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A Complete Checklist to Start a Restaurant Business in India
Shivani Jain
| Updated: Jul 04, 2020 | Category: Business, FSSAI

A Complete Checklist to Start a Restaurant Business in India

A place that serves both the delicious food and attractive ambience becomes the first choice for customers. Therefore, despite the tough competition, every young entrepreneur chooses to start a restaurant business in India.

As per a report by STATISTA [1] , the Market Value of the Indian Restaurant Industry was about Rs 4 Trillion in 2019. This blog will discuss the steps involved and the license required for starting a restaurant in India.

Steps Involved to Start a Restaurant Business in India

The restaurant business comes under the ambit of Food Retail Segment. The term “restaurant” includes casual dining, fine dining, café, etc. Besides this Pub, Lounges, Clubs, and Bar are also the popular choice among the youth. The steps included in opening a Restaurant Business in India can be summarised as:

  1. Decide the Type of Restaurant Business;
  2. Arrange Investment to Finance the Business;
  3. Evaluate the Cost Involved;
  4. Decide the Location of the Business;
  5. Acquire all the License required;
  6. Arrange the Workforce for the Restaurant;  
  7. Design a Unique Menu;
  8. Arrange Suppliers and Vendor for the Business;
  9. Installations in the Restaurant.
Restaurant Business Menu

Decide the Type of Restaurant Business

An individual who wants to start a restaurant business in India needs to first decide the restaurant’s idea. The term “idea” includes factors like capital investment, size, interior design, APC, etc. APC stands for Average Price per Customer. It provides an idea about the average amount that a customer will spend in the restaurant.

Next, the individual needs to consider the theme and cuisine of the restaurant. He must ensure that both theme and cuisine of the restaurant are in sync with each other.  

After that, there is a need to gather all the ideas in one document known as the Restaurant Business Plan. A business plan will help the proposed owner to acquire potential investors for the business.

Arrange Investment to Finance the Business

Arranging Investment is one of the most important factors to consider while opening a food outlet in India. The ways of financing of business can be summarised as:

  1. Self-funding: The option of “Self-funding” is relevant only if the individual has enough money in his bank account.
  2. Partnerships: Running a restaurant in partnership is also an excellent way to reduce the risk of investment.
  3. Loans: If an individual wants to start a dream restaurant, but requires heavy investment. Then securing a loan from a bank to fulfill the business requirement is the best choice. However, for obtaining a loan, one needs to keep something as collateral with the bank.
  4. Venture Capitalist and Angel Funding: Obtaining funding from investors is a tough task. As they normally consider the factors like growth potential and quality of a business model.

Evaluate the Cost Involved

Another significant factor is to carefully evaluate the restaurant costs for running a restaurant in India. It is always advised to start a small outlet first instead of a big venture. The significant costs involved in a restaurant business can be summarised as:

  1. Food Business: A food cost denotes the value of all the raw materials used in preparing a fast food dish. Normally, the food cost needs to be around 30 to 40% of the menu price.
  2. Overhead Costs: Overhead costs mean the cost other than the food and labour cost. These costs include the following:
  3. Rent: The rent belongs to a significant part of the restaurant costs. Rent of the premises solely depends on the location of the business. However, the amount of rent must not exceed 10% of the total revenues.
  4. Interiors: The cost of interiors depends on the budget and theme of the outlet.
  5. Kitchen Equipment: Purchasing the proper quality kitchen equipment involves a huge amount. But the owner always recovers this cost in the long run.
  6. License: Restaurant licenses act as an important expense of a restaurant. The fees of the license depend on the size of the establishment.
  7. Point of Sale: It is a new age modern technology that assists in the restaurant’s operations.
  8. Marketing: Normally, an individual, should spend 1 to 2% of the revenues on marketing the restaurant. He must maintain a balance between online and offline marketing. Online marketing means digital marketing. In contrast, offline marketing denotes word of mouth or publishing pamphlets.

Decide the Location of the Business

A perfect location has the power to decide the future of a restaurant. Factors like competitors, types of cuisines preferred, and dining facilities must also be considered.

The factors to choose a location can be summarised as:

  1. Accessibility and Visibility: It is always advisable to locate a restaurant at a place that is easily visible and accessible. Usually, the restaurants on the ground floor or are in front of the road have higher accessibility. That means upper floor outlets are not suitable due to low visibility.
  2. No Objection Certificate: An individual needs to acquire NOC from at least three neighbours.

Acquire all the License required

In the next step, an individual needs to acquire all the licenses required for starting a restaurant business in India. The permits required can be summarised as:

  1. Business Registration: An individual needs to first acquire either a private company registration or partnership registration. Business Registration is required for filling annual returns etc.
  2. GST Registration: Obtaining GST registration is mandatory for all the food outlets operating in India. After registration, GSTIN (Goods and Service Tax Identification Number) is provided to each restaurant owner.
  3. Trade License: Restaurants need to acquire Trade License from the Municipal Office.
  4. Liquor License: If a restaurant provides Liquor to its customer, it must obtain a Liquor License. One can acquire a liquor license from the Local Excise Commissioner.
  5. FSSAI License: Obtaining an FSSAI License is a must for starting a restaurant business in India. This license guarantees the safety and quality of the food served.
  6. Pollution Control License: This license confirms that a restaurant business in India does not harm the environment.
  7. Shop and Establishment License: A restaurant owner needs to obtain a shop and establishment within 30 days.
  8. Eating House License: One needs to obtain this license from the Licensing Police Commissioner of the respective city.

Arrange the Workforce for the Restaurant

The types of staff needed in a Restaurant can be summarised as:

  1. Kitchen Staff: The term “Kitchen Staff” includes Chefs, Support Staffs, and Food Preparation Staff. Other than Chefs, rests two are mostly unskilled labour.
  2. Service Staff: This part comprises of waiters, food delivery boys, housekeeping staff, etc. These people have direct communication with the customer, so they must have good communication and training.
  3. Management Staff: The term “Management Staff” denotes manager, cashier, store manager, etc. These people must have knowledge and experience of their work.

Design a Unique Menu

Now the business owner needs to design a unique menu. A smartly crafted menu acts as a cherry on the cake for the restaurant and its profits. A unique menu includes dishes made from similar ingredients, dishes that need less time. For example, the menu of the food truck [2] contains dishes that are quick to make.

An individual must consider whether it wants to start a Multi cuisine or a single cuisine restaurant. For example, Multi cuisine includes Haldiraam, whereas Single cuisine includes Pizza Hut.

Arrange Suppliers and Vendor for the Business

Both suppliers and vendors are crucial for the smooth functioning of a restaurant. A store keeper at the restaurant can place the order for the raw materials to the suppliers. It will, as a result, reduce the cost of travelling and save the time of a restaurant.

Conclusion

Starting a Restaurant Business in India is best for an individual who wants to have high-profit margins. Also, customers choose that place which pleases not only their taste buds but eyes as well. However, the restaurant business in India involves a lot of documentation and licensing procedures. At Swarit Advisors, our experts will assist you in obtaining FSSAI License, GST Registration hassle-free. To make your dream restaurant a reality, contact our experts today.

Read, More:How to Start a Virtual Kitchen Business in India

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Shivani Jain

Shivani has completed her B com LLB (Hons) and has the experience of writing various research papers during her college time. Earlier she was working as an Associate in a Delhi based Law Firm, but her interest in writing made her pursue Legal Content Writing as a career. Her core area of interest is in writing about various legal enactments, tax, and finance.

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