How to Open a Restaurant With No Money? ( 7 Wise Ideas)

Starting a new business is not always simple. It usually takes some risk and lots of money, which is the main problem for new entrepreneurs. Opening a restaurant is a risky venture. It includes many things, and each thing requires expenses. Many find it difficult to open a restaurant because they do not have funds for their business, and they give up on their dreams for that reason.

However, if you have an idea and no money, it is still possible to achieve something great! There are many ways to get money and open your restaurant. Keep reading to find out more about these ways and maybe use them for your future business.

Read also: What Is The Best Restaurant Type To Open: Top 21 Ideas

1. Family and Friends

The easiest way to raise capital for your restaurant is by asking your family and friends. They will often accept it because they believe in your dreams and trust you completely. Moreover, you do not need to prepare a business plan or a pitch. 

However, it is not the best method because you are under constant pressure, and it is risky for everyone. If your restaurant business ends up fail, you may ruin your relationships. On top of that, you will not have money to pay your debt. Of course, it would be better for your business to grow, because you will be able to realize your vision.

If you decide to go for this type of funding, always set the right expectations. Let your family member or friend know the duration of how long this investment is going to be, and that there is always a risk of losing the money. Without a doubt, you will do everything you can to help them grow their money, but there is no guarantee, and they should expect this to be a high-risk investment.

I would not recommend this method, because a lot can be at a loss. Although it sounds like a simple way, you risk a lot if your business fails. Not only will you not be able to return the money, but you will also be under pressure because it is a family member and you will think constantly about how to repay them.

2. Food Incubators

Business incubators are important for new ventures as they offer startups access to resources they need. They are usually temporarily launching pads for new business until they learn to stand on their two feet. 

Opening a new restaurant and starting a business from the scratch requires thousands of dollars, and it is questionable whether you will succeed on the market. Many started from low-cost kitchen space until they opened their own. Food incubators provide you with space you pay hourly or even monthly. Food incubators have existed since the 60s, and they educated entrepreneurs on running a business.

Food incubators will help you present yourself, attract clients and eventually expand into your own space. It is the perfect first step and a stepping stone to opening your restaurant. 

You will not only reduce the cost but meet chefs who will give you useful pieces of advice and inspire you with their food and concept. In that way, you will get a clear picture of a restaurant you want to open and the food you want to serve.

3. Loans or credit

People starting a new business often opt for bank loans. However, sometimes they cannot get it, especially if they have not opened a restaurant yet. Banks consider the restaurant business too risky and are not willing to always provide you with credit. 

When you want a loan, you need to have security to pay a loan back, and it calls for a restaurant business background. That is why getting a bank loan is not simple as you need to prove positive cash flow, and it is impossible if you have not opened a restaurant yet and do not have any revenue.

If you want a loan for a new restaurant, you need to meet some conditions. Keep in mind that things such as previous experience, a perfect credit score, financial security, and advance payment may help you get a loan.

There is another way of financing, and that is a restaurant loan. There are many SBA or Small Business Association loan programs that enable leaders and organizations to help small entrepreneurs achieve their dreams. It is a great option for opening a restaurant, and there is no reason not to seize an opportunity.

If you decide on financing through SBA, keep in mind you have to prepare a business plan. A business plan will help you get the money because it states clearly how you plan to run your business and earn money to pay the loan back. It includes a lot of paperwork and effort to prove the concept and convince the bank that your plan and business are viable, so you better invest time in preparing a good and successful business plan.

Also, the most important thing before deciding on these options is to establish your tax structure and determine if you will be a sole proprietor, a limited liability company, or a corporation. 

A sole proprietor will concentrate on borrowing, whereas a corporation may issue equity. You can use the equity in your home or other property as collateral and borrow the money. There is the option for applying for unsecured borrowing. 

If you have bad credit, traditional banks are unlikely to finance your restaurant dream unless you present a compelling business plan. Others, on the other hand, may offer you financing at significantly higher lending rates.

If you have poor credit, do not worry because some financial institutions give loans in such cases. Loans where your credit does not matter, such as short-term cash advance or “pay-day” loans have high interest rates because sometimes borrowers do not pay the money back. Many do not suggest this type of financing because it may lead you to enormous debt.

