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Opening Your Fast Food Restaurant: Best Practices

Opening a fast food business can be a great way for entrepreneurs to start their first business in a profitable segment. Because there are so many different cuisines, niches and business models to choose from, fast food is a versatile industry with many opportunities for growth. Consider these best practices and use them as a guide when preparing to open your first fast food location.

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Benefits of opening a fast food restaurant

As the owner of a fast food restaurant, you can provide your community with an in-demand service and grow a prosperous income stream. Fast food is an exciting industry for people with an interest in food and advertising.

Fast food restaurants have the potential to be extremely profitable and can be relatively simple to run, especially if you purchase a turnkey franchise outlet. Fast food restaurants are sometimes referred to as quick-service restaurants.

Pros and cons of franchising

One of the first steps is to decide if you want to start an independent restaurant or an outlet of a fast food franchise. Many popular fast food chains are available as franchises.

With franchises, you can pay a franchise fee and ongoing royalties to a parent company in exchange for the right to use their business model. Both starting your own restaurant concept and buying a franchise come with their benefits and drawbacks, differing in a few key areas:

Level of control

As an independent fast food restaurant owner, you can design the menu, decide on your branding and customize your restaurant according to your ideas. When buying a franchise location, you have to operate the restaurant according to a set of legal guidelines determined by the franchisor. Depending on the amount of freedom you want, being in complete control of your restaurant can be a benefit or a challenge.

Risk

Both franchises and independent fast food places come with a degree of financial risk because you’re investing your own money without any guarantee of your restaurant’s success. Franchises tend to be a safer option when it comes to risk overall because they come with a proven business plan and a support system through the franchisor.

Branding

When starting a standalone restaurant, you’re building a reputation and brand from scratch. If you decide to franchise, you’ll be part of the parent company’s brand and mission statement. Customers who already recognize a franchise brand may be more likely to give you their business than try a new establishment they aren’t familiar with.

However, opening an independent fast food company gives you the flexibility to refine and change your business’s image. If you have an idea for a truly unique concept that isn’t already represented in the franchise market, you can embrace that branding by opening an independent restaurant.

Opportunity for growth

Consider whether you want to eventually own more than one location before deciding whether to franchise. It can be costly to run multiple franchise locations, especially if you have to pay other managers to oversee the day-to-day operations on top of franchise and royalty fees.

If your independent fast food restaurant is successful, you can retain more of the profits and invest them in opening additional locations or even become a franchisor and license your concept to franchisees of your own.

Cost of opening a fast food restaurant

The initial cost of opening a fast food restaurant tends to start at around $250,000 and increases based on the geographic location, building size and labor fees. Some popular fast food franchises can cost over $1 million dollars to open, including a minimum amount of assets you must have to qualify as a franchisee. Here’s a breakdown of the primary costs of opening a fast food establishment:

Location and utilities

Your fast food restaurant’s physical location will likely be one of your biggest expenses. Constructing a new building from scratch, buying an existing building or leasing commercial property can incur significant costs.

Buying a fast food restaurant that already has the necessary fixtures to serve food is generally more affordable than building a custom space. It costs an average of $450 per square foot to purchase a restaurant space.

Consider whether you want to have a dining room with restaurantserversor just a drive-thru. Select a space that can accommodate your needs.

Renovations

Renovating the interior and exterior of your fast food restaurant is a necessary expense for building the infrastructure of a successful fast food restaurant. If you purchased an existing building, you may need to make significant modifications to outfit it with an updated kitchen and attractive displays for customers.

Make sure you have all the plumbing and electrical work in place for a commercial kitchen. Interior decor, signage, comfortable seating, lights, an intercom and other features are necessary for creating the appropriate ambiance for customers.

Equipment

Once your space is prepared, you need to purchase appropriate equipment for the kitchen and dining room. Your appliances alone can cost several thousand dollars, depending on whether you purchase new or used equipment and what types of cooking you need to do. You’ll also need a point-of-sale system to track orders, cash registers, beverage machines, ice machines, serving trays, menus and janitorial supplies.

Inventory

You’ll need to have enough inventory on hand to cover the expected orders from your opening. Before buying inventory, you should have a good idea of how your supply chain works and how often you can place orders to replenish your inventory.

If you need fresh ingredients and can only buy in small batches, your inventory costs may be higher than if you use frozen foods bought in bulk. Initial inventory costs for a fast food restaurant include ingredients for all menu items, frying oil, condiments, cups, lids, straws, napkins, to-go bags and other packaging.

