Opening a restaurant is exciting and challenging, but it takes a lot of planning and work. It would be best if you considered where your restaurant will be, what you’ll serve, who will work there, and how you’ll let people know about it.
Before you open, you’ll need to get the necessary permissions and licenses and prepare a restaurant business plan. Focusing on gaining a competitive advantage and making your restaurant different from others is important. You also need to create your restaurant marketing plan
One of the questions before opening and planning out a restaurant idea is how to open a restaurant with no money?
This article will show some ways to get money to start a restaurant. To learn more about opening a restaurant, check out our complete guide on how to start a food business.
18 ways to get money for opening a restaurant
1. Start a virtual restaurant and sell food online from home
Virtual restaurants, also called ghost kitchens or cloud kitchens, are small businesses that offer delivery or takeout exclusively. It does not have a physical storefront or dining area for customers.
If you are wondering how to start a virtual restaurant, check out our guide.
An essential part of a virtual restaurant’s online presence is having a website. We have compiled a simple guide outlining the steps to create a website for your restaurant. Here you can check how to create a restaurant website.
After building a restaurant website for your virtual restaurant, the next step is setting up an online ordering system. We have compiled a comprehensive 10-step guide to show you how to set up an online ordering system on your restaurant’s website.
2. Establish a pop-up restaurant first
If you’re looking for ways on how to start a restaurant with no money, then a pop-up restaurant is a great option. This temporary dining spot can be set up in different locations, such as bars, empty buildings, etc. When looking for ways on how to start a restaurant with no money in a temporary location you’re in luck, as it doesn’t include the overhead expenses of a traditional restaurant. It is also an excellent way for chefs to experiment with different menu planning concepts.
3. Start a food truck
When looking for ways on how to start a restaurant with no money, investing in a food truck business is a good alternative to opening a restaurant or home-based catering. The initial restaurant expenses are notably lower, especially if you purchase a used vehicle. Additionally, if you have no prior experience in the food industry, starting with a food truck can be an excellent way to gain experience and knowledge.
Success food truck stories:
- Since 2009, Grill Em All has been making burgers. They started as a food truck in Southern California and are now an award-winning restaurant. They won the first Great Food Truck Race on the Food Network in 2010.
- In 2012, Chicken & Rice Guys opened their first food truck. Since then, they’ve expanded their business and opened multiple restaurants and a successful catering service.
4. Become a partner of a restaurant service provider
Instead of jumping into the deep end and looking for ways on how to start a food business with no money, start small and think about partnering with a restaurant services provider. For example, you can become an UpMenu affiliate partner and earn by recommending a food ordering system to restaurants.
Suppose you actively focus on networking and recommending a solution, with each subsequent restaurant that decides to use the system. In that case, you will have an additional source of passive income, translating into increased savings.
You can get paid as an affiliate – by promoting Upmenu on the Internet
5. Begin in a restaurant incubator
One of the ways to look for funds for a restaurant startup is to begin in a restaurant incubator. According to QSR Magazine, a restaurant incubator is a facility that provides resources and support to help entrepreneurs launch and grow their own food businesses.
Restaurant incubators may offer a range of services, including
- kitchen space,
- capital without equity requirements,
- equipment,
- marketing support,
- business coaching,
- a network of encouraging and similar-minded culinary experts
These facilities provide a cost-effective way for entrepreneurs to get their restaurant business. They often have established networks and connections within the industry to help businesses succeed. Look for restaurant incubators in your area. Remember that some established restaurants also have their own incubator programs.
Look for restaurant incubators in your area. Here you can check some examples of restaurant incubators:
- Branchfood – Boston, MA
- Hope & Main – Warren, RI
- Food Innovation Center – Portland, OR
- The Hatchery – Chicago, IL
- CommonWealth Kitchen – Dorchester, MA
6. Apply for a business loan
One of the safest routes you can take if you’re looking for ways on how to start a restaurant with no money is taking a restaurant loan. Certain banks can offer you a bank loan but remember that receiving funds can take a few weeks or even a few months. It is crucial to apply for a loan as early as possible. If you have been approved for a loan, read the terms carefully before accepting it. Make sure you understand the interest rate, repayment schedule, and any fees associated with the loan.
