A fast-food restaurant is a restaurant where clients pay for quick-service food products before eating. The food purchased may be consumed in the restaurant, taken out, or delivered. Most fast-food outlets also sell beverages, such as water, juice, and soda, but usually not alcohol.
Available data shows that there are 204,555 Fast Food Restaurants businesses in the United States as of 2022, an increase of 1.3% from 2022. The US fast food industry market size (by revenue) is $317.5 billion as of 2022. The expected CAGR (compound annual growth rate) of the US fast food industry is 5.1% from 2020 to 2027.
Steps on How to Start a Fast Food Restaurant Business
Table of Content
Conduct Market Research
It is important to note that starting a fast food restaurant business requires reliable market research to be able to maximize profits from the business. Please note that the first step in the market research process should be to develop market-based research questions in line with your overall business goal and objective.
In this regard, you should source for information that will help you maximize your business, give you a hint of what your potential market will be looking out for from a fast food restaurant business, and also help you operate your fast food restaurant business with less stress.
a. Who is the Target Market for Fast Food Restaurant Business?
If you are thinking of opening a fast-food restaurant then you should make target demographics all-encompassing. It should include corporate executives, socialites, students, migrants, entrepreneurs, tourists, business people, celebrities, and every adult in the neighborhood where your fast food restaurant will be located.
b. Is Fast Food Restaurant a Profitable Business?
Yes, the fast-food restaurant business is quite profitable. The industry is worth over 317.5 billion U.S. dollars and in the United States, food and beverages services contribute about 4 percent of GDP.
c. Are There Existing Niches in the Industry?
No, there are no existing niches when it comes to the fast-food restaurant business because fast food restaurant is a niche idea in the restaurant industry;
d. Who are the Major Competitors?
- Burger King
- Taco Bell
- Dunkin’ Donuts
- Pizza Hut
- Panera Bread
- Sonic Drive-In
- Carl’s Jr./Hardee’s
- Little Caesars
- Dairy Queen
- Jack in the Box
- Papa John’s
e. Are There County or State Regulations or Zoning Laws for Fast Food Restaurant Business?
Yes, there are county and state regulations and zoning laws for fast food restaurant businesses in the United States. Please note that the Food and Drug Administration (FDA) sets the federal Food Code, but they don’t oversee individual fast-food restaurant businesses. Instead, the various states use the Food Code as the basis for their food codes. They may adopt its rules, interpret them differently or set their own rules.
Please note that in the United States, you are required to follow your state’s foodservice code. Visit the FDA website for a list of food service codes by state. Use this to find the state authority handling restaurants and bars and view the laws that apply in your state.
f. Is There a Franchise for Fast Food Restaurant Business?
Yes, there are franchise opportunities for fast food restaurants. Here are some of them;
- Burger King
- Taco Bell
- Dunkin’ Donuts
- Pizza Hut
- Panera Bread
g. What Do You Need to Start a Fast Food Restaurant Business?
- A Feasibility Report
- Business and Marketing Plans
- Business Licenses and Permits
- A Good Restaurant facility
- EIN (Employer Identification Number)/Federal Tax ID Number.
- A Corporate Bank Account
- Suppliers of food ingredients and drinks
- Startup Capital
Memorable Fast Food Restaurant Business Names
- Village Square© Fast Food Restaurant, Inc.
- Finicky® Fast Food Restaurant, LLC
- Lucas© Fast Food Restaurant, Inc.
- Food Nest® Fast Food Restaurant, Inc.
- Bob Robinson™ Fast Food Restaurant, Inc.
- Good Times™ Fast Food Restaurant, LLC.
- The Choice© Fast Food Restaurant, LLC
- Food Court® Fast Food Restaurant, Inc.
- Eagles Nest© Fast Food Restaurant, Inc.
- Sit Out© Fast Food Restaurant, Inc.
- Finger Licking® Fast Food Restaurant, LLC
- Finger Licking® Fast Foods, LLC
- Garvin Chickens™ Fast Foods, LLC
- Princess Daniella© Fast Foods, Inc.
- Finicky® Fast Foods, Inc.