Labor

Another startup cost to consider is the overall expense of recruiting, hiring and training employees. Research the going wage in your area for key positions, such as a fry cook, cashier and restaurant manager, and calculate how much their salaries will cost for initial training and regularly scheduled shifts. If you’re contracting an accountant to manage your finances or a lawyer to help with registering your business, estimate the number of hours you may need and use that information to update your budget.

Marketing

You can use a variety of methods at various price points to advertise your new fast food restaurant. Some business owners rely on word-of-mouth, press coverage and social media interactions as their primary source for attracting customers, making your marketing very affordable.

Others hire a public relations firm to launch full-scale advertising campaigns. If you’re opening a new outlet of a franchise, you might get free advertising from the franchisor, depending on the franchise agreement.

Franchise fees

If you buy a franchise, you pay startup fees to the parent company in exchange for their business plan, operations manual and the right to use their intellectual property. Franchise fees can start at $10,000 for a fast food restaurant and rise above $100,000, depending on the company. There may also be additional charges for location scouting, insurance and other factors.

Related:Investing in Franchises: Choosing the Right Franchise (And is it Right For You?)

Choosingyour fast food niche

Select your restaurant concept and develop a menu based on the niche you want to serve. As a fast food restaurant, it’s important to serve food that appeals to your target audience. To find a fast food niche that works for you, consider these strategies:

Exploring existing niches

Some fast food restaurants, such as drive-thru burger joints, target a wide audience by using popular themes, while others try to capture a more specific niche with a certain type of cuisine or a unique ordering system. You can create a new niche by choosing a new type of menu that isn’t available as fast food in your area, or use one of the most popular concepts for fast food:

  • Fried chicken
  • Burgers
  • Ice cream
  • Hot dogs and corn dogs
  • Tex-Mex
  • Coffee and breakfast
  • Sandwiches
  • Pizza

Doing market research

To narrow down your choices on the niche to pursue, perform market research to learn what kinds of fast food are in demand in your area. Some niches might succeed in one place and fail in another based on regional food preferences.

Make note of any local competitors and what kinds of restaurants have succeeded or failed. Gather demographic information about your location’s population, and research what niches appeal to your ideal customer persona.

Developing a menu

Brainstorming different menu items can provide guidance toward an overall theme. Consider what main dishes you want to serve and how you could link them with a cohesive theme.

For example, if you have your grandma’s fried chicken recipe that everyone loves when you make it, this could be the basis of a successful fast food restaurant. Maybe you’ve perfected your grilled cheese and want to share the toasty goodness with the community.

A common strategy for fast food restaurants is to use a few key ingredients in different combinations to create a customizable menu. Think about what other dishes you can prepare with a few staple ingredients and consider using them to create your restaurant concept.

For example, Raising Cane’s specializes in chicken fingers and offers chicken finger baskets and a chicken finger sandwich. If you’re going with the grilled cheese theme, you can offer sandwiches with different combinations of cheese or add in protein, such as ham or turkey. Your base item is the grilled cheese with simple variations that are easy to cook.

Using thematic branding

In addition to the type of food you serve, your restaurant’s theme, decor, logo and mascot can all add to your fast food restaurant’s niche. Using a theme for restaurant decor and menu item names can create a unique brand niche that makes you memorable to customers. Refer to your market research to identify themes that will be well-received in your community and by your target audience.

Writing your business plan

Before you can secure outside funding and start executing your new restaurant, develop a business plan that you can reference to keep your fast food restaurant on track during the starting phases. Your business plan helps you anticipate your income and expenses, make sales forecasts and use data-driven strategies to increase traffic to your new restaurant. The main parts of a fast food restaurant business plan are:

Executive summary

The executive summary contains a review of the key details involved with launching your fast food restaurant. The purpose of an executive summary is to show investors and business partners that your restaurant has a plan to be successful. This section should include a basic timeline and budget for launching the restaurant, an overall mission and value statement, a summary of market research and the core strengths that will help the restaurant become profitable.

Company description

The company description summarizes the day-to-day operations of the fast food restaurant. It includes basic information on the management structure and overall concept. The company description also lists information about the fast food restaurant’s branding and any marketing materials that are already prepared to sell the restaurant’s concept to customers and investors.

Concept and menu

Provide an in-depth discussion of the fast food restaurant’s menu and overall concept. This section should feature a sample menu, complete with the menu’s visual design and recipes you plan to use. Explain the service structure, such as counter or table service, and plans for the design scheme you’ll decorate the space with.

