The hospitality market is fiercely competitive, unforgiving and, particularly in London, requires a fair chunk of change. According to exclusive data from Toast, the average monthly revenue for a new restaurant in the capital that’s less than a year old is £88,500, with a profit margin of just 3-5 per cent. That means there’s little room for error, and it doesn’t take a lot for a business to find itself underwater.

But opening a restaurant is usually done with passion, and no amount of doom, gloom or naysaying will put off those determined to make it their mission. If that sort of determination sounds familiar and you see yourself as an aspiring restaurant owner, you must meticulously evaluate your strategy for a successful launch. Thankfully, to support any budding would-be restaurateurs, Toast has compiled a step-by-step guide on how to open a restaurant in London and win.

Let's get into it. Here's how to open a restaurant.

Diners have endless choices when deciding where to eat in London. In fact, there are over 15,000 restaurant businesses in London, and that's not counting the likes of ghost kitchens. So finding a concept that captivates is essential for getting bums on seats. What culinary delights will you offer? Are you aiming to be celebrated for locally sourced ingredients? Whatever your vision, document your aspirations and how you wish to be perceived.

Johnnie Crowe, chef-founder and co-owner of the Michelin-starred St Barts notes: ‘This should be something that is part of your identity. You’re going to be working on the floor or in the kitchen, running this business, so after the fit out and the buzz of the opening, you will be in for a long old slog. The idea has to be something that you love and believe in.’

Elliot Hashtroudi, founder of Camille in Borough Market, says it’s important to be unique with a strong identity. ‘Go against the grain. There’s enough restaurants serving flatbreads and caviar on rostis!’

As your idea starts to come to life, it’ll serve as your restaurant's compass, paving the way to step two.

Without a solid business plan, your London restaurant dream will be hard to achieve. A good business plan acts as a comprehensive blueprint detailing how your venture will materialise and (crucially!) make money upon opening.

‘Our business plan to begin with was purely based around what we wanted the identity of St Barts to be: British produce at the very heart of everything,’ says Johnnie.

Utilise your business plan to guide your initial steps and secure funding from potential investors for necessary capital. An effective restaurant business plan should include:

• Company overview, including your business model

• Industry analysis focusing on London's market, including target demographics, location study, and competitive landscape

• Marketing plan

• Business model and service model (Are you a quick service restaurant? Fine dining? Fast food?)

• Operations plan (staffing, customer service policies and procedures, restaurant point of sale solution, payroll)

• Financial analysis and business model (investment plan, projected profit and loss statement, break-even analysis, expected cash flow)

If crafting a business plan is new to you, seeking advice from a seasoned advisor or restaurant mentor can ensure you have a compelling and clear vision for potential investors.

Let's face it – starting a restaurant is an expensive endeavour.

Whether you're franchising, partnering or venturing solo, substantial initial capital is required. And Elliot sums it up nicely with his sage advice: ‘Never get into business with someone you couldn’t go for a drink with.’

For those lacking personal funds, various financing options are available, such as:

• Equipment and technology loans. Negotiate with your bank or provider a way to procure loans for kitchen equipment and restaurant tech, which can be one of the most expensive costs.

• Working capital loans. These help cover operating costs while your restaurant has more expenses than income. Ideally, budget six to twelve months of operating costs until you reach the break-even point.

• Lines of credit. If you’re approved for a business line of credit, you’ll receive a maximum credit amount, but you'll only be charged for the amount you actually use. Like a credit card, the line of credit constantly revolves. As you pay your balance, you’ll have more credit to draw on for future expenses.

St Barts began in a similar way, says Johnnie. ‘Bank loans can be scary, but ultimately, if you’re looking to create a special experience in the higher end of the market, you will need plenty of capital to make your stamp on the food scene in London. But if you’re going for more casual dining, doing the work yourself with things like crowdfunding or raising money through a series of events works too. It’s how we first started with our other restaurant, Nest.

The significance of the right location for your restaurant in London cannot be overstated. Conduct thorough research on local demographics, market trends, competition and specifics of the potential site, including its size, visibility and history. Alternatively, consider a ghost kitchen for a location-independent model.

