The Complete Guide To Starting Your Hospitality Business

You’ve dreamed about starting your own hospitality business for long enough! Now it’s time to get cracking. This guide takes you through each component of opening a business and leads you through each step to realising your dream.

Read on and you’ll find general information about opening a hospitality business. Once you’ve devoured that information, check out our venue-specific guides so you can learn more about starting a cafe, restaurant, food truck, pub, bar or nightclub.

If you like what you see, you can download our guides to keep as reference – plus you’ll get a free startup checklist to help you cover every base.

Why Start a Hospitality Business?

Starting a new hospitality business is an exciting time for any new business owner. Sure, significant challenges await. It’s not easy owning a hospitality business and smaller businesses can go under. It takes a certain amount of research, preparation and perseverance to succeed with your business.

But there are some pretty tempting reasons to create your own hospitality business

You get to be your own boss

You decide the business’s personality

You decide how to define the business through decor, fare and marketing

You are rewarded by seeing patrons enjoy your venue

Important Traits to Have

If you’re keen to start a hospitality business, it’s always a good idea to begin with a solid base made up of:

A broad range of venue management skills

Hospitality industry experience and connections

Technical support

The ability to plan

It’s also helpful to have an industry mentor who’s successfully launched a similar venture and can offer advice and guidance, particularly in the planning and launch phases of the business.

The Cost of a Hospitality Business

There are a number of startup costs associated with opening a new hospitality venture.

There are a number of startup costs associated with opening a new hospitality venture.

  • Obtaining a lease for the venue
  • Securing licenses and permits
  • Fitting out the premises – including the kitchen and venue furniture
  • Venue marketing and branding
  • Initial stock of food
  • Staff uniforms
  • Working capital
  • Hospitality management software
  • POS hardware
  • Insurance
  • Professional fees incurred from business advisers, lawyers or accountants.

You’ll also have running costs to cover, including:

You’ll also have running costs to cover, including:

  • Suppliers
  • Staff wages
  • Rent
  • Loan repayments
  • Annual license renewals
  • Repairs and maintenance
  • Income taxes

Be careful not to erode your reserve capital in the beginning by splashing out to buy everything brand new.

Instead, invest strategically in the elements most likely to draw in customers (quality food and good customer service) and upgrade on aesthetics when you’re more established.

How to Fund Your Venture

If you can’t afford to finance on your own or with the generous help of family, there are a number of finance options worth considering.

Many new business owners require external funding to get off the ground and for continued growth. The main types of finance options include:

Bank/Lender Loans

Crowdfunding

Venture Capital

Angel Investors

Bank/Lender Loans

Many banks and other types of lender tend to be risk-adverse, so if you’re looking to secure a loan, you’ll need a detailed business plan with clearly established key performance indicators (KPIs). This serves to inform prospective lenders on your proposed business so that you get the right loan.

Before you approach a lender, make sure you talk to an accountant or business adviser.

You’ll need to consider:

  • how much you’ll need to borrow
  • what type of loan you’ll need
  • whether the business can a ord to repay the loan as well as interest and other fees that come with the loan
  • what security you can provide the lender that will increase your chances of being approved
  • whether you’ll need access to borrowed funds ‘up front’ or ‘at call’
  • what loan terms are suitable for your business
  • whether you’ll need an overdraft limit.

To help you out with these considerations, InfoChoice has a handy small business loan comparison tool

Crowdfunding

Crowdfunding platforms like GoFundMe, Kickstarter or IconPark are also becoming popular. In these set ups, financial investment from the general public is used as an incentive for non-financial reward, such as food venue vouchers.

Venture Capital

Venture capital is a type of business financing for startup companies that have long-term growth potential. Venture capitalists are more likely to go for high risk investments, but they often get a say in how the business is run.

Angel Investors

Angel investors are individuals who invest in small startups. They are often family and friends of the aspiring business owner and invest in exchange for equity ownership.

Since they are typically focused on helping you start your business rather than the success of the business, their terms are generally more forgiving than a lender’s.

Want to save this guide for later or get started straight away with our bonus checklist?

Download Guide & Bonus Checklist

How to Find the Perfect Venue

So you’ve decided you want your own gig. Do you buy an existing business or establish your own? We’ve summarised some of the main advantages and disadvantages of both options.

Buying an Existing Business

Advantages

  • Previous experience available from existing employees and management
  • Start up work is already done – Less risky than establishing a new business
  • Immediate cash flow
  • You’ll have an established base of customers, and access to suppliers, employees and stock
  • Finance history will help inform business plans, making it easier to secure loans and attract investors

Disadvantages

  • Reason for selling may be that it was unprofitable or underperforming
  • Often requires a large up-front investment, and you’ll need to budget for professional legal and accountancy fees
  • May require extensive improvements which require capital

Establishing an New Business

Advantages

  • Complete operational freedom
  • More flexibility and freedom. Full control of venue location, business fit-out, branding, employees and suppliers
  • Ability to start small scale then grow, rather than spend significantly to acquire an existing business or franchise
  • Ability to differentiate your offering from existing hospitality offerings in location of choice
  • Clean slate – ability to establish yourself as a ‘new’ offering for the local community and build “goodwill” from locals

Disadvantages

  • Considered more risky than buying an existing business
  • Literally starting from scratch – you need to secure business premises, buy equipment, hire staff, source suppliers
  • You may run at negative cash flow for up to two years – have you budgeted for this?
  • No business history means that suppliers may require up-front payments for goods

Buying vs Leasing Your Premises

Once you’ve done your research and decided on a location, you’ll need to decide whether you’ll buy or lease your business premises. Then it’s good to inspect several potential business premises in the local area to get a detailed understanding of price and availability.

