Opening a restaurant is exciting and challenging, but it takes a lot of planning and work. One of the questions before opening and planning out a restaurant idea is how to open a restaurant with no money?
This article will show some ways to get money to start a restaurant. To learn more about opening a restaurant, you can also check out our complete guide on how to start a food business.
Key Takeaways
- Combine Multiple Funding Sources: To launch your business, you may need to combine different funding options to secure enough capital.
- Low-Cost Business Models: Start with affordable options like food trucks, home-based catering, or a virtual restaurant.
- Adapt and Evolve: As your business grows, adjust your model to fit new opportunities and experiences.
- Local Support: Take advantage of the support of local groups and organizations.
- Seek Help and Advice: Don’t be afraid to ask for help, talk to other restaurant owners, ask for advice and support.
- Lower Operating Costs: Carefully analyze your expenses and find ways to reduce operating costs to ensure restaurant profitability.
18 ways to get money for opening a restaurant
1. Start a virtual restaurant
Virtual restaurants, also called ghost kitchens or cloud kitchens, are small businesses that offer delivery or takeout exclusively. It does not have a physical storefront or dining area for customers.
An essential part of a virtual restaurant’s online presence is having a website.
We have compiled a simple guide outlining the steps to create a website for your restaurant. Here you can check how to create a restaurant website.
After building a restaurant website for your virtual restaurant, the next step is setting up an online ordering system. Thanks to that, your customers can easily place orders directly from your website.
You can check our guide on how to set up an online ordering system on your restaurant’s website.
2. Establish a pop-up restaurant first
If you’re looking for ways on how to start a restaurant with no money, then a pop-up restaurant is a great option. This temporary dining spot can be set up in different locations, such as bars, empty buildings, etc.
It is also an excellent way for chefs to experiment with different menu planning concepts.
3. Start a food truck
When looking for ways on how to start a restaurant with no money, investing in a food truck business is a good alternative to opening a restaurant or home-based catering.
The initial restaurant expenses are notably lower, especially if you purchase a used vehicle.
Additionally, if you have no prior experience in the food industry, starting with a food truck can be an excellent way to gain experience and knowledge.
Successful food truck stories:
- Since 2009, Grill Em All has been making burgers. They started as a food truck in Southern California and are now an award-winning restaurant. They won the first Great Food Truck Race on the Food Network in 2010.
- In 2012, Chicken & Rice Guys opened their first food truck. Since then, they’ve expanded their business and opened multiple restaurants and a successful catering service.
4. Become a partner of a restaurant service provider
Instead of jumping into the deep end, start small and consider partnering with a restaurant services provider.
For example, you can become an UpMenu affiliate partner and earn by recommending a food ordering system to restaurants.
You can get paid as an affiliate – by promoting Upmenu on the Internet
Suppose you actively focus on networking and recommending a solution, with each subsequent restaurant that decides to use the system.
In that case, you will have an additional source of passive income, translating into increased savings.
5. Begin in a restaurant incubator
One of the ways to look for funds for a restaurant startup is to begin in a restaurant incubator.
A restaurant incubator is a facility that provides resources and support to help entrepreneurs launch and grow their own food businesses.
Restaurant incubators may offer a range of services, including
- kitchen space,
- capital without equity requirements,
- equipment,
- marketing support,
- business coaching,
- a network of encouraging and similar-minded culinary experts
These facilities provide a cost-effective way for entrepreneurs to get their restaurant business. They often have established networks and connections within the industry to help businesses succeed.
Look for restaurant incubators in your area. Remember that some established restaurants also have their own incubator programs.
Look for restaurant incubators in your area. Here you can check some examples of restaurant incubators:
- Branchfood – Boston, MA
- Hope & Main – Warren, RI
- Food Innovation Center – Portland, OR
- The Hatchery – Chicago, IL
- CommonWealth Kitchen – Dorchester, MA
6. Apply for a business loan
One of the safest routes you can take if you’re looking for ways on how to start a restaurant with no money is taking a restaurant loan. Certain banks can offer you a bank loan but remember that receiving funds can take a few weeks or even a few months.
It is crucial to apply for a loan as early as possible. If you have been approved for a loan, read the terms carefully before accepting it. Make sure you understand the interest rate, repayment schedule, and any fees associated with the loan.
You can apply for a business loan through the U.S. Small Business Administration (SBA).
7. Apply for business grants
Another option worth considering is obtaining grants. Some grants have particular requirements, meaning it may take some effort to locate one you are eligible for.
Nevertheless, if you conduct thorough research, you may find a grant that meets your qualifications.
However, be prepared for the possibility that your application will be denied. Don’t let that stop you from continuing to explore other opportunities or improve your business.
You can apply for a business grant through the Grants website.
