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How to Start a Fast Food Restaurant

Written by:

Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.

Edited by:

David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.

How to Start a Fast Food Restaurant

Fast Facts

Investment range

$123,300 - $238,300

Revenue potential

$365,000 - $1,095,000 p.a.

Time to build

6 – 12 months

Profit potential

$73,000 - $219,000 p.a.

Industry trend

Growing

Commitment

Full-time

People everywhere have busy lives, often eating on the go, which is why the U.S. fast food industry is worth more than $360 billion. From Burger King, to Taco Bell, to Dairy Queen, fast food restaurants are scattered throughout every city.

If you have a unique concept in mind for a fast food restaurant, perhaps you could build the next big fast food franchise.

But there is much to learn about the business. Fortunately, this step-by-step guide has you covered with all the information you need to become a fast food mogul. 

Step 1: Decide if the Business Is Right for You

Pros and cons

Pros

  • Large and growing market
  • Get creative with your concept
  • Franchise opportunity

Cons

  • High startup costs
  • Competitive industry

Fast food industry trends

Industry size and growth

Fast Food industry size and growth

Trends and challenges

Trends

  • Advancing technologies are creating new, more convenient ordering options for fast food customers and enhancing the overall customer experience.
  • Customers are demanding healthier fast food options, spurring fast food restaurants to add items like plant based burgers to their menus.

Challenges

  • Labor shortages in the fast food industry are rising, creating a staffing issue for fast food restaurants.
  • Rising prices of ingredients are narrowing the profit margins of fast food restaurants.
Fast Food Industry Trends and Challenges

Demand hotspots

Fast Food Restaurants demand hotspots

What kind of people work in fast food?

Fast Food industry demographics

How much does it cost to start a fast food restaurant business?

Startup costs for a fast food restaurant range from $125,000 to $240,000. Costs include a down payment on the building construction, kitchen equipment, and an operating budget.

Alternatively, you could become a franchisee by buying a franchise. However, successful franchises like McDonald’s cost up to $2 million. 

You could also start with a food truck and work your way up to a fast food restaurant.

You’ll need a handful of items to successfully launch your fast food restaurant business, including: 

  • Kitchen and beverage equipment depending on your products
  • Counter and POS system
  • Tables and chairs
Start-up CostsBallpark RangeAverage
Setting up a business name and corporation$100 - $500$300
Business licenses and permits$100 - $300$200
Insurance$100-$500$300
Website$1,000 - $3,000$2,000
Down payment on building construction$50,000 - $100,000$75,000
Equipment and restaurante furnishings$30,000 - $50,000$40,000
Operating budget$30,000 - $50,000$40,000
Marketing budget$2,000 - $4,000$3,000
Ingredients$10,000 - $30,000$20,000
Total$123,300 - $238,300$180,800

How much can you earn from a fast food restaurant business?

What you charge customers will vary by product. These calculations will assume an average sale per customer of $10. Your profit margin should be about 20%.

In your first year or two, you might get 100 customers a day, bringing in $365,000 in revenue. This would mean $73,000 in profit, assuming that 20% margin. 

As you gain traction, you might get 300 customers a day. With annual revenue of $1,095,000, you’d make a tidy profit of $219,000.

Fast Food Restaurant earning forecast

What barriers to entry are there?

There are a few barriers to entry for a fast food restaurant. Your biggest challenges will be:

  • Funding the startup costs
  • Breaking into a competitive industry

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Step 2: Hone Your Idea

develop a business idea

Now that you know what’s involved in starting a fast food restaurant, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research could give you the upper hand even if you’ve got the perfect product. Conducting robust market research is crucial, as it will help you better understand your customers, your competitors, and the broader business landscape.

Analyze your competitors 

Research fast food restaurants in your area to examine their products, price points, and customer reviews.

  • Make a list of fast food restaurants that offer similar products. 
  • Analyze the menus, prices, and popular items of competing fast food outlets in your area.
  • Check out their online reviews and ratings on Google, Yelp, and Facebook to get an idea of what their customers like and dislike.
  • Identify your competitors’ strengths and weaknesses. 

This should identify areas where you can strengthen your business and gain a competitive edge to make better business decisions.

Why? Identify an opportunity

You’re looking for a market gap to fill. For instance, maybe the local market is missing a fried chicken fast food restaurant, or a fast food place that also has ice cream.

