Have you ever dreamed of opening your own restaurant? While the idea of owning your own eatery is exciting, it’s important to understand the financial aspects involved.
Starting a restaurant involves more than just renting a space and cooking meals. There are many expenses to take into account, like permits, equipment, supplies, and staff wages.
Well, how much does it cost to open a restaurant? In this post, we’ll break down all the costs associated with opening a restaurant. We’ll give you a glimpse into the expenses you’ll need to consider as you embark on this culinary adventure.
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One-time Costs
These expenses are things you only need to pay for once, like deposits, permits, equipment, and more.
Lease Security Deposit or Loan Down Payment
When you rent a building for your restaurant, you usually have to pay a security deposit. The amount can vary depending on the size and location of your restaurant, ranging from around $2,000 to $12,000.
If you plan to buy the building, you’ll need a down payment, usually around 10% of the purchase price.
Business Licenses And Permits
To operate a restaurant legally, you’ll need to obtain various licenses and permits. These include city licenses, health and safety permits, and liquor permits if you plan to serve alcohol.
The costs for these permits can vary, so you’ll need to find out the specific requirements and fees for your area. Individual permits may range from $100 to $300.
Legal and Processing Fees
Starting a restaurant involves a lot of paperwork and legalities. It’s a good idea to seek help from a lawyer to ensure everything is done correctly. The fees for legal assistance can vary but may range from $500 to $2,000.
A lawyer can review documents and contracts to protect your interests and save you money in the long run.
Building Improvements:
If you own the building or have a long-term lease, you may need to make improvements to suit your restaurant’s needs. Remodeling costs can be significant, ranging from $250,000 to $350,000.
These expenses include setting up your kitchen and making other necessary changes to create a welcoming space for your customers.
Kitchen and Cooking Equipment:
Setting up your kitchen with the necessary equipment is crucial. Costs for kitchen equipment can vary depending on the size of your operation. For a small-scale restaurant, you may spend around $50,000, while a larger setup could cost upwards of $150,000.
It’s worth considering buying second-hand equipment in good condition to save some money.
Tables, Furniture, and Tableware:
To create a comfortable and appealing dining area, you’ll need tables, chairs, and other furniture. On average, you can expect to spend around $80,000 on these items, including decorations and tableware.
The actual cost will depend on the quantity and quality you choose.
Ordering and Payment Technology
To efficiently manage orders, payments, and inventory, you’ll need a Point-of-Sale (POS) system or similar technology.
Investing in a good system can cost around $20,000, ensuring smooth operations and accurate record-keeping.
Signage and Advertising
Making a splash with your grand opening requires effective signage and advertising. Allocating approximately $20,000 to $30,000 upfront can help you create a memorable introduction to attract customers.
Accessibility for Disabled Persons
Depending on your location and regulations, you may need to make your restaurant accessible to disabled patrons. Adding ramps and accessible bathrooms can be expensive, sometimes amounting to $30,000.
This cost influenced some restaurateurs to start as takeout-only establishments to avoid this expense initially.
Recurring and Ongoing Costs
Once you’ve opened your restaurant, there are ongoing costs you need to consider to make sure your business thrives. These expenses are recurring and play a crucial role in maintaining your operations.
Although they may seem overwhelming, with proper expense tracking and management, you can stay on top of your finances.
Lease or Mortgage Payments:
Your monthly lease or mortgage payment is one of the most significant ongoing expenses. The amount you pay depends on factors like location and negotiation. Monthly costs can range from $2,000 to $12,000.
If you choose to buy your location, you’ll also be responsible for property and land taxes. Leasing offers flexibility but comes with the possibility of limited stay duration.
Negotiating lease renewals with small percentage increases can provide stability. In any case, you’ll need insurance to protect your business.
Employee Salaries
Your employees are essential for your restaurant’s success, and ensuring they are paid is crucial. The salary range varies based on positions.
A salaried manager may earn $28,000 to $55,000 annually, while head chefs can cost $1,300 to $1,800 weekly. Line and prep cooks typically earn $575 to $650 per week. Wait staff usually earn minimum wage and keep their tips.
Food and Beverage Costs:
Food and beverages are the heart of your restaurant, and the costs vary depending on your menu. The type of food and drinks you serve will impact expenses.
You can explore cost-saving options when obtaining a liquor license, such as considering a satellite license from a brewing company, which allows you to sell their alcoholic beverages in your establishment.
Utilities
To keep your restaurant functioning, you’ll need to cover utility expenses. This includes gas, electric, water, trash removal, phone, and internet services.