Management and ownership structure

Go into detail about who will own and manage the business. Explain whether the company is an LLC, a partnership or a sole proprietorship and include details on who will manage the daily operations of each part of the restaurant.

Related:How to Hire a Restaurant Manager

Employees and staffing needs

Make note of how many employees you anticipate needing to successfully launch the restaurant. In this section, detail your hiring process and create basic job descriptions for key roles. Your employee handbook and training materials should also be included in this section of the business plan.

Market and competitor analysis

Detail your relevant market research to give an idea of the existing market and opportunities for building a customer base. Include demographic information about the income level, age and buying habits of the local market. You should also review the competing fast food restaurants in the area and how their menu, concept and prices compare to yours.

Advertising and marketing strategies

Explain how you plan to attract diners to your new fast food restaurant. Include strategies for initially attracting customers and convincing them to return and make repeat purchases. Identify the basic reasoning for choosing various advertising channels and how you expect marketing to impact sales.

Financials

Your business plan should be a repository for all your company’s financial data, including projected costs, the break-even point and expected sales during the restaurant’s launch. Break down how much capital you currently have access to and how much you need to raise to cover all costs. Forecast ongoing expenses, and make a timeline for when you can expect to be profitable and self-sustaining.

Tips for selecting a location

People visit fast food restaurants for a convenient meal, so choosing the right location is essential to your success. Some franchisors will scout locations on behalf of their franchisees and assign you to a particular territory, but you’ll have to do your own research to open an independent fast food location.

Consider these key factors when choosing where to place your fast food restaurant:

  • Visibility:Choose a location with good visibility from the street to generate interest from people driving by. Make sure you have space for prominent signs to direct customers toward the restaurant.
  • Accessibility:Select a densely populated area with other nearby businesses to ensure your restaurant is as convenient and accessible as possible.
  • Labor and supply costs:Research the cost of operating in different neighborhoods or cities, so you can maximize your profits.
  • Competition:Look for an area that doesn’t have many direct competitors, so you can capture a high percentage of potential customers.

Registering a fast food business

Before you officially operate as a business, take care of the legal elements of opening a fast food restaurant:

  • Register as a business.Submit the necessary paperwork and fees to get a federal tax ID. You might also need to register your business with the state if you’re operating as an LLC, corporation or partnership. Your registration ensures you can legally operate as a business entity. Consult with a business attorney if you’re not sure which business structure to choose or how to register your company.
  • Get the appropriate permits and licenses.Apply for permits to serve food and beverages, post signs at your location, resell products and collect sales tax.
  • Read up on regulations.As a restaurant, you’re obligated to meet health code standards and other safety regulations. Review your local health and safety laws to ensure you can pass an inspection.

How to hire fast food employees

Follow these steps to hire employees for your fast food restaurant:

  1. Create job descriptions.Write clear job descriptions for each position, and post them on job boards.
  2. Post signs to attract applicants.Post signs in your fast food restaurant’s windows during renovation and direct them to an online application for easy processing, or have paper applications available.
  3. Schedule in-person interviews.During the interview, look for friendly candidates with excellent customer service skills to be the face of your company.
  4. Develop standard training materials.Use a consistent guide to train your new employees on company policies and procedures.

Best ways to market your fast food restaurant

There are several methods you can use to market your new fast food restaurant:

  • Social media ads
  • Coupons
  • Loyalty programs
  • TV ads
  • Grand opening events
  • Partnering with bloggers or reporters

Test different marketing methods to advertise your new business. Use analytics from those efforts to identify the most effective options.

FAQs about opening a fast food restaurant

What are the risks of opening a fast food restaurant?

Financial risks for opening a restaurant include increasing food and labor costs. If you don’t attract enough customers, you won’t be able to cover those costs. Finding enough employees can be challenging, since fast food positions are often low-skill, entry-level positions.

How can you get funding to hope a fast food restaurant?

The high cost of opening a restaurant means you’ll likely need funding from somewhere to launch your business. You might qualify for business loans if your credit is good enough. Business grants might also help with startup costs. Other restaurant owners seek out investors, but you’ll likely need to give up part of your ownership in exchange for the investment. Finance as little as possible to minimize your business debt.

What is a soft opening?

When opening a fast food restaurant, you might consider having a soft opening. This is essentially a practice run at opening the restaurant. You might limit it to friends and family. It gives you and your staff a chance to test out the operations and work out the kinks before you hold your grand opening. This can be very helpful for making the public opening better with fewer issues. It also gives you a chance to collect feedback from the people who participate.

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