New to the industry

Get answers to the most important questions when starting a café, takeaway or restaurant.

The two best pieces of advice for those new to the industry

Do you have a budding dream of having your own pizzeria, cafe, coffee shop, restaurant, grill bar or other business, but don't know where to start?

Then you've come to the right place.

We have been working with customers, suppliers and authorities for many years, and have followed the subsequent start-up on the sidelines and answered countless questions. Now we are collecting all the answers on this page - for the benefit of as many new entrepreneurs as possible.

Regardless of what type of restaurant you are considering, there are two common features that determine whether you get off to a good start or not.

1. A sharp (simple) concept: The sharper your concept is, the easier it will be for you to differentiate yourself and communicate it to the target audience. This gives you a financial advantage as you don't need as much equipment, and it makes it easier to get featured in local media and on social media when your concept stands out.
2. Preparation: Half of new businesses close within 2 years. There is high competition, it is expensive to get started, and if you don't get the concept right, it is costly and time-consuming to change it. You have one chance to prove yourself to customers, so be ready from the start. Otherwise, they won't come back. Make sure you have savings to draw on, as the high fixed costs mean that it will take time before you can make a living from it.

But we have also seen that if you have a sharp concept, are prepared and are willing to spend many hours getting something started, you can easily succeed.

Premises

Should I set up my own premises from scratch (new establishment) or take over an existing kitchen (lease or purchase) or enter into a franchise?

It is often the budget that determines whether you choose to take over a fully equipped commercial kitchen, or whether you choose to put your own stamp on the interior design and start from scratch in empty premises.

But some have the budget to choose for themselves.

The most optimal solution is of course to establish and furnish the room from scratch, as this will give you exactly what you want and adapt it to your concept. However, this is often a very time-consuming and expensive solution, as new establishments generally take longer to complete and cost more than you budget for.

There is also the question of whether the premises can be approved for operation as a restaurant. This can be a challenge if the premises have not previously been used as a restaurant. Here, you need to enter into dialogue with the municipality early on, so that you are clear before you start planning and furnishing.

Therefore, in some cases it may be a better idea to take over an already equipped kitchen. People in the local area are familiar with the location as a point of sale, the premises are often equipped, the premises are in most cases approved in advance (as long as you produce something in the same style) and sometimes a machine park is included. This equipment can be used immediately and replaced on an ongoing basis when finances allow. If you take over a kitchen in advance, the project will be less time-consuming and it will be easier to stick to the budget.

Contract

It must be clear whether it is a rental of premises or a lease, where you take over the operation of an existing business. Especially for leases, you must pay close attention to the contract, as you are often less well protected here than in a rental contract.

If you are in doubt whether it is a lease or a rental agreement, the corporate lawyers have a good article that you can read here .

Another option is assignment, where a current tenant can get rid of their lease by transferring the contract to another business owner, who will then hand over the lease on the terms already agreed upon in the contract.

In both transfer and lease, you will have to pay a sum in addition to the rent. The same applies to franchises , where you buy into a concept. Here, you will often pay an amount at start-up, where you buy into the concept, and equipment/furniture is made available. The advantage here is that you buy into something that is known and that will quickly boost sales. You often have a marketing package that you can rely on and thus concentrate on operations.

The disadvantage is that you have to hand over a portion of your sales or profits to the company behind the franchise concept, and you may risk being terminated if you do not meet the obligations in the agreement. You may also risk that other franchisees do not meet the obligations, which can affect the franchise brand as a whole and ultimately your business. The industry organization Horesta is skilled in advising in many areas, and we always recommend that you, as a newbie, sign up for a membership with them and get the right help in the difficult start-up and subsequent operation.

Economy

Should one have financial leeway?

Yes.

Many restaurants and cafes are operating but do not generate huge profits. Therefore, it can be difficult to create greater financial flexibility.

Make sure you have an agreement with the bank in case your equipment breaks down and needs to be replaced urgently. Few suppliers give credit to smaller businesses for larger amounts. The vast majority will require cash payment, and if you want a leasing agreement, it may take some time before you are approved.

So to avoid being in a stressful situation with a shutdown, make sure you have a plan in place if some expensive equipment needs to be replaced urgently. The equipment will have to be replaced sooner or later, and using VAT as operating liquidity is in no way recommended.

What is leasing?

Leasing is a way of renting the product for an agreed period. It could be 12 months, 24 months, 36 months or 48 months.

You pay a deposit which often corresponds to 3 months' service excluding VAT. When the period has expired, the deposit is often offset against the residual value (scrap value) and ownership of the equipment is transferred to you.

In addition, an establishment fee (approx. 1,250 excluding VAT) and insurance (will often be 3 per thousand of the leasing value excluding VAT) is often paid.

To be approved for leasing, you either need to see your personal annual statement from the previous year or the company's accounts. If you are in RKI , this may be an obstacle.

The advantage of leasing is that the amount is fully deductible in your income statement. In contrast to a cash purchase where a large part of the purchase price must be depreciated over the coming years. It is also an advantage if you do not have the funds, as the investment is distributed over a longer period of time. As a start-up, it is an advantage, as you can continuously have some money in the cash register to pay the monthly payment. But if you have the funds to do so, it is always cheapest to either pay in cash or take out a bank loan.

If you are unsure about your concept, it can also be a good solution to rent some equipment for a fixed agreed period, where you can test whether the concept works. You are often personally liable for a leasing contract. This means that if your business turns out to be unprofitable, or if you do not get to use the equipment, you are basically stuck with the contract until it expires.

