How to Open a Restaurant Successfully
How to Open a Restaurant Successfully

Eating out frequently is becoming a norm in metros as well as smaller cities. An increasing number of people go out to celebrate special occasions, and thus restaurants business in India is in the limelight. Starting and running a restaurant successfully is a difficult task and requires more than just perseverance. It is a capital-intensive business and needs the right planning and execution skills to be successful.

Notwithstanding the economic risks and strict working hours, the restaurant business is a rewarding entity. According to data compiled by the 'National Restaurant Association Of India (NRAI),' the restaurant industry is growing at a 9% annual growth rate (compounded). However, starting and operating a restaurant requires funds, and one way to procure money is througha restaurant business loan.

Eating Out


Things to consider before starting a restaurant:

Concept of your restaurant: The concept of the restaurant implies the type of cuisine and the theme of your restaurant. The ambiance of your restaurant is paramount in making the right kind of impression on customers. It would help if you had a rough idea of the average price that a customer can spend based on which your investment hinges. Once you have decided on your business plan, you can apply for a restaurant loan from financial institutions.

Different cost factors involved in starting a restaurant: Starting and running a restaurant has significant input costs. Some of the cost factors to consider in calculating the overall cost are:

Ø  Food cost - Food cost includes all the raw materials and ingredients required to prepare a dish. Ideally, food cost is 30% of the cost. Vendors supplying raw materials must be selected, and the necessary ingredients should be well-stocked. 

Ø  Labour cost - After food, human resources required to run a restaurant efficiently is the most significant expenditure incurred. It can be categorized into three segments:

ü  Kitchen staff: It comprises chefs, support staff, etc.

ü  Service staff: It includes housekeeping, waiters, etc. who interact with customers

ü  Management: Manager, chief chef, cashier is all-inclusive in the management staff.

Ø  Overhead cost - The overhead cost includes factors such as:

ü  Rent: The restaurant's rent is a significant expenditure and is based on the restaurant's location.

ü  Interiors: the interiors define the theme of your restaurant and set the tone.

ü  Kitchen equipment: Purchasing the right kind of equipment for the kitchen is costly but is necessary.

ü  Marketing: Marketing restaurant is essential, and both offline and online methods should be deployed to create a buzz among the people.

Location of restaurant: The success of any restaurant depends a lot on the location. Proper research is needed to determine the competition; the cuisine offered etc. Easy accessibility and proper visibility should be the main criteria before selecting the location of your restaurant.

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Different licenses required to start a restaurant: You need different types of licenses to run a restaurant in India. The cost in acquiring these licenses varies and depends on the venture size. Some of the licenses required are:

ü  Trade license: The municipal corporation issues the trade license and must be renewed every year. The license cost may vary between Rs 10000 to Rs 1 lakh depending upon the restaurant size.

ü  FSSAI: The ‘Food ssafety and sstandardsAuthority of India (FSSAI)' is the nodal agency to issue a license for food business in India. The permit may cost between Rs5000 to Rs 10000.

ü  GST Registration: GSTIN number is a necessity in running a restaurant business in India.

ü  Professional tax license: A professional tax license is required for a restaurant as it employs salaried staff earning Rs.10000 or more per month.

ü  Business registration: a restaurant must file annual IT returns and should be registered.

ü  Some other licenses, such as fire safety, pollution control, etc., are also required.

A stellar menu: While designing a restaurant, it is essential to include dishes that can be made using locally obtained ingredients. The restaurant menu should lure customers into spending more on dishes, but the pricing should be appropriate. Cuisine serving the demand of customers should be in focus.

Install the right technology: Managing a restaurant is tough, but the right kind of software can help in streamlining the operations with ease. Niche software solutions to run a restaurant is now available for smooth operations and must be procured. It is the right kind of investment for the restaurant business.

Food Menu


Arrange the funds for restaurants: The paucity of fund is a major hindrance to starting a restaurant. Once the business plan elaborating the amount of capital required to open a restaurant is finalized, an individual can approach financial institutions such as banks and financial companies like Lending Kart for arranging the funds. 

Loans for a restaurant come under the business loan category, and financial institutions extend the credit finance to eligible candidates easily.

Features of restaurant business loan

ü  Restaurant loans up-to Rs 2cr (depending on the lender) can be applied for by an applicant.

ü  Restaurant business loans take less time to process, and digital documentation cuts downtime.

ü  Quick loan disbursal by financial companies like Lending Kart(within 3 days) in comparison to traditional banks.

ü  Restaurant business loans are collateral-free. There is no need to pledge any asset as security.

ü  There is complete transparency in offering loans with no hidden costs involved.

ü  The interest rates charged by lenders vary and depend upon many factors like credit history, business stability, location, etc.

ü  The restaurant loan comes with a Flexi-loan repayment facility. An applicant can select from different loan tenures according to convenience.

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Eligibility criteria to get a restaurant loan:

ü  The restaurant location should be favourable.

ü  The restaurant should be operational for a minimum of six months.

ü  For a restaurant to qualify for a loan, the average turnover of the said entity must be Rs 90,000 or more for the three preceding months before loan application.

ü  Blacklisted business entities are not entertained for loans.

ü  The credit score of the applicant is also taken into consideration before sanctioning the loan.

Documents required to apply for a restaurant loan:

The following documents are required to avail a restaurant loan:

ü  Identity proof: PAN card, Passport, Driving license, Aadhar card.

ü  Address proof: Aadhar card, Voter ID, Ration card, Utility bills(Phone bill, electricity, water)

ü  Bank statements for the last six months

ü  Business proof

ü  Passport size photos

ü  IT returns for the last two financial years.

Charges that apply:

The overall charges, including fees that an applicant has to pay for getting a restaurant loan, are as follows:

Interest Rates

 15% to 27%(depends on lender and factors)

Processing fee

2-3% (one-time charges that vary)

Loan Amount

Rs. 50,000 to Rs. 2cr.

Repayment Schedule

Monthly or Bi-weekly

How to apply for a restaurant loan online?

Three simple steps to avail of restaurant loans are:

Step 1:Fill in the loan application form by providing necessary details.

Step 2:Upload all the required documents (already mentioned) for the verification process.

Step 3: Once the verification of documents is complete, the loan is approved, and the money is sanctioned to the account.

Changing lifestyles and transforming food habit is fueling the growth in the restaurant business. People prefer to dine out and try new cuisines. Changing demography is another reason for new and thriving restaurant chains coming up across the nation. But the restaurant business is highly competitive and capital intensive. Apart from self-funding, an applicant can approach financial institutions for restaurant loans that are made available at competitive rates to eligible applicants. It is an easy way to secure the money and start or run your restaurant business smoothly.

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