You can apply for a business loan through the U.S. Small Business Administration (SBA)
7. Apply for business grants
Another option worth considering is obtaining grants. Some grants have particular requirements, meaning it may take some effort to locate one you are eligible for.
Nevertheless, if you conduct thorough research, you may find a grant that meets your qualifications. However, be prepared for the possibility that your application will be denied. Don’t let that stop you from continuing to explore other opportunities or improve your business.
You can apply for a business grant through the Grants website.
8. Consider applying for a loan from non-bank lenders
Alternative loans are gaining popularity as an option, whether from traditional or non-bank lenders. Partnering with a lender knowledgeable about the specific details and obstacles of the restaurant industry can simplify the process. However, carefully read the conditions and requirements. Although it might be a quick way to get financing, it can be risky.
9. Consider financing through unsecured small business lending
It is a viable option for those seeking to purchase a restaurant with little or no initial capital. Unlike secured loans, which are tied to the assets of the business being purchased, unsecured loans are tied to the buyer’s personal creditworthiness.
Two main conditions need to be met:
- a strong credit score = a score of 680 or higher
- a low debt-to-credit ratio – you need to pay off any existing credit accounts before applying
10. Check HELOC (Home Equity Line of Credit)
According to Bankrate.com, a Home Equity Line of Credit (HELOC) is a type of loan that allows homeowners to raise money against the equity in their homes. The home’s value secures the loan and can be used for various purposes, including financing a restaurant. HELOCs typically have variable interest rates and flexible repayment terms.
11. Consider ROBS – 401k Rollover for Business Start-Ups
“A ROBS is an arrangement in which prospective business owners use their retirement funds to pay for new business start-up costs. ROBS plans, while not considered an abusive tax avoidance transaction, are questionable because they may solely benefit one individual – the individual who rolls over his or her existing retirement funds to the ROBS plan in a tax-free transaction. The ROBS plan then uses the rollover assets to purchase the stock of the new C Corporation business.”
Source: Internal Revenue Service (IRS)
With the 401k ROBS or Rollovers for Business Start-Ups method, you can easily obtain equity for purchasing a restaurant without having to invest a lot of money. As the restaurant business owner, you can use the funds to pay for a variety of expenses related to the business, such as equipment purchases, inventory, and marketing expenses. It is important to note that a ROBS is not a loan, but rather a transfer of funds from your retirement account.
12. Look for a private investor
A worthwhile alternative to explore is searching for private restaurant investors. Business angel investors and venture capital firms often invest in restaurants by acquiring a portion of ownership at a predetermined valuation.
If you approach an angel investor, having an excellent sales pitch for your restaurant is important. Foodservice businesses are known to be high risk investments, which can make it challenging to persuade someone to invest in your concept.
- Look for investors through LinkedIn. Create a comprehensive business plan outlining your vision for the restaurant, including concept details, location, menu, marketing plan, and financial projections. Share this plan with your network and ask for feedback and potential investments.
- Attend networking events and make sure you have a clear and concise elevator pitch that explains your restaurant concept, target market, and business plan. Bring business cards and any relevant marketing materials or documents. Remember to introduce yourself, be friendly, and approachable, and try to find common ground with other professionals.
- Speak with other restaurant owners who have used investors by introducing yourself and explaining why you are interested in speaking with them. Make sure to ask specific questions about their experience with investors, including how they found them, how they structured the deal, and any challenges they encountered.
- Join an incubator program that is specifically for restaurant owners. Once you have identified a program that you are eligible for and interested in, complete the application process. This may involve submitting a business plan, financial statements, and other relevant documents.
- Utilize investor databases like Angel Match to find investors who are interested in investing in restaurants. reach out to them via email or other means of contact provided in the database. Introduce yourself and your business, and provide a brief overview of your solid business plan and what you are looking for in an investment.