We advise against quick loans because several of them lure you with interest-free and installment-free loans. But where they make their money is when you miss an installment. And then there can be a lot of costs on the loan. In general, it is a good idea to look for what is called APR or annual percentage cost. It is a legal requirement that it is written (often in small print) on the contract, and shows you what the loan costs you annually with interest, fees and other things. That way you can compare the different financing options, and thereby see what is cheapest for you.

Commercial kitchen equipment

Professional or household models?

Many of the machines we use in a kitchen are available in versions for professional use and private use: For example, hand blenders, refrigerators, mixers and ovens.

Products for the professional market are designed for intensive use. The requirements for the professional market are different in terms of capacity, time and reliability.

That is, products that can handle larger quantities at a time and where the components are stronger. This could be:

• Reinforced hinges, because a professional refrigerator is opened hundreds of times during a day.
• The heaters are more powerful so the equipment can run all day.
• Higher ventilation point so that the products do not get hot after prolonged use.
• Certain materials are suitable for "hard treatment" in a commercial kitchen where things often get hectic.
• Products that are easy to clean.

Especially within the refrigerator and freezer sector, there are some rules that make household products unsuitable, and you really need to think about it, as you risk having to buy twice or getting a fine from the Danish Food Agency.

What is the difference between expensive and cheap models?

As it has become easier for retailers to start up (all you need is a website and a catalog from Germany), with increased globalization, where the world has figuratively become smaller and a sea of unknown brands have become available, the supply of commercial kitchen equipment has never been greater.

In the past, there were two to five recognized brands within each category. Today, almost every week, we come across a new brand that we are not familiar with. This has meant that the range of products has never been greater, and it is therefore a jungle for people who do not know the industry to find their way around.

Many people ask themselves: Why should I pay DKK 10,000 for an item when I can buy a similar product for DKK 5,000?

Even though two products look similar, there can be a big difference between them. The cheapest products on the market are typically produced in Asia. There is nothing wrong with that in principle (this applies to many electronics, for example). But there is a big difference between whether a product is produced using European technology/methods in a factory in Asia, or using one's own methods. This is largely due to a lack of quality control and different perceptions of what good quality is.

Good quality in Denmark and good quality in China are perceived very differently, for example. So unless there is strict quality control, you will often experience a failure rate that is 5-8 times higher than for a product produced from a recognized technology with quality control (our experience). So the saying that you get what you pay for often applies in our industry.

There is also a growing trend in the industry where providers with inferior products often “forget” to mention certain specifications that make the product appear better than it is. This only highlights the good aspects of the product and deliberately omits the bad. It could be a cheap product that uses significantly more power, or that is much noisier than the alternative.

Advantages

Unfortunately, many people buy cheaply and close their business shortly after. They don't necessarily get to experience the low quality of the product, because even cheap products typically last a year or two. But in an era of green transition and a "use-and-throw-away" culture, we think it's more important than ever that customers are critical of what they buy and think more long-term.

Calculate the total costs

Of course, it can be difficult with a limited budget, but you should at least consider the total cost of the chosen product. Not least considering that it is an industrial product that must be able to cover a demanding need. You should consider the following before you buy:

• What you have to pay for the product ex. VAT
• Product lifespan
• The product's consumption costs (will often be electricity)
• Maintenance of the product throughout its lifespan (service)
• Lost profits/extra working hours if the product needs to be serviced
• Used value at resale

Why isn't there a 2-year warranty?

We find that many customers expect that the Danish Sales Act provides a 2-year right of complaint. Unfortunately, they forget that this is a business purchase, and there is freedom of contract, which means that as a retailer you can disregard the Danish Sales Act and only offer a limited right of complaint or guarantee.

Ask your catering equipment supplier what warranty they offer.

Should I choose gas or electric equipment?

Many customers are unsure whether to choose electricity or gas. Machines such as deep fryers , pancake makers , pasta cookers , stoves and ovens are available with either gas or electricity.

Advantages and disadvantages of gas

Gas is generally a little cheaper and gets hot faster. But the ambient temperature is high, and it can be difficult to control the temperature. You should also pay attention to whether the product you buy can be used for natural gas, bottled gas or town gas. The latter are difficult to find. The pressure and nozzles are different. You can always see on the nameplate what the product is preset for.

Some are tempted to buy a gas product in Germany, but the pressure here is also different and does not work in Denmark. Always make sure to get documentation from the supplier that the product is approved for Danish conditions. This is a requirement from the fire authorities. And remember that installation must be carried out by an authorized professional . In addition, there must be a manual in Danish, a type plate in Danish and a printed installation connection on the box. Likewise, documentation for food contact materials.

Advantages and disadvantages of electricity

Electric machines are easy to install and use. One kilowatt costs approx. DKK 1.80,- excluding VAT and charges (2020). The temperature of electric machines is stable when using a thermostat. It is advisable to use a grounding adapter so that you do not get a shock if there is a transition in the equipment.

The equipment has a power rating in Watts. This is the max. power. And you need to make sure that you can draw enough power from the outlet. Also check how many amps the machine requires and how many amps you can draw in the building.

If the equipment needs a lot of power, it requires a power plug, and here you also need to make sure that you have enough power. Equipment for power plugs is delivered 9 out of 10 times with a cord but without a plug. So here it requires a professional to put the plug in, unless you can get the supplier to do it in advance (often a CEE plug).

In products with a rotating part (dishwasher, mixer, etc.), the rotating part will run the wrong way if the phases are not set correctly.

Induction heats up faster than regular hobs and uses significantly less energy. If you can afford it, you can save a lot of money on your electricity bill.