reference should be made to the Business Start-up Info-Guide for
your region (Alberta,
and Labrador, Northwest
Edward Island, Quebec,
for information on the steps involved in establishing a new business.
Starting a business can be a rewarding undertaking, but it comes with its
challenges. Before starting a business in Canada, it is wise to do your
research. You should also make sure you are suited for entrepreneurship,
and understand that significant effort may be required. As such, you should
thoroughly enjoy the field you are getting into, and you must believe in
your product or service as it may consume much of your time, especially
during the start-up phase. There are many issues to consider such as regulations,
financing, taxation, managing your business, advertising, and much more.
For more information, see the Checklist
for Going Into Business.
The following is additional information to consider:
TABLE OF CONTENTS
1. Industry Overview
2. Licenses, Permits and Regulations
3. Managing Your Operation
6. Additional Information
9. Web Addresses
- demanding - expect long days, often 10-15 hours per day. You must
excel in many areas such as food preparation and service, management,
marketing, meeting people; purchasing, inventory control and personnel
- governed by federal, provincial and municipal laws. Understand all
pertinent regulations before making any decisions, especially before
purchasing or leasing a building.
A few years ago, the statistical bodies of Canada, the U.S. and Mexico got
together to come up with a classification that was the same for all three
countries, so that data collected in all three countries on a specific industry
could be compared accurately across country boundaries. This system is called
the "North American Industrial Classification System" or NAICS
- NAICS codes are:
- 722110 Full Service Restaurants
- 7222210 Limited-Service Eating Places
Types of Operation
Depending on your experience, finances, location and customers, decide
on the type of restaurant:
- cater to a variety of customers;
- must excel in service, food preparation and inventory control due
to lengthy menus;
- popular in tourist areas, but declining in general.
- highlight food from a particular country or region;
- must offer personal service with excellent cuisine.
- offer one food type or a variety of a certain dish;
- best in urban areas;
- owners should have lots of restaurant experience.
- offer a wide variety of quick, pre-prepared dishes;
- heavy traffic flow is needed for high customer turnover.
- normally franchise operations offering limited menu. For more information
regarding a franchise, see the document Checklists
- attractive to beginning operators
- offer simple, pre-cooked hot dishes and cold plates;
- large transient population is needed;
- controlling labour costs can be difficult.
- small operations offering take-out or eat-in;
- location, efficiency and good food are critical;
- easiest type of restaurant for the beginner due to low initial capital
outlays and minimal payroll requirements.
Choosing the right location for your business is important. Considerations
include the needs of your business, where your customers and competitors
are, and such things as taxes, zoning restrictions,
noise and the environment. For most businesses, an appropriate location
Layout and Design
Aim for a practical, useful layout, while setting the mood. Make sure
- seating/waiting areas, serving room, cashier area, rest rooms, bar
- one or more areas from which you can view the entire restaurant;
- lighting, signs and obstacle-free traffic flow;
- a variety of seating arrangements: 50% of customers come in pairs;
30% come alone or in groups of three; and 20% in groups of four or more;
- adequate room - the suggested square footage requirements per chair
are: 10-20 sq. ft in traditional restaurants, 10-12 in cafeterias, 7-17
in coffee shops;
- a kitchen that allows efficient and effective food preparation and
interaction between staff, safety in movement, dry and cold storage,
dish washing, an area for staff's personal items, convenient delivery
zone, ease of cleaning and maintenance, and proper ventilation and lighting.
Calculating Seating Capacity
To determine the maximum potential of your restaurant and break-even point:
1. determine desired profit - convert to percentage of sales to get sales
2. determine number of operating days - divide number of days into sales
to get average daily sales;
3. estimate volume percentages for meal periods (breakfast, lunch, dinner);
4. multiply figures in step 3 by average sales per day to get dollar volume
5. determine average check per meal period;
6. divide dollar volumes in step 4 by average check for the number of
patrons per period;
7. estimate a) average seat occupation per meal period; and b) time per
8. divide time per period by average occupation to get seat turnover per
9. divide possible seat turnover into number of patrons to get number
of seats required per period;
10. take the largest seating requirement in step 9 and add a 20% safety
margin for the seating capacity.