Personal installment loans, which require a credit check, are the easiest type of financing to repay because they allow for monthly payments over longer periods on more affordable terms. 

4. Find Angel Investors or a Partner

Angel investor is a person or organization that finances your business idea. Angel investors will help you finance your business, but in return, they want ownership equity. 

You always have to ask yourself why they would invest in you and how you are unique. They are not wealthy people that invest in everything. Angel investors do not give money because they are generous, but because they see some value in your business plan. If your business idea is good, they will also benefit from it. 

Angel investors will not always give you cash. For example, they often help startups offset the costs of launching their businesses by investing in a building they own. They typically do this in exchange for a long-term lease. The good thing is they will guide you and be your mentor on the journey of starting a successful business.

Another way is to find a partner. If you have little or no money, you can try to find a partner that will grow your business with you. Besides cash, they can provide you with some good ideas for success. There are a lot of operations, from marketing to finance within your business, and the other person may bring a lot to the table. Do not forget it will turn out successful only if you find a suitable partner you can trust.

There is always a risk when bringing someone new into your business, as you may find an untrustworthy partner that will leave you without money and will not contribute to the work at all. You have to be very strategic when making a deal with another person. It includes a lot of conversations and setting the right expectations in the beginning. You should know what to expect from each other because that is the key to building a dream team.

5. Crowdfunding

Thanks to the internet, you can achieve many things and even get money for your business. You can fund your restaurant project with the help of crowdfunding sites. It is enough to record a good pitch and upload it to sites. Many people support small businesses, especially if they believe in them. It does not mean you will always get the fund you would like. If you are lucky enough, you can attract people and achieve your idea.

Before you start your crowdfunding campaign, set your fundraising goal and duration, decide where the money will go, and come up with rewards for donors. Then put your video and launch your campaign. Many restaurants started this way, and now they run successfully. This is an excellent motivation for you to do the same.

6. Food Truck, Pop-up Restaurant or Catering Business

Maybe you have some money saved up, but not enough for opening a restaurant. There is something you can do and eventually expand your business. You can start with a food truck, catering business, or a pop-up restaurant. Starting this way will help you research the market and see how consumers react to you and your services. If you gain a reputation, you can expand your business and open a restaurant with no problems.

With a food truck, you will not have overhead, and you will not have to pay electricity and rent. You do not even have to hire a lot of staff. You can use the internet as a platform for marketing. 

You can start a pop-up restaurant anywhere, such as existing restaurants, and sell food to their customers until you gain experience. After that, you can move to a bigger location.

The catering business is an excellent way to try your hand at planning a menu, pricing, food preparation, and other elements present in the restaurant business. In that way, you will make new clients starting from your kitchen. If you want to set up a catering business, local authorities will probably need to certify your kitchen. To avoid this, you can rent time in a commercial kitchen.

Read also: How to Start a Food Truck

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7. Delivery-only

You can start with a small restaurant at your home. If you have spare space, you can offer customers takeout food with an easy ordering experience, such as online, over the phone, or in person. 

This has always been a profitable mode of business. Many industries, especially pizza industries, are still thriving while others in the same-store sales are experiencing a drop. The key to a successful business is lowering overhead and improving the experience for consumers.

It takes time to get into the restaurant business, but it is important to build your repertoire, reputation, and connections. It is obvious you cannot open a restaurant right away without the money, so you can always start somewhere, and delivery-only is one of them. It takes determination, money, and careful planning, but once you get the clients and experience, you can become a great restaurant owner.

Similar to this concept is a virtual restaurant that emerged due to the global pandemic. The virtual restaurant offers delivery-only without the presence of brick and mortar. The difference is that you have to share the kitchen with others. Many entrepreneurs opt for this method because there are no considerable costs, and they and their business can benefit from it. 

You can share the kitchen with entrepreneurs that want to serve only breakfast and lunch, and you can rent out their kitchen to serve dinner or vice versa. The important thing is to collaborate and bring out the best from this method. Delivery service may advertise and manage food delivery via website or application.

This method requires discipline. You need to ensure space is a good fit for your concept, and you can easily return it to its original state. This idea sounds promising, and many people can try it on their way to open a restaurant. With the help of this method, you can research the market, make clients and money you will use for opening your restaurant.