In efforts to provide our readers with the best content possible, we’ve created a comprehensive guide to opening a restaurant.

We’ve interviewed top experts in the field, from successful chefs and restaurateurs, restaurant consultants and many more, to help guide you through opening the restaurant of your dreams.

Table of Contents

  1. Introduction
  2. Initial concept
  3. Franchising
  4. Setting up your business
  5. Building your team of experts
  6. Conclusion

Disclaimer: you are reading the Canadian guide on how to open a restaurant. To read the American Guide to Opening a Restaurant visit us here.


Introduction

In efforts to provide our readers with the best content possible, we’ve created a comprehensive guide to opening a restaurant. We’ve tapped into our network of professionals and have interviewed top experts in the field. From successful chefs, restaurateurs, restaurant consultants, lease brokers, bankers, and many industry experts, we’ve compiled their advice to help guide you through opening the restaurant of your dreams.

So, let’s get started! Strap yourself in, there’s a lot of information to go over. 

Disclaimer: this is a guide to how to open a restaurant in Canada (there are differences pertaining to legal entities, and sources like lease brokers, financing options, etc). Stay tuned for our US version!


Initial Concept

If you have an idea of your restaurant concept, then great! That’s really the first step. If you do not, there are a few things you can do to draw out inspiration:

Travel

Travelling is really the most fun option to find great concept ideas. Take Famoso for an example. Famoso is a Neapolitan style pizzeria conceived in 2005 from a European trip by Justin Lussier and his wife. They fell in love with this style of pizza when travelling in Naples, and thought it would be a great concept to bring back to North America. Since their launch in 2005, Famoso has grown to over 20 corporate and franchise locations across Canada, solidifying their hunch.

Another great example is ¿CóMO? Taperia founded by Shaun Layton and Frankie Harrington. Shaun has managed and designed bar programs for top Canadian restaurants like L’Abattoir and Juniper; its safe to say he’s a veteran of the bar industry! As for Frankie, he’s no stranger to success having founded and sold his previous concept Meat and Bread.

The proprietors found themselves travelling to Spain multiple times, falling in love with Spanish food, tapas and culture. They wondered why Spain’s food culture was not more prevalent in Vancouver, and decided to bring what they loved back home. This idea has now come into fruition of ¿CóMO? Taperia. With extensive research on location, menu design, restaurant design and branding, the restaurant has quickly and notably made their presence known in Vancouver’s competitive dining scene.

Franchising

If you lack the creativity to develop a concept but excel in analytical operations, franchising might be the better route for you!

Franchises are proven systems and the hardest part of starting one is choosing the right brand that fits you. If you’re looking for inspiration, you can get a lot of ideas by visiting international franchise shows. Click here for a well rounded list.

Or think of where you’ve travelled in the past. What was the best thing that you ate? Much like how the exclusivity of chains like In-And-Out and Shake Shack have been tourist and local go-tos, is there a franchise brand that would make people at home feel the same?


Buying a Franchise

Looking into buying a franchise may be a really good way to get involved in a concept that’s already proven.  

Why and when should someone buy a franchise? What are the costs and benefits? If it’s your first foray into the restaurant world, and you’re unsure of what to do or where to start, buying a franchise concept could really help you gain confidence and experience.

To provide some background knowledge, we reached out to Christoph Barrow, one of the individuals behind Define Concepts (“Define”), a company that helps proprietors turn their restaurant concepts into successful franchise organizations. Define Concepts has helped Pacific Poke, a quick service restaurant specializing in sustainable seafood, grow from 1 corporate location to 12 franchise locations in a little over a year. The concept is very much on trend with current consumer expectations – quick, fast, healthy food that’s 100% sustainable.

Using Define Concepts and Pacific Poke as an example, we’ve broken down the costs and benefits of buying a franchise.

Costs – Startup

It costs between $250,000 to $350,000 to open a Pacific Poke depending on site selection (i.e taking over an existing establishment with little to no renovations, or developing a completely new site).

Costs can be broken down as follows:
Initial Franchise Fee $20,000
Design, Construction, Architecture and Engineering Plans $20,000
Project Management $5,000
Tenant Improvements and Fixtures $150,000
Signage $8,000
Equipment $50,000
Electronics $6,000
Initial Training Fee $8,000
Incorporation and Legal Fees $15,000
Insurance $2,500
Grand Opening Promotion $5,000

Ongoing Costs

There is also a royalty fee of 6% and a marketing fee of 2% on revenues.