8. Explore loan options from non-bank lenders
Alternative loans are gaining popularity as an option, whether from traditional or non-bank lenders. Partnering with a lender knowledgeable about the specific details and obstacles of the restaurant industry can simplify the process.
However, carefully read the conditions and requirements. Although it might be a quick way to get financing, it can be risky.
9. Consider financing through unsecured small business lending
It is a viable option for those seeking to purchase a restaurant with little or no initial capital.
Unlike secured loans, which are tied to the assets of the business being purchased, unsecured loans are tied to the buyer’s personal creditworthiness.
Two main conditions need to be met:
- a strong credit score = a score of 680 or higher
- a low debt-to-credit ratio – you need to pay off any existing credit accounts before applying
10. Check HELOC (Home Equity Line of Credit)
According to Bankrate, a Home Equity Line of Credit (HELOC) is a type of loan that allows homeowners to raise money against the equity in their homes.
The home’s value secures the loan and can be used for various purposes, including financing a restaurant.
HELOCs typically have variable interest rates and flexible repayment terms.
11. Consider ROBS – 401k Rollover for Business Start-Ups
“A ROBS is an arrangement in which prospective business owners use their retirement funds to pay for new business start-up costs. ROBS plans, while not considered an abusive tax avoidance transaction, are questionable because they may solely benefit one individual – the individual who rolls over his or her existing retirement funds to the ROBS plan in a tax-free transaction. The ROBS plan then uses the rollover assets to purchase the stock of the new C Corporation business.”
Source: Internal Revenue Service (IRS)
With the 401k ROBS or Rollovers for Business Start-Ups method, you can easily obtain equity for purchasing a restaurant without having to invest a lot of money.
As the restaurant business owner, you can use the funds to pay for a variety of expenses related to the business, such as equipment purchases, inventory, and marketing expenses.
It is important to note that a ROBS is not a loan, but rather a transfer of funds from your retirement account.
12. Consider finding a private investor
A worthwhile alternative to explore is searching for private restaurant investors. Business angel investors and venture capital firms often invest in restaurants by acquiring a portion of ownership at a predetermined valuation.
If you approach an angel investor, having an excellent sales pitch for your restaurant is important. Foodservice businesses are known to be high risk investments, which can make it challenging to persuade someone to invest in your concept.
- Look for investors through LinkedIn. Create a comprehensive restaurant business plan outlining your vision, including concept details, restaurant location strategy, menu, marketing plan, and financial projections.
- Attend networking events and make sure you have a clear and concise elevator pitch that explains your restaurant concept, target market, and business plan. Bring business cards and any relevant marketing materials or documents.
- Speak with other restaurant owners who have used investors by introducing yourself and explaining why you are interested in speaking with them. Make sure to ask specific questions about their experience with investors, including how they found them, how they structured the deal, and any challenges they encountered.
- Join an incubator program that is specifically for restaurant owners. Once you have identified a program that you are eligible for and interested in, complete the application process. This may involve submitting a restaurant business plan, financial statements, and other relevant documents.
- Utilize investor databases like Angel Match to find investors who are interested in investing in restaurants. Reach out to them via email or other means of contact provided in the database. Remember to provide a brief overview of your solid business plan and what you are looking for in an investment.
13. Review a peer-to-peer lending service
Obtaining financing for your restaurant can be accomplished through a peer-to-peer lending service. This online resource connects lenders with borrowers, resulting in faster approval processing and better interest rates for both parties than traditional banks or credit unions.
Nevertheless, there is a greater possibility of the borrower defaulting on the loan when using this service.
14. Consider crowdfunding
Crowdfunding is raising money for a project or venture by obtaining small funding from many people, typically through online platforms or social media.
Raise funds for your restaurant and set a realistic fundraising goal, and make sure your campaign includes details about your restaurant concept, your funding goal, and what you plan to use the funds for.
If you already run a restaurant and plan to open a new restaurant location, you can ask your current customers to donate. You can offer them a free meal or a gift card in return.
Successful crowdfunding restaurant stories:
- Wreckfish is a great example of successful crowdfunding. The owner, Gary Usher, announced on Kickstarter that he plans to open a new location. Thanks to 1,522 backers, they raised £208,956.
- Travail Kitchen and Amusements is another great example. James Winberg, Mike Brown, Kale Thome, and Bob Gerken wanted to open The New Travail and The Rookery. Thanks to 1,090 backers on Kickstarter, they raised $255,669.
15. Establish a catering business from home
Consider operating a home-based catering business that allows you to prepare food from your residence. However, it’s more probable that you’ll manage the business aspects from your home and cook the food in a commercial kitchen space.
According to SBA, depending on the regulations in your area, you may be required to prepare food in a commercial kitchen space. This can be a shared kitchen or rented kitchen space.