- Aunty Estee™ Fast Foods, Inc.
- Tasty Tanya™ Fast Foods, Inc.
- The Food King© Fast Foods, Inc.
- Chicken Federation® Fast Foods, LLC
- Jeff Jules© Fast Foods, Inc.
- Taste Buds© Fast Foods, Inc.
Register Your Business
a. What Type of Business Structure is Best for Fast Food Restaurant?
In reality, there are several options when it comes to the business structure of a fast-food restaurant, but the one most players in this line of business consider is an LLC. It is common to consider an LLC because providers want to protect themselves from lawsuits. Please note that an LLC will need an EIN if it has employees or if it will be required to file any of the excise tax forms listed below.
b. Steps to Form an LLC
- Choose a Name for Your LLC.
- File Articles of Organization.
- Choose a registered agent.
- Decide on member vs. manager management.
- Create an LLC operating agreement.
- Comply with other tax and regulatory requirements.
- File annual reports.
c. What Type of License is Needed to Open a Fast Food Restaurant Business?
- General Business License
- Health and Safety Permit
- FSSAI license
- Food Handler’s License
- Liquor license
- Health and trade license
- Lift clearance license
- Zonal Permits
- Signage Permit
- Operational State Facility Inspections
- A music license if you want to play live, recorded, or streaming music in your fast food restaurant
- A dumpster placement permit that specifies where you can put your dumpster outside your restaurant
d. What Type of Certification is Needed to Open a Fast Food Restaurant Business?
These are some of the certifications you can work towards achieving if you want to run a fast-food restaurant company;
- Clean Health Certificate
- Food handler Certification
- Catering Training Certificate
e. What Documents are Needed to Open a Fast Food Restaurant Business?
- Business and liability insurance
- Federal Tax Payer’s ID
- State Permit and Building Approval
- Certificate of Incorporation
- Business License
- Business Plan
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Contract Document
- Company Bylaws
- Memorandum of Understanding (MoU)
f. Do You Need a Trademark, Copyright, or Patent?
If you are considering opening a fast food restaurant business, usually you may not have any need to file for intellectual property protection or trademark. This is because the nature of the business makes it possible for you to successfully run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
Cost Analysis and Budgeting
a. How Much Does It Cost to Start a Fast Food Restaurant Business?
There is no clear-cut startup cost for a fast-food restaurant, but available data shows that the cost for a small to medium fast-food restaurant can range from $300,000 to over $750,000.
What are the Costs Involved in Starting a Fast Food Restaurant?
- Business Registration Fees – $750.
- Legal expenses for obtaining licenses and permits – $3,300.
- Marketing, Branding and Promotions – $2,000.
- Business Consultant Fee – $2,500.
- Insurance – $8,400.
- Rent/Lease – $200,000.
- Other start-up expenses include stationery ($500), and phone and utility deposits ($1,800).
- Operational Cost (salaries of employees, payments of bills et al) – $70,000
- Start-up Inventory – $35,000
- Store Equipment (cash register, security, ventilation, signage) – $1,750
- Furnishing and Equipping the Restaurant – $150,000
- Website: $600
- Opening party: $3,000
- Miscellaneous: $2,000
b. What Factors Determine the Cost of Opening a Fast Food Restaurant Business?
- The size of the fast-food restaurant
- The choice of location
- The required licenses and permits
- The type of facility
- The type of food and related products retailed in the fast-food restaurant
- The cost of hiring and paying a business consultant and attorney
- The cost for branding, promotion, and marketing of the fast-food restaurant business
- The cost for furnishing and equipping the fast-food restaurant business – facility
- The cost of insurance
- The cost for registering the business
- Source of your food ingredients, supplies, and ongoing expenses
- Cost of recruiting and training your staff
- The cost for the purchase and customizing of uniforms
- The cost for the grand opening of the fast-food restaurant business
c. Do You Need to Build a Facility? If YES, How Much Will It Cost?
It is not compulsory to build a new facility for your fast food restaurant business, but if you have the finance, it will pay you to build your own facility. The truth is that building or reconstructing a facility will help you come up with a facility that will perfectly fit into your overall business goals and vision.
d. What are the Ongoing Expenses of a Fast Food Restaurant Business?
