Forward-thinking entrepreneurs are always on the lookout for the next money-making opportunity. However, the restaurant business requires you to have certain hospitality traits to start a successful venture. It’s a serious trade that requires a hefty investment but gives you a very high ROI - if you know what you’re doing.
If you are considering to open a restaurant-, you’ll need access to an estimate of your cost breakdowns. The average restaurateur will have to spend anywhere from $200,000 to $800,000 to get things off the ground. That’s a lot of money to invest, which is why it’s important to take stock of your needs, wants, expenses and costs.
The following is an estimate of what the restaurant start-up cost checklist looks like. Note that the exact cost breakdown of restaurant start-ups depends on each venture. Yours may differ substantially
Restaurant Start-up Costs
The biggest initial investment is choosing between renting a place or buying one. You’ll also have to spend money on renovation, purchase commercial equipment, and cover miscellaneous restaurant expenses before you can open your door to diners. Here are few things you’ll have to keep in mind:
- Space for restaurant
- Renovations of the property
- Commercial supplies for the kitchen
- Licenses and permits
- Marketing
Securing a Commercial Space for Your Restaurant
You can either lease a commercial restaurant space or outright buy it. When signing a lease, you can commit to a few years of occupancy and pay a refundable deposit, which usually covers a few months.’The amount for the refundable deposit depends on various factors, such as the real estate market, pricing trends, and location.
The average lease security deposit for restaurant spaces ranges from $1,500 to $10,000 or more. If you’re planning to purchase the entire space, you’ll have to put down at least 10% of the asking price as down payment. In addition, buying your own space means having to pay taxes on both your property and the land it’s built on.
Restaurant Licenses and Permits
The hospitality industry, including restaurants, is heavily regulated. You’ll have to pay for regulation permits, such as health and safety, liquor permits, and so on. The exact expenses vary, depending on what is required of the restaurant. Expect to spend anywhere from $100 to $400 when applying for permits.
Legal Permits and Processing Fees
For obvious reasons, you’ll want to keep your operation as legitimate in the eyes of the law as possible. This includes taking care of all necessary legal paperwork required during business formation. We recommend hiring an experienced lawyer to ensure you’re doing things right.
Expect to spend anywhere from $1,000 to $3,000 or more to hire a lawyer so they can review contracts for you. An experienced lawyer can prove invaluable to your restaurant, especially when it comes to signing contracts. Expect to pay $10,000 or more when these licenses are up for renewal.
Check in with your county’s public records department, especially when taking note of property ownership, temperature violations or termite infestation, etc. If ’you don’t have the data, make sure your legal team gets access to the information.
Also worth noting are little details like music that you can play at your restaurant to keep the ambiance up.
Restaurant Renovations
The interior décor of the dining room can influence the ambiance of your restaurant to attract more diners and tourists. Being sloppy with interior décor will hurt your cash flow in the long run and make it that much harder to grow your brand. Expect to spend anywhere from $200,000 to $400,000 to remodel your restaurant. We believe this is money well spent in the grand scheme of things.
Commercial Restaurant Equipment
Commercial kitchen equipment can cost you an arm and a leg. A small start-up kitchen will require as ‘little’ as $50,000 for standard equipment or upwards of $200,000 for heavy-duty equipment to cater to a larger audience.
In addition to cooking equipment (such as industrial mixers and stoves), you will also need a commercial dishwasher and adequate refrigeration. With that said, most restaurants overspend when it comes to their equipment.
Depending on your operations, you’ll likely have to invest in the following:
- Equipment: Stoves, fridges, freezers, ovens
- Workspaces: tables and counters
- Cooking tools: Pots, cookers, ladles, pans, strainers
- Bar equipment: Cocktail shakers, mixers, ice cube machines
You can save money by procuring second-hand tools. The past year’s events have led to many restaurants closing up shops and selling their wares to recoup their costs. Make sure to properly inspect these tools before spending your money.
Restaurant Tables and Furniture
The restaurant ambiance will depend on the quality of tables and furniture you choose. Expect to shell out anywhere from $80,000 to $150,000 on quality decor, chairs, and tables. High-end kitchen setups can cost upwards of $250,000 - which is something most restaurant owners won’t afford during the first few months of operation.
Pro tip: If you’re strapped for cash, we recommend looking at DIY restaurant décor ideas to add charm and personality to your space without breaking the bank.
Investing in Ordering and Restaurant Payment Technology
If you want to streamline payment collection, invoices, taxes, and online payment methods, you’ll want to invest in a payment technology that can keep up with all your daily needs. Modern-day POS systems can be well integrated into your restaurant operations and can even be used to keep track of inventory. Expect to pay anywhere from $10,000 to $20,000 for POS technology.
This will provide your servers with devices that they can carry around to diners and collect payments.
Food Expenses
This is a critical expense for the restaurant, but the exact breakdown of your costs depends on the nature of the food and drinks you are serving. You can also keep costs low by getting a ‘satellite license’ for selling liquor. This will help you purchase directly from licensed breweries and wineries.
Pro tip: Make sure to do your research when it comes to the supplies. Never skimp out on quality and try to buy in bulk so that your vendor can give you more affordable deals. You can also partner up with your local farmers to source locally-grown food. That makes for a good marketing slogan too.
Monthly Utilities
Expect to pay monthly bills to keep your restaurant fully operational. This includes gas, electric, water, trash, phone, and internet bills. You are looking at about $3,000 per month or more, depending on your exact expenses.
Hiring and Training Staff
Running a restaurant is not a one-man operation - you will need staff. It takes a whole team to manage the day-to-day duties while you make the big picture decisions. Your employees will work at reception, clean the tables, cook food, serve diners, and more.
Remember to look for employees whose values and traits align with your restaurant’s brand strategy. Don’t forget to conduct background checks on employees to minimize the risk of fraud.
When everything is said and done, you’re looking at $30,000 or $60,000 for a manager to run things smoothly for you. You will also have to pay $1,500 to $2,000 weekly to your chefs and cooks. Servers mostly earn minimum wage and supplement their income with tips.
Marketing on a Budget
You will have to get the word out to drive foot traffic to your restaurant. Unfortunately, getting attention to your brand is a hard-fought battle that requires an exact and consistent marketing strategy. Don’t skimp out on the marketing budget for your restaurant just to save some money because it can hurt your long-term strategy.
You will need to find someone who can create your restaurant’s website, CRM, create social media posts, design logos, write blogs, respond to online reviews, and work with celebrities. Of course, you could pull some of these tasks on your own - but we recommend hiring expert help to get things rolling.
You can outsource some of these tasks to a freelancer for under $1,000 or less. One effective way to build a restaurant reputation is to get your restaurant listed on local directories and advertisement sites, including free review platforms. You can also spend ad money on traditional options such as radio and TV - but the marketing budget will be much higher, usually around $2,000 for a 30-second spot.
Wrapping Up
Due to the nature of the restaurant industry and the cost of the equipment involved, you need a decent amount of capital available to spend. This doesn’t mean you should overspend on unnecessary items.
It can be incredibly easy to go overboard when designing your dream restaurant and getting all those fancy gadgets. But you should always keep your budget in mind. For commercial kitchen equipment, make sure to shop around and check in for second-hand tools from places like eBay and Craigslist. This step alone can save you thousands.
Similarly, be modest when it comes to your kitchen remodeling projects. Utilize a restaurant design that is compatible with your goals for interior décor as well as your budget.
Pro tip: Running a restaurant is hard with so many moving pieces. You can let experts handle your online presence by considering signing up with MenuCRM to save you time and money for things like websites, CRMs, and menu design. Click here to learn more.