On average, these utilities can amount to around $2,500 per month.
Marketing and Advertising
To attract customers and maintain a consistent presence, you’ll need to allocate funds for marketing and advertising. Traditional advertising methods like print or broadcasting can be expensive, but web advertising and social media platforms offer more affordable or even free options.
Insurance and Permits
Additional recurring expenses include insurance coverage (building, inventory, liability) and various licenses and permits required for your business.
These can include business permits, food handlers’ permits, sign permits, music licenses, and ADA compliance. Budgeting around $10,000 for insurance renewals and permit fees is a good estimate.
Restaurant Technology
In today’s digital age, investing in restaurant technology is crucial for streamlining operations. This includes point-of-sale (POS) systems, online ordering platforms, reservation systems, and employee scheduling software.
Homebase offers an all-in-one platform to manage your restaurant workers, including employee scheduling software, time clock app, and communication tools. The cost of restaurant technology can vary depending on the specific software or service provider you choose.
Miscellaneous Expenses:
Miscellaneous expenses cover unforeseen costs that may arise unexpectedly. These can include repairs to equipment or fixtures, which can be costly.
It’s essential to factor in these “what-if” scenarios into your budget to be prepared.
Other Costs to Consider
When planning to open a restaurant, it’s crucial to consider lesser-known expenses that can impact your budget.
Décor and Remodeling Costs
Even if you choose a commercial space that previously operated as a restaurant, some remodeling may be necessary.
Expect to spend anywhere from $5,000 to $100,000 or more, depending on the extent of renovations and your desired aesthetics.
Kitchen Equipment
The cost of kitchen equipment depends on whether you choose to lease or purchase. You’ll also need to invest in essential items like dishes, glasses, and linens for in-restaurant dining.
Also consider the cost of a laundry service to ensure cleanliness and proper maintenance of restaurant items.
Licensing Costs
Obtaining the necessary licenses is essential for legal compliance. Business license costs can range from $75 to $7,000 or more, depending on your location and local requirements.
Food-handling service licenses typically cost around $100 to $1,000 initially, while liquor licenses can range from $300 to $14,000, depending on state regulations.
Sanitation Costs
Maintaining a clean and hygienic environment is crucial in running a successful restaurant. Consider allocating a budget for sanitation, which may involve hiring a cleaning crew for regular cleaning and maintenance.
The cost can vary depending on the size of your business, ranging from around $90 per hour for small establishments to nearly $1,000 for larger restaurants.
Consider a Ghost Kitchen
If you want to reduce some of the opening costs, an alternative business strategy to consider is a ghost kitchen. This approach eliminates the expenses associated with in-house dining, allowing you to focus on efficient operations and potentially achieve a quicker return on investment.
Restaurant Startup Cost Checklist
Opening a restaurant is super exciting, but it can also cost a lot of money. To help you plan and budget for everything you’ll need, here’s a checklist of expenses:
- Commercial Space – Determine how much you’ll need to budget for leasing or buying a suitable location for your restaurant.
- Renovations and Decor – Allocate funds for any necessary renovations or improvements to create an inviting and appealing dining atmosphere.
- Kitchen Supplies and Equipment – Plan your budget for purchasing essential kitchen equipment, such as stoves, refrigerators, utensils, and cookware.
- Restaurant Technology – Consider the cost of implementing technology solutions like POS systems, online ordering platforms, small business apps and reservation systems to streamline operations.
- Licenses and Permits – Set aside a budget to cover the fees for obtaining necessary licenses and permits required for your restaurant’s legal compliance.
- Marketing – Plan a budget for marketing activities to promote your restaurant and attract customers. This includes expenses for advertising, social media management, and other marketing strategies.
- Insurance – Allocate funds for insurance coverage to protect your restaurant from potential risks, including liability, property damage, and employee injuries.
- Restaurant Labor Costs – Consider the salaries and wages you’ll need to pay your employees, including chefs, cooks, waitstaff, and managers.
- Rent and Building Fees – Budget for monthly rent or mortgage payments and any additional fees associated with the building, such as maintenance or property taxes.
- Food Costs – Estimate the expenses associated with purchasing ingredients and supplies for your menu offerings.
- Utility Costs – Include expenses for electricity, gas, water, trash removal, phone, and internet services needed to run your restaurant.
- Payment Processing Fees – Consider the fees associated with payment processing systems for credit card transactions.
If you need more money to start your restaurant, you can ask your friends and family for help, apply for a small business loan, find an investor, team up with a business partner, or even run a crowdfunding campaign.
