- How to Open this Business: Guide
- TOP-7 KPI Metrics
- Running Expenses List
- Pitch Deck Example
- How To Increase Business Profitability?
- How to Sale More?
- How To Build a Financial Model: Guide
- How To Raise Capital: Guide
- How to Value this Business?
Introduction
It’s no secret that the restaurant industry is booming. In 2019, the industry was estimated at US8 billion and is expected to reach US trillion by 2023. This growth is driven by the demand for convenience and choice, which is why many entrepreneurs are taking advantage of the opportunities trade it offers.
If you dream of starting your own restaurant, it is important to understand the costs associated with starting a business before doing so. Although costs will vary depending on the type of restaurant you decide to open and the city or state in which you operate, these are generally the one-time start-up expenses you can expect:
- Lease Improvements
- Equipment and devices
- point of sale system
- Licenses and permits
- Restaurant design and decoration
- Furniture and lighting
- Menu design and printing
- Signage and marketing materials
- Security system and surveillance cameras
In this blog post, you’ll learn about each of these costs in detail, along with what you can do to reduce them and other tips for successfully launching a restaurant.
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start-up costs
Establishing a catering business can be an expensive affair. Before you even start buying raw materials, there are a number of costs associated with opening a restaurant that you need to consider.
| Article | Average cost (USD) |
|---|---|
| Lease Improvements | ,000 – ,000 |
| Equipment and devices | ,000 – 0,000 |
| point of sale system | ,000 – ,000 |
| Licenses and permits | 0 – ,000 |
| Restaurant design and decoration | ,000 – ,000 |
| Furniture and lighting | ,500 – ,000 |
| Menu design and printing | 0 – ,500 |
| Signage and marketing materials | 0 – ,000 |
| Security system and surveillance cameras | ,000 – ,000 |
| TOTAL | ,100 – 8,500 |
These are all costs you incur before you can even begin to open doors and start serving customers. As you can see, the cost of opening a restaurant can range considerably, depending on the size and theme of the restaurant. Be sure to keep these costs in mind as you plan your menu, decor, and overall strategy for success.
Lease Improvements
Leasehold improvements to a restaurant are essential to building a successful business. The right fixtures, furniture, signs and accessories can help create a memorable atmosphere and experience for customers. But all these improvements come at a cost. The average cost of leasehold improvements ranges from a few thousand to hundreds of thousands of dollars, depending on the extent of the renovations.
Cost assessment
When evaluating the cost of leasehold improvements, it is important to consider all potential expenses. This includes, but is not limited to:
- Construction costs to renovate the existing space or build an entirely new space
- Equipment and furniture
- Lighting, signage and window treatments
- Flooring and wall coverings
- Installation for any custom work
On average, you can expect to spend anywhere from ,000 to 0,000 on lease improvements depending on the scope of work required. This cost can be spread over several years, but it is important to budget accordingly and factor these costs into the total cost of opening a restaurant.
When it comes to leasehold improvements, it’s important to check with your landlord or property manager to determine if they are required to cover any of the costs associated with the improvements. Some landlords may provide an allowance to cover part of the cost, while others may provide all necessary fixtures and furniture. It is important to understand the specific terms of your lease before signing on the dotted line.
Equipment and devices
Opening a restaurant, whether it’s a large chain or a small family business, can be a costly undertaking. The largest costs for restaurant owners are usually related to purchasing equipment and appliances. According to the National Restaurant Association, the average cost of equipment and appliances for an establishment ranges from ,000 to ,000, with larger establishments spending upwards of ,000. Smaller restaurants may have the option of purchasing used equipment for a cheaper rate.
The types of equipment and appliances that restaurants need can vary greatly, depending on the cuisine, concept and size of the restaurant. Popular buys include:
- Commercial refrigerators : ,000 – ,000
- Commercial ovens : ,000 – ,000
- Food Prep Stations : ,000 – ,000
- Exhaust cottons : ,000 – ,000
- Freezers : ,500 – ,500
- Fryers : ,000 – ,000
- Grills : ,000 – ,000
It is important for restaurant owners to prioritize their equipment and appliance purchases. Smaller restaurants may not be able to buy everything they want, so it’s important to have an idea of what equipment and appliances are essential to run the business versus those who don’t. are not. It is also important to start research early and budget the budget accordingly.
point of sale system
A point of sale (POS) system is a vital part of the restaurant industry. It allows restaurants to track customer orders, staff schedules, inventory, and more. A good POS system can help a restaurant increase efficiency, reduce costs, and improve customer satisfaction.
The cost of a POS system depends on the size of the restaurant, the type of equipment needed and the software chosen. The average cost of a POS system for small restaurants (less than ,000 in sales) is between ,000 and ,000. For larger restaurants, the cost is closer between ,500 and ,000.
