Opening a restaurant is your dream, but is it something you can afford? Don’t give up if you’re intimidated. Just like any big investment, most people require financial assistance in the form of a bank loan to afford the startup costs. We’ll help you weed through the individual costs of starting a restaurant so you can create a reasonable budget and acquire the funding you need.
How Much Does it Cost to Open a Restaurant?
The median cost of opening a restaurant is $275,000 or $3,046 per cover for a leased space, according to a recent survey. This number jumps to $425,000 or $3,734 per cover with an added land purchase. Numbers like this can be slightly deceiving because there is no one-size-fits-all answer to this question. The cost of your restaurant will be affected by a number of factors, including the location of your business, your restaurant concept, and whether you choose to lease or buy your space.
Restaurant Startup Costs
Before you come up with a final number and apply for a restaurant startup loan, familiarize yourself with the types of expenses you need to account for in your budget. We’ll provide you with an average restaurant startup costs breakdown as well as some ways you can reduce your spending.
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Security Deposit or Down Payment
Securing the property for your restaurant will be one of your major expenses. If you plan to buy the location outright, you’ll need a down payment of 10% of the property value to secure your loan. The cost of real estate varies greatly by location but when it comes to restaurants, a great location is key. If you choose a poor location because it’s less expensive, your business may end up suffering in the long run.
How to Save:
- Choose to lease a commercial space instead of buying and you’ll only be responsible for a security deposit and first month’s rent.
- Try renting space in a food hall to test out your restaurant concept. The cost of renting a booth will be much less than leasing an entire space.
- Consider buying a food truck instead of making a land or building purchase.
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Construction or Renovation
Whether you are making improvements to an existing building or starting from scratch, construction costs will be one of your greatest expenses. The extent of your renovations will determine your total cost.
How to Save:
- Purchase an existing commercial space and convert it to a restaurant instead of investing in a new build.
- Buy an existing restaurant that’s already outfitted with plumbing and HVAC to save time and money.
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Kitchen Equipment
Foodservice equipment will be your next biggest expense. Not only do you need cooking equipment like ranges, flat top grills, and char broilers, you also need refrigeration units to store your food items and warewashing equipment to keep your dinnerware clean. If your restaurant has a bar, you’ll need to invest in a tap system, liquor displays, and underbar organization. Don’t forget all of the pots, pans, and utensils required to make your menu items.
How to Save:
- Leasing your restaurant equipment instead of buying it outright can help to free up more of your initial budget.
- Buy used equipment instead of new.
- Check out Scratch and Dent merchandise with minor superficial damage that has no effect on its operation.
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Furniture and Tableware
Your furnishings and flatware spending plan is tied straightforwardly to your café idea. In the event that you intend to open an upscale café with a mind boggling menu, you’ll undoubtedly need to put resources into very good quality furnishings and rich china dinnerware. Then again, in the event that you have a basic menu and easygoing idea, your decorations and flatware will presumably be more efficient. In any case, you’ll need sufficient dinnerware, china, and flatware to serve the entirety of your visitors on your busiest shift.
The most effective method to Save:
- Avoid the decorative liners and put resources into alluring tabletops all things being equal. You’ll set aside cash in your spending plan and you’ll profit by diminishing your water utilization on washing materials.
- Look out for cafés that are shutting. Numerous entrepreneurs are glad to sell their stock and you may get a decent arrangement on apparatuses and dinnerware.
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POS System
A POS framework will be advantageous to your café from numerous points of view. In addition to the fact that it streamlines the requesting interaction, retail location innovation assists with stock administration, worker the board, and deals detailing. Your POS bundle ought to incorporate front-of-house stations with touchscreen screens, receipt printers, and charge card scanners. Back-of-house parts incorporate kitchen shows or pass printers. Extra frill incorporate portable POS tablets, tableside POS screens, or stand requesting screens.
The most effective method to Save:
- Be traditionalist. There are numerous highlights and extras you can add onto your POS framework bundle, however you can set aside cash by going with an essential framework. You can generally add onto your bundle later on.
- Try not to be reluctant to arrange. In case you’re purchasing a POS bundle, inquire as to whether the seller will toss in instructional courses complimentary.
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Initial Food Inventory
Your initial food inventory cost will be greater than daily or weekly replenishment because you’ll need to include non-perishable items. Condiments, spices, oils, and coffee are just a few of the items you’ll need to build up your staple inventory. These ingredients will last you a long time before they need to be replaced, especially if you buy in bulk. To come up with an initial food cost projection, start by analyzing your menu and pricing out each ingredient.
How to Save:
- Test out your menu items and weigh each ingredient. You’ll be able to come up with the most accurate projection by knowing exactly how much of each item you need.
- Buy in bulk. You’ll get the best deals on non-perishables by buying wholesale.
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Licensing
Running a restaurant requires several types of licenses before you ever open your doors. You’ll want to get a head start on this step because it can be a lengthy process. Liquor licenses in particular can be quite costly depending on your location and whether you live in a quota or non-quota state. Quota states only issue a limited number of licenses which can drive the cost up immensely.
How to Save:
- There’s no way around the fees for most permits. However, you can choose to skip the liquor and stick with beer and wine only. This will lower the cost of your liquor license fees.
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Advertising
Spreading the news about your new eatery is urgent. You’ll need to save part of your spending plan for your underlying promoting plan and fabulous opening. The expense for promoting will differ significantly relying upon what outlets you pick and whether you employ an advertisement organization.
The most effective method to Save:
- You can diminish your showcasing cost extensively by using free promoting through online media channels like Twitter and Instagram. Rather than paying for a site, make a free Facebook page.
- Make a posting for your eatery on Google My Business. It’s free and permits you to share all the significant information about your efficient your area, hours, and site.
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Pay rates
Bookkeeping
As you recruit your staff, remember that paid preparing is standard for new workers. Wages and compensations will become an integral factor in the months and weeks paving the way to your first day of the season. Contingent upon your staff prerequisites, this expense will fluctuate incredibly.
The most effective method to Save:
- Rather than employing the entirety of your staff simultaneously, recruit on a case by case basis. In the event that you have a half year until your first day of the season, you needn’t bother with a full staff ready yet. This will eliminate the wages you need to pay out.
- It’s not difficult to disregard your own compensation when you’re representing such countless different expenses. Numerous café proprietors don’t pay themselves until the business begins making money.
