United States still being one of the fastest growing yet, it houses majority of the global fast food chains such as McDonald’s, Subway, Starbucks, KFC, Burger King, Pizza Hut, Domino’s, Dunking’ Donuts, Taco Bell & the list goes on.
Venturing into such a space and competing with giants requires meticulous planning with a market size of $273.2 billion in 2019 and speculative increase of market size by 1.1% in 2019.
Business Plan and Business Name
A framework for a business starts from scratch and onto a business plan such as lean canvas framework, is essential to access the viability of your business plan. Your business plan is the foundation to venturing in the said sector with clarity in attracting investors and business partners as well as securing bank loans.
Businesses are identified by their name and brand image and these both are vital as they attract the target customers. Every fast food restaurant chain is identified by its work culture and majority customer culture it serves. Your customer’s have to identify themselves with your business and that leads to conversion and sales.
Location of Business
Where your branches function is of paramount importance as it attracts the right customers. As in the case of McDonald, the fast-food chain doubles down as real estate giant as it is habitual in buying out high value real estate in prime areas and it volume of business every day is its crux.
The sociology-economic niche that you cater has to be identified to ascertain a location, including the culture of the majority of your customers. It can vary from school kids, college teens, and working individuals looking for a quick snack to a late brunch in their busy days.
A few steps more to walk and you may lose quite a number customers to another competitor just because they are closer on a busy street intersection.
Types of Ownership
Sole proprietorship – A business grows and evolves financially over time as its volume if business increases. Such an evolution is seen in every basic business which initially can be a sole proprietorship.
Partnership – As a business grows, with a necessity for greater financial resources, there is a requirement for partnership in key decision making such as finances and growth.
Corporation – It refers to much more evolved business where several individuals identify themselves as a corporation, its powers and liabilities are distinct from those of its members. In these are C corporations and S corporations.
- C corporation – Such a corporation under United States federal income tax law, is taxed separately from its individual owners. There is no known limit on the number of shareholders, foreign or domestic. Any distribution from the earnings and profits of a C corporation is treated as a dividend for U.S. income tax purposes.
- S corporation – Such a corporation under United States federal income tax law, that elect to pass corporate income, losses, deductions, and credit through to their shareholders for federal tax purposes. Its taxation resembles that of a partnership.
Limited Liability Company (LLC) – Such an enterprise is preferred by many as it is flexible and blends qualities of partnership as well as corporate structures. As it is a legal form of company that provides limited liability to its owners in many of jurisdictions of United States.
Types of Licenses and Permits Involved
There are several licenses involved before one goes ahead with opening their doors to customers. It might be tedious to go through all the paperwork yet it is all worth it with a great restaurant concept, and great location.
⦁ Business Registration – Such a license is required in any US jurisdiction to open & operate any type of business. It legitimizes your business as a legal entity. Based on the location you may need to pay flat yearly fee or a percentage of complete sales.
Such a registration costs about $50 and the license costs in the range of $25 to $7000 dollars based on the type of business involved and expected profit. If you intend on selling alcohol, there might be further state or federal licensing.
⦁ Employer Identification Number – Every business in US territory with employees requires such a license to operate. Internal Revenue System (IRS) issues EINs as it is a tax ID number. This may take a while as the IRS issues in EIN per day but it’s absolutely free, just visit the IRS website or contact the IRS though phone, mail or fax.
⦁ Certificate of Occupancy – When you preferred location of business is approved after inspection, the local zoning/building department issues a certificate, it certifies that the building is aptly constructed and maintained. The process to get the certificate varies in many jurisdictions and in different building structures.
Food Service License – Such a license is issued by the area health department. Their representative makes a in-person visit to your establishment and ensures weather all food safety protocols are in order. When the license is obtained, you may expect regular visits from the health department to your establishment. Any lapses during these visits may lead to suspension or cancellation of the license.
Such a license can temporary, fixed or mobile food service license, with your restaurants name, Permanent kitchen facility address and owner’s personal information. In some area the license may expire automatically, be sure to keep track and renew. The license costs vary depending on location and number of employees, ranging from $100 to $1000.
⦁ Music License – Music makes food all the more better, but to play it publically requires such a license to avoid any copyright infringement fines ranging from $750 to $30,000 and not to mention chances of getting sued by music artists, this includes live music, streaming services, DJ and Karaoke nights.
⦁ Building Health Permit – Any new building or an enterprise starting in that building requires such a permit. Normally an establishment obtains a health permit from the local health department along with the business license, with periodic health inspection of the location. It may not be mandatory in every state. Such a permit costs depending on the states jurisdiction ranging from $50 to $1000.
⦁ Seller’s Permit – Such a permit assists a state to identify a business as a collector of sales tax. Some states identify it as “sales tax” permit/license. Majority of food and beverages businesses are required to obtain a sellers permit.
While application for the permit is free, it may require a security deposit incase you have unpaid taxes and close down your establishment’s, the amount is calculated once applied.
⦁ Resale Permit – Such a permit allows your restaurant to make certain non-taxable purchases (eg: wholesale beverage inventory) if some of these items are bought to use in manufacture of resale-able products such as meals. Such a permit prevents double collection of sales tax on these types of products, the tax is collected only when your customer buys the products.
