Independent restaurants are privately held companies and are commonly organized as sole proprietorships, partnerships or even Limited Liability Corporations (LLCs). Though independent restaurants can have several locations, each location is still owned by the single person or group of people. If you have a great idea for a new restaurant concept and enjoy the challenge of turning that idea into a successful reality, opening an independent restaurant is the way to go.
- Profitability. Independent restaurants do not have to share royalties with a franchise owner. This means all the profits your restaurant brings in are yours to keep. For this reason, some independent restaurants can become more profitable than a competing chain.
- Exclusivity. Independent restaurants offer unique concepts that can be original and exciting to diners. When you walk into a McDonald’s, you know what kind of food and service to expect. With independent restaurants, the experience is new and unique.
- Familiarity. Many independent restaurants are family owned and have been handed down through several generations. For regular diners, this creates feelings of comfort, like being at home.
- Adaptability. If the eating habits of the client base suddenly change, to favor local or organic ingredients for example, independent restaurants can quickly change to meet these demands, because there is no bureaucratic red tape to go through.
Here are some of the main drawbacks to being an independent restaurant:
- High failure rate for startups. Independent restaurants that are just starting out have a higher failure rate than franchises. This is because their brand may be new and unfamiliar to the public, so they have to work hard to win them over.
- Trial and error marketing. New restaurants that are not a part of a chain do not have a proven marketing strategy. Though you can try and copy from the franchises, many of your marketing initiatives will fail, because you have to learn what works for your specific concept and target market.
- Funding difficulty. Most banks will consider a new independent restaurant a risky venture, because the failure rate for independents is higher than chain stores. However, an excellent credit rating and personal assets will help secure any loans you need to take out.
» More on Funding Your New Restaurant
Independent restaurant owners can open more than one location, and it is a great way to earn more profit and spread your successful concept to new areas. However, you will want to make sure your first location is able to run on its own, because you will be spending most of your time getting the new store locations up and running. If you have to micromanage multiple locations, you will burn yourself out, and both stores will suffer.
Starting a new restaurant can be an overwhelming task. Though you have a great idea in mind, sometimes the logistics can trip you up. Before getting too far into the planning stages, you will want to hire a business lawyer that is familiar with a restaurant’s legal obligations, so you cover all your bases.
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- Legal Structures in the Restaurant: Sole Proprietorships, Corporations, Partnerships and LLCs
- How to Open Franchise Restaurant: A Quick Guide
- Restaurants Organized as Corporations
- Organizing Your Restaurant as an LLC: Pros and Cons
- Restaurants Organized as Partnerships: Pros and Cons
- How to Start a Theme Restaurant
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