In starting a restaurant business in India you will need to register with many government licensing authorities. The food and beverages industry is one of the fastest-growing industries in India. Hence, the restaurant business in India comes as one of the most profitable food retail businesses.
The Indian restaurant market is expected to grow by 15% in the future, with organized players expected to grow more rapidly. The fine and casual dining segments are expected to register a 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, and even quirky.
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Here is a 7 Step Guide to Starting a Restaurant Business
Before we get into the details of how to start a restaurant business, let us check whether the 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, airports, 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 the restaurant business is a profitable venture to start in India.
Here is a 7 Step Guide on Starting a Restaurant Business
1. Decide on the Type of Restaurant Type You Want to Start
There are many types of restaurants 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
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 website domain name is available or not
Check: How to Name a Business
3. Create a Business Plan
If you want to make serious money, a comprehensive business plan or customized project report is a must in starting a 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
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 a 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(FSSAI). You will need to obtain this license from the state-level licensing authority. Generally, the food business operator license comes for 1 year and it is renewable.
- GST Registration: GST registration is a must to operate a restaurant business in the country. You can apply for GST Registration online also.
- P Tax: P tax stands for professional tax. You will need to have registration and will need to submit fees once a year.
- Shops & Establishment License: Registration with the shops & establishment act is mandatory for starting a restaurant business in India.
- Labour License: You must apply for a labor license from the Labour Department.
- Trademark Registration: In starting a restaurant business in India, trademark registration is beneficial for entrepreneurs.
It is always advisable to consult with a small business adviser in creating the right business plan and in obtaining the necessary permission in starting a restaurant business in India.
5. Arrange Funds
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 for getting a bank loan for a restaurant mainly depends on factors such as the proposed business model, the experience of the promoter, the CIBIL report, and the collateral security offered. Additionally, you can apply for a collateral-free loan under the CGTMSE scheme offered by the 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.
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 pressure on training and retention costs in restaurants.
While restaurant operators manage profitability at the store level, high business 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 the 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.