How To Open A Small Restaurant With No Money

How To Open A Small Restaurant With No Money

Anyone who loves food has likely dreamed of opening a restaurant at some point or another. But like many before them, your ideas have likely been met with derision and that obnoxious stat that about 30% of restaurants fail within the first year.

Yes, restaurants are a risky venture, and it’s difficult to start any business when you’re short on cash, but that doesn’t mean you can’t or shouldn’t try to follow your dream.

It may just be easier to start small. While opening a small restaurant is still expensive, it’s more achievable than diving straight into a 50-table fine dining experience. You’ll just need a lot of everything that’s not money: vision, work ethic, guts — you name it.

In this article, you will learn how to open a small restaurant with no money.

What do you need to open a small restaurant with no money?

Being short on money is a navigable problem. Being short on ideas or inspiration is not. Here are the steps to take to open a small restaurant with no money.

• Come up with a concept: You probably already had a small restaurant idea before you even clicked into this article! This is just the layup step to get you going.

• A restaurant business plan: Now things get a little tougher. Your restaurant business plan is essential and should be very well thought out before you go pursuing capital. Your business plan demonstrates that you’ve thought through the day-to-day operations and long-term financial goals of your small restaurant and understand what you’ll need to do to make a profit within a reasonable timeframe. Potential investors and lenders need to see this.

• Restaurant capital: We’ll get into this later, but you need to find money somewhere!

• Licenses and permits: Different states have different licensing and permit requirements. Make sure you know what’s needed in your location and understand the extra costs associated with licenses and permits, especially if you plan to serve alcohol.

• Menu: Coming up with menu ideas is another fun step, and one you may have already thought about when exploring your small restaurant concept. Ideas are one thing, though, menu costing is the next important step to understand how much you must charge per plate to make a profit.

• Restaurant staff including FOH, BOH, and managers: Hiring isn’t your first priority, but you should take some time to figure out what kind of staffing you’ll need to operate your small restaurant from the start.

• Restaurant technology: In recent years, restaurant technology has exploded in popularity and quality. Technology can help your small restaurant in myriad ways, from scheduling and payroll to recipe costing. Check out our rundown of the 9 most important types of restaurant technology for inspiration.

• A marketing or promotional plan: The restaurant industry is extraordinarily competitive and you’ll need to find your niche quickly. Coming up with a marketing plan will help you hit the ground running with outreach to customers and building excitement in the community, turning one-time visitors into lifelong patrons.

• An opening date/launch plan: An addendum to your marketing plan, your launch plan lays out the action items in the days and weeks leading up to your small restaurant’s official opening. Will you have special pre-tastings? Will you open for certain exclusive events before your official launch? Are you offering a special on launch day? Whatever your plan, think it through thoroughly.

How much does it cost to open a small restaurant?

The average startup cost for a small restaurant is $375,500, but largely depends on location. Real estate is, of course, more expensive in certain cities and you may have more licensing and permit fees in urban areas. It’s more affordable to lease an existing restaurant space than to renovate a new one.

How to open a small restaurant with no money?

If you don’t have $375,000 lying around, don’t fret! You can still open a small restaurant with no money. Let’s discuss some of your options.

Use a restaurant incubator

Restaurant incubators are like startup incubators — they’re places where you can test your idea and get guidance from experienced leaders before you bring your small restaurant idea to the public. These shared spaces offer kitchen facilities for you to work on your restaurant concept, test menu items, and potentially get financial support to get started.

The benefits of an incubator may include:

• Equity-free capital

• Business development training

• Mentorship programs and workshops

• A community of supportive culinary professionals

There are incubators all over the country, from giants like yogurt company Chobani Incubator to more local programs like Portland, Oregon’s KitchenCru.

Apply for restaurant loans or explore capital opportunities

You always have access to restaurant financing options, but they may function slightly differently than other small business or personal loans you’ve taken out. Restaurant loans often have very specific terms, so going through each option with a financial advisor is important.

That said, in the general sense, anyone seeking to open a small restaurant may have access to business loans, community development loans, micro-lending programs like the Small Business Association (SBA) loan program, and alternative lending programs. Your local restaurant association or Rotary Club could help you find even more potential financing options at a local level.

Alternative lending programs have become increasingly popular in the restaurant industry as restaurant-specific lenders understand the unique nuances and challenges of the restaurant industry. These programs can help build a loan repayment program and terms that make sense for your small restaurant and could function like investors, giving you guidance and coaching to enjoy greater success.

Find an investor

While finding an investor can be time-consuming, it doesn’t mean there’s no way to find a restaurant investor. You’ll need to absolutely blow an investor away to win a restaurant investment.

A better option may be finding an angel investor. Angel investors are people who get behind an idea more for the people involved or the concept rather than the potential for a massive financial windfall. They may just want to see a nice new restaurant open in town. An angel investor could be a family member, friend, or someone in your community who believes in your idea. You’ll just have to lean on your network to discover opportunities and people who may want to invest in local talent or businesses.

Get creative with crowdfunding

Believe it or not, crowdfunding is an option for restaurants. You don’t see a lot of restaurants on sites like Kickstarter, Indiegogo, GoFundMe, and WellFound, but they do exist, and these sites can be a good way to get some startup capital.

If you go the crowdfunding route, expect a tough marketing challenge. You’re probably not going to get donations from all over the world, so you need to advertise your campaign locally and offer great incentives to those who donate. You’ll have to tap into the local community to build their enthusiasm for your restaurant, explain to them why your restaurant will have a positive impact on the community, and encourage them to donate by offering great freebies in exchange for their support.

Start small

Yes, you’re starting a small restaurant, but you could start even smaller. Pop-ups and food trucks are great ways to get a proof of concept of your small restaurant idea without diving all the way in. Many pop-up restaurants have built off their initial success to become fully-fledged restaurants.

By trying out menu ideas and a restaurant concept in a pop-up or food truck, you can see what works, what doesn’t, and hone your idea while potentially making a little money too to fund the eventual hard opening. (All while making a more minor upfront investment.)

Reach out to your local restaurant association

Finally, local and national restaurant associations are great resources for anyone aspiring to open a small restaurant with no money. You could find leads on restaurant space, potential investors, or just find guidance to master your idea.

These are some of the best resources to check out:

• The National Restaurant Association, which offers events, webinars, and more about restaurant growth and advice for small businesses.

• Your state restaurant association, which may offer specific programs or perks to help new restaurant owners and will clue you in on what you need to do to be successful in your area.

• Local groups like rotary, which support businesses and encourage idea exchange all over the world.

Think big, start small

Opening a restaurant is expensive, even if you’re just trying to open a small one. But if you don’t have money, you can still open a small restaurant. You’ll need to tap into every ounce of vision, passion, and grit to do it, but it’s certainly possible. Take the time to really think through your idea, document it well in a business plan, and learn how to pitch it to potential investors. Then get out there and start getting people as excited about it as you are.