Opening a restaurant is a big undertaking. There are many factors to consider and costs to factor in. But how much does it really cost to open a restaurant?
The answer, of course, depends on several variables. The type of restaurant, the location, the menu, and the size all play a role in how much it will cost to get the doors open.
However, on average you can expect anywhere from a few thousand to a few million. According to a survey by RestaurantOwner, the median cost to open a restaurant is $375,500 or $3,586 per seat. If owning the building is figured into the amount, the cost increases to $525,500 or $5,018 per seat.
In this article, we’ll explore the different restaurant startup costs associated with opening a new restaurant to help new restaurant owners can get a better idea of what it will take to make restaurant concept a reality.
Average Restaurant Startup Costs Breakdown
The cost to open a restaurant will include everything from the rent or mortgage payments on the building to the price of the dishware. Here is a list of some of the most common expenses associated with opening a new restaurant:
Business, Liquor and City Licensing Fees
You will need to obtain a business license as well as any other local permits required by your city or state including a liquor license. These fees can range from a few hundred to a few thousand dollars depending on the location and type of restaurant.
Construction and Remodeling Costs
If you’re renting your commercial space that needs some work to be done, you’ll need to factor in construction costs. This can include anything from painting and repairs to building out a kitchen. Construction costs can range from a few thousand dollars to hundreds of thousands of dollars, depending on the scope of work that needs to be done.
Cooking and Food Service Equipment
Another big expense when starting a restaurant is purchasing equipment for the kitchen and dining room. This can include items like stoves, ovens, cold food tables, dishwashers, and refrigerators for the kitchen as well as tables, chairs, and booths for the dining room. The cost of this equipment will depend on the quality and quantity that you need.
You can expect to spend anywhere from $5,000 to $100,000 on restaurant equipment. To save on some restaurant costs, you may want to consider leasing equipment instead of purchasing it outright or purchasing used equipment.
Dishware and Glassware
In addition to the kitchen equipment, you’ll also need to purchase dishware for your restaurant. This includes plates, glasses, and silverware. The cost of this will depend on the type of restaurant you’re opening and the quality of dishware you select, but you should budget for at least $1,000.
In addition to furniture, you’ll also need to decorate your restaurant. This can include paintings, posters, and other wall hangings. The cost of this will depend on the type of decor you select and how much you need. You should budget for at least $500 for restaurant decor.
Point of Sale System & Other Restaurant Technology
A point of sale (POS) system is a must-have for any restaurant. This system allows you to take orders and process payments. The cost of a POS system will vary depending on the features you need, but you can expect to spend at least $1,000.
You’ll also need to purchase other restaurant technology like computers, printers, and software. The cost of this will depend on the type and quantity of equipment you need. You should budget for at least $1000 for this technology equipment.
In today’s world, a restaurant website is a must. Not only will it allow customers to find your restaurant, but it can also be used to take online orders. The cost of a website will vary depending on how many features you need, but you should budget for at least $500.
Of course, you’ll also need to factor in labor costs when starting a restaurant. This includes the cost of hiring chefs, cooks, servers, and other staff. The cost of labor will depend on the number of employees you need to hire and their hourly wages.
You can expect to spend at least $7,000 per month on labor but will increase as the need for more employees increases.
Finally, you’ll need to factor in marketing costs when starting a restaurant. This includes the cost of advertising through the restaurant’s social media platforms, PR, and online marketing. The cost of marketing will vary depending on the type of marketing you do and how much you spend. The average start-up cost for marketing should be for about $1000, but should include targeted marketing for the grand opening.
Now that we’ve gone over some of the most common expenses associated with opening a new restaurant, let’s take a look at how much it will actually cost to open one.
The cost to open a restaurant will vary depending on the type of eatery you’re starting, the location, and the size. However, you can expect to spend anywhere from $150,000 to $450,000 to get your restaurant up and running.
