So, you want to start a restaurant business in Canada? You have already been told it’s considered a high-risk enterprise. You’ve heard Canada’s food retail and service industry is challenging. But like many small business entrepreneurs, you want to be part of it! And Canadians love eating in restaurants. So much so that between 2006 and 2016, restaurant sales rose by 50%, while the population grew by only 11.4%.

The COVID-19 pandemic caused restaurant sales to take a severe downward spiral due to social distancing measures and caution in public places, and many restaurants closed. Pivoting to delivery, pickup, and meal-in-a-box solutions did help, but the industry is still recovering when consumers were forced to dine out less. Pre-pandemic more than half of Canadians ate out once a week or more.

A restaurant owner introducing a few of his dishes

There is promising news, however. If you’re considering opening an eatery in the not-too-distant future, your timing may be spot on since Canada’s food service industry is anticipated to return to pre-pandemic levels in 2023. Commercial food service sales are projected to increase to more than $97.5 billion by 2026, riding the wave of a rebound in spending.

What Kind of Restaurant Should You Start?

There’s much to think about, such as the type of food you want to serve, at what price point, and how you want people to be served. We’ll address serving styles in the next section, but here are some common restaurant concepts that you may want to consider:  

  • Gourmet and fine dining
  • Casual and family dining (pubs, bistros, etc.)
  • Family style and fast casual
  • Cafés and coffee shops
  • Buffet
  • Fast-food
  • Pop-ups, food trucks, concession stands

Whether your vision is a high-end wine-paired experience or feeding lively families a casual meal, you can create whatever atmosphere you want.

What Type of Restaurant Service Styles Are There?

The kind of restaurant you open goes together with the service style you will utilize for your front-of-house, such as:

Upscale restaurants – Restaurants specializing in fine gourmet dining are best paired with elevated full table service and a focus on cuisines and ambience. Diners typically receive silver service where your meal is plated at the table rather than in the kitchen.

Midscale restaurants – A casual dining bistro or authentic pub is much more laid back than the full table service you would expect at a fine dining restaurant. You still are served at your table, but there is less procedure and convention. It can include buffet restaurants, where patrons serve their food, but the drinks are still brought to the table.

Quick-service restaurants – These are essentially self-serve restaurants. Whether it is a fast-food location or if you operate a food truck, diners will order their food and beverages at the counter, and their food is either brought to the table themselves or by the counter staff. This level of service is part of the reason why the price of food and drink is relatively low.

What Permits and Licences Do You Need?

Running any business in any province of Canada makes you subject to the bylaws, regulations, and permit requirements at the municipal, federal, and provincial levels. Add in the complications of serving food and alcohol, and you will have quite a to-do list.

Once your restaurant is registered provincially, you can apply for your federal business number (with the Canada Revenue Agency) and register your business structure (sole proprietorship, partnership, corporation) so that you file the correct application with the federal government. Next, you tackle the restaurant-specific paperwork, which varies significantly across the country, and includes:

  • Federal and provincial business licences and permits
  • Taxation on restaurant services
  • Food safety regulations
  • Liquor licensing (if you intend to serve alcohol; be aware of your liquor liability)
  • Public health inspection
  • Accessibility compliance
  • Restaurant insurance

To ensure you fill out all the necessary red tape, the Canadian government has a database called BizPaL to find the permits and licences you need for your business. You can filter by location and industry and find the ones you may require when starting and running your small restaurant.

Bear in mind that some regulations apply to the employees that you hire. You must ensure anyone that you hire has the appropriate certifications. For example, in Canada, it is a legal requirement for many food workers to have the Canadian Institute of Food Safety’s Food Handler Certification.

How Much Does It Cost to Start a Restaurant?

Do you have access to $500,000? That is the high-end of the average restaurant startup cost in Canada ($300,000 and $500,000). You may find that amount surprising until you consider all startup and ongoing expenses.

Having a budget as part of a well-thought-out business plan can help prepare you for the opening costs for a small new restaurant business and the estimated running costs for the next few years. Be realistic. Through this process, you’ll determine if you have sufficient funds for your enterprise.

You will need to secure funding if you don’t have the cash or capital to fund it. That business plan will help you borrow money from a bank, investors, and stakeholders; you’ll need to ensure your finances are in tip-top shape to obtain financing options such as business loans or a line of credit. Also, check out funding opportunities that don’t need to be paid back via government grants in Canada at the federal, provincial, and municipal levels.

What contributes to these startup costs? First, there is the location cost, whether you lease or buy. There are construction and property improvement costs, such as redesigning or renovating to make your space into the restaurant you had in mind and fully comply with all regulations. Finally, mandatory permits, licences, business registration, and more will add up.

Purchasing the technology needed to run a competitive restaurant today is critical, so you will want to include the cost of buying a point-of-sale (POS) system specific to restaurants that help manage orders, inventory, scheduling, payments, and more. At this point, you have only just begun to lay out costs, and you need to include the commercial kitchen equipment and front-of-house furniture purchases. Before opening, you must pay for signage, menu design, and marketing fees to communicate your upcoming space.

As you get closer to opening, your costs will include hiring and training your staff. The chefs, cooks, and servers you choose are integral to the restaurant experience. That budget must also include the cost to prep your kitchen for opening day with the first inventory stock. It will be a big one, as you are starting from scratch. Basic administrative costs include utilities, Wi-Fi, phones, web hosting, and insurance. Maintaining reasonable on-hand operating capital should also be considered.

Where Should You Establish Your Restaurant?

Depending on the type of restaurant you want to open, the location could play an essential part in the success of your restaurant. The amount of customer traffic and neighbourhood are crucial elements, and your dynamic and lively restaurant may be ill-suited to a financial district that turns into a ghost town after 5 p.m. For a more convenience-focused restaurant, a spot right off the highway exit is significantly better for your traffic than a location off the beaten path.

