A Guide to Restaurant Startup Costs

A Guide to Restaurant Startup Costs

A report from the National Restaurant Industry revealed there are more than 1 million restaurants in the United States, and 9 out of 10 have fewer than 50 employees—meaning they are small businesses. If you’re looking to get yourself a slice of the proverbial pie that is the multi-billion-dollar restaurant industry, read on to learn about the costs associated with starting your own restaurant.

Building a Business Plan

Startup costs for any business don’t come with a small price tag, but they also don’t have to be preventative. With the right mindset, expectations and business plan, your initial investment can bear significant fruit. According to the industry blog Upserve, the price tag can range anywhere from $95,000 to $2 million. First things first, you must have a well-crafted business plan that articulates your vision, with specifics to back it up. Prospective lenders are going to want to know they can trust you’ve done your homework, and one of their first questions will be related to what your startup costs are projected to be. Take a look at this article Entrepreneur put out on crafting the perfect business plan.

Your Food Costs

According to RestaurantReport, “A profitable restaurant typically generates a 28%-35% food cost. Coupled with labor costs, these expenses consume 50%-75% of total sales.” The larger the menu you want to showcase, the higher your food costs—so bear that in mind, and do your research beforehand about which vendors and ingredients you plan on using. Profitable restaurants also have great relationships with their suppliers, who will work with you to negotiate pricing.

Your Labor Costs

You’ve already decided on your dream restaurant concept. Now it’s time to consider how much staff you’ll need to make it a reality. Consider all areas, from the front of house (hostesses, servers, bartenders, bussers) to the back of house (chefs, line cooks, dishwashers). Also bear in mind the high turnover rate restaurants see: 73% overall, according to reports. This number is important because you’ll have to factor in the cost of proper training and equipping your staff with the tools they need to be successful and happy in their roles. Your salary should be accounted for as well.

Your Operating Costs

This category is almost a catchall for the equipment you’ll need to run a successful restaurant. Items like kitchen appliances, serveware, and laundry service all fall into the costs of doing business. Expect to spend between $10,000 and $100,000 up front, depending on the size of your establishment.

Your Rent and Utilities

One of the biggest costs of opening and maintaining a business is the rent or mortgage. Depending on the size of your place and the area in which you’re located, this could range dramatically, from the tens to hundreds of thousands of dollars annually. You’ll need to do heavy research into which area you want to be in, whether you want to build a place of your own or rent out a space, or even if a food truck is a more economical approach for you.

Just as with your own home or apartment, you’ll also be responsible for keeping the lights on. Gas and electric bills can cost up to $1,000 a month depending on the size of your place, so be sure to factor that in. Consider also that if you are renting, it’s always possible the prior owners have unpaid bills. Before you sign anything, ensure those debts are taken care of.

What we’ve detailed here are the biggest costs associated with starting a restaurant, but by no means is this a comprehensive list—décor, marketing, even music licensing fees are all costs you may want to consider. One thing is certain though: If your dream is to be a restauranteur, you can’t put a price tag on that. ARF Financial has worked for years with business startups, helping fund the success of countless entrepreneurs just like you. From lines of credit to Flex Pay Loans, we’ll help craft the perfect solution for your needs. Head to arffinancial.com and get a no-cost, no-obligation quote today. After writing that business plan, it’s the first step toward starting the career of a lifetime.