How Much Money Do You Need to Start a Restaurant?

Starting a restaurant is notoriously one of the most expensive business endeavors you can embark on. There are a lot of upfront costs to become a restaurant owner and there’s a ton of competition in the industry. You may be open for months or even years before you completely recoup on your investment. However, don’t let that intimidate you if you’re really passionate and excited about opening a restaurant. With the right insights and strategies, you can still start something great.

It all starts by understanding what you’re up against and setting a plan for yourself. Get the facts about new equipment costs and how to create the ideal employee experience. Know what your cash flow is going to look like and what monthly payments you can really afford. Having a savings goal and understanding the financial elements will be the best way to succeed with your new restaurant. Here are a few things you should know about how much it costs to start a restaurant and how you can manage those expenses.

Costs can range quite dramatically.

It’s important to note that all restaurants are not created equal. A five-star eatery in NYC or Las Vegas is going to cost millions of dollars to open while a mom-and-pop sub shop in suburban Ohio will be less. Likewise, a fish and steak place sit-down location may cost more than cheaper cuisine.

For this reason, you’ll see numbers anywhere from $100,000 to $100,000,000 to open a restaurant. On average, it costs about $275,000 or $3,046/seat to open a new restaurant. Just be ready to get your calculator out and understand that your location may be more or less depending on what you want to build.

Your location will define your costs.

Location is everything when it comes to opening a new restaurant. You want to be sure you are located in a place where you are accessible to your community. Also, know that the city or state you’re in will dictate costs like your mortgage/lease agreement and extra costs. For example, a new spot in Hawaii is going to be a bit more pricey because of fewer real estate options.

You’ll also have to find great support services like equipment and appliance repairs wherever you go. If you’re going with a Hawaii location, HonoluluApplianceRepairPro.com has got you covered for any problems with your refrigerator, oven, or AC. Wherever you go, you want to rely on experienced teams as a great way to keep your new business running effectively.

Purchase great equipment, but be sure not to overspend.

One of the biggest expenses for your new restaurant is your kitchen equipment. People spend so much money getting the stove, oven, refrigerator, freezer, and any other type of equipment you may need. You definitely don’t want to skimp on these things but do be sure you aren’t overspending.

You can even try restaurant equipment financing to get great deals that you can pay off as you start turning a profit. This is a good solution to help your startup get the essential equipment you need while saving some money along the way.

Have money to invest in your employees.

You have a great action plan to get your restaurant up and running, but you can’t do it all on your own. You need to bring in other team members to help you get started. Make sure you have the funds to truly invest in your employees and create a strong company culture. Consider investing in an employee engagement platform that encourages employee recognition and open communication. This can help stimulate growth and make your team feel like a true part of your new business.

Balance your one-time costs with your recurring expenses.

As you look into your restaurant budget and ultimate financial goals, it’s important to differentiate your one-time costs from your recurring expenses. When you first open, you’re going to have to pay a downpayment, business license, legal fees, refurbishment costs, equipment, furniture, POS systems, and signage. These costs will be a lot upfront, but once you pay them, you’ve made the investment and will own those products.

Eventually, you’ll earn back the cost of these items. On the other hand, you’ll have your recurring costs. This will include things like your rent/mortgage payments, payroll costs, food expenses, utilities, and marketing costs. Budget to spend a good amount of money on these every month. Hopefully, once your restaurant is up and running, you’ll be able to get a nice return on investment for all these different expenses.

Monitor your inventory and food expenses.

When you’re serving food, you want to make sure you have great products that you can prepare. This means you’ll be constantly investing in your inventory and keeping fresh produce in your restaurant. Be realistic about what you’re going to sell and don’t waste money on overly expensive products that are going to go bad in a few days. This step will take some trial and error to understand exactly how much food you need every month and how much you can afford to spend.

Set a financial plan with room for savings.

As you’re getting ready to open your restaurant, you need to make a financial plan for the long term. This will help get investors behind you and establish a savings plan or emergency fund if things go wrong. The restaurant industry is unpredictable in so many ways, so use a savings goal calculator to figure out a number you want to put away for a rainy day. Having a set plan for any financial situation will help set you up for success.

Be smart with your marketing plans.

When you first open it, you want everyone to know about it. Marketing will be the best way to get the word out and start hitting your bottom line. However, be careful not to go overboard with different marketing plans. Be strategic and look for low-cost options to get people in the door. Make sure your return on investment is high before you start breaking the bank to publicize your new business.