Starting a restaurant from scratch is an ambitious, high-committal venture. Like every business project, it requires careful handling and precautionary behaviour. Our best advice on the best way to do so stems from expert sources and includes special guidance on how to draw up your own restaurant start up cost checklist.
Cost of Starting Up a Restaurant
The answer is as varied as a restaurant menu. Gary Occhiogrosso, a hospitality specialist, has estimated that fast-casual restaurants cost between $250,000 and $400,000 to open, that is simply “to ‘turn the key’ and open the doors for business”.
Although no two restaurants are the same, they more or less have to consider the same costs when starting up. A restaurant start up cost checklist includes:
- Location of building
- Building renovations
- Food and cost of goods
- Security system(s)
- Restaurant technology
- Legal licences and related fees (i.e. professionals such as lawyers)
- Kitchen equipment
- Uniform (if applicable)
- Marketing and advertising
- Staff and payroll fees
- Emergency money, for repairs and maintenance
- Daily expenses (i.e. telephone calls, network charges)
Laws, rules, and regulations are a key consideration for every potential restaurant owner. Inevitably, the next step for your idea is to work on the various legal necessities all business proposals must consider.
This section provides a checklist of general legal requirements. Thankfully, when considering costs of starting up a restaurant, most of these essential processes are free.
1. Request Planning Permission
All restaurants need planning consent from the government to operate. Business laws require information on buildings to specify their intended use, specifically speaking, a category known as “Use Class”.
2. Apply For a Restaurant Licence
All businesses need a licence to operate — and restaurants are definitely no exception. Hospitality companies that work with food (i.e., selling, cooking, storing, preparing, or distributing food) have to register with a local council about a month before opening for business.
3. Apply for an Alcohol Licence
Many customers feel that alcohol is an essential part of the hospitality experience. If starting a restaurant that serves meals in the evenings, more customers will expect alcohol to be readily available. Local councils provide the necessary licences for premises planning to serve alcohol.
4. Adhere to Health and Safety Regulations
In hospitality, health and safety is a continual concern. All restaurant owners have a legal obligation to keep everyone safe. While on premises, both customers and staff need to be reassured that they’re completely safe and sound. Regulations include:
- Risk assessment
- First aid
- Policy regulations
- And much more
For more specific information, restaurants can consult national bodies.
- In the USA the National Restaurant Association is a community of hospitality experts that provides wider legal support for the industry
- The British government have an A to Z list for food and catering businesses
- In Ireland, the Restaurants Association offers experienced, professional advice on legal matters
- Restaurants Canada break down essential legal information on industry taxes and fees
- The Australian government highlights legal concerns relevant to the food services industry
Costs of Starting Up a Restaurant and Technology
A number of software options are available for today’s restaurants. They help restaurants start-up and provide support when looking toward long-term growth.
1. POS Software — Accounting
Every restaurant has to consider its cash flow. Monthly in and outgoings determine effective budgets. Working out profits from the costs of starting up a restaurant will require an estimate of sales. Total sales minus total costs are the profit.
Since keeping track of money with pen and paper can be tricky business, POS software is available to do this all for you. These systems contain accounting functions that:
- automate tracking of money in- and outgoings to and from a restaurant’s bank account
- provide key analytics on a restaurant’s most profitable (and less profitable) periods
- handle tax records, automating any deductions
2. POS Software — The Point of Sale
Card usage is at an all-time high. Therefore, a good point-of-sales (POS) system is essential. Its main function permits restaurants to:
- take payments at tables
- split bills
- provide refunds instantly
Extra features include analytics, inventory tools (dishes, drinks), staff scheduling features, and handheld functionality.
3. Reservations and waitlists
Digital waitlist and restaurant reservation systems allow you to seamlessly handle both walk-in customers and guests who have reserved tables. A digital waitlist helps restaurants:
In today’s digital age, when restaurants allow customers to book tables online, they receive better feedback, improving their online reviews. In the long term, starting restaurants will need to compete with restaurants already using digital technology to enhance the customer reservations experience.