If opting for a physical presence, choices include leasing, purchasing, or constructing your restaurant. Evaluate the following when considering a location:

• Target audience and customer profile

• Real estate market conditions in London

• Community engagement

• Site dimensions

• History of previous occupants

Your chosen location and its size should embody your restaurant's theme. An upscale steakhouse may require a standalone building. If you want to sling fish and chips or toasties in Borough Market, you could operate from a food truck.

‘Think about if you want to operate for lunch trade or not and how many days you want to be open, then work out what the area is like for each of those things,’ says Johnnie. Choosing a location close to where you live is important too. ‘I spent the first year-and-a-half commuting from my flat in Shepherds Bush to the restaurant in Hackney, which worked out as 44 days a year on the train. Not ideal!’

As mundane as it might be, securing all mandatory licences and permits is a process that can take time, so never leave it to the last minute. Licences and permits vary based on your restaurant's concept; here are just a few that you may need to open:

• Premises licence

• Personal licence

• Food business registration

• Food hygiene certificate

• Health and safety assessment

• Risk assessment

• Fire safety risk assessment

• Environmental permits

• Music licence

• Signage licence

Early pursuit of these licences, despite their cost and time requirements, is crucial for serious restaurateurs. You don’t want red tape to delay your opening!

‘Your menu will surely be linked to your restaurant idea, but your customer base will also dictate what it is, so be ready and willing to pivot if the customers end up wanting something slightly different to what your original grand plan was,’ says Johnnie. ‘This doesn't mean changing the identity of the restaurant but does mean you will have to be flexible.’

For instance, in a gastropub, how will your classics, like a roast, stand out? What unique touches can you add? How will you position your brand through your menu?

Next up, your pricing will come into play. Menu pricing involves considering the cost of goods sold, food cost, sales forecasting, inventory management, profit margins and compliance with food safety and health regulations.

Elliot notes: ‘With margins tight it’s crucial to push the bounds of sustainability and use every element in a zero-waste approach. Having a great relationship with farmers, growers and suppliers is paramount to help build your identity and formulate your product. Let them dictate your menus!’

Your staff are the backbone of your restaurant and they play a crucial role in its success.

Recruitment options include referrals, job postings and career websites. Creating a pleasant working environment is key to attracting and retaining talent. However you go about it, be sure to find people you click with, who embody the ethos of your brand.

Writing down customers’ orders the old-fashioned way with pen and paper will get old, fast, and according to Toast’s Restaurant Technology Report, 95% of restaurateurs agree that technology improves business efficiency.

New restaurants in London should consider investing in the following:

• A cloud-based restaurant point of sale (POS) system

• Kitchen display screens

• An online ordering system for restaurants

• Restaurant reporting and analytics

• Restaurant inventory management software

• Restaurant accounting software

• Simple scheduling and team communication

• A restaurant payroll solution

• A restaurant loyalty or rewards solution

With these technologies, scaling your business and establishing a successful brand will be much easier – although you may not need everything from the get-go.

Launching a restaurant demands a comprehensive marketing plan that not only captures but also engages your target audience effectively, from day one.

Your marketing efforts should not be a scattergun approach but a finely tuned strategy prioritising channels most likely to reach and resonate with your target demographic. This means understanding where your potential customers spend their time (online and offline) and tailoring your messaging to appeal directly to their preferences and dining habits.

Right – you’re ready to take London by storm. But before you swing those doors open to the public, a soft opening allows you to iron out those final few issues. Think of it as a dress rehearsal; invite your nearest and dearest to be your taste testers for the night.

Johnnie advises: ‘Make sure it's only family and friends to begin with. The first few services will be a nightmare with staff bumping into each other and the kitchen team cooking the wrong things and burning themselves. Just try and enjoy the chaos and make sure to take a step back from the night. Soft openings are for you to get the offering right, not for the people attending.’

Opening a restaurant is a challenge full of hard work and hurdles. Ultimately, for those brave enough to take on the task, it might just be one of life's most rewarding decisions. And if down the line, you decide to expand your restaurant business, it can help to have a partner like Toast.