Benefits – Startup

The biggest benefit of working with a group like Define Concepts is their process of making sure you know what you’re getting yourself into. When venturing down a new business, sometimes hand holding is a necessary step. Especially in an industry that has a notorious failure rate.

Chris, who also owns brands like Mucho Burrito and Famoso, knows how hard it is to run a successful business, even under a franchise environment with head office support.

“It takes hard work and dedication to operate successfully, and only works if the person going into it really wants this.” – Christoph Barrow, Define Concepts

Knowing this, Define never “sells” their franchise concepts to prospective buyers. They make sure buyers understand the work involved to make a location successful. Franchising is more than just signing on the dotted line. Define Concepts enrolls their potential franchisees to really research the brand they’re looking into franchising.  Communication with head office, other franchise owners, and to the community they’re looking to open in is crucial in making sure that the brand really resonates with the franchisees’ values.

Case Study: Pacific Poke

Take Pacific Poke for example. They’re a 100% Oceanwise brand. This means that their inventory cost will be higher other poke places. If a franchisor prefers to purchase farmed (open net pen) salmon to cut costs, they wouldn’t be the right fit for Pacific Poke.

And if you’re still unsure about committing to a franchise brand, talk to someone who already does! Many franchise groups like Denny’s have associations where members are easily reachable. Being able to talk to other franchisees and seeing the viability of the business significantly reduces the risk of buying a franchise in comparison to opening a new concept.  

Location:

A restaurant can make it or break it on location alone. Frank and Shaun spent a year looking for the perfect location for ¿CóMO? Taperia. And their efforts spent searching has been well worth it. But Frankie and Shaun are not like most restaurant owners. They had a wealth of knowledge and experience that new business owners do not weld.

For established franchising groups, they understand location better than anyone and their expertise on location is definitely something you can leverage off.

“A restaurant concept that works well in the downtown core, may not work in the suburbs” Chris notes.

Even with an established brand, factors like foot traffic, parking, and community play a large factor for success. With a franchise experts, they’ll be able to gauge these factors for you.

Construction:

Finding a reliable contractor can be difficult and often times this can be on top of searching for plumbers, electricians, etc. Budgets are tight when opening a restaurant and a delay in construction and the building process can leave a heavy dent in your projected budget.

When purchasing an established franchise brand like Pacific Poke, you won’t have the added stress of contractor timelines. You’ll have access to contractors who are proven to be reliable with prior experience building the same concept. This significantly reduces the risk of cost overruns and delays.

Financing:

Some restaurants fail to make it past the idea phase due to lack of financing. Given the environment of the restaurant industry, most traditional banks or lenders view restaurants as high risk businesses. This is largely in part of high closure rates, competition and skyrocketing food & labor margins.

But with franchising, you can leverage off your head office’s connections in finding the right financing options. In case of emergencies, Chris recommends that ”you should have 6 months of operating costs on hand.” In addition, you’ll have expert advice on hand, when you need it.

Training:  

Franchising is a good idea for first time business owners as, in most cases, the training is thorough. Opening a business is overwhelming enough and restaurant operations don’t follow the standard 9am to 5pm business model. As a restaurant owner, you’ll need to learn everything from accounting, hiring, purchasing food, and marketing. With a franchising team behind you, your success is often their success. This warrants a wealth and experience of knowledge from a team that can provide hands on support with training you and your employees.

Franchisees can also expect to spend over a month at an existing Pacific Poke location. Learning rules, regulations and procedures through a guide is one method of learning but with first hand experiences in a real restaurant environment in invaluable. By physically being at a franchise location and being present, franchisees are able to learn the in and outs of the business. Chris notes Pacific Poke  franchisees “go over every single aspect of managing a restaurant from prepping food, sanitation, inventory control, hiring, managing employees, restaurant technologies, reading restaurant financials and much more.” It’s like going through restaurant university!

Purchasing Power:

Food costs are one of the biggest expenses for restaurants but with the purchase of a franchise  comes with their buying power. Franchisers buy in bulk and franchisees are able to take advantage of discounted rates instantly. Franchisees can share a preferred rate with its food supplier due to the total number of locations under the brand. This could mean anywhere from 1-10% off of selected food costs passed on to you!

Ongoing support:

Hand in hand with a strong training program is consistent support. One of the biggest benefit of purchasing a franchise is aligning yourself with an organization that is invested in your success. With an established franchise brand, most franchisees will have a retainer of tools and consistent and present support.

