how much money do i need to open a restaurant

Last Updated On May 16, 2019 / Written By Caroline Sams

How Much Money Do I Need to Open a Restaurant?

Even though restaurant start-up costs will vary from business to business, you should still have a rough idea of how much you will spend on this endeavor. Read on to learn more about the operational costs of running a successful restaurant.

how much money do i need to open a restaurant 1036

So, exactly how much money would you require to set up a decent restaurant? Well, we don’t have an exact answer to your question as restaurant start-up costs will vary or differ depending on a lot of factors, including location, concept, scale, and others. Nevertheless, we’ll still try to give you a rough estimate based on our research.

Before we get started, please note that the information contained in this article is solely meant for informational purposes. For professional advice, especially when it comes to tax, accounting, and legal issues, please speak with a professional, such as a restaurant coach, an attorney, an accountant, or any other professional in your line of interest.

The following numbers are from a member survey conducted by RestaurantOwner.com.

Median cost - $275,000
On the lower end - $125,000
On the higher end - $555,000
Average cost if buying a building - $425,000

According to the same RestaurantOwner.com survey, many of the interviewees cautioned that their estimated budget (based on the above-given costs) rose by at least 15%.

Now, let’s see what you can expect to spend your capital on during the process of setting up your restaurant.

How Much Are Restaurant Consultation Fees?

how much are restaurant consultation fees 1051

Seeking professional help will help minimize or eliminate startup mistakes, most of which can be pretty expensive. The more experienced your team of consultants, the less ugly surprises you are likely to encounter along the way.

Some of the professionals you may consult with include-

1. A restaurant coach
2. An accountant
3. An attorney
4. A marketing expert
5. An architect and/or a general construction contractor

Estimated cost - $0 - $50,000

Online employee scheduling software that makes shift planning effortless.
Try it free for 14 days.

The Location Is Crucial to a Restaurant’s Success

The location is the most important thing to spend money on. Experienced restaurateurs know expensive locations are pricey for a reason, and the same applies to cheap locations. So, if you can invest in an expensive location, go for it; if not, buy what you can afford, but be ready to do some vigorous marketing.

Restaurant Decor and Equipment Are Important

restaurant decor and equipment are important 1053

In addition to interior decor and furnishings, you will need kitchen equipment and appliances, which will eat up the biggest chunk of your money. You want your kitchen to be as functional as possible, and you also want to create a pleasing and comfortable environment for your customers. Interior decor is where most aspiring restaurateurs tend to get carried away; the best thing is to make a decor budget and strive to stick to it. You must, however, also make an allowance for the unexpected. Expect to spend between $20,000 - $400,000 on your restaurant equipment and interior decor depending on the size and type of restaurant among other factors.

Keep In Mind Exterior Restaurant Finishes

keep in mind exterior restaurant finishes 1054

While your restaurant will need to look good on the inside, the outside also needs to look presentable. Some things you need to invest include lighting, landscaping, and so on; this should cost you anything from $1,000 - $40,000.

Online employee scheduling software that makes shift planning effortless.
Try it free for 14 days.

Be Sure to Have an Emergency Fund for Your Business

Your new restaurant may start making money right away. However, suppose it doesn't, which is what happens with most startups, you will need some savings to fall back on and to keep things going for at least 6 months. In addition to that, you will also need to pay yourself a salary assuming you intend to leave formal employment to concentrate on your new venture. Aim to set aside at least $20,000 to $250,000 or more depending on your abilities.

Pay Special Attention to Licensing, Permits, and Utility Bills

pay special attention to licensing permits and utility bills 1056

You are going to need a license and a host of permits depending on your state or region. You’ll also need to make a deposit on various utilities, such as water, electricity/power, gas, internet, telephone, and so on. Take time to find out what licenses and permits you need to operate, but the best thing here is to consult with an expert. Prepare to spend anything between $2,500 to $200,000 on utility bills deposits and licenses and permits.

Set Aside Money for Marketing and Advertising

set aside money for marketing and advertising 1057

If your intention is to set up a new restaurant, especially in an area where many restaurants already exist, you will need to do some serious marketing, in terms of advertisements and promotions. In this case, a PR agency or a news outlet can help you get the coverage you need. If you plan on opening a franchise, your advertising will most likely be taken care of by your franchisor. Expect to spend $0 - $35,000 on marketing depending on location, concept, competition, and other factors.

Hiring and Training Employees Is Crucial to Business Success

Expect to spend time and money on finding, hiring, and training employees. When it comes to training, make sure to comply with state and local requirements, especially when it comes to policies and procedures. You also need to include payroll or labor costs for about 6 months in your emergency savings. Once your restaurants can stand on its feet, your payroll cost should ideally amount to around 20-25% of your revenue.

Account for Food and Beverage Costs in Your Budget

account for food and beverage costs in your budget 1059

Labor and food costs will be your biggest ongoing costs once your restaurant starts operating. Food and beverage costs should also be factored in when setting emergency savings aside until the restaurant can pay for its needs. Once operational, your food costs should ideally not go beyond 40% of your revenue.

Put Money Towards Advancing Business Technology

put money towards advancing business technology 1060

Modern technology will make your work easier, especially when it comes to workforce and inventory management. Some of the systems you may consider utilizing include a point of sale system (POS), employee scheduling software, time tracking software, and inventory tracking software. Do your due diligence before purchasing technology to ensure you get what you are paying for.

By now, you have a rough idea of how much it takes to open a restaurant. If, after reading this, you still feel it’s something you can achieve, it’s time to talk to the professionals to get a clearer picture of what to expect.

27 cta content inline and exit intent


You May Also Enjoy

Business management has never been easier. Try any business app free.

See what our customers are saying about us.

smb business management logo famousdaves
"Our customer's trust is what keeps us in business. They expect fresh tasting food with no threat of ill-born diseases. Zip HACCP keeps us compliant with HACCP and FDA regulations through its integrated temperature solutions, food safety assurance, and end-to-end task reporting. We also use Zip Inventory to save time on inventory counts and have much-needed predictability to our ordering process. The Hubworks business management apps are perfect for our restaurants."

,

Attend a webinar

Our scheduled webinars are a great way to learn more.

Sign Up