Growing a business is all about expansion and for many food businesses, the obvious way to grow is to open a new restaurant. This might mean using a rental space or licensing a kitchen as your very first commercial set-up as a fledgling small business. Or it could be opening in a new location if your first restaurant, or restaurants, have done well. But is that actually the best business decision? Let’s take a look.
Opening A Restaurant Feels Like A Logical First Step For Many Food Businesses
Restaurants offer food businesses a lot of benefits. They give you access to new customers, the space to prepare more food and the opportunity to serve more customers per day, increasing your profits. A restaurant or cafe gives food businesses that had previously been based at home or at market stalls a more permanent location, somewhere customers can come back to. Restaurants help to establish a brand within the larger market.
Renting A Restaurant Is A Big Gamble
But opening a restaurant is a significant gamble. For small food businesses, it’s a big leap of faith. Even for food businesses that have found success with one restaurant, a second location doubles the pressure to succeed.
If you are going to open a new restaurant, you need to be aware of the risks so you can accurately weigh them against the potential benefits.
Restaurants Are Expensive
The financial burden of opening a new restaurant shouldn’t be underestimated. Profits for restaurants are on average between 2% and 6% – that’s not a huge margin. Full-service restaurants are at the lower end of that scale, which can be hard to attain if you are a new restaurant trying to get your name out there and draw in customers.
If COVID-19 has taught restaurants anything, it’s the slimness of this margin when your primary source of income, dine-in customers, disappears. Even before the pandemic, foot traffic could not be relied upon. Rain can put off customers. Tube strikes can stop people getting to you. An abundance of similar and more established restaurants can leave your tables empty more often than not.
Restaurants are expensive to run for lots of reasons so you need to ask…
Can You Really Afford To Rent A Restaurant?
Restaurant rental isn’t just about getting a space. You need to find one in the right location, hire more staff and furnish the space – both the kitchen and dining area. Each of these areas has an impact on the overall costs of getting your new restaurant up and running.
Finding The Best Locations Will Inevitably Increase The Cost Of Renting Your Restaurant
Finding the right location for your restaurant is difficult, even if budget is taken out of the equation. Locations that guarantee plenty of footfall are going to be in prime places like high streets or busy areas of towns and cities. This inevitably drives up the cost of renting a restaurant there.
Prices will vary, but a typical London restaurant costs £70,000 minimum per annum, and that’s just the rent. It doesn’t include any other building fees or bills for electricity, gas and heating.
The Cost Of Hiring Staff Is More Than Wages, It’s Training And Time Too
For a new restaurant you’ll need to hire more staff. That’s more people in the kitchen and more people front-of-house too. If you are opening your first restaurant and don’t have any experience, you’ll need to hire someone to manage your floor and/or kitchen.
You can’t be everything to everyone in your restaurant. Yes, you can play a part in service, but you’ll also be performing the duties of the person who owns the business – marketing, business planning, accounting. It’s a lot to take on. If you try to make savings by hiring fewer staff, you’re more likely to burn out and make mistakes. And that could be the end for your restaurant.
Even if you already have one restaurant and are opening another in a new location, you won’t have enough skilled staff for both restaurants. Hiring people without experience is cheap and they may have lots of potential, but you (or an experienced team member) will need to spend time training them, in service and about your food. As we all know, time is money. But it’s money you have to invest.
Restaurants Need Kitchen Equipment, Practical Furnishings And Your Brand’s Stamp Of Style – And That’s Not Cheap
You might think renting a restaurant means you’ll be set up for kitchen equipment and furniture, but that’s unlikely. Previous tenants will take their equipment with them, or if they leave it behind it probably means it’s inefficient or defective. Setting up a kitchen is about more than cookers and ovens. You need counter space, cold storage, frozen storage, washing up areas (that are large enough for your size of service), areas for plating and for wait staff to retrieve dishes.
Then there is your service area. You’ll need tables and chairs for diners, and you’ll need all the cutlery, glassware and table covers. You’ll also want to put your brand’s stamp on the space, painting the walls and making sure you have quality flooring, lighting and proper heating. You need to create an inviting atmosphere that ensures diners enjoy their experience.
Licensing A Commercial Kitchen Is More Cost Effective
An alternative to opening a new restaurant is licensing a commercial kitchen. Commercial kitchens, such as Foodstars’ facilities, are like apartment buildings but for food businesses. You get your own kitchen, with built-in infrastructure, but at a much lower cost than renting a whole restaurant.
Why License A Kitchen Instead Of Renting A Restaurant?
If your goal is expansion, then licensing a commercial kitchen serves that goal but at a lower cost and with less risk than renting a restaurant. There are lots of benefits to commercial kitchens over restaurants.
Lower Start-up Costs
Units in commercial kitchen facilities have already been set up so that food businesses can move in and start operating quickly and efficiently. All the aspects of creating a workable kitchen, such as gas and electricity connections and health and safety compliance, have already been taken care of. All you need to do is choose what cold and frozen storage and equipment you need, then move in.
Skipping these start-up costs will make a huge difference to your food business’s financial burden while making this growth step.
Kitchens You Can Grow Into, And Expand Further
Upgrading to a larger or additional kitchen will give you the increase in capacity to serve more customers. What’s great about working with a commercial kitchen facility is that if your brand really takes off, you can expand into a larger space, taking over more kitchens in that location or opening in new locations as part of the network of commercial kitchens.
Yes, you’ll still need to get in more staff and train them, but without the start-up costs, this becomes much more manageable financially. Plus, you won’t have a front-of-house, so you can focus on building skills in your kitchen team.
Commercial Kitchen Facilities Are In Popular & Accessible Areas
Part of the trouble with choosing the right place to rent a restaurant is finding a location that is close to customers and easy to travel to/from so you can make deliveries to other towns and cities. Commercial kitchen facilities, like Foodstars, have done this research for you.
All our locations have been selected because of their built-in customer base, whether they are close to residential areas or business districts, or both. They are also near access routes, making it easy for you to get on the road and deliver to markets and other towns and cities.
Access also means being close to public transport so your staff can easily get into work.
Expand Your Kitchen Into Delivery, Rather Than Into A Restaurant
Food delivery boomed during the pandemic, but it was on the rise beforehand and looks likely to continue being a popular choice, even now in-person dining is available again. Expanding your business into food delivery, using a commercial kitchen, is a much safer bet for your business.
If you license a kitchen with Foodstars, you also get the added benefits of the kitchens being set up for delivery. This means there are collection areas, with access for delivery drivers, as well as the ability to use POS systems to see all your orders as they come in and go out. Getting onto food delivery apps gets you in front of more customers. Licensing a commercial kitchen allows you to deliver easily. All you have to do is take care of the food!
Ready To Sign-Up?
To get started and look at licensing your new commercial kitchen, you can get in touch with our team and discuss your food business’s requirements. You can take a tour of a Foodstars location near you, or in an area you want to expand into. You could be moved into your new kitchen in just a few days. So what are you waiting for?