You might consider targeting a niche, such as pizza or healthy foods.

Your fast food restaurant might benefit from a unique theme or concept that can differentiate it from competitors.

What? Determine your products (menu)

You’ll need to develop a menu of food and beverages and create your recipes for your fast food items. Whether it’s a specific cuisine (like Mexican or Asian fusion) or a particular style (like gourmet burgers or vegetarian fast food), pick something that aligns with current trends and your passion.

How much should you charge for fast food products?

Your prices should be based on market prices in your area, but also on your costs to produce and serve the items.

Once you know your costs, use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will depend on your restaurant concept, but it’s likely to be broad. Research the demographics, preferences, and spending habits of your target audience.

Where? Choose a fast food restaurant location

You’ll need to find a good location with available land to build on. Here the factors to consider when choosing a location for a fast food restaurant:

  1. Demographics: Analyze the age, income, and eating habits of the local population to ensure they align with your target market.
  2. Foot Traffic: Opt for locations with high pedestrian activity to increase the likelihood of walk-in customers.
  3. Visibility and Accessibility: Choose a spot that’s easily visible from main roads and accessible to both pedestrians and vehicles.
  4. Proximity to Competitors: While being near similar businesses can bring more customers, being too close might split the clientele.
  5. Parking Availability: Ensure there’s sufficient parking for customers, as lack of parking can deter potential diners.
  6. Size and Layout: Ensure the space is large enough for kitchen equipment, dining area, and staff while fitting within your budget.
  7. Local Labor Market: Check the availability and cost of local workers, especially if you’re in an area with many restaurants.
  8. Lease and Rental Costs: Understand all costs involved, ensuring they align with your financial projections and budget.
  9. Local Regulations and Zoning: Verify the location is zoned for food services and understand any specific local regulations.
  10. Proximity to Suppliers: Being closer to your main suppliers can reduce transportation costs and ensure fresh deliveries.
  11. Public Transport Links: Locations near bus stops or train stations can attract more customers due to increased accessibility.
  12. History of the Premises: Research previous businesses in that location; a history of failed restaurants might indicate underlying issues.
Fast Food Restaurant idea rating

Step 3: Brainstorm a Fast Food Restaurant Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

  • Short, unique, and catchy names tend to stand out
  • Names that are easy to say and spell tend to do better 
  • Name should be relevant to your product or service offerings
  • Ask around — family, friends, colleagues, social media — for suggestions
  • Including keywords, such as “burgers” or “chicken”, boosts SEO
  • Name should allow for expansion, for ex: “QuickEats Ventures” and “MetroMunch Hub” over “BurgerBlitz Bistro” or “FryFiesta Express”
  • Avoid location-based names that might hinder future expansion
  • Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead and reserve your business name with your state, start the trademark registration process, and complete your domain registration and social media account creation. 

Your business name is one of the key differentiators that sets your business apart. Once you pick a name, reserve it and start with the branding, it’s hard to switch to a new name. So be sure to carefully consider your choice before moving forward. 

Step 4: Create a Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

  • Executive Summary: Provide a brief summary of your fast food restaurant business plan, outlining your concept, location, and anticipated success.
  • Business Overview: Describe the nature of your fast food restaurant, specifying the type of cuisine you’ll offer, such as burgers, pizza, or sandwiches.
  • Product and Services: Detail the menu items and dining experience you’ll provide, emphasizing any unique offerings or signature dishes.
  • Market Analysis: Analyze the local market for fast food, considering factors like population demographics, dining trends, and consumer preferences.
  • Competitive Analysis: Identify other fast food establishments in your area, highlighting your restaurant’s competitive advantages, such as healthier options or faster service.
  • Sales and Marketing: Explain your strategies for attracting customers, including advertising, promotions, and online ordering options.
  • Management Team: Introduce key team members, such as chefs, managers, and financial experts, emphasizing their qualifications and roles.
  • Operations Plan: Outline the daily operations of your fast food restaurant, covering everything from sourcing ingredients to food preparation, customer service, and compliance with health and safety regulations.
  • Financial Plan: Present financial projections, including startup costs, expected revenue, and profitability estimates based on menu pricing and customer volume.
  • Appendix: Include any relevant permits, licenses, or certifications needed to operate a fast food restaurant, as well as sample menu items or photos of the restaurant location if available.
what to include in a business plan

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to fast food restaurants. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your fast food restaurant will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

  • Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
  • General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
  • Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts. Here’s how to form an LLC.
  • C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation. Read how to start a corporation here.
  • S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.
types of business structures

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Form Your LLC

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Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

  • Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
  • SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
  • Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
  • Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
  • Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
  • Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
  • Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
  • Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a fast food business. You might also try crowdfunding, angel investors, or venture capitalists if you have an innovative concept.  

