Houston is one of the fastest-growing cities in America; it is the best destination for all food lovers. This place is known for its creative cuisine and food trucks. Houston is quickly becoming a must-visit place for all the foodies and chefs. But if you are an Entrepreneur in Texas, you may be thinking about how to open a restaurant in Houston to capitalize on this food craze.
If you are fond of food and have a dream of opening a restaurant in Houston, then you must follow some basic plans to make it successful in the long term. But before you plan to jump into the procedure, there are some points you need to follow for a successful food business:
Finalizing the concept of your restaurant
There are many key factors in opening a restaurant and finalizing a concept is the most essential one. You must have a solid plan or concept for your restaurant. Having an innovative idea will automatically uplift the image in the eyes of the customers, and will make your restaurant a more celebrated and exciting destination.
Hence, before you finalize the concept of the restaurant, do proper market research. Try and know what are the cuisines that customer like these days, what concepts are not properly exploited by the restaurant owners. So choose the one which is not adopted by many restaurants.
However, if a particular theme or idea has been consciously ignored by some restaurateurs, find out the reason behind it. Perhaps that audience and area are not appropriate for the concept, doing proper market research becomes quite essential to avoid potential failure.
Create an actionable business plan
You need to have an excellent plan for your restaurant, which involves, getting shareholders on board, budgeting properly, creating a great menu, having a professional chef and a technology partner, and hiring the staff according to the requirement. Hence, creating a business plan will be the first step towards making your dream of having a restaurant come true.
Make sure you have an indispensable prerequisite in your business, which also contains a business overview, SWOT analysis, industry analysis, financial analysis, operations plan, and marketing plan.
With all these things written in your business plan in a comprehensive manner, where you can return to now and then, you can hardly go wrong. It will solve all the queries you have in mind on how to open a restaurant in Houston.
Do comprehensive Market Research
Without having a proper understanding of the market in the surrounding area, you can hardly plan to have an upper hand over your competitors. Hence, you need to know which restaurants in a particular area are doing well and which are not, and the main reason behind the success or failure of the competitors in the market.
A comprehensive understanding of how the competitors are working in the market will also help you to get an idea of how to plan accordingly so that you can have the edge over them when your restaurant comes into play.
Promote your restaurant well
Unless you promote your restaurant well, you might not be able to stay within the sight of your customers. Venture into both offline and online marketing. Create social media pages for your restaurant and upload high-quality pictures and videos of the food, ambiance of your restaurant, and even the parties organized at your restaurant.
Running restaurant marketing campaigns is another way to attract customers. Before you plan to open your restaurant, you can set up stalls in front of the restaurant where you can give a free tasting of your special dishes. Prepare a proper marketing strategy that can help you a long way to make a mark in the restaurant industry.
Apart from these points mentioned above, there is some legality that needs to be followed before you plan to open a restaurant in Houston. The first one is:
Insurance
There are many types of risks involved in operating a restaurant, such as employees and customers falling or slipping on the premises, someone getting hurt from the broken glass of hot liquid, or someone becoming seriously ill from the food itself. There is the top of generic business risks such as theft, fire, or other sources of property damage or personal injury.
So it is always beneficial to try and work with an insurance agent who has experience in writing policies for restaurants. For property coverage, try to make sure that everything of importance, from stoves to plates is fully covered. For injuries to people, make sure that you have an excellent general liability policy.
This should not cover only the patron who slips at your restaurant’s front door, but also the one who becomes gravely ill from eating at your restaurant. And, if you do outside catering, make sure that you have proper vehicle insurance as well.
What are the types of insurance you need to open a restaurant in Houston?
All businesses in Houston need to have a certain type of insurance. Restaurants need basic business insurance policies like property, general liability worker’s compensation, and much more. But they also need specific insurance policies for liquor liability and food contamination. Policy costs can differ widely based on:
- Location
- Sales
- Square footage
- Building age and type
- Security systems and fire prevention
- Projected number of customers
- Inventory, technology value, and equipment
- Number of employees
You must have a handle on all those figures to get a comprehensive sense of what your insurance cost will be. Below is the type of insurance you need for your Houston restaurant and the ranges in policy costs.
General liability: It protects against any liability you have if someone is injured at your organization and can expand to lawsuits and other costs related to copyright violation, damaged reputation, food-borne illness, and property damage.