Preparing Menus and Setting
the Right Price
your menu carefully. Know what items your customers prefer and how they
like them prepared. Provide variety while maintaining stable cost averages.
Menu prices are a combination of food costs and what is needed to meet
expenses and realize a profit. Generally, the price of an item is approximately
three times the food costs, depending on restaurant type, operating expenses
and competitors' prices. To establish pricing:
- estimate your sales - counter-balance higher cost items tagged with
lower markup, with higher markups on lower cost items;
- maintain a desired overall food cost percentage, usually 33-40% of
gross sales, and a normal margin of profit;
- balance items ranging in popularity - monitor high demand items which
can determine your success.
to table of contents)
2. LICENSES, PERMITS AND REGULATIONS
One area of rules and regulations that all new businesses must comply
with is that of licenses, permits and regulations. When creating a business,
the entrepreneur must contact the municipality involved, along with the
provincial/territorial and federal governments.
Each municipal government has the authority to issue its own business
licenses within its jurisdiction. Since there is no uniformity throughout
the country regarding municipal licenses for businesses, you should consult
with the appropriate local officials to determine whether your business
will be affected by local regulations and licensing requirements. Businesses
(including home-based businesses) must also meet the zoning by-laws that
control property uses in their municipalities.
Examples of licenses, permits and regulations that could apply to you
when starting your restaurant may include, but are not limited to:
- vendor permit
- building permit
You can get permit, license and regulation
information by contacting your province/territory, local city hall, town
or village office or rural municipal office. Contacts for local, provincial/territorial
and federal governments can be found in the government listings of your
telephone directory or on the Government
of Canada Web site.
to table of contents)
3. MANAGING YOUR OPERATION
Insurance needs for businesses vary greatly.
It is best to choose an insurance agent or broker familiar with your size
of business and, in particular, an agent familiar with your type of operation.
If you don't have an insurance agent, it could be a wise decision to ask
other business owners in your area to recommend one. Your local restaurant
association may also have information about insurance packages specifically
tailored for restaurants.
The following list is included to remind you not to overlook the complex
areas of business insurance. It is best, however, to discuss your specific
requirements with your insurance agent.
- fire insurance (extended coverage on buildings and contents);
- liability insurance;
- burglary protection (theft coverage);
- dishonesty insurance (covers thefts by employees).
Word-of-mouth advertising and good public
relations are often the best ways of promoting a restaurant. Depending
on your market and its size, also consider flyers, newspapers (especially
for holiday promotions), radio, TV, the business pages of the telephone
book and the Internet. Also bear in mind that a satisfied customer is
A Web site should have details to describe the location (your restaurant's
address, telephone and fax numbers, and directions on how to get to your
restaurant), hours of operation, menus, and anything else you think may
be of interest to potential customers. However, once you launch a Web
site, you must update it on a regular basis.
Participating in community events is another way of advertising your restaurant.
You may also hold events that will promote your restaurant, i.e. have
a wine or beer tasting evening and choose the menu to suit the occasion.
For more information regarding advertising and marketing, see the following
The Online Small
Business Workshop - Marketing Basics covers the basics
from developing your customer profile to promoting your business.
The federal Competition Act governs misleading advertising
and deceptive marketing practices for all businesses in Canada. The Act
defines which marketing practices are illegal and the process of complaint
For more information, consult the Competition Act - Misleading
Advertising and Deceptive Marketing Practices, administered
by Industry Canada or visit the Competition
Bureau Web site.
Successful businesses have extensive knowledge about their customers and
their competitors. Acquiring accurate and specific information about your
customers and competitors is a critical first step in market investigation
and development of a marketing plan.
In developing a marketing plan, your primary functions are to understand
the needs and desires of your customer, select or develop a product or service
that will meet customer needs, develop promotional material that will make
the customer aware and ensure product or service delivery.