For example: Define Concepts provide ongoing business coaching and training with their brands. As a franchisee, you can leverage off their expertise and franchise community and learn what other successful franchisees are doing.  

Cost / Benefit Summary

Startup Costs: Whether you go down the franchise or independent owner route, a lot of the start up costs are unavoidable.The benefit here is being able to reduce your risk by having access to other franchisees. You get to talk to other businesses and understand the viability of the concept before investing a single dollar. This is huge in terms of value – you wouldn’t be able to …

Ongoing Costs: This is really subjective and really depends on you. Is this your first restaurant or are you seasoned industry veteran? Are you uncertain of what to do and need more guidance? Do you see a concept that you just want to be a part of?

If you’re set on buying into a concept, check out our article on 5 things to consider before buying a franchise.


Setting Up Your Business

Financing

There are various lending options that are designed to accommodate different business needs. Here’s a quick list of lendors:

Canadian Small Business Financing Program

This program is really designed to allow small businesses to access capital.

  • Key items to note
    • For small businesses with up to 10 million in revenues
  • Loans are for
    • Land and building
    • Leasehold improvements
    • Equipment
    • Registration fee
  • Cost:
    • Registration fee of 2%

Merchant Advance

Merchant Advance is a great alternative for financing restaurants.

  • Key items to note:
    • must have been operational for at least 6 months
  • Loans are for:
    • Loans for working capital (running business)
    • Leasing equipment
  • Cost:
    • Repayment is generally based on a x% of terminal sales (credit card / debit card)

Diversity Capital

  • Key items to note:
    • Loans for working capital (running business)
  • Loans are for:
    • Franchise funding
    • Leasing equipment

BDC Startup Financing

  • Key items to note:
    • Loans for working capital (running business)
  • Loans are for:
    • Fixed assets
    • Franchise purchase

Other options to note:

Consulting

Restaurant consultants – what are they worth? The value a consultant brings really depends on your experience and how comfortable you are in opening a restaurant. When it comes to consultants, they can guarantee 2 key factors:

  • Cost savings
  • Experience laden knowledge

To provide some insight, we’ve contacted Fifteen Group, one of the largest consultants in North America. The knowledge that Fifteen Group has provides is priceless as their team comes with a wealth of experience across multiple different backgrounds. Whether is financing, management, menu design and costs, or marketing, they’ve got all their bases expertly covered.

A common thing that they’ve noticed with first time restaurant owners? Cutting costs in the wrong places.

Most overspending happens when new restaurant owners are trying to cut costs on equipment by purchasing equipment that does not work in their environment. For example: refrigerators. Obviously, fridges are important – they house a large portion of a diner’s experience. But often, Fifteen Group found that clients try to make a quick/cheap-fix like purchasing a regular fridge from any store rather than an industrial fridge. More often than not, the same client ends up purchasing an industrial fridge anyways, as the cheaper fridge breaks down after a couple of months.

“Invest the money where it counts and you won’t come across unexpected costs later… the problem isn’t overspending; its short term underspending.” – Fifteen Group

Another example of how restaurant consultants like Fifteen Group can save you and your business significant costs, is menu engineering. Here’s one of many of their experiences:

  • One client of ours had done their menu and food cost on their own, and they assessed themselves to have a margin of 33%. When our consultants went in to complete menu engineering, they could tell something was off, and decided to do their own margin assessment. Results came back a few days later at 42%. Indeed, the restaurant had underestimated their food cost and overestimated their profit margin.After consultant intervention, they were able to bring the margin down 12% to a comfortable 30% margin, and the restaurant has enjoyed increased sales and profitability. This is the crux of what we do; and can do for new restaurateurs who are in the business of saving money and resources.”

Opening a restaurant is hard, even as a seasoned veteran. Often new restaurant owners underestimate how difficult it can be to open a single location or expand to more. Restaurant consultants are able to provide a wide scope of industry experience, expertise, tools. Much like how franchisees have the support of a franchise group, restaurant consulting groups have a dependent team of extremely competent and confident business partners

For some tips on how to save money when opening a restaurant, please check out our article here.

Setting up your tax accounts

Once you decided how you’ll operate, you’ll need to set-up tax accounts with Canada Revenue Agency as well as apply to work safe, and business licenses.

Make sure to get a GST/HST number BEFORE any large expenditures. This is probably the best short term financial advice I can give you. Make sure you have a GST/HST number so you can get back any GST/HST paid.  (note that legally you are not required to have a GST/HST number until your revenues reach $30,000 over four consecutive quarters). For more information on how to register, visit here.