By planning and budgeting for each of these expenses, you’ll be better prepared to open your dream restaurant and make it a success.
Conclusion
Opening a restaurant involves various one-time, recurring, and other costs that need to be carefully considered and budgeted for.
From lease deposits and permits to kitchen equipment, furniture, and ongoing expenses like employee salaries and food costs, the financial aspects can add up quickly. However, with proper planning, workforce forecasting and expense management, you can navigate these costs effectively.
A useful tool that can streamline your restaurant operations is Homebase, an all-in-one employee app. Homebase offers features such as employee scheduling, time tracking, and communication, helping you manage your restaurant efficiently.
Leveraging technology solutions like Homebase, you can optimize your restaurant’s operations and potentially achieve a quicker return on investment.
One easy app to manage your hourly team.
Get your team in sync with our easy-to-use, all-in-one employee app.
> Get started for free with Homebase
Opening a Restaurant FAQs
What Cuisine Should My Restaurant Specialize In?
Your restaurant’s focus should be on a cuisine that matches both your cooking expertise and the tastes of your intended customers. It’s important to concentrate on a specific culinary style to maintain high food quality, rather than mixing too many different types.
How Do I Select an Ideal Location for My Restaurant?
Choose a location that complements your business strategy and is easily reachable for both your staff and your intended clientele. Key factors to consider include the level of nearby competition, the characteristics of the surrounding area, and the availability of public transport.
What Is the Typical Cost of Opening a Restaurant?
Opening a restaurant typically costs between $100 and $800 for every square foot, with an average of about $450 per square foot. This cost can vary greatly depending on factors such as location, the restaurant’s concept, its size, the materials used, and the necessary equipment.
What Legal Obligations Must I Fulfill to Open a Restaurant?
You must secure various permits and licenses, comply with food safety standards, adhere to wage laws, and confirm your employees’ eligibility to work. Additionally, securing property insurance, general liability insurance, and workers’ compensation insurance is necessary.
How Should I Plan My Restaurant’s Budget?
Your budget should cover expenses like rent, food and beverages, staff wages, marketing, insurance, and costs for licenses and permits. It’s important to monitor your budget regularly and adjust it based on your restaurant’s performance and changes in market conditions.
What Licenses and Permits Are Required to Open a Restaurant?
Necessary permits include a business license, a food handling and safety permit, and a building permit. If you plan to serve alcohol, you will also require a liquor license.
What Type of Restaurant Should I Open?
Your choice should align with your target market’s preferences for service style and price range. Options range from fine dining and casual dining to fast casual and quick service formats.
How Should I Plan My Restaurant’s Opening?
Plan a soft opening for close acquaintances, family, and media, followed by a grand opening for the wider public. This strategy allows you to test operations and make adjustments before officially opening.
What Are the Initial Costs for Starting a Restaurant?
Initial costs for starting a restaurant vary, ranging from approximately $175,500 to $750,500. These costs encompass expenses for leasing commercial space, making renovations, purchasing kitchen equipment, technology investments, licensing, marketing, insurance, staff salaries, rent, food inventory, utility bills, and payment processing.
What Health and Safety Standards Must My Restaurant Meet?
Your restaurant must comply with strict health and safety regulations. This includes adhering to food handling and safety practices, building safety requirements, and ensuring ADA compliance for outdoor seating.
How Do I Handle Trash Disposal for My Restaurant?
Your restaurant must contract a private carting company to remove all its waste. Using public trash bins for your restaurant’s garbage is not permitted.
What Should Be the Operating Hours for My Restaurant?
Your restaurant’s operating hours will depend on local laws and your business model. Some areas may impose specific closing times, especially for outdoor dining.
How Can I Ensure My Restaurant Is ADA Compliant?
Ensure that your restaurant offers accessible seating in all dining areas. A minimum of 5% of the seating must be accessible, and an ADA-compliant ramp should be provided for curb access.
What Are the Costs Before Opening a Restaurant?
Pre-opening costs, which can range from $5,000 to $20,000, typically include marketing efforts, hiring and training staff, and other preparations necessary before the restaurant opens.
How Can I Redesign the Interior of My Restaurant Post-Opening?
Redesigning the interior of your restaurant after opening can be difficult. Thus, it is crucial to plan and execute your interior design carefully before the restaurant begins operations.
Remember: This is not legal advice. If you have questions about your particular situation, please consult a lawyer, CPA, or other appropriate professional advisor or agency.
