Starting an F&B business in Singapore is not a simple processUnlike many overseas businesses where one can say “Hey, I am good at making fried chicken wings! Let’s get a license and sell it on the street.”. Due to many food scares and unhygienic food vendor practices from the early years of Singapore, the government has since taken control and created strict regulations towards operators in the F&B industry. F&B operators are required to run their business in a food establishment determined by Urban Redevelopment Authority (URA) as location for Food and Beverages. The National Environmental Agency, is the governing body for the F&B establishment. Quoted from National Environmental Agency,
“NEA Oversees the licensing, management, and regulation of hawkers to maintain and promote good hygiene practices and public health standards in government hawker centres. Manages the upgrading of hawker centres. Conducts regular checks on food establishments, cooling towers, swimming pools, and public toilets to ensure that a high standard of hygiene is maintained. Promotes anti-littering practices through education and enforcement. Maintains an effective system of public cleansing to keep Singapore clean and to prevent environment-related diseases.”In short, they are the “person in charge” of whether you can operate your business. If you disregard their rules, they have the authority to issue warnings, suspensions, fines and in worst case scenarios to cease your business. Whether you are a local entrepreneur or a foreigner, you are to have knowledge of the industry and expertise to make your journey more efficient. Below is a list of 8 steps that will help anyone looking to start a new F&B business.
1. Setting aside your CapitalDo not underestimate the cost of setting up your F&B establishment in Singapore. Depending on the location and size of your establishment, the average startup cost of setting up a F&B business typically ranges from $50,000 – $500,000. The rental cost, employee wages, renovations, and the overall standard of living greatly contributes to the high cost. The average rule of thumb, is to set aside a minimum of 6 months to cover rental fees for the continuation of your establishment. There are no shortcuts in setting up this type of corporation. If you find yourself struggling to meet the capital, you may want to compromise on the least important factors such as renovations, rental costs, furniture or consider a business partner. We don’t advise or recommend loans, due to the huge risks involved.
2. Budget PlanningA critical step in forming a solid business foundation, is to have a strict budget and financial plan made in advance. If funds are not a concern, you can skip this section. Based on the capital you have, identify the cost for:
- Renovations (Takeover vs Bare): Bare units will greatly increase your costs, while takeover unit may already have the basic, such as exhaust, flooring, kitchen, piping, ceilings, carpentry, and electrical.
- Rental: How much rent can you afford each month? You should set aside at least 25% of the amount stated in the rental contract. For example, if you have a 24-month lease, then set aside 6 months, 36 months lease term, set aside 10 months. This would be considered your contingency fund.
3. Incorporating your F&B companyThe first step, is registering your business with ACRA. Go to www.bizfile.gov.sg . Singaporeans Singpass is also needed for incorporation. Foreigners will have to apply for Entrepass with the Ministry of Manpower and subsequently you will need to apply for Singpass after the Entrepass. Your primary list for incorporating your company is to complete; SSIC description (restaurant 56111), food caterers 56201, etc. You can search for a more extensive list here . Since the F&B scene in Singapore is rather competitive, food catering as a secondary activity is strongly advised. Depending on your business arrangement, select a sole proprietor, private limited, or limited liability as the type of company. We personally suggest Private Limited. Complete the steps by submitting payments of S$15 for ACRA registration and approx. $300-$600 for the incorporation.
4. Choosing a LocationBased on our experience, location is one of the most important factors in the survival of an F&B business. You may have the best staff, a beautiful establishment, great food, and even the best prices. However, if the location is not convenient to foot traffic and is not easily accessible to those driving, you may have lost a substantial amount of income in operating and marketing expenses. There are many locations available to choose from. Spaces are readily available in shopping malls, towns to the Heartland Mall, Central Business District, and Sub Regional Centers catering to working individuals. One of the keys to your new F&B business surviving, is your proximity to your customers for both lunch and dinner. If you have chosen your location in a Business Park or The Central Business District, you can be sure that lunch hours will be demanding, however, the dinner will be dismal unless there are residential estates nearby. If you plan to open a restaurant in a shopping mall, be sure to do your math and budget accordingly. Some shopping malls and operators have policies in place, taking a percentage of gross turn over (GTO) from their daily tenant revenues. The same rules apply for food courts such as “Ko Pi Tiam”, “KouFu”, “Food Junction” for example. Carefully planning your costs is a vital step that should never be overlooked.
5. Location Suitability: Supply and DemandWhether you are opening a restaurant, a food stall, café, or bar, once you have found a good location that serves the needs of both lunch and dinner crowds, thoroughly inspect the surrounding area. Look for rentals that are within a decent proximity to potential customers. Put time and thought into your location, don’t make an impulse decision, settling for a less than suitable rental option. I’ll provide a personal example. I found a good location, that had given me the ability to serve both lunch and dinner crowds. Although there was a GTO and slightly higher rent, I knew the demands were high at the site. We therefore kept it as a possible option. We ultimately decided not to act on it, and we let it go 1 week later after taking the numbers into consideration. Since the supply of food edges well over the demand, I would need to lower my prices, reducing my profits in order for me to be competitive with the competition. The GTO, rental, and overheads ratio will increase, so it didn’t make financial sense to continue at that location. Most entrepreneurs do not consider this step, causing it to be a major setback. However, all of this does not apply if you are providing unique food without much competition.
6. Applying for License to conduct businessThere are mandatory licenses to apply for depending on your F&B concept- Is it a Restaurant, Caterer, Café, Bar? Here are some of the common licenses for Food & Beverage services in Singapore with the appropriate links for the applications.
- Food Shop License
- Restaurants, Cake-Shops, Eating Houses, Coffee-Shops, Food Courts, Snack and Drink Counters, Market Produce Shops, Private Markets.
- Apply only after you have signed the tenancy agreement and if your interior layout plan has already been finished.
- Food Shop License allows the hire foreign workers. This does not apply to food stalls.
- Basic Food Hygiene Course Sign up to get certified for Food Handlers. Refreshers are offered after 5 years of passing the course
- Liquor License If intending to sell liquors/beers. There are several classes.
- Under the Customs (Liquors Licensing) Regulations, any sales of intoxicating liquors in Singapore will require a liquor license issued by the Liquors Licensing Board (LLB).
- The LLB issues two categories of licenses:
- For retail sale of intoxicating beverages for consumption on the premises
- For retail or wholesale of intoxicating beverages for consumption off the premises
- To conduct both retail sale and wholesale, two licenses will be required. For example, a Retail Liquor Shop License and Wholesale Liquor Shop License may be issued to the same outlet.
- Halal License – Serving Halal customers.
7. Kitchen Equipment and Space PlanningDepending on the type of kitchen your business requires, some companies offer a one stop commercial kitchen solution, Jackie’s, Kitchen Box, and Kitchen Hub are perfect examples. They can customize almost anything and advise you towards your personalized kitchen design. Including space planning, equipment needs and specifications. It is important to discuss with your chefs their needs and requirements to optimize the kitchen space for improving efficiency and effectiveness. Your budget can be easily overrun. Stay within your budget by managing the list of equipment that you will need and keep in mind that customized equipment is always more expensive.
All commercial kitchens use steel grade 304 which is considered food grade material. This steel will not rust unless it comes into direct contact with a highly acidic chemical. It is not advisable to compromise anything lower than food grade steel 304 for food safety. To reduce cost, you can opt for refurbished equipment from equipment and stainless steel reseller’s.Courtesy of Jackie’s. Click www.www.allaboutfnb.sg for more suppliers to meet your needs.