Requirement of such a permit depends on annual sales and state of residence.
Inquiring about resale numbers in ones sates to find the required office may be
required. Such a permit may cost $0-$50 dollars.
⦁ Dumpster Placement Permit – While it may not sound important yet right disposal of restaurant food waste is vital, including the dumpster placement location around the kitchen. Based on the dumpster size its stipulation and permit cost is determined.
⦁ Live Entertainment License – Live events at your establishment are permitted only through such a license. State licensing authorities provide annual entertainment licenses in such cases. This applies to concerts, dances, public shows at your establishment.
⦁ Employee Health Permit – The crux of disease control is indirectly is EHP as the employees handling food and beverages dispense it to numerous customers. Employees are required to complete a state approved food handlers course and hold a food handlers permit, as it teaches employees regarding food storage, proper sanitation, avoiding food borne diseases.
The FDA has specific training resources for employee health and food protection. Such
permits cost $100 to $500 varying from state to state.
⦁ Sign Permit – Advertisement attract customers but such sign boards require a sign permit from the local government. The specified acceptable size of such advertisements with respect to location, lighting vary by county, state and city. If the location is leased/rented, it’s best to acquire a written approval from your landlord.
Some states make it mandatory to hire a licensed contractor to design, install, and permit signage and convey the design ideas to the required Planning department in your city. Such a permit ranges from $20 to $ 50.
Many of the above licenses/permit can acquired by visiting your state governments sites, search online for the required permit along with state, phone call, fax or in-person, be sure to set aside close to $2,500-$20,000 for all the required licenses/permit.
Documents Required for Business Registration
⦁ Licenses/Permits – Start off with the above licenses and permits will give you clear cut legal requirements of your business. Lack of any required licenses may hamper your company’ growth.
⦁ Social Security Number – The Social security number specifies your Address and Name, every prior background checks such as financial, criminal, and educational of you and your business partners.
⦁ Green card – A document that solemnizes your US citizenship, as a proprietor it is vital you specify your Green card information.
So What’s the Total Investment?
The fast food restaurant business is quite unique with franchises leveling the playing field, taking off the ground requires little effort other than right capital.
Start up costs comprise of close to $175,000 to $375,000 when done meticulously. Location is crucial, real estate prices vary greatly in the range of $100-$800 per square feet based on size, equipment, concept and materials.
Improper planning may lead to breakdown of business, better the professional you hire to make a team better results you have. Dim Interiors, congested seating areas, lack of proper parking might chase away customers. Lapses in team work communication and improper equipment may hamper business too.
Great interiors & Equipment: Kitchen equipment and quality furniture keep your brand alive and make the customers visit your establishment frequently. Such equipment may run $20,000-$40,000 but is worth it if planned on the right budget and with no compromise on quality.
Surrounding Finishes: It is not only your establishment but also the space outside that attracts the locals to your business, such as landscaping, lighting, design also if there is a outdoor seating space it has to be maintained well. The signs, the lighting and design mean a lot to bring in customers ranging from $1,000-$40,000.
Billing Technology: A great Point of Sale(POS) system, maybe a handheld system makes service much faster, gains customer loyalty to plan loyalty programs. There are various pricing models for such tech by restaurant technology providers, varying from flat rate, annual fee to monthly billing.
What Kind of Staff do I need?
Fast foods restaurants are well fast in service, they have to be run properly with various kind of employees based on the size generally it is constant. A keen knowledge of skills required helps hiring the right employees.
Servers, Cashier, Delivery: A fast food restaurant has both counter and window servers that provide food to the customers, some bring the food to the customers. Employees at the counter need to be friendly and alert as they do the billing and collect cash. So does the delivery personnel, responsible for to pick up, deliver, collect the money and provide change.
Chef/Cook: They balance the supply/demand, handle orders, and keep a track of the raw materials ingredients. All cooks have to have s certain knowledge of food safety and handling, so keep hygiene to the required levels.
Management: Overseeing operations day to day is vital, to keep a quality consistency throughout the day, week, month and so on. Managers and their assistants keep a track of employee schedules while accountants handle finances including orders, vendor issues, taxation and payroll.
Initial or regular you may require professional experts to stand out such as architects, designers and lawyers to prevent any anticipated problems, such costs range upto $50,000.
Do I Need Marketing?
Absolutely, while there are major players with franchises out there a new restaurants is bound to stand out. Free samples, attractive offers, maybe 24 hours service will bring in the customers by the droves.
Basic papers adverts, radio & TV ads initially and a long term digital campaign with social media handles that are active, engaging, and consumer friendly pave way for a great marketing strategy.
If you have survived against giants such as McDonald’s, KFC, Subway etc are still going strong, it may just be the time to take the next step. You could either start of with a 2nd and 3rd branch or turn yourself into a franchise. While your own branches locally in a county/city are easy to handle and keep a consistency is consumer satisfaction with enough zest.
A franchise is a completely different ball game with multi state branches and bigger teams and management, be sure to weigh in your finances and credit score to go ahead.