A good record keeping system should be simple to use, easy to understand,
reliable, accurate, consistent and designed to provide information on a
Note: All staff working with cash should be trained to recognize
counterfeit currency (see document Security
Features for Canadian Bank Notes).
The legal requirement concerning financial records specify only that they
be a permanent, accurate and complete record of your daily income and expenses.
There are many types of record books and bookkeeping systems available.
- double entry bookkeeping;
- commercial bookkeeping systems;
- one-write systems;
- computerized systems;
- single entry bookkeeping.
The use of professional services is essential to the success of a small
business. Professionals can provide knowledge and expertise in the areas
where you may have little. They can round out your management team to ensure
your business is operating efficiently.
As an entrepreneur, there are four main areas of professional services with
which you may consult:
Furnishings and Equipment
Before you open your restaurant, you will
need tables, chairs, lighting and decorative items. You will also need
kitchen, bar and dinner wares. The menu, size of restaurant and kind of
service will determine the type of equipment you will require. For assistance
in this area, you may get the advice of a sales representative or consult
trade publications and manufacturers' Web sites. List that equipment and
its cost to you. An important factor to consider when choosing equipment
is the after-sales service and repair and their affordability.
Used Equipment - Consider buying used equipment as a cost-saving
measure. Sources of used equipment could be a restaurant that is closing
or dealers in second-hand equipment. The drawback to this approach is
that, often, there are no guarantees with the purchase.
Leasing Equipment - Another alternative is to lease equipment to
help keep start-up costs down. To obtain financing for capital leasing
for new or used equipment for the creation of your business, see the document
Leasing Pilot Project.
For more information on parts and materials, overhead, stock control and
pricing, see the document Business
Plan for Small Service Firms.
On Industry Canada's Web site, you may also want to consult the section
a Pay System
Pay administration is a management tool that enables you to control personnel
cost, increase employee morale, and reduce workforce turnover.
the Right Price
Setting the right price can influence what consumers will buy, which in
turn affects the total revenue and the profit. In the end, the right price
for the product/service is the price that the consumer is willing to pay
for it. Hence, correct pricing decisions are a key to successful management.
In the restaurant business, you must have procedures for controlling inventory
and costs. Ask people in the industry for information about procedures for:
- Purchasing - Most of the time, purchasing is done over
the telephone, by fax, or online. Often no contract is signed between
the purchaser and the supplier; therefore, it is essential that you
choose your supplier carefully.
Develop specifications on food brand names, size, quantity, grade/weight,
delivery time/place, emergency deliveries, availability and policies
for substitutes or damaged goods. Entertain bids from multiple sources
and get the best product for the lowest price. Use a Purchasing and
- Receiving - Check all deliveries against the Purchasing
and Receiving Form, focusing on three things: quantity, price and quality
(i.e., temperature: frozen goods must be frozen); packaging should be
intact. Make sure specifications are met. Careful recording will show
short shipments, price variations and weight differences.
- Budgeting and Projecting - Establish a cash budget and
maintain cash flow projections on a continual basis.
- Calculating Monthly Food Costs - Determine the actual
cost of food consumed and the actual cost of food sold. This is a combination
of opening inventories, purchases, adjustments and closing inventories.
This ratio should remain relatively constant.
- Calculating Beverage Costs - Record all bottle deliveries
- Preparing Food - Make sure staff understand portion
sizes (photograph entrees or give written instructions) and set up a
recipe reference file to list dishes, portions and supplies needed.
- Storing - Ensure refrigerated and frozen products are
quickly placed in a cold storage- storage temperature for dry goods
(between 10-21 C) and frozen goods (-18 C or less). Rotate your stock
to ensure that oldest items are used first before the new stock.
Making a profit is the most important -- some might say the only objective
of a business. Profit measures success. It can be defined simply: revenues
- expenses = profit. So, to increase profits, you must raise revenues,
lower expenses, or both. To make improvements, you must know what's really
going on financially at all times.
You can find additional information on managing your operations, by viewing
our index of popular
Complete Article: http://www.cbsc.org/alberta/