13. Review a peer-to-peer lending service
Obtaining financing for your restaurant can be accomplished through a peer-to-peer lending service. This online resource connects lenders with borrowers, resulting in faster approval processing and better interest rates for both parties than traditional banks or credit unions. Nevertheless, there is a greater possibility of the borrower defaulting on the loan when using this service.
14. Consider crowdfunding
Crowdfunding is raising money for a project or venture by obtaining small funding from many people, typically through online platforms or social media. Raise funds for your restaurant and set a realistic fundraising goal, and make sure your campaign includes details about your restaurant concept, your funding goal, and what you plan to use the funds for.
If you already run a restaurant and plan to open a new restaurant location, you can ask your current customers to donate. You can offer them a free meal or a gift card in return.
Success crowdfunding restaurant stories:
- Wreckfish is a great example of successful crowdfunding. The owner, Gary Usher, announced on Kickstarter that he plans to open a new location. Thanks to 1,522 backers, they raised £208,956.
- Travail Kitchen and Amusements is another great example. James Winberg, Mike Brown, Kale Thome, and Bob Gerken wanted to open The New Travail and The Rookery. Thanks to 1,090 backers on Kickstarter, they raised $255,669.
15. Establish a catering business from home
Consider operating a home-based catering business that allows you to prepare food from your residence. However, it’s more probable that you’ll manage the business aspects from your home and cook the food in a commercial kitchen space.
According to SBA, depending on the regulations in your area, you may be required to prepare food in a commercial kitchen space. This can be a shared kitchen or rented kitchen space.
Running a home-based catering business is a simple way to lower startup expenses. Moreover, you can start with catering to a few parties, and after doing so, think about whether or not you’re heading in the right direction with your dream restaurant. It’s a great way to verify in practice whether this is the type of activity you want.
16. Talk to your landlord about the possibilities
Another solution is to start by finding a location. When this condition is met, you can ask the owner about expanding the premises. If you offer the owner shares in the restaurant, he will likely lower your fees. Remember that the result of your arrangements should be included in the contract.
17. Consult your local restaurant association and ask for assistance.
Another idea is to consult your local restaurant association. As the National Restaurant Association states, they are an organization that represents the interests of the restaurant industry, providing support and resources to its members and advocating on their behalf with government bodies and other stakeholders.
The association typically provides lobbying, training, research, networking opportunities, and marketing support services. You can receive free guidance on a small business loan and connect with the right individuals to help you start immediately.
- Here is a link to the National Restaurant Association
- You can also check a list of State Restaurant Associations to seek help
18. Cut down on operational expenses
Think about the methods of lowering your restaurant’s operational expenses.
- Food: This includes the cost of purchasing raw materials such as meat, vegetables and spices, and beverages such as alcohol and sodas. Restaurants typically try to keep these costs at around 30% of their total sales.
- Labor: This includes the cost of hiring and compensating employees, including cooks, waiters and support staff. Labor costs can vary widely depending on the size of the restaurant, number of employees, and minimum wage laws in your area.
- Rent: This includes the cost of renting or leasing restaurant space, as well as the cost of utilities such as electricity, gas, and water. Having to pay rent and utilities can be a big expense, especially in high-cost areas like big cities – so make sure you have enough money to get started.
Carefully analyze each of the biggest operational cost groups and where you can cut the expenses. An example of cutting labor costs could be implementing tableside ordering in your restaurant. Thanks to this solution, you require fewer staff and don’t need a printed menu in your restaurant.
Key Takeaways
- If you are looking for ways on how to open a food business with no money, there are several restaurant funding options to consider.
- You may need to combine multiple funding sources to launch your business.
- Consider starting with low-cost business models like a home-based catering business, virtual restaurant, or food truck
- With the passage of time and the experience you gain, you can change your business model over time
- Take advantage of the support of local groups and organizations
- Don’t be afraid to ask for help, talk to other restaurant owners, ask for advice and support
- Carefully analyze and try to lower operating costs
Frequently Asked Questions (FAQ)
How to open a restaurant with no money and bad credit?