Step 8: Apply for Fast Food Business Licenses and Permits

Business Licenses and Permits

Starting a fast food restaurant business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You’ll need to check with your state and local governments about various health and food service license and permit requirements. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your fast food restaurant business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

  • General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
  • Business Property: Provides coverage for your equipment and supplies.
  • Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
  • Worker’s compensation: Provides compensation to employees injured on the job.
  • Property: Covers your physical space, whether it is a cart, storefront, or office.
  • Commercial auto: Protection for your company-owned vehicle.
  • Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
  • Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.
types of business insurance

Step 11: Prepare to Launch

Launching a Business

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You may want to use industry-specific software, such as Restaurant365, ToastTab, or Square, to manage your inventory, purchases, and sales. 

Accounting

  • Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero
  • If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Create a website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Your customers are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. 

Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Order Ahead”. This can sharply increase purchases. 

Marketing

Here are some powerful marketing strategies for your future business:

  1. Loyalty Programs: Implement a loyalty program offering discounts or free items after a certain number of purchases to keep customers coming back.
  2. Social Media Engagement: Leverage the power of social media by regularly posting engaging content, running contests, and responding promptly to customer comments and messages.
  3. Local Partnerships: Collaborate with nearby businesses or events for cross-promotions, reaching a broader local audience.
  4. Limited-Time Offers (LTOs): Introduce exclusive, time-sensitive menu items to create a sense of urgency and drive customer curiosity.
  5. Community Involvement: Sponsor local sports teams, participate in community events, and engage in charitable activities to build a positive brand image.
  6. Food Delivery Partnerships: Partner with popular food delivery services to expand your reach and convenience for customers.
  7. Distinctive Packaging: Design eye-catching, branded packaging that not only protects the food but also serves as mobile advertising when customers take it home.
  8. Innovative Menu Items: Regularly update your menu with new, unique items to entice repeat customers and generate buzz among potential ones.
  9. Customer Feedback Loop: Establish a feedback system to understand customer preferences, address concerns promptly, and continuously improve your offerings.
  10. Theme Nights or Events: Host themed nights or special events to create a buzz, attract new customers, and provide a memorable experience.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your fast food restaurant meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your fast food restaurant business could be: 

  • Eat healthy even on the go
  • We make sandwiches your way
  • Gourmet hot dogs you can’t get anywhere else
unique selling proposition

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a fast food business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in fast food for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in fast food restaurants. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

Building a Team for a New Business

You will need workers to fill various roles. Potential positions for a fast food restaurant business include:

  • Counter Clerks – customer service, make sales
  • Cooks – prepare food items
  • Marketing Lead – create and implement marketing strategies
  • General Manager – accounting, scheduling, inventory management

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Start Making Money!

Running a Business

America has a love affair with fast food, which is why the industry is so huge. It takes an investment to start a new fast food restaurant, but if you have a unique concept and great recipes, you can recover your investment quickly and make good money. You could even franchise your restaurant one day and have locations all over the country.

You’ve mastered the business part, so now you’re ready to hit the road toward fast food world domination!

Fast Food Restaurant Business FAQs

Is a fast food restaurant profitable?

Fast food is always popular, so it can be a very profitable business. You need a great location, a unique concept, and tasty food to be successful.

What is the growth potential of a fast food restaurant?

The growth potential of a fast food restaurant is unlimited. You can expand to new locations or even franchise your business if you’re successful.

Can you start a fast food business on the side?

You could purchase a franchise, have someone manage it for you, and just reap the profits. However, if you’re starting a fast food restaurant from scratch, it’s going to be a full-time business.

How do I run a fast food restaurant successfully?

Fast food restaurant success involves effective marketing strategies, consistent, quality food, and a great location. You also need to train your employees well so that they provide an excellent customer experience.

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How to Start a Fast Food Restaurant