How much does it cost: $450- $6500 per year
Property insurance: It covers the entire property, which can be the building, furniture, equipment, and everything you own. If you rent the space, the owner will have property insurance, but you need to make sure that you are covering your contents inside the building. You might also need to know exactly about your policy covering earthquakes, other natural disasters, floods, and damage due to mechanical errors.
How much does it cost: $1100-$27,00 per year
Liquor liability: This is not legally required in Houston, but you should have it. Liquor liability insurance safeguards your business if an intoxicated patron commits any crime, damages property, or injures someone.
How much does it cost: $500-$3500 per year
Worker’s compensation: It is a type of insurance that all businesses must have, by law. It protects the employees from expenses due to on–the–job injuries, illness, and related lost wages. Worker’s compensation also comprises an employer liability compensation lawsuit which is filed against the restaurant.
How much does it cost: $1 per $120 of payroll
Business interruption insurance: It sets up a safety net for instances when you temporarily shut down your business due to damage from windstorms, fire, vandalism, and other sources. Check the policy properly for what the sources of damage are and are not covered, so make sure that the ones likely to pose a threat in your part of Houston are covered
How much does it cost: $800-%12,000 in premiums
Food contamination insurance: It will help you recover the losses stemming from food spoilage or contagion in the wake of a power outage.
How much does it cost: about $19,000 per year, but in high volume restaurant
Automobile liability insurance: It’s imperative if your restaurant does not have any delivery or catering using vehicles of its own. It also covers the accident-related damages including the repairs and any medical associated or legal cost
How much does it cost: premium range starts from $1300-$27,00 premiums
Before you set up the first table, you need to set up business operations, which mainly means forming a business entity and registering for federal and state tax identification numbers, and also obtaining business permits.
Select a business entity
Some options that need to be considered when choosing a business entity are as followed:
- Limited or general partnership
- Sole proprietorship
- Limited liability company
- Corporation
Each type has its own merits. However, restaurants have many people coming through the doors. There are also people engaged in physical activity and working with hot substances or fired on the premises. Because of these risks, you might want to consider a business entity type that limits your liability, like a corporation or LLC.
When you are planning on how to open a restaurant in Houston, keep in mind that there are few smart choices at the outset that can save thousands over the life of your business. Whether it is limiting accountability or determining the best possible structure for you, an experienced business law attorney can help. So don’t hesitate to consult with an experienced lawyer as you are planning to open a restaurant in Houston.
Securing a Tax Identification Number
Once you have formed the business entity, you might need to obtain an EIN from the internal revenue service. This is like a social security number for your business. It allows you to hire employees, open bank accounts, and pay taxes. Also, you might have to register for the tax identification number in Texas. This number is very similar to EIN, but it is how the state of Texas identifies you on local filings and state. As you are in the process of opening a restaurant in Houston, you may find the need for both these numbers in order of your social security number.
Obtaining permits
One of the main issues Texas entrepreneurs face is understanding which permits and licenses their new business needs. An experienced business lawyer can help you to navigate the permitting process. Some of the permits and licenses you might need are:
- Sales tax permit
- Health and safety permits
- Facilities Permit
This is not a comprehensive list. There are only a few licenses and permits you might need when opening a restaurant in Houston. You can also apply for the sales tax permit through the Texas State Comptroller’s online site.
Facilities permits, also known as most safe and health permits are typically handled by the local authorities. Check with the local fire department to see if you will need the crowd control permits or other location-specific permits. You might need to navigate these complex permitting regulations when starting a food business in Houston, Texas.
To assist you, the Texas Department of State Health Services has combined all the permits and license information for retail food business people. Experienced business law attorneys can help you pertain to the permits you have been looking for.
Let’s look at the checklist for How to open a restaurant in Houston, Texas:
Confirming the safety and health rules
There are several layers of safety and health rules when opening a restaurant. Be cautious not to get tripped up by the maze of regulations. In some cases, the permit rules apply to the restaurant; in some cases, they also apply to the food service staff.
Because restaurants are all about the people eating food, they are also subject to significant regulations regarding food and health safety. One version of the DSHS’s field inspection manual for food service establishments runs approximately 250 pages. There are a few of the many matters covered by the DSHS food establishment rules, which are:
- Employee cleanliness issues, like procedures for employee hand and arm cleaning
- Employee health issues, like reporting on employees who have a certain disease
- Standards of freezing, cooking, and reheating the food
- Standards of construction of utensils, measuring devices, and other types of equipment.