Of course, the amount of money you’ll need to start your restaurant will also depend on how much you’re willing to do yourself. For example, if you have experience in the food industry, you may be able to get by with a smaller budget. Additionally, if you’re opening a smaller eatery, you may not need to spend as much money on equipment and decor.
Other Ongoing Expenses
In addition to the startup costs, there are also a number of ongoing restaurant expenses you’ll need to factor in when starting a restaurant. These include food costs, rent, utilities, and insurance.
One of the biggest ongoing restaurant expenses is food costs. This includes the cost of ingredients as well as the cost of labor to prepare the food. The food cost will vary depending on the type of restaurant you’re running, but you can expect to spend 30% to 35% of your revenue on food.
Rent and Building Fees
Another big expense for restaurants is rent. The amount you’ll need to pay will depend on the size and location of your eatery. For example, if you’re opening a restaurant in a major city, you can expect to pay much more in rent than if you were opening in a smaller town.
Your initial cost usually includes the lease security deposit, the first and last month’s rent, and any build-out fees associated with getting the space ready for your restaurant.
In addition to rent, you’ll also need to factor in the cost of any building fees, such as CAM (Common Area Maintenance) charges.
Another ongoing expense for restaurants is utility costs. This includes the cost of electricity, gas, water, and trash service. The amount you’ll need to pay will vary depending on the size of your restaurant and how often you’re open.
Finally, you’ll also need to factor in the cost of insurance when starting a restaurant. This includes property insurance, general liability insurance, and liquor liability insurance. The amount you’ll need to pay will depend on the size and location of your eatery, as well as the type of insurance you choose.
As you can see, there are a lot of costs associated with starting a restaurant. However, if you’re prepared for these expenses, you’ll be one step closer to opening your dream eatery.
Factors That Effect Restaurant Startup Costs
There are a few factors that will have a big effect on how much it costs to start your restaurant:
The next thing to consider is the location of your restaurant. The cost of renting or leasing a restaurant space will vary depending on the market you’re in. For example, a commercial space in a prime location will likely be more expensive than one in a rural area. Additionally, the cost of build-out and renovations will also vary depending on the location.
Type of Restaurant
Another factor that will affect how much it costs to start your restaurant is the type of eatery you’re opening. For example, a fast food restaurant will have different start-up costs than an upscale restaurant.
Your restaurant’s menu will also play a role in how much it costs to start up. If you’re planning to serve simple, inexpensive dishes, your food costs will be lower than if you’re aiming for a more upscale menu. Additionally, the cost of ingredients will also vary depending on the season and where you source them from.
Finally, the size of your restaurant will also impact how much it costs to get started. Obviously, a larger space will require more money for rent or lease, build-out, and renovations. But you’ll also need to purchase more cooking equipment and supplies, and you’ll likely have higher labor costs.
The actual cost of starting a restaurant will vary depending on the specific type of restaurant, location, menu, and size, but you don’t need to break the bank.
How To Save Money When Opening Your Own Restaurant
As a new restaurant owner, there are a few general tips you can follow to help keep your costs down:
Do Your Research
Before you get started, it’s important to do your research. This includes everything from understanding the ins and outs of the restaurant industry to knowing how much it will cost to lease a space in your desired location.
One of the best ways to save money when starting a restaurant is to start small. This means leasing a smaller space, outfitting it with less expensive fixtures and furnishings, and keeping your menu simple. You can always expand your operation later down the road as your business grows.
Another great way to save when opening a restaurant is to bargain shop. This includes everything from negotiating lower prices with vendors to scouring Craigslist for used kitchen equipment or furniture.
Opening a new restaurant is a big undertaking, but with careful planning and a bit of thriftiness, you can keep your costs under control.
So, How Much Does It Cost?
The actual cost of starting a restaurant will vary depending on the specific type of restaurant, location, menu, and size of your dream restaurant, but with careful planning and a solid restaurant business plan, you can open the restaurant of your dreams without breaking the bank.
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