Opening a restaurant with no money or bad credit can be daunting, but there are steps you can take to make it more manageable. Here are some suggestions:
- Start small: Rather than opening a full-service restaurant right away, many soon-to-be restaurant owners start their business idea with food trucks, temporary booths, or catering business. These options can be less expensive and allow you to build a customer base without a large initial investment.
- Use free or low-cost resources: Use resources like social media, online marketplaces, and community message boards to promote your business and find customers. Consider reaching out to local government organizations or programs that offer resources and support for small business owners.
- Connect and collaborate: Work with other local businesses or organizations to encourage each other and share resources. Attend networking events and engage with your community to build relationships and find potential hires.
- Find creative sources of funding: consider crowdfunding, ask friends and family about loans or investments, or seek grants or loans from small business organizations. You can also negotiate payment plans with sellers or landlords to reduce your financial burden.
- Focus on Profitability: When you’re starting out with limited resources, it’s important to focus on building a profitable business model. Limit overhead, choose low-cost parts and equipment, and find ways to maximize revenue while minimizing expenses.
How much money do you need to open your own restaurant?
The amount of money you need to open your own restaurant can vary greatly depending on many factors, including the size and location of the restaurant, the type of food, the quality of the equipment and decor, and more.
According to a survey by RestaurantOwner.com, the average total cost to open a restaurant in the United States is between $175,000 and $750,000.
Can you start a small restaurant with 10000 dollars?
It is possible to start a small restaurant with $10,000, but that won’t be easy. With this amount of money, you must be extremely frugal and creative to make your restaurant successful. Here are some things to consider:
- Location: To keep costs down, you’ll want to find a location with low or no rent. That could mean starting with a makeshift food cart or restaurant, or finding affordable space in a less popular neighborhood.
- Equipment: Depending on your needs, you may need to purchase used equipment or choose cheaper alternatives, such as equipment rental.
- Menu: Keep your menu simple and focus on affordable ingredients to reduce food costs. Consider offering a limited menu or specializing in a particular dish to cut costs.
- Employees: On a tight budget, ask friends and family members to help run your restaurant, or consider hiring part-time or freelance workers.
- Marketing: To reduce marketing costs, you can use social media and other low-cost advertising channels to promote your restaurant.
How do I open a small restaurant in 2024?
Opening a small restaurant requires careful planning and preparation. If you are looking for ways on how to start a food business with no money, you can still create a prosperous restaurant. Here are the general steps to take:
- Brainstorm: Decide what kind of restaurant you want to open, such as a casual, gourmet, or fast food restaurant. Consider your target audience, the type of food you want to offer, and the mood you want to create.
- Market research: Research the local market to see if there is a demand for your type of restaurant. Look at the competition, customer demographics, and consumption trends.
- Make a Business Plan: Develop a business plan that describes your concept, target market, financial projections, marketing plan, and management structure.
- Secured Financing: Determine how much money you need to open your restaurant and explore your financing options, such as small business loans, crowdfunding, or personal savings.
- Choose a location: Find a venue that aligns with your restaurant concept and target audience. Consider factors such as rent, parking, foot traffic and zoning requirements.
- Apply for licenses: For licenses necessary to operate your restaurant legally, such as a food service license, a business license, and a liquor license.
- Kitchen and dining room design: Purchase appliances, furniture and supplies for your kitchen and dining room. Hire staff and train them on your menu and operations.
- Marketing your restaurant: Develop a marketing plan to promote your restaurant to your target audience. Use social media, local advertising, and word of mouth to build awareness and engage customers.
- Open your restaurant: Plan a preliminary opening to test your operations and gather customer feedback. Make the necessary adjustments, then officially open your door.
How do I start my own restaurant from scratch?
Opening your own restaurant from scratch requires careful planning and preparation. Here are the general steps to take:
- Brainstorm: Decide what kind of restaurant you want to open, such as a casual, gourmet, or fast food restaurant. Consider your target audience, the type of food you want to offer, and the mood you want to create.
