Is It Expensive to Open a Restaurant?

This is one of the most common inquiries when opening a restaurant, but the response is typically grossly underestimated.

If a sizable cash reserve and sales pick up immediately, that may not be an issue. Still, it might be disastrous if the account is small, the estimate is inaccurate, or sales take longer to take off than anticipated.

Estimating the cost of opening a restaurant can seem daunting, especially for the many would-be restaurateurs who lack practical expertise in the industry. It’s not necessary. When pitching your restaurant business plan to a bank or investors, it can be helpful to have concrete numbers to back up your projections.

When opening a new eatery, these are the primary outlays that must be made:

Lease

In addition to the first month’s rent and any applicable fees, there may also be a deposit of several months’ rent or a few hundred dollars necessary before you can get the keys.

Tenant Upgrading

Once you have the space, you may need to modify the interior, such as adding or removing walls, rewiring, replumbing, finishing the area, installing lighting, shelving, fixtures, etc.

The Start of the Inventory

Everything you need for your grand opening, from food to drinks to booze, is included here. Depending on the conditions you negotiate with your vendors, you may be able to finance all or a portion of this expense. However, as a new restaurant, it will be more challenging to secure excellent conditions from the start, and you will need good credit, business experience, and, to some extent, industry knowledge and contacts to succeed.

Printing

The need for printing is universal in the restaurant industry. This could be as simple as menus and business cards, or it could involve a great deal more.

Supplies for a Restaurant

You’ll need to invest in or rent the appropriate machinery to run it. It’s easy to overlook the cumulative expense of minor items like fax machines, phone systems, computers, desk chairs, filing cabinets, etc., that every restaurant requires.

Deposits and Service Charges

Power, communication, and other essential services must be activated before business can begin. The initial payments for some of them may be twice as much as the standard payments since a deposit or hook-up fee is required.

Permits/Licenses/Taxes

Business licenses, health permits, and other permission or tax payments are generally not costly, but they do need to be accounted for in the budget. Several states require a sales tax deposit. Fees and taxes may be due when registering a corporation or limited liability company.

Services Provided by Experts

There will be costs connected with hiring professionals, like an attorney, accountant, etc., to help you get your business off the ground. Unless there is a convoluted investor arrangement or partnership agreement, most eateries can avoid problems.

Team Members

You can launch a business independently or with a few trusted partners, but adding staff will require funding. Additional $0.20 or more per payroll dollar will be incurred due to payroll taxes, social security, etc.

Marketing/Advertising

Any promotional efforts for the new eatery will require a financial investment. You can advertise in the yellow pages, send out mailers, create a website, sign in front of your building, run advertising in trade publications, or do many other things. Most of these costs will arise before any advertising activity, rendering such revenues unavailable for payment.

Insurance

Depending on the scope of your company, many forms may be required. In most cases, you can divide the whole price into monthly payments.

Price Variables

The unexpected may add up quickly at any restaurant. When starting a restaurant, it’s essential to have a good idea of how much everything will cost.

If you don’t plan, you’re guaranteed to fail, and failure nearly usually means running out of money and having to close the doors on a restaurant that could have been incredibly successful if it hadn’t.

Former restaurant owner and full-time startup business consultant Matt Remuzzi wrote the definitive guide to write a “guaranteed to get funded” restaurant business plan and full restaurant financial projections quickly and easily (even with no prior experience or background). His website, http://www.CapForge.com, is one of the top web hubs for information on starting a business.

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