Also, spend time negotiating a favourable lease – if you have strong turnover but are pouring a large portion of that money to the landlord, you’re shooting yourself in the foot.

Lastly, before you sign the contracts, seek financial and legal advice to make sure you understand what you’re signing.

Choosing Your Location

The location of your hospitality venture can be a key factor in its success or failure. It’s important you research different locations to ensure the demographic makeup of the area complements the type of venue you’re looking to establish.

Questions you need to ask are:

  • Are there sufficient suppliers available to service your business?
  • Who are the potential competitors already established in the area?
  • How can existing businesses in the area complement yours?

It’s also a good idea to contact the local council to assess projected growth figures, and ensure the cost of buying or leasing in the area is in line with what you can afford. Key considerations to look out for are any planned development, council rates and zoning.

The Australian Government has a number of resources to help business owners choose the right location.

Know Your Food Safety Requirements

There are five food safety standards in Australia which may apply to your business:

HACCP

HACCP (pronounced HASSP) is a food safety and risk assessment plan to help identify risk to avoid food contamination or code violations.

To get started implementing HACCP in your business, download the HACCP Safe Complete Kit.

There are seven principles of HACCP that should be used by businesses, including:

  • Hazard analysis
  • Critical control points
  • Critical limits
  • Critical control monitoring
  • Corrective action
  • Procedures
  • Record keeping

Training Your Staff in Safe Food Handling

It’s a legal requirement in Australia that all employees handling food must be trained in basic food safety. Therefore you should provide food safety and appropriate training as part of the induction.

Employers have a number of options to consider, ranging from:

  • Nationally accredited online training courses
  • Classroom training
  • In-house training through a consultant
  • The use of approved manuals

Your Food Supervisor

It’s compulsory in many Australian states and territories (VIC, NSW, QLD, ACT) to have a nominated Food Safety Supervisor on staff.

This person will:

  • have the correct training and certification
  • understand their unique obligation to the business
  • will support other employees to provide health and safety in line with regulations
  • handle non-compliance or negligence issues that arise.

How to Choose the Right Hospitality Staff


In a competitive industry like hospitality, finding and retaining employees is one of the biggest challenges facing venue owners and managers.

Skills required for hospitality roles will largely depend on the type of venue you’re recruiting for but can range from barista skills, food and drink preparation, cash handling, customer service and management skills.

Additionally, employers should equally consider soft skills like interpersonal skills, the ability to multitask and be adaptable, team work, strong organisational skills and having good attention to detail.

How to Find Staff

Many business owners find staff through advertising in the local paper or through job hunter websites such as:

In addition, promoting the role through your social media platforms, as well as putting a simple ad in the window, will help raise the attention of potential job seekers.

There are a number of specialist recruitment services available to help time-poor business leaders ensure they are recruiting employees that have not only the right job-related skills needed for their business, but also the right cultural fit. Some examples are:

How to Brand and Market Your Business


The hospitality industry is highly competitive. Many inner-city suburbs of major capital cities in particular are experiencing gentrification, which is changing the demographic of these areas, but also attracting new hospitality businesses. Business leaders must remember that there will be other venues vying for consumers’ money and loyalty.

You will need to keep your eye on the food, beverage and aesthetic trends that are appealing to your target market, the price point of similar venues in the area, and how you can provide a point of differentiation

Branding

are honest and authentic in their branding

ensure points of difference echo through in the branding associated marketing

keep their messaging professional

engage with their customers

Marketing

When it comes to marketing, there are a number of options to consider.

Social Media

Social media is widely used by the hospitality industry for marketing purposes and to help businesses communicate with their target demographic. In fact, a growing number of consumers now expect hospitality venues to have an active digital and social presence.

Social media has the added benefit of being a cost effective marketing option, with potential for high reach.

The most cost and time effective way to use social media to market your venue is to identify the key social platforms that your current and prospective customers use, and use clever content and targeted marketing to reach them.

Advertising

Advertising in the local paper, or through online “hot spots” like Broadsheet, TimeOut and Concrete Playground, can boost awareness of your business and are worth considering if your marketing budget allows.

Tech savvy business owners may also look to invest in some paid Facebook or Instagram ads, once these platforms have been established.

Lastly, if your business has invested in a POS solution like Impos, the marketing feature will enable you to harvest contact details and send online newsletters with new promotions or incentives.

Incentives may include loyalty offerings for regular customers, bundle deals, “happy hour specials”, or discounts with the launch of business milestones (i.e. the launch of a new menu), just to name a few.

Want to save this guide for later or get started straight away with our bonus checklist?

Download Guide & Bonus Checklist

Want more venue-specific info? Check out our guides for starting your own cafe, restaurant, food truck, pub, bar or nightclub.

Talk to Us

Get in touch with our hospitality POS experts to see how Impos can help your business thrive.

Get Started

Download our free Product Booklet to learn more about how Impos can help your venue thrive

Product Booklet