- Supplies (inventory expenses)
- Utility bills (internet subscriptions, phone bills, signage and software renewal fees et al)
- Salaries of employees
e. What is the Average Salary of your Staff?
- Chief Executive Officer (Owner) – $65,000 Per Year
- Human Resources and Amin Manager – $43,000 Per Year
- Restaurant Manager – $40,000 Per Year
- Accountants/Cashiers – $33,000 Per Year
- Chefs (Cooks) – $30,000 Per Year
- Waiters/Waitress – $26,000 Per Year
- Cleaners – $25,000 Per Year
- Security Guard -$24,000 Per Year
f. How Do You Get Funding to Start a Fast Food Restaurant Business
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for a loan from your bank/banks
- Pitching your business idea and applying for business grants and seed funding from the government, donor organizations, and angel investors
- Source for soft loans from your family members and your friends.
Write a Business Plan
a. Executive Summary
Chicken Federation® Fast Foods, LLC is a registered fast food restaurant business that will be located along one of the busiest roads in San Diego – California. We have been able to lease a facility that is big enough for the kind of fast food restaurant we intend launching and the facility is located in a corner piece directly opposite the largest residential estate in San Diego – California.
b. Products and Service
- Fast Food
- Non–alcoholic beverages
c. Mission Statement
Our mission is to establish a fast food restaurant that will make available varieties of well–prepared delicacies, snacks, and drinks at affordable prices to the residents of San Diego – California, and other cities in the United States of America where we intend to open our chains of franchises.
Our vision is to become the leading fast-food brand in San Diego – California and to establish a one-stop fast food restaurant in San Diego – California and other cities in the United States of America.
d. Goals and Objectives
The goals and objectives of a fast food restaurant business are to provide an outlet where customers pay for quick-service food products before eating. They also provide an option that allows food purchased to be consumed in the restaurant, taken out, or delivered.
e. Organizational Structure
- Chief Executive Officer (Owner)
- Human Resources and Admin Manager
- Restaurant Manager
- Chefs (Cooks)
- Security Guard
a. SWOT Analysis
- Ideal location for a fast food restaurant business
- Highly experienced and qualified employees and management
- Access to finance from business partners
- Availability of different types of fast food and snacks.
- Reliable and efficient inventory management system.
- Financial constraints may restrict the publicity and branding of the business
- A new business that will be competing with well-established fast-food restaurants and franchises in the city.
- Inability to retain our employees longer than we want during the teething stage of the business.
- A rise in the number of young people who love fast food within our market space
- Online market, new services, new technology, and of course the opening of new markets.
- The arrival of a new fast food restaurant within our market space
- Economic uncertainty
- Liability problems
- The U.S. Food and Drug Administration (FDA) could change its regulatory status and decide to enforce strict regulations that can strangulate new businesses like ours.
b. How Do Fast Food Restaurants Make Money?
Fast food restaurants make money by selling the following products;
- Fast Food
- Non–alcoholic beverages
c. Payment Options
- Payment with cash
- Payment via credit cards
- Payment via online bank transfer
- Payment via mobile money transfer
d. Sales & Advertising Strategies
- Introduce your fast food restaurant by sending introductory letters alongside your brochure to construction companies, campgrounds, corporate organizations, households, gyms, schools, and other key stakeholders throughout the city where your fast food restaurant is located.
- Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, LinkedIn to get your message across
- Create a basic website for your business to give your business an online presence
- Directly market your products.
- Join local fast food restaurant business associations for industry trends and tips
- Provide discount days for your customers
- Advertise our business in community-based newspapers, local TV and radio stations
- List your business on yellow pages ads (local directories)
- Encourage the use of word-of-mouth marketing (referrals)
a. How Much Should You Charge for your Product/Service?
The average cost of a combo meal at a fast-food restaurant is $4 to $7.
b. How Much Profit Do Fast Food Restaurant Owners Make a Year?