Running a home-based catering business is a simple way to lower startup expenses. Moreover, you can start with catering to a few parties, and after doing so, think about whether or not you’re heading in the right direction with your dream restaurant.
It’s a great way to verify in practice whether this is the type of activity you want.
16. Discuss options with your landlord
Another solution is to start by finding a location. When this condition is met, you can ask the owner about expanding the premises. If you offer the owner shares in the restaurant, he will likely lower your fees.
Remember that the result of your arrangements should be included in the contract.
17. Consult your local restaurant association and ask for assistance
Another idea is to consult your local restaurant association. As the National Restaurant Association states, they are an organization that represents the interests of the restaurant industry, providing support and resources to its members and advocating on their behalf with government bodies and other stakeholders.
The association typically provides lobbying, training, research, networking opportunities, and marketing support services. You can receive free guidance on a small business loan and connect with the right individuals to help you start immediately.
- Here is a link to the National Restaurant Association
- You can also check a list of State Restaurant Associations to seek help
18. Cut down on operational expenses
Think about the methods of lowering your restaurant’s operational expenses.
- Food: This includes the cost of purchasing raw materials such as meat, vegetables and spices, and beverages such as alcohol and sodas. Restaurants typically try to keep food costs at around 30% of their total sales.
- Labor: This includes the cost of hiring and compensating employees, including cooks, waiters and support staff. Labor costs can vary widely depending on the size of the restaurant, number of employees, and minimum wage laws in your area.
- Rent: This includes the cost of renting or leasing restaurant space, as well as the cost of utilities such as electricity, gas, and water. Having to pay rent and utilities can be a big expense, especially in high-cost areas like big cities – so make sure you have enough money to get started.
Carefully analyze each of the biggest operational cost groups and where you can cut the expenses.
An example of cutting restaurant labor costs could be implementing tableside ordering. Thanks to this solution, you require fewer staff and don’t need a printed menu in your restaurant.
Frequently Asked Questions (FAQ)
How to open a restaurant with no money and bad credit?
Opening a restaurant with no money or bad credit can be challenging, but there are ways to make it manageable. Here are some suggestions:
- Start small: Begin with a food truck, booth, or catering business to reduce initial restaurant costs and build a customer base.
- Use free resources: Promote your business through restaurant social media marketing and online platforms, and explore local government programs that support small businesses.
- Collaborate: Partner with local businesses, attend networking events, and engage with your community to build relationships and find resources.
- Find creative funding: Consider crowdfunding, loans from friends and family, or grants from organizations like the Small Business Administration. Negotiate payment plans with vendors to ease financial strain.
- Focus on profitability: Minimize overhead, choose affordable restaurant essentials, and maximize restaurant revenue while keeping costs low.
How to start a small restaurant with no money?
Starting a small restaurant with no money requires creativity. Here are some cost-effective ways for small business owners to make it happen:
- Keep startup costs low – Opt for a simple menu and a small, cost-effective space.
- Use a shared kitchen – Rent a kitchen from a local commissary or food incubator to save on setup costs.
- Seek alternative funding – Explore crowdfunding, small business loans, or find partners who can invest.
- Leverage free marketing – Use social media and build a strong online presence to attract customers at no cost.
- Consider a food truck or pop-up – These options require less initial investment and can help build your brand.
Learn more about how much does it cost to open a small restaurant.
How much money do you need to open your own restaurant?
The amount of money you need to open your own restaurant can vary greatly depending on many factors, including the size and location of the restaurant, the type of food, the quality of the equipment and decor, and more.
According to a survey by RestaurantOwner.com, the average total cost to open a restaurant in the United States is between $175,000 and $750,000.
How do I start my own restaurant from scratch?
Starting your own restaurant from scratch requires careful planning. Here are the key steps:
- Brainstorm: Decide on your restaurant type. Here you can read more on types of restaurants (e.g., fast food restaurants, casual dining restaurants, and quick service restaurants).
- Market Research: Research the local demand, competition, and customer trends.
- Create a Restaurant Business Plan: Outline your concept, target market, financial projections, and restaurant marketing plan.
- Secure Financing: Determine how much money you need and explore financing options.
- Choose a Location: Select a venue with ideal rent, parking, restaurant foot traffic, and zoning.
- Apply for Permits: Get the necessary licenses, such as a food service and business license.
- Design the Kitchen and Dining Area: Purchase restaurant equipment, furniture, and supplies. Hire staff and train them on your menu and operations.
- Create a Menu: Develop a menu that suits your concept and audience, factoring in prices and ingredients. Here you can learn more about creating a restaurant menu.
- Marketing: Use social media, local ads, and word of mouth to promote your restaurant.
- Open Your Restaurant: Test operations with a soft opening, gather customer feedback, and then officially launch.
