How Much Does It Actually Cost To Start a Restaurant?

How Much Does It Actually Cost To Start a Restaurant?

July 17, 2020, 04:33 PM UTC

No one wants to put a price tag on a dream. But if you ever want to move your “I should open a restaurant” fantasy to reality, you’re going to have to do just that. So if you’re still reading this, we can only assume you’re not here to dwell on just how costly this endeavor can actually be -- but are instead ready to breakdown the numbers of what it will actually cost to open your own restaurant.

To help analyze this cumulative cost, we’ve provided a summary of the average cost for opening a restaurant as well as the hit list for the biggest upfront costs.

What is the average cost of opening a restaurant?

Experts calculate the average startup restaurant cost starts at $175,000 and ranges up to $750,000.

Before you hyperventilate into a brown paper bag, remember there is no standard number for this as a restaurant startup cost is largely contingent on a variety of factors including size and style. For instance, $59 a square-foot (on the lower end) isn’t as scary if you’re opening if you’re a small sandwich shop.

Pro tip: To get a stronger sense of what your specific brick and mortar will cost, opt for a custom restaurant opening calculator.

What are the primary costs when opening a restaurant?

Brace yourself: there is a litany of costs associated with opening a restaurant. Let’s stick to the ones that if you avoid can promptly lead to a restaurant failure.

A quick word of advice before we dive in (and before you should dive into your project, honestly): determine how much capital you have to spend in the first place. Every restaurant owner's budget is different, naturally, but determining your priorities upfront will help navigate which of the following areas you should allocate the most funds.

Professional services

While DIY is a great way to save pennies, there are some things you shouldn’t attempt to handle on your own; especially if you're a first-time restaurant owner (which, we can only assume you are if you’re researching “how much it costs to open a restaurant”). Consider bringing in experts when it comes to finding your property (read: real estate agents) as well as as an attorney, accountant and architect when it comes to making sure you’re legally, financially and building code covered.

Licensing and permitting

Speaking of building codes, depending on which state you are opening in, permits can run you anywhere from $200 - $200,000. Yes, this range is huge, and that’s because there are a million licenses, insurance and permits needed depending on what kind of concept you’re doing; on the lower end whether you serve liquor and scaling all the way to the high-end renovation permitting.

Location and occupancy

Like you’ve probably heard countless times, or three to be exact, “location, location, location” is a pretty big deal and can ultimately make or break your restaurant. (Hence, why we listed a professional real estate agent as a strong hire.)

It can also come with a large price tag. But the rule of thumb is: it’s better to spend the money on a good location with lots of foot traffic and exposure than have to rely solely on marketing to get butts in seats. Could this mean more money spent on the renovation? Possibly. But it’s still an investment that could pay off in the end.

Interior + exterior

There’s a saying when renovating a home: “While you’re at it” can be your best and worst friend. In short, while you’re renovating, designing, or just outfitting -- costs tend to add up very quickly. Your restaurant floor plan will be a deciding factor when it comes to outfitting the interior with seating, furniture, lighting, etc.

But lest you forget the less glamorous items that will ultimately dictate how efficiently your back of house operates including a phone system, utilities (woof), signage, kitchen equipment (large enough to warrant its own category!) and menus among other must-haves.

Putting together a restaurant checklist and a spending limit for each one can help you stay within a proposed budget.

Equipment

Something you probably didn’t think when telling your friends about the bomb Naan-style pizzas you plan to have on the menu? You guessed it, equipment. Kitchen equipment (ranging from stove and ranges to mixers and a kick-ass knife set) is not cheap whatsoever; in fact, depending on your concept, it can actually be one of the heftier priced items on your list.

Think of this way: when you buy nice kitchen appliances for your home it breaks the bank. Now factor in even more top of the line, not to mention larger and more efficient, and you can count on at least $50,000 (and in the hundreds of thousands if you’re in the large-scale or fine-dining game).

Technology

We’ve talked about the importance of a strong point-of-sale (POS) system for good reason. It’s a key component to streamlining your staff training, scheduling as well as your billing and checkout process as well as how you ultimately track profits. So yeah, pretty much the “hub” of your restaurant, if you will.

A POS system, depending on the platform and capabilities, can run you anywhere from $100-$400 / month.

>>>RELATED: Everything New Restaurant Owners Should Know About POS Systems

Food Expenses

Sure, you need to open first -- but when you are operational, you need to have food. And similar to your lease and utilities, this is not a fixed cost, but an ongoing one you will need to continuously budget. Especially because food cost will typically consist of around 30% of your restaurant’s overall spending. These go-to formulas for calculating your food costs will come in handy!

Marketing

You don’t want to need this, but let us assure you -- you do. Marketing, like interior design, is another one of those costs that if not kept at bay can fly off the charts in expense. But, it’s also vital to your restaurant being noticed, so think of it as about as worthy of an investment as your location. You need good promotional content, especially in a market as saturated as hospitality. Working with a public relations company, while costly, could be very beneficial if opening up a more upscale eatery -- but you should at the very least make sure your social media game is handled by a pro.

Never fear: we have you covered on everything you need to know about social media marketing.

To sum up, your grand total is [drumroll]...

Yeah, there’s no way to know unless we’re writing a story just about your restaurant. Sorry. But! Hopefully, you now get the drift on who and what exactly the major players will be when it comes to dictating said cost for your restaurant venture.

[Photo: Tim Mossholder via Pexels]