Why Every New Hospitality Business MUST Complete a Feasibility Study Before Opening

Want to Open a New Restaurant or Café in Canada?

Many people dream of owning their own business.  Of them, a high-percentage want to open a restaurant, café or bar.  With covid-19 not ending any time soon it is definitely more challenging to open a successful business.  However, finding the right location is now easier and less expensive.

A feasibility study is an essential component of your start-up’s success, but it’s a process many new restaurateurs skip out on, leading to wasted time and a quick loss of investment. A feasibility study must be conducted in order to determine the potential success rate of the restaurant, and to minimize the risks related to the start-up.

This plan or study should be the first of three plans (a feasibility study, a concept development, and a business plan) that work as a cohesive unit prior to securing any lease or investing any further funds.

Here are four essential categories to assist you in researching and presenting a successful feasibility study and getting started on the path to living your dream.

Step one: preliminary analysis

Outline your proposed restaurant in terms of service style, target market, required location size, and style of food and beverage. Take this time to be as specific as possible!

Next, determine if your restaurant will fill a gap in a currently under-served niche in your market (look at age groups, income groups, and multicultural populations specifically). List as many details as possible.

Will your new restaurant successfully compete with similar food and beverage concepts within your proposed market? Is there enough room for more? What advantages will your new concept bring to differentiate yourself? Use this time to consider intended food and beverage quality, space capacity, location needs, value statements, pricing structure, and atmosphere.

If your market has zero direct competitors, first ask yourself: why?

Next, what immediate challenges or threats will your start-up face? What is the labour market looking like? Are there enough qualified chefs, managers, and bartenders, for example? Would your location have challenges in terms of supply chain management or food and beverage delivery logistics? Are you close to a farming community?

If you think your early vision has a chance – move on to the next step of the process.

Step two: Market Survey

A good market analysis is key to your success. Accumulate and analyze your market’s population trends, lifestyles, demographic features, community profiles, cultural factors, traffic patterns, local capital improvement projects, and the income levels within your target city.

Next, analyze the food and beverage offerings within your community. Map them out by location and style of concept. Keep in mind high-end grocery chains that now offer quick meal solutions.

Complete a SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) to analyze the pricing, menu options, location, seating, promotions, service level, customer reviews, and community involvement of each key competitor.

Finally, get out in the market (physically and/or online) and survey actual target customers. Ask them a series of important questions regarding your visualized concept. Document these answers for review and analysis to determine if the target market is not only large enough, but has room for growth.

Step Three: Prepare Financial Forecasts

This is an important step, for obvious reasons. But how will you know your proposed restaurant’s monthly expenses and revenue? With careful research, analysis, industry percentages, and reports from government agencies, you can determine averages and projections for your concept and style of service.

With this step, you can also determine projected start-up costs (budget constraints), staffing needs, wages and salaries, food and beverage costs, average monthly lease payments, marketing and advertising costs, and much more.

To determine potential revenue, you can project your operating hours, seating or take-out capacity, and revenue per customer goals that are a reflection of the market size. Use this data to complete an hourly based revenue per seat analysis to back-up your numbers and realistically see how many customers can be served per hour, day, week, and month.

There is a lot of data you need to research, to complete this step, so you may want to consider hiring a professional who knows the industry and/or local market at this point. It is important to understand projected break-even points and if there is enough demand in your market space so you know you can generate a profit.

Step Four: Review the Risk

Re-examine your entire study so far. Make sure it is organized with graphs, charts, and plenty of factual data. Does the data reflect realistic expectations? Analyze your risks, time, and overall projections.

Listen to your gut feeling and make sure your next decision is a calculated one. The more data you collect, the easier the decision will be. Are you ready to make the commitment? If not, walk away now.

If yes, great… the next step is taking this data and implementing it into your action plans!




We all know the stats of failing restaurants and cafe in Canada and there is no doubt it is a challenging venture.  Engage with one of our experts to ensure you have all of the information, support and plans to make your dream a success.  We can partner with you to complete a comprehensive Feasibility Study for your region for under $2000!  Contact Pinnacle Consulting today to find out more and schedule a free consultation – Morgan@hospitalityconsulting.co

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