- Market research: Research the local market to see if there is a demand for your type of restaurant. Look at the competition, customer demographics, and consumption trends.
- Make a Business Plan: Develop a business plan that describes your concept, target market, financial projections, marketing plan, and management structure.
- Secured Financing: Determine how much money you need to open your restaurant and explore your financing options, such as small business loans, crowdfunding, or personal savings.
- Choose a location: Find a venue that aligns with your restaurant concept and target audience. Consider factors such as rent, parking, foot traffic, and zoning requirements.
- Apply for permits and permits: Apply for the permits and permits necessary to legally operate your restaurant, such as a food service license, a business license, and a liquor license.
- Kitchen and dining room design: Purchase appliances, furniture and supplies for your kitchen and dining room. Hire staff and train them on your menu and operations.
- Create a menu: Build a menu that fits your restaurant concept and target audience. Consider prices, ingredients, and food preparation.
- Marketing your restaurant: Develop a marketing plan to promote your restaurant to your target audience. Use social media, local advertising, and word of mouth to build awareness and engage customers.
- Open your restaurant: Plan a preliminary opening to test your operations and gather customer feedback. Make the necessary adjustments, then officially open your door.
How to start a bar with no money?
If you’re looking for ways on how to open a bar with no money, you’re in luck, as it can be done with creativity and ingenuity. Here are some steps you can take to get started:
- Develop a business plan: Write a comprehensive business plan outlining the concept, target audience, marketing plan, and financial projections.
- Find partners or potential investors: Consider partnering with someone with industry experience or looking for investors willing to invest in your bar.
- Negotiating with suppliers: Contact your suppliers and negotiate payment terms or ask for credit, as this may help you delay some of your costs.
- Start small: Consider starting with a pop-up or portable bar that can be set up at events or rented out for private parties. Doing so can help you save money and generate revenue and build a reputation without the cost of a fixed location.
- Get creative with space: Consider renting space that’s currently unused, such as an unused corner of an existing business or underutilized outdoor space.
- Keep costs low: Find ways to cut costs, such as buying used equipment or finding affordable alternatives to decor and furnishings.
- Focus on profitability: Build a profit-maximizing menu, focusing on high-margin items. Consider offering special offers or promotions to attract customers.
- Connect and collaborate: Partner with other local businesses or organizations to cross-promote and share resources. Attend networking events and engage with your community to build relationships and find potential collaborators.
How hard is it to open a restaurant?
Planning out how to start a restaurant with no money can be a challenging and complex endeavor. The difficulty can vary significantly based on several factors, including your experience in the restaurant industry, the type of restaurant you want to open, location, funding, and more. Here are some key factors that can influence how hard it is to start a restaurant with no money:
- Experience: If you have prior experience in the restaurant industry, including management or culinary experience, you may have a better understanding of what it takes to operate a restaurant. Without experience, the learning curve can be steeper.
- Concept and Cuisine: When you plan to start a restaurant with no money, the type of business you choose matters. A small café with a limited menu may be easier to start than a fine dining establishment or a large-scale franchise.
- Location: When looking to open a restaurant with no money, the location can significantly impact its success. Finding the right location that matches your target audience and has sufficient foot traffic can be a challenge.
- Business Plan: Developing a solid business plan is crucial. It should outline your concept, target market, marketing strategy, financial projections, and more. A well-thought-out plan can make the process smoother.
- Finances: Securing funding for your restaurant can be one of the most challenging aspects. You’ll need grants for opening a restaurant, lease or purchase of space to equipment, licenses, permits, and initial inventory.
- Regulations and Licensing: Navigating the legal and regulatory requirements for opening a restaurant can be complex. You’ll need permits for food handling, alcohol service (if applicable), health inspections, and more.
- Menu Development: Creating a menu that appeals to your target audience, is cost-effective, and stands out in the market requires careful planning and possibly the involvement of culinary experts.