If a restaurant chooses a cloud-based POS system, the cost will include a monthly subscription fee. A cloud-based POS system will typically cost to 0 per month. It is important to consider cost over time when choosing the right POS system.
Other components to consider when budgeting for a POS system include hardware and software. Hardware such as printers, scanners, cash drawers, and screens will cost between 0 and ,000. The software will cost between and 0. Additional costs may be associated with integrating a POS system with existing software.
In addition to one-time costs, costs are associated with a POS system. These costs include support and training ( to 0/hour), maintenance fees (usually 1% of total cost), and credit card transaction fees (.10 to .50 / transaction).
Overall, the cost of a POS system can range from a few hundred dollars for small restaurants to several thousand dollars for larger restaurants. Deliberately planning and evaluating options can help restaurants make the best decision for their needs and budget.
Licenses and permits
When you start a restaurant, you must obtain several licenses and permits in order to operate legally. The cost of these licenses and permits varies depending on the location and type of restaurant you plan to open. However, overall, the cost of obtaining licenses and permits for a restaurant is estimated to be around -0 in the United States .
In addition to general licenses and permits, you may need to obtain certain permits and licenses depending on the type of restaurant you are opening. For example, a wine or beer bar may need to apply for a liquor license. Food truck owners may need to obtain permits from local government or health agencies. This cost can range from 0-,000 , depending on where you are.
If you use a commissary kitchen to prepare food for your restaurant, you may need additional licenses or permits to operate legally. This cost can range from -0 , depending on your state’s specific requirements. Additionally, you may need to obtain a business license to operate legally. This cost can range from -0 .
Overall, the cost of licenses and permits for a restaurant can range from -,500 , depending on the type of restaurant and where it is located.
Restaurant design and decoration
Restaurant interior design is an important part of creating a great customer experience. It sets the mood, aesthetics and creates a certain ambiance that can help attract customers. Your decoration should be both comfortable and welcoming, but also elegant and eye-catching. According to the latest statistics, designing and decorating a restaurant can cost anywhere from 0,000 to million depending on the size of the restaurant and the type of decor you desire.
Lighting and Electrical – One of the factors that often stretch restaurant start-up budgets is electricity and lighting. It can range from ,000 to ,000 just for the electrical setup, while lighting can cost anywhere from ,000 to ,000 depending on the type and number of lights.
Design Costs – Depending on the scope of your project, you can expect architectural design services to cost between ,000 and 0,000.
Furniture and equipment – Purchasing furniture, equipment, dishes and linens can add up to a significant expense. Furniture can cost between ,000 and ,000, equipment between ,000 and 0,000, and dishes and linens for around ,000-,000.
Construction costs – Construction costs such as demolition, painting and drywalling, fixtures and plumbing repairs, interior finishing and floor installation can range from ,000 to 0,000.
In order to save money on designing and decorating your restaurant, you might consider doing some of the work yourself or hiring experienced contractors who can offer discounts or do the job at a better rate. than usual. Also, instead of buying new equipment, you can search for used furniture and equipment, which can save you a lot of money.
Furniture and lighting
When you start a restaurant, there are many costs associated with furnishings and fittings. According to the National Restaurant Association, the average cost to purchase and install furniture and fixtures for a restaurant could range from ,500 to ,000. Within those two numbers, there are several costs that need to be considered when budgeting for furniture and fixtures.
Table and chairs – Tables and chairs are usually the largest piece of furniture and light fixtures. Buying them can range in cost depending on the style and number of chairs you need. A more economical setup usually involves folding chairs and laminate tables which could cost around ,000 to ,000. Mid-grade seating such as regular chairs and tables with laminates can range from ,000 to ,000, while more high-end seating can skyrocket the cost to ,000 at ,000.
Countertop, Refrigeration, and Beverage Dispensing Equipment – These items will generally vary depending on your menu and style, but here are some general prices you can budget for. Countertops that can be custom made or pre-made can range from 0 to ,000. Refrigeration, freezers and ice machines can cost between ,000 and ,000. Finally, for beverage dispensing, you should budget 0-,000.
Cutlery, chinaware and glassware – For each seat in your restaurant, you will need to determine the amount of software, glassware and cutlery. Chinaware, depending on how many pieces you need, can cost 0 to ,000 and glassware can cost 0 to ,000. Also, cutlery will cost around 0-00.
Lighting – Lighting is another important piece of furniture. This will depend on the layout of the dining room and the inclusion of outdoor seating but also any type of track lighting or decoration. On average, installing lighting can cost between 0 and ,000 depending on the type and how it will be set up.
Other Equipment – Other major equipment needed for a restaurant are items like ovens, grills, fryers, blenders and mixers. This can range from ,000 all the way up to ,000 for high end ovens. Again, all of these costs will depend on the type of restaurant you use.