You’ll also need a payroll number. You can find how to register for one here.  Make sure you let the CRA agent know when you will commence operations if its sometime in the future. CRA will expect payment of source deductions collected once operations commence, so if this changes due to delays, make sure you keep them informed (or expect a nasty letter).

Depending on the province you operate in, you may need a PST number. For a table summary on sales tax on food and beverages, please here.

Workers Compensation Insurance is by province. To apply, simply visit your provinces workers compensation board.  

Other licenses and permits

Liquor licenses are by province, and premise license is generally issue by city.  Please contact your accountant or lawyer if you are unsure of the licenses required to operate your business.


Building your team of experts

Finding the right accountant

You’re in luck – I actually have quite a bit of experience in this area.  I’ve been a professional accountant for over 10 years, and have worked with many other professionals in small to national sized accounting firms.

Throughout my experience, I’ve learned one thing – not all Chartered Professional Accountants (CPAs) are equal. There are so many different areas in accounting (audit, management accounting, consulting, large business tax, small business tax, etc.) that the quality of an accountant’s work really depends on background and experience.

National firms tend to cost more than boutique firms. Below is the standard charge out rates you can expect.

Mid-sized to

National Firm

Boutique Firm
Junior Accountant $200.00 $75.00
Manager $300.00 $150.00
Partner $500.00 $300.00
So why would anyone want to go for the more expensive option?

For one, national firms have the capacity to service larger companies. If you needed an audit and had multiple locations spread across Canada, a small boutique firm would not have the resources to service your need. Another advantage of a larger firm is the shared knowledge within the organization. A larger firm means a larger client base, and more competent accountants to service such clients. Somebody knows what they are doing, and the odds of you getting knowledgeable service is good.

What if you wanted great, knowledgeable service and do not want to pay large firm fees?

You can get the best of both worlds with a boutique firms. Here are some tips to know if the accountant you are talking to is a dud or an all-star.

The right experience matters

First off, make sure the accountant you are talking with has been designated for at least 4 years. If the accountant you are talking to just got designated and is now a partner in his or her own one man firm – RUN.  Getting your Chartered Public Accountant (CPA) title is really an entry level milestone, and in the accounting world, you’re still very junior (aka you can work on my file but please have someone experienced review your work).

The right type of experience matters just as much. Someone that got designated at a non profit organization, or answering the phone at Canada Revenue Agency, won’t have the right experience to help you with structuring your small business.  Make sure your accountant has worked in an accounting firm, in a tax advisory position, for several years (at least 4/5 would be ideal), before making the jump to starting his/her own firm.

Your All-Star accountant would have been a tax manager (not audit or anything else) at a CPA firm for at least five years, and ideally has gone through the In-Depth Tax Course.  The In-Depth Tax Course is more specialized training in taxes, corporate structuring, etc. which would greatly help in providing you with the right tax advice. That being said – one of my former bosses, didn’t go through this course yet he is a tax genius. So it’s not always a necessity – however, it’s a good thing to use to filter out capabilities.

A word of advice

If you are in the Vancouver area, I would highly recommend Akeroyd Leung Amlani. I went to school with Steve, a partner there, and he fits my description above (All-Star!). His family are restaurant industry vets and he is extremely knowledgeable in that area! In the tri-cities area, A-R and Partners, is another great boutique firm with top notch partners. For a national size recommendation, MNP are the people to go to.

Disclaimer: I have worked at both A-R Partners and MNP in my career and owe a lot of my knowledge to the amazing people there.

Finding the right bookkeeper

Just like finding the right accountant, the right bookkeeper is equally important. The right bookkeeper will not only transact entries, will also provide expertise on financial analysis, accounting and payroll software advice, etc.

You will be working with your bookkeeper more frequently than your accountant, so the right fit is very important. Find someone who is well versed in different types of software as this will greatly impact how efficient your books are being managed.

  • Here’s our ideal tech stack:
    • Cloud based accounting system (Xero / Quickbooks)
    • Auto pulling bank transactions to accounting system
    • Time attendance system that is connected to payroll
    • Ability for you to see how your business is doing at a click of a mouse

Bonus if he/she has a good restaurant clientele base

My recommendation? Jessica Weismiller – Your Steel Toed Bookkeeper!


Conclusion

In short, opening a restaurant is a lot of work; as evident with all the information above. It’s a lot to digest but more often than not, the journey is always well worth it. However, with the right team, opening a restaurant and managing your growth should be a breeze!