rising consumerism and affluence: Growth in the affluent and middle classes, backed by the Indian youth with more spending capacity, is driving India’s consumption story, and restaurants are no exception.
- The eating-out experience: Consumers’ preference for eating out is largely driven by their desire for a different experience in terms of service, ambiance, and food.
- Media proliferation and enhanced exposure: Media explosion and the emergence of celebrity shows have increased awareness among the consuming class. Moreover, with rising international travel, people are becoming progressively exposed to different cuisines and culinary styles, and this has given impetus to the experience-seeking behavior of consumers while eating out.
- Evolution of new eating avenues: The evolution of new avenues with the increase in food courts at malls, forecourts, airport and railway lounges, and along highways is driving the growth of the organized QSR and dining segment.
- Increased interest by international and national brands: International and national brands are investing bandwidth and capital in developing the QSR market in India.
Hence, we can easily conclude that restaurant business is a profitable venture to start in India.
Here is a 7 Step Guide on Starting a Restaurant Business
1. Decide on Type of Restaurant Type You Want to Start
There are many types of restaurant you can start. Selecting the type will depend on the taste and trend of the local community and your funding capacity. You can also go for buying a franchise of a reputed organization.
2. Name your Restaurant Business
Naming a restaurant business is a critical decision as it conveys to the customers what kind of restaurant you are running and the menu you are providing. The name should be relevant and catchy. In addition to this, check whether a similar domain name is available or not
3. Create a Business Plan For Restaurant Business
If you want to make serious money, a comprehensive business plan or customized project report is the must in starting the restaurant in India. You will need to determine the area, menu, interior, nature of the facility, staffing, and marketing plan. In financial planning, the major aspects are operational costs and fixed costs. It is advisable to keep at least 6 months overhead in hand for the smooth running of day-to-day operational activity.
4. Legalities & Licenses For Restaurant Business
In starting the restaurant business in India, you will need to obtain the necessary licenses and permits from the local organizations responsible for governance. Here are the following licenses that you must procure from Government Authorities:
- Enterprise Registration: First of all, you must register your firm with the Register Of Companies according to your ownership pattern.
- Trade License: You will need to procure Trade License from the local Municipal Authority.
- Health Certificate: You can obtain this permission from the local Municipal Health Department.
- Food Business Operating License: Restaurants need to obtain a Food Business Operator license from the Food Safety and Standards Authority of India. You will need to obtain this license from state-level licensing authority. Generally, the food business operator license comes for 1 year and it is renewable.
- Vat Registration: You must apply to your local Sales Tax Department for Vat Registration Number. Also, you will need to file returns quarterly to the Sales Tax department. You can apply for Vat Registration online also.
- Service Tax Registration: According to the latest rule restaurants that are air-conditioned are required to obtain service tax registration if their annual sales will be more than Rs.10 lakhs. Currently, service tax is chargeable at 4.94% in air-conditioned restaurants.
- P Tax: P tax stands for professional tax. You will need to have registration and will need to submit fees once in a year.
- Shops & Establishment License: Registration with shops & establishment act is mandatory in starting a restaurant business in India.
- Labour License: You must apply for labor license from the Labour Department.
- Trademark Registration: In starting a restaurant business in India, trademark registration as beneficial for the entrepreneurs.
It is always advisable to consult with a small business adviser in creating the right business plan and in obtaining necessary permission in starting a restaurant business in India.
5. Finance For Restaurant Business
As with any business, finance is a critical factor in starting a restaurant business in India. However, you can arrange finance in two ways other than your own investment. Either from an individual investor or from a bank. Eligibility of getting the bank loan for a restaurant mainly depends on factors such as the proposed business model, the experience of the promoter, CIBIL report and collateral security offered. Additionally, you can apply for a collateral free loan under CGTMSE scheme offered by Government of India.
6. Key Operational Aspects of Running a Restaurant Business
- Managing demand fluctuations
Optimally managing surges and declines in demand at certain times in the week or day, such as lunch versus dinner, or weekdays versus weekends is challenging.
- Volume versus value
A high volume of transactions with a low ticket size per transaction places pressure on operating efficiency. Therefore, it leads to low per staff revenue.
- Staff retention
Restaurants tend to face high staff attrition, at levels of 40%–50%. This can be largely attributed to competitive salary offers. Additionally, high staff turnover rates place the pressure of training and retention costs on restaurants.
- Corporate overheads
While restaurant operators manage profitability at the store level, high corporate overheads (especially staff costs) put pressure on overall profitability.
7. Choose the Right Software
Technology plays a critical role in the success of the restaurant business. Talk to software vendors and choose a proper Retail retail software for your restaurant business.
Starting a restaurant business in India is profitable. However, you need to have a clear business plan and understand the local market demand.