Will you buy a lot and custom build? Or lease an existing space for now? Does that lease location require an extensive reno to bring it up to code? There is a lot to consider before you sign on any dotted lines.

Remember which municipality your location falls under, and ensure that you have considered the zoning requirements before making any assumptions. Check ahead to ensure that you won’t face any restrictive regulations that will impact your restaurant business.

Also, check with local planning boards to see if there are any future development plans for the area that may play a part in the future of your restaurant business.

How to Differentiate Your Restaurant

The best restaurant differentiator is about more than cuisine. It’s about creating a space and a dining experience with all your passion and doing it well. When you hunger for running your dream restaurant, it shows and draws in diners who want a little of what you’re having. A thirst for delighting diners is critical, and an appetite to leave people satisfied always helps.

What do you do well? Identify what that is – be it making a great Korean BBQ or a delicately iced treat, focus on it daily at your restaurant and reinforce it in your marketing so that it is communicated to your target market.

You can be innovative or shocking, use technology, and feature sustainability or authenticity. Still, you need to be a great place that serves excellent food that your customers love. Focusing on what you do best and doing it well will make you stand out from the rest.

How to Decide What Your Dining Room and Branding Should Be

Your dining room is where the magic happens and should serve as the epitome of your restaurant branding. To develop a viable restaurant, you need to be informed on what you must do to draw in the crowds and, hopefully, the regulars you envisage.

Your branding should make sense when paired with your restaurant concept, name, and menu, and all should ultimately fill a niche in the restaurant landscape of your location. You can cook up the right solution for this by doing your research.

What do you like about your favourite or most memorable restaurant experiences? Can the staff move efficiently around the dining room, and are the guests comfortable? These observations will guide you to choose what works well and help you avoid what doesn’t.

Keep your investigation going and research the ideal layout for your dining room. It can provide actionable information, such as statistics on the average party size at sit-down restaurants. For example, why cram your space full of four tops when up to 50% of all customers need a two-top?

Remember that you may be limited in what you can do with your dining room or overall branding if you decide to invest in a franchise restaurant. In this case, the owners grant you, as a third party, the right to use the restaurant’s name, branding, and model.

Lastly, what’s in a name? The name you give your restaurant should reflect what your restaurant is and provides diners with a clue as to what to expect at your restaurant. Provinces across Canada will have varying restrictions for your restaurant name; for example, you must comply with Quebec’s Charter of the French Language requirements. Be sure to make it a good one!

How to Create a Menu

Creating a menu for a restaurant entails much more than listing your offering of delicious food. You must factor in that the food dishes you choose, and the quality of the ingredients you use, directly affect the price point on that menu, which is dictated by the type of restaurant you are opening.

A few other things to consider when building the restaurant menu – will you have one menu all day, or will you have separate day and dinner menus? What beverages will you be serving, and will that include alcoholic beverages? Will the drinks menu include a full bar or a few select mixed drinks, beers, and wines? Will your menu provide vegetarian-friendly options? Most people expect to see a few meat-free options on the menu and, when not included, can limit who can frequent your restaurant.

Research food trends gaining in popularity or that are in high demand. If your restaurant concept and menu items have strong consumer demand, you safeguard your anticipated sales and future growth by giving the people what they want. 

Keep your menu short and sweet – today’s diners are looking for concise, curated experiences with straightforward descriptions. They also expect transparency regarding ingredients and preparation, as accommodating special dietary requirements has become commonplace. If you take care to identify items that contain gluten, are low in sodium, and are heart-healthy, you will have content customers.

Lastly, before opening, test your menu. Have a “Friends and Family” test run to gather constructive input on how your food tasted and how close to the menu description it was. It’s also a great way to work out any kinks before you go live.

How to Attract Employees

The demand and competition to find qualified staff continues to increase. At the same time, the pool of workers is modest, and finding front- and back-of-house staff is a big concern for small restaurant business owners. That means you need to get creative with how you recruit workers.

Regardless of the challenges, the staff representing your restaurant are crucial elements. Therefore, you must develop a feasible pay scale and draft job descriptions to attract good hires. Unless you plan to do it all, start with hiring your management team first (general manager, kitchen manager, front-of-house manager). From there, they can help you implement your vision by hiring and training the kitchen staff (head chef, sous chefs, prep cooks, line cooks, dishwashers), the front-of-house team (servers, hosts, runners, and bussers), and the bar staff (bartenders, barbacks, cocktail servers).

Consider taking steps to retain your great staff by building a solid work culture that provides employee benefits, training programs, and incentives.

With the restaurant staff in place, choose a payroll provider and use the tools to stay on your payment schedule. A happy team is an remunerated team!

Startup Restaurant Resources

Doing research is a must before launching any business. For aspiring restaurateurs, here are a few helpful resources for starting a restaurant business in Canada:

What Kind of Insurance Does a Restaurant Need?

Restaurants have a higher risk of occupational hazards damages than other types of businesses, making up a considerable portion of insurance claims. From slip-and-fall hazards to the risk of food poisoning, you can’t afford to serve the public food without protecting your assets.

Restaurant insurance is a term for several insurance policies combined to provide comprehensive coverage, including general liability, commercial property, equipment breakdown coverage, product liability, and cyber liability insurance.

Fill out an online application with Zensurance to get a free quote. Our licensed brokers can advise you on the coverages you need to ensure you’re adequately protected before you start serving the mouth-watering dishes for which you’ll be renowned. Bon appétit!

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About the Author: Liam Lahey

Liam is the Content Marketing Manager at Zensurance. A writer and editor for more than 20 years, he has been published in several newspapers and magazines, including Yahoo! Canada Finance, Metroland Media, IT World Canada and others.