How Much Money Do U Need to Open a Restaurant

One of the most common questions we get asked is: "How much does it cost to open a restaurant?" It's a challenging question to answer, because there's numerous restaurant startup costs to consider.

Getting your restaurant idea off the ground will likely be your most challenging project as a restaurateur, but it will also be your most rewarding. As with most big decisions in life, the question after "How do I open a restaurant?' is "How do I pay for everything?" In this guide, we'll review all of the restaurant startup costs you will need to prepare and budget for.

Average Restaurant Startup Costs

Let's start with the hard numbers associated with opening a restaurant. According to BudgetBranders.com, expect to pay around $178 per square foot if you buy your location; if you decide to lease your location instead, expect to pay around $159 per square foot. Depending on your rent, furniture choices, and how you're renovating your space, total restaurant startup costs can range from $95,000 to over $2 million.

However, there are many variables involved. Keep in mind that it's wiser to use an equation – or a custom restaurant opening calculator – to figure out your anticipated costs based on your specific scenario and concept.

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Restaurant Opening Calculator

This calculator lays out some of the fundamental financial costs of opening a restaurant, so you can start planning and bring your dream restaurant to life.

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Restaurant Opening Cost = ~$450 Per Square Foot

On average, the cost to open a restaurant is between $100 and $800 per square foot, with costs varying based on location, concept, size, materials, new or existing location, and equipment.

That's a median cost of $450 per square foot. For a restaurant operating out of hundreds or even thousands of square feet, that number can add up quickly.

You might purchase a 1,500 square foot restaurant that's going out of business with all furniture, fixtures, and equipment for $6,000, and then only put an additional $20,000 into it. Conversely, you could build a restaurant from the ground up and spend over $1,000,000 on a 5,000 square foot location.

There are many variables involved in opening a restaurant — there is no one size fits all answer. Having a thorough understanding of the areas where you intend to spend your money will offer you more clarity on final expected costs.

What Restaurant Startup Costs You Can Expect

Failing to plan properly is the best plan for failure. The more expansive, experienced, and professional your team, the less surprises you will face as your project progresses. When starting out, you and your team should take the necessary time to follow through with any plans.

By nature, restaurants work on very small margins and have many moving parts, so if you start with a poorly designed layout, you may lose thousands in additional labor and lost customers. A bland or off-putting seating area will discourage people from ordering a second drink. Spotty construction and poor equipment choices can cost you twice as much down the road.

Here are some of the biggest restaurant startup costs and expenses you can anticipate.

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Restaurant Floor Plan Templates

Use these restaurant floor plan templates to get inspired as you map, or reimagine, the layout and space setup for your restaurant.

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1. Utilities

While you won't be fully operational during your restaurant's buildout, utilities such as gas, water, and electricity need to be. For a restaurant of 4,000-4,500 square feet, expect to pay an average utility cost of between $1,000-$1,200 a month.

Price Range: $1,000-$1,200 minimum; allocate more if your restaurant is bigger than 4,000 square feet.

2. Location

One of the most important decisions you'll have to make when opening your restaurant will be its location.

Generally speaking, it's wise to spend the money on a better location that has good foot traffic, rather than have to rely solely on marketing to drive guests into your restaurant.

Depending on your concept, you might also be in a position to consider a few different options:

• Building from the ground up and investing in new construction

• Opening in an existing building and purchasing an operating restaurant

• Converting an existing commercial space to a restaurant space

Each of these options have their pros and cons and will dramatically affect your upfront costs — there are no right or wrong answers here — but with diligent research, you can make an informed decision  on which option is best for you.

3. Interior Finishes and Equipment

This is where all the little things start to add up.

You know that you need kitchen equipment and large kitchen appliances. Your restaurant will also need furniture and decor to bring your brand to life for your guests. And don't forget the back-end requirements like signage, lights, a music system, and a phone system.

It's easy to get carried away here, so careful budget planning is essential to controlling your opening costs. The biggest driver of the price range here is kitchen equipment and furniture, largely depending on the size of your kitchen and dining room, respectively.

Price Range: $20,000-$400,000

RESOURCE

Restaurant Business Plan Template

No matter where you're at in your restaurant ownership journey, a business plan will be your north star. Organize your vision and ensure that nothing is overlooked with this free template.

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4. Pre-Opening Expenses

Everything needs to be ready to go the second you unlock the doors for your restaurant's grand opening.

