Every person who wishes to open a restaurant usually asks how much it will cost to open one. It is not a simple question because of the numerous restaurant startup costs you need to factor.
As a restaurateur, getting the restaurant project from the ground up is challenging yet rewarding if you succeed. However, it is a big decision, and the question that most people need to answer is the cost to start a restaurant and the ten things any new restaurateur must be aware of.
10 Costs Any New Restaurateur Needs To Know
If you plan to open a restaurant, you must consider specific costs that vary significantly depending on the location, size, and other startup choices. For example, opening a takeout restaurant is cheaper to open than opening a burger restaurant that seats 150 people.
The following are what every restaurateur needs to budget and plan for before venturing into this demanding but lucrative business venture.
1. Food Costs
When it comes to food costs, the more items you have on your menu, the more complicated it gets to estimate the food budget. More dishes raise the potential of incurring losses at the startup stage. You need to develop your menu early to understand what it will comprise to budget for the ingredients and get affordable suppliers.
Statistics show that food costs are profitable but only account for 28-35 percent of the total sales. However, different restaurants attract different food costs.
2. Operational Costs
Operational cost is the things you must do to keep your restaurant running once you get it started. It involves equipment, glasses, dishes, and linens, among other items. When buying kitchen equipment, you can save money by leasing, buying wholesale, or purchase used equipment.
New equipment can be costly for a startup business, especially if you have to pay everything upfront. Other costs include valet parking and laundry services for your napkins and tablecloths.
Restaurant Operational Costs range between $10,000-$100,000 initially.
3. Labor Costs
When you are planning to open a 150-seat burger restaurant, there is no doubt that you will need staff to work in the kitchen and front house. It would be best to consider what salaries you will give to each employee and the outstanding benefits that will keep them motivated to keep working for you.
Labor costs also involve the costs to train new staff and other crucial incentives that will enable you to retain them. How much do you plan to pay yourself?
Restaurant Salary Range between $20,000-$100,000+ Annually
4. Rent and Premise Fees
Primarily we look at the cost of your restaurant per square foot. Depending on its location, concept, and size, the prices may fluctuate.
The average cost of an average-sized restaurant may cost around $5000 every month, primarily if it’s centered in prominent central US Cities like New York and Miami.
It is essential to research so that you understand the costs based on the popularity of the location. Owning the restaurant premise offers considerable reprieve in monthly expenses, but it is an expensive option for startup restaurants.
On average, restaurant rent/premise fees may range between $40,000 -$150,000+ Annually
5. Hidden Costs
Hidden costs are expected in almost every business venture. The restaurant business is not an exception. When making your budget, you should factor in extra expenses to go towards unforeseen things like equipment failure, plumbing, and electrical mishaps, construction, etc.
Other hidden charges include unclear pricing fees from suppliers and restaurant insurance.
The hidden charges budget may range between $2,000-$5,000 annually
6. Technology Costs
It is imperative to consider technology costs for your restaurant. It can make a slight difference between the success and failure of your startup restaurant business. The systems you put in place should help you run your business in a transparent and less complicated manner.
For instance, an inventory management program and the mobile point-of-sale system will help you understand sales better. It is up to the restaurateur to determine the kind of technological advancements suitable for the restaurant.
Simple advancements like online orders can drive massive sales for your business.
Restaurant technology costs range between $2,500-$10,000+ annually
7. Marketing Costs
As a startup restaurant, hiring established marketing firms can be costly. But you need a reliable and robust marketing structure. Sometimes it can be as simple as setting up social media pages run by a small team. It might sometimes demand a professional marketing firm to do a revamp on your restaurant’s entire face and brand.
Marketing costs can range between $1,000-$25,000 annually
8. Utility Costs
Every business owner understands that businesses attract utility charges. These include electricity bills, water bills, telephone and internet bills, among other charges.
Be wise to plan for such utilities in your budget and know the average cost per month. Before signing any contract, ensure there are no pending utility bills from previous owners, as this may force you to incur expenses not stipulated in your utility cost budget.
Restaurant utility costs range between $5,000-$20,000+ per year.
9. Music Licensing Fees
It is common for restaurants to have background music. It may seem like an unnoticeable thing, but if it lacks, the silence becomes deafening. Playing music in commercial places entails that you pay for the music rights.
Among other licenses you need to run your restaurant business, a music license is vital to avoid paying hefty penalties.
Music licensing charges range between $500-$3,000+ annually
Music licensing penalties range between $1000-$30,000
10. Remodeling and Decor Costs
Ambiance sets the mood and value for your restaurant. Having the atmosphere you envision can be costly, but it is what your restaurant needs. Décor includes furniture, lighting, and making your space work for you.
Restaurateurs can achieve this by buying used or new restaurant items depending on the preset budget.
Remodeling and decor costs range between $5,000-$100,000+ when starting.
Startup restaurants attract lots of initial expenses. However, it would help if you remembered keeping some reserve capital if you meet unexpected expenses.
When budgeting, try to be precise to spend less than what you have planned to achieve success.