- Plumbing, waste, and water supply
- Disposal and garbage
- Sanitizing and cleaning utensils and types of equipment
- Physical facilities, like the construction of ceilings, walls, and floors
- Ventilation
With the food organization rules in mind, you can anticipate regular monitoring from your local health section. Health Inspection authorities usually have a lot of leeway concerning what they can examine, and health assessment can cover a broad choice of items in your restaurant.
As suggested by the DSHS regulations, the inspections can cover not only the food itself, prepared and raw, but also the refrigeration system, waste disposal, and cooking equipment in many other areas. Be aware of the local health authorities publishing the results of their inspections online.
Apart from the state regulations and the health and safety of the restaurant workers, the federal occupational safety and health administration also has a variety of regulations relating to, among other things, hand protection, eye and face protection, and walking-working surfaces.
There are also three types of food establishment permits- fixed establishment, temporary establishment, and mobile food unit. Permit fees fluctuate based on the gross annual volume of sales. Speaking with a Texas business lawyer will help you immensely when navigating which health and safety rules apply to you.
Getting a liquor license
It is something to keep in mind when opening a restaurant in Houston is whether you want to serve liquor. If you do, you have to get a liquor license. Liquor licensing is handled through the Texas Alcoholic Beverage Commission.
The liquor licensing process can be a little complicated and time-consuming. You should take that into consideration when planning the timeline for opening a restaurant. A trusted lawyer can also help to guide you through the licensing progression.
Hiring Employees
Once you have decided on the business entity and taken all the necessary steps to create your business, now it is your time to hire a team. For some, this is the most exciting part of the process. Because of the high turnover in the restaurant market, be sure to consult with a lawyer before you make your first hire.
Make sure to have strong employment procedures and policies in place. Clear, robust, and firm rules help create an equitable and safe workforce for all.
Open a business account in Bank
Once you have the entity documents, like articles of incorporation, organization minutes, and an EIN, you can open a bank account for your food business. Make sure you pick a business-friendly bank that does not charge you high for depositing or withdrawing money.
Pick up a location or sign a lease
If you plan to have a physical parking location for the restaurant in Houston, then you need to start looking around the city for the best location. Depending on the available spots, you need to start negotiating with various landlords to make sure that the agreement is with the type of food you will be serving and that they are okay with you.
Also, make sure that there is ample parking for your customers nearby so that they can park easily. Also, keep in mind that the zoning is correct for the restaurant business. This means only certain areas of the city and county allow a certain type of business in certain areas.
Make sure that you take a copy of the lease and review the details. If you prefer, you can have a real estate or business attorney review the lease to make sure no clause in the lease will hurt you financially later.
Design your restaurant layout and look
You need to make sure that the layout of the restaurant is consumer friendly and attractive. Make sure the restroom is located in the area so it is easily accessible for customers and staff. Your kitchen layout is also set for utmost competence, particularly during busy hours. It is also advisable to work with an architect and designer who exclusively works with restaurants.
Order equipment, materials, and supplies
Many kitchen items are on backorder especially due to the shortage of materials. Hence, it is recommended to order the equipment, shelving, and other kitchen items as soon as possible. This might take months due to backorders. You may also consider visiting some places and storehouses to check the equipment and furniture that might be more cost-efficient than ordering new ones.
Obtain and apply for Merchant Credit Card Service
The smallest business accepts credit cards now. So, if you wish on accepting credit cards with your business, you might need to check with your bank and make sure to apply for Merchant credit card services so you can start accepting credit cards. Make sure your merchant credit card processing works with the POS system that you will be using. You want to be able to process payments right within the POS system, so you need to find POS integration services for restaurants.
Start advertising and set up a website
Starting a business is not easy. You need to get the word out in Houston and nearby places. Set up a website for your business and start promoting it online. Your website should have prices, a menu, and what times are you open. If you have any happy hour running or any special event, make sure it is mentioned on the website.
You should also go about investing in a mobile application for a restaurant.
Train and hire employees
You need to determine if you want employees to run your restaurant business or if you will be starting it solely with your family’s help. If you do need employees, then hire a payroll company or an accountant who can help you set up the payroll for the employees. You also need to have each employee fill out a form, i-9 form, and employment application and provide it to your payroll company.
Once you hire the employees, you also need to start training them to make sure they learn to serve the customers properly. Employees when properly trained help run a smooth business.
Schedule a Grand opening
It is imperative to plan a date for the Grand opening of your restaurant business. This is the only way you can make sure all your systems are working properly. We also recommend you do a soft opening first where you can invite your friends and family and have them try your food.