It depends, but available reports show that on average, a restaurant that rings up $1-million in sales might only give the owner a profit of $25,000 to $40,000 each year, while a restaurant owner whose establishment brings in $3-million in revenue can likely afford to pay themselves between $75,000 and $120,000, depending on their profit margin.
c. What Factors Determine the Amount of Profit to Be Made?
- The capacity of the fast-food restaurant
- The types of food, snacks, and drinks retailed
- The location the fast-food restaurant is covering
- The management style of the fast-food restaurant
- The business approach of the fast-food restaurant
- The advertising and marketing strategies adopted by the fast-food restaurant.
- The number of years the fast-food restaurant is in business
d. What is the Profit Margin of a Fast Food Restaurant?
You can expect a net profit margin of around 7 to 10 percent. Although factors like franchise affiliation may affect profit margins.
e. What is the Sales Forecast?
Below is the sales forecast of a fast-food restaurant. It is based on the location of the business and other factors as it relates to such startups in the United States;
- First Fiscal Year: $1.2 million
- Second Fiscal Year: 2.5 million
- Third Fiscal Year: $4.2 million
Set Up your Office
a. How Do You Choose a Perfect Location for Fast Food Restaurant?
- The demography of the location
- The demand for fast foods, drinks, and other snacks in the location
- The purchasing power of residents of the location
- Accessibility of the location and the road network
- The number of fast-food restaurants, sandwich shops, food carts, mobile food trucks, regular restaurants, and canteens in the location
- The local laws and regulations in the community/state
- Traffic, parking and security et al
b. What State and City are Best to Open a Fast Food Restaurant?
- Dallas-Fort Worth, Texas
- Atlanta, Georgia
- Boston, Massachusetts
- Palm Beach, Florida
- Washington, D.C.
- Scottsdale, Arizona
- Portland, Oregon
- Asheville, North Carolina
- Las Vegas, Nevada
- Los Angeles, California
- New York City, New York
- San Francisco, California
- Washington DC
- Chicago, Illinois
c. What Equipment is Needed to Operate a Fast Food Restaurant?
Before you can open a fast-food restaurant, you should budget and buy chairs and dining tables, POS and receipt issuing machines, storage hardware (bins, rack, shelves, food case), counter area equipment (countertop, sink, ice machine, etc.),
(Flat Screen TVs, sound system, DVD players, cooking gas, deep freezers, fridge, blenders, store equipment (cash register, security, ventilation, signage), serving utensils (plates, ashtrays, glasses, flatware) and fancy lightening amongst others.
When it comes to hiring employees for a standard fast-food restaurant, you should make plans to hire a competent chief executive officer, human resource and admin manager, restaurant manager, chef (cook), waiters and waitresses, cleaners, and security guard.
Launch the Business Proper
No fast food restaurant opens its door for business without first organizing an opening party to officially launch the business. You can choose to do a soft opening if you are operating on a low budget or you can go for a grand opening party. The bottom line is that with a proper launching of the fast-food restaurant, you will officially inform people in your city that your fast food restaurant is open for business.
a. What Makes a Fast Food Restaurant Business Successful?
- Choose a good location and shop facility to launch the business
- Make sure you offer a wide variety of foods and drinks (give your customers options)
- Be deliberate with your marketing sales approach
- Encourage the use of word of mouth to promote your fast food restaurant business
- Leverage on all available online and offline platforms to promote your fast food restaurant business
b. What Happens During a Typical Day at a Fast Food Restaurant?
- The shop is open for the day’s work
- The kitchen staff prepares the food and snacks
- The serving areas, serving wares, chairs, and tables are properly arranged
- Walk-in customers are attended to
- Delivery of orders are made
- Stocks are taken and reports are written and submitted to superior officers
- The business is closed for the day.
c. What Skills and Experience Do You Need to Build a Fast Food Restaurant Business?
- Excellent culinary skills
- Excellent customer services skills
- Interpersonal skill
- Accounting and bookkeeping skills
- Business management skills
- Bargaining skill
- Work experience in a fast-food restaurant environment
- Experience in managing people
- Experience in business administration
- Experience in preparing a wide variety of fast food and snacks.