Menu design and printing
Designing and printing menus for your restaurant can be a tedious and expensive process, but it doesn’t have to be. It is essential to have a professional quality for your menus if you want to make a great first impression on your guests.
Depending on the size, design, and quantity of menus you need, the cost of menu design and printing can range from a few hundred to a few thousand United States Dollars (USD) for the project as a whole.
For a single-sided menu, total costs can average between 0 and 0 USD, while a two-page single-sided menu can cost up to 0 to 0. A standard 8.5 by 14 inch menu size starts at 0 USD to 0, while a larger 9 by 13 inch menu averages 0 USD to 0.
If your menu includes additional features such as Die-Cuts or Spot Varnish, you can expect your costs to increase to 0 to 0 for an 8.5 by 14 inch menu and 0 to 0 for a 9 by 13 inch menu. Additionally, you can expect to pay additional fees for colored prints.
For multi-page three-page menus of three pages and more, costs can start at 0 USD to 0 for an 8.5 by 14 inch menu and go up to 0 USD to ,200 for the same menu. size with additional features such as Die-Cuts and Stitch Polish.
If you print in bulk, you can expect to see a discount on your total cost. For example, if you print 1,000 copies of an 8.5 by 14 inch menu, you can expect to pay around 0 to 0.
Signage and marketing materials
Having a recognizable brand and an inviting storefront is essential when starting a restaurant, and signage and marketing materials are an essential part of that. They are an important part of a restaurant’s public face and provide crucial information to customers. Creating and distributing the right materials is key to drawing people to your doors and creating a positive first impression.
The cost of signage and marketing materials depends on the type and quality of materials you choose. Vinyl banners can cost as low as to around for a 3′ x 5′ banner. Custom graphics and branding can cost between 0 and 0. Custom lettering usually costs 0 to 0. Posters, brochures, and flyers typically range from .50 to .00 per copy, depending on size and complexity. Printed garments can cost 30-50% more than empty garments.
Signage and marketing materials also include digital costs. Website design and online brand representation can cost anywhere from 0 to 00. For a mobile app with square payouts, the cost is around ,000. If you choose to advertise online and via social media, you may pay a one-time campaign setup fee of between 0 and ,500 depending on the project. Then, expect to maintain a budget for monthly promotional expenses of around 0 to ,000 per month, depending on your monthly initiative goals.
Plus, there are maintenance costs to consider: new banners, repairs, batteries, and programming updates. Calculate funding for these tasks. Depending on the size of your business and the type of signage and marketing you need, you can easily spend a few hundred to a few thousand dollars on signage and marketing materials. According to Statista , the average spending in 2020 on marketing materials in the United States was .2 billion .
Security system and surveillance cameras
When it comes to opening a restaurant, safety and security are two of the most important concerns for owners. In order to protect their customers, employees and assets, restaurant owners need to invest in reliable security systems and surveillance cameras. Unfortunately, these add-ons can be quite expensive. According to recent studies, American restaurants spend an average of ,220 per year on security, or 5 per month . The cost varies depending on the type of equipment, the size of the cover and the amount of cameras needed to completely secure the restaurant.
When purchasing a security system, restaurants have a number of options available. The most common types of systems are alarm systems and surveillance cameras. Both systems are important components of a well-rounded security plan. Alarm systems are relatively inexpensive, with entry-level systems starting at around 0 . For a basic system, restaurants should expect to pay a 0 in monthly monitoring fees.
Surveillance cameras provide visual evidence during criminal activity and can help deter potential intruders. Security cameras are generally more expensive than alarm systems, with high-end systems costing upwards of ,000 . This high price covers the cost of cameras, video capture technology and video storage. Again, smaller restaurants should expect to pay additional monthly fees for monitoring services.
For the most part, it is recommended that restaurants invest in both types of systems in order to achieve full coverage security. The combined cost of the two systems could reach ,000 or more , depending on the size of the restaurant. It is also important to consider the cost of maintenance and repairs for each system, as well as the cost of an employee or contractor to manage the systems.
Conclusion
A successful restaurant startup depends on having enough ready-made capital and allocating resources wisely. To get an overview of the cost it entails to open a restaurant, the main initial investments include leasehold improvements, equipment, point of sale system, licenses and permits, restaurant design and decoration , furniture and fixtures, menu design and printing, signage and marketing and surveillance cameras and surveillance cameras. The cost of all these items greatly depends on the type and size of the restaurant as well as the location.
For entrepreneurs, the first step is to have a plan. Research the market – What are the competition’s menus and prices, what kind of customers are in the area, and how well the concept can be marketed. Fully explore all available options and find ways to cut costs in each of the necessary investments.
Most importantly, budgeting for the type of restaurant you want to open, location, and competition is crucial. Having a good budget plan eliminates surprises that may arise in the process and increases the chances of success.