How to Start a Diner

Part 1 - How to start a Diner business - Background

Diners are general watering holes for locals, so they have the potential to become mainstays in any given town. Restaurant owners can distinguish themselves by a variety of factors: speed, quality of service, price, restaurant theme and menu items. Successful diners are known for giving fast, friendly service.

Our guide is in 3 parts:

• Part 1 - How to start a Diner business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening a diner?

Average start-up costs to open up a restaurant are around $275,000 if you rent, and $425,000 if you buy the building. These fees should include everything, such as kitchen appliances and technology for the building.For further context (when you need to replace items), an industrial fryer will cost around $700, and an average table and chair set will run around $250.  

You or the landlord of the building will also need to obtain a Certificate of Occupancy, which states the building is up to code. Your employees and customers will need protection against injury, as slips and burns are common in restaurants. You’ll need OSHA compliant workers’ compensation for employees and safety signage for customers.

If you choose to open up a franchise, such as a 5 and Diner (a 50s themed diner), you’ll need $250,000 in liquid assets and $750,000 net worth (e.g., real estate holdings).

What are the ongoing expenses for a diner?

Any diner will have a variety of ongoing expenses:

• Server salaries

• Equipment maintenance and replacement

• Cost of food

• Marketing

• Administrative items (e.g., computers, office supplies)

Who is the target market?

An ideal customer is someone who lives in the area, and one who is likely to establish a good rapport with the serving staff. Once a person has positive associations with the diner, they are more likely to bring their friends and to return again and again. Casual eateries are generally profitable only when they’re able to establish a good foundation of ‘regulars.’

How does a diner make money?

Diners make money by charging people for food with a profit margin. The cost of the food items must cover rent, equipment, staff salaries, and restaurant fixtures. Restaurants have some of the highest overhead of any business, so diners may operate at a deficit for many months before starting to see profit.

How much can you charge customers?

The standard formula for restaurants is to total the cost of the raw ingredients, and then multiply that by at least 3 to determine the listed menu price. However, each business will be influenced on where they are and who their clientele is. You will need to determine a profitable margin based on your rent price, staff wages, and equipment costs. However, you may also want to check out your competitors’ prices in the area before setting the final dollar amount.

How much profit can a diner make?

Profits are dependent on the amount of sales they make in any given day. The profit margins are typically only about 5 to 6% though, so there needs to be a high volume before restaurant owners start seeing major profit. If your restaurant does $500,000 in sales in a year, then your profit would be $27,500.

How can you make your business more profitable?

The best thing an owner can do is determine what people are willing to pay a premium for, whether that’s healthy but delicious food or a trendy new flavor that everyone’s talking about. Even diners can get a little fancy to keep their customers. There’s also the possibility of branching out into merchandising (e.g., T-shirts, hats) or by setting up stands and selling prepared foods at farmer’s markets for further promotion.

Day-to-Day and Growth

What happens during a typical day at a diner?

Owners may find a general day consisting of the following tasks:

• Hiring and managing employees

• Overseeing the cooking process

• Designating and coordinating shifts for all staff

• Ordering inventory and food supplies

• Performing inspections to ensure quality and cleanliness

• Preparing budgets

• Building and equipment maintenance

• Testing and experimenting with new menu items

What are some skills and experiences that will help you build a successful diner?

The best skills an owner can have is being a good multi-tasker. Most tasks on a to-do list may seem simple, but put all of it together and it’s a time-management puzzle that not everyone can solve. You should also be good at reading people and understanding what they want. When diners have legitimate complaints, listening and negotiating skills will become critical to staying in business.

What is the growth potential for a diner?

Diners aren’t generally known for being large restaurants, though there are exceptions to this rule. A diner may expand in terms of physical space (e.g., buying the building next door and expanding the seating area), or they may become a franchise. Should your diner become extremely popular, with long wait times and enthusiastic prospective customers, then it’s recommended you open another location to accommodate the demand.

You may also wish to start a franchise. For example, popular chains like Denny’s or Ruby’s allow owners to use their name and menu to establish a business. The name recognition and built-in advertising can give owners a leg-up when it comes to getting their first customers.

What are some insider tips for jump starting a diner?

More than anything else, a diner needs to be consistent if it hopes for success. While no business is perfect, uneven service, food quality, or restaurant cleanliness will quickly turn customers off. If people see Yelp reviews that are sometimes good and sometimes bad, they may feel uncomfortable taking a chance. An owner cannot survive in the competitive restaurant world without watching every detail.

You also need to be smart about spending. Look for deals and sales whenever you can. Restaurants that have gone out of business are a good way to pick up perfectly functional equipment at a deep discount. Many owners will overspend before even opening the doors on everything from Facebook ads to redecorating, only to find their sales don’t support the initial enthusiasm.

How and when to build a team

The best time to build a team is at the very beginning, before the diner opens. Once the diner becomes popular, it will be difficult to hire and fire simply due to time constraints. Staff turnover often has a more significant impact on profits than owners think. Between trying to fill in the absent person’s shifts and training new people, there’s a lot of potential for major mistakes. While a certain amount of this is unavoidable in a business like a diner, you should really be looking for people who are willing to stick with the organization to make it a success.

Part 2 - Is a Diner business the right fit for you?

Part 3 - Action plan to launch your Diner business in 90 days