You'll need to invest in a proper training program to ensure your staff is ready and efficient. You'll also need to have plenty of inventory ready in your back of house and freezer to get you through your opening period. This inventory includes food, plates, drinks, cups, water pitchers, and whatever items will help you create an exceptional guest experience. For restaurant type specific guides refer to our resources below:

• Brewery
• Juice Bar
• Pizza Shop
• Food Truck
• Coffee Shop
• Bar
• Ice Cream Shop
• Donut Shop
• Bakery

Price Range: $20,000-$120,000

5. Marketing

This section is contingent on exactly what kind of restaurant you're running. If you open up a franchised location, your advertising may be taken care of. But a new restaurant in a saturated market might require heavy advertising and promotional costs across various channels and outlets.

If you're opening an upscale restaurant in a busy city, you might work with a PR agency to get coverage, or you might be approached by a news outlet for details on a story about the restaurant.

Like every other variable in opening a restaurant, the cost of marketing and PR depends on your concept, your competition, and other factors that only you, as the restaurant owner, can know for sure.

Price Range: $0-$35,000

6. Capital and Contingency

Even if your restaurant becomes a hit, it will still take some time to get things up and running. You need to plan for gradual sales growth and realize that your customers will take a while to become regulars. Put aside some much-needed capital and contingency funding for your restaurant to get you through at least six months of unpredictable or low sales volume.

Price Range: $20,000-$250,000

7. Exterior Finishes

The restaurant shouldn't just look spectacular on the inside. If you have any control over the exterior of your building, you may want to make investments in outdoor design, lighting, and landscaping. And if you have an outdoor dining space, you'll definitely want to make the most of it during patio season.

Even without control over the exterior, you'll still need signs outside of your restaurant to let your new guests know that you're open for business.

Price Range: $1,000-$40,000

8. Organizational and Development Costs

This is probably everyone's least favorite part of opening a restaurant, but it's one of the most important. You'll definitely need to file and pay for your restaurant licenses and permits, make your insurance deposits, and make utility deposits for gas, electricity, and water.

This might take up time as much as it does money, so start brushing up on the necessary licenses and permits you'll need to open your restaurant.

Price Range: $2,500-$200,000

9. Professional Services

First-time restaurant owners likely shouldn't dive in without some helping hands. A restaurant consultant — not to mention expert advice from professionals like architects, lawyers, and designers — would be wise for a strong standout and opening for your restaurant.

Price Range: $0- $50,000

10. Technology

Your technology stack that will allow your restaurant to run smoothly. All restaurants need a restaurant point of sale system and — depending on your concept — you'll likely need other features and technologies to help your restaurant go off without a hitch.

Full service restaurants might want a handheld POS system to turn tables faster, and quick service restaurants might want a strong customer loyalty program.

All restaurant technology providers have different pricing models. Legacy systems usually have flat rates that can run into the six-figure range, while more modern POS providers have more manageable monthly fees. Because of that, it's best to reach out to a restaurant tech provider directly to see what their pricing looks like and make comparisons yourself.

Price Range: Get a Quote

11. Food Cost

As this is literally the bread and butter of your restaurant (pun intended), you'll want to ensure that you have everything needed for a successful opening. Running short of food items — especially in the beginning — sets the wrong impression with guests. In addition, a well-stocked inventory guarantees that the back of the house has everything they need for seamless service. As with everything, the average food cost per month will vary, depending on the type of cuisine and menu offerings.

Price Range: $5,000-$25,000

Bonus Cost: Franchise Fees

Clearly, this cost doesn't apply to you if your restaurant isn't part of a franchise, but if it is, be ready to write a hefty check. Here's a list of average franchise fees for popular restaurant chains:

• Popeye's: $50,000

• McDonald's: $45,000 (+ $750,000 in liquid capital)

• Jack in the Box: $25,000

• Subway: $15,000

• Long John Silver's: $10,000 - $20,000

Assembling Your Restaurant Startup Dream Team

We all know that restaurants tend to fail when they are underfunded. Undercapitalization will make an already challenging business more difficult to keep afloat. In order to avoid the pitfalls, you have work with professionals every step of the way.

Here is a list of trades and professionals that you should consult as you plan to open your restaurant:

• Real estate agents

• Attorneys

• Accountants

• General construction contractors

• Marketing firms

• Architects

Enlisting the help of professionals like the ones above will ensure that you're doing things right. If possible, seek out professionals that have experience working specifically with restaurants.

Open a Restaurant without Closing Your Bank Account

Before making the big decision to open a restaurant, calculate how much capital you have to spend and how much you're willing to allocate to each area. For example, you might want to spend more on renovations than advertising.

Budget smart and try to be precise as possible. While you could end up spending way more or much less than you had planned, starting a restaurant with a reasonable, well-considered budget will better set you up for success.

Tech Tip

Learn how a better point of sale system can help you run your restaurant.

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How Much Money Do U Need to Open a Restaurant

Source: https://pos.toasttab.com/blog/on-the-line/how-much-does-it-cost-to-open-a-restaurant

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