Instead of physical staff scheduling using paper templates and pen-and-paper spreadsheets, restaurants can use specialised software instead. Software packages help:
- Share adaptable digital schedules when they’re ready
- Sync digital calendars, such as a guest reservations list
- Speed up scheduling with automatic shift allocation
Want to know more? Our ultimate guide tells you everything you need to know about restaurant scheduling software.
Our comprehensive guide delves into the ultimate buyers list for restaurant equipment. Restaurants can expect to pay tens of thousands, depending on the size of the restaurant and whether the equipment is new or second-hand. This includes:
- Cooking equipment, such as ovens, slicers, hot plates, ranges, grills, and also pots, pans, and mixing equipment
- Preparation equipment, such as knives and cutting boards
- Storage equipment, such as refrigerators, freezers, containers, and shelving
- Washing equipment, such as sinks, dishwasher appliances, and associated tools
- Serving equipment, such as plates, cutlery, and associated serving ware
- Safety equipment, such as industrial ventilation
The Restaurant Fit Out
Fitting out a new restaurant costs a lot of money, and new owners have to consider:
- Size of the restaurant
- Previous use of the building
- Structural work
- Safety infrastructure — such as fire alarms
Read our comprehensive guide that covers this big topic, providing everything you need to know.
Top 8 Ingredients For Starting Up a Restaurant
Now that both the legal and technological grounds are covered, it’s time to start up your restaurant.
When considering the costs of starting up a restaurant, business owners need to keep in mind that financial returns are not instant. However, don’t let this deter you. Be it a lifelong passion project or a timely investment, there are plenty of opportunities to open a successful restaurant today. Bolster your confidence with these top tips.
1. Get Creative On Concepts
Every idea starts with a vision, an ideal. The challenge then is to bridge that big idea with realistic expectations and goals.
When crafting a concept for your restaurant, bring in others on your idea to receive feedback. At this stage, always interrogate your intentions. Why start your restaurant when a hundred others are already open in your area? Ask reasonably what you hope your business will bring to the local hospitality table.
This is healthy business thinking. Whittling down your vision from a passing ideal to an everyday reality will help stimulate pragmatic thoughts, which you can then transfer to the planning stage.
Regarding a concept, pay great attention to detail. Keep in mind that consistency and appropriateness is key. For example, if you plan to start up a fine dining establishment, think about what formalwear your staff will dress in. Otherwise, it would be totally inconsistent with your restaurant’s concept and style to dress employees in a t-shirt and denim jeans.
2. Draw Up a Business Plan
This sets the direction of a restaurant’s aims and goals, including future improvements. A business strategy must include:
- A summary of contents
- Restaurant description
- A current analysis of the hospitality industry, including the relevant sector
- Geographic strategy, looking at consumer characteristics based on location
- Marketing goals, that outline the intentions of a restaurant’s advertising team
- Financial forecasts
For advice on starting to draw up and write a business plan, including free templates, read about best practices at gov.uk/write-business-plan.
3. Hold Onto Some Money
Money is serious. Every potential restaurant owner will need to invest serious thought in a restaurant start-up cost checklist. Here are our top tips.
- Plan all outgoings. Restaurateurs should expect to spend a great deal. From staffing costs to overheads, there’s no limit to the number of things to pay for. However, getting to know the specific upfront costs can help owners plan accordingly.
- Prepare for price fluctuations. Being cautious about spending, restaurants can prepare for sudden rises in costs. Economic forecasts are famous for underestimating sudden hikes. If you find that your restaurant bills hike on a yearly basis, enact a monetary policy to control spending.
- Build up excess savings. This is a restaurant’s best defense against uncertainty. Beforehand, add as much money to your restaurant’s stock of savings as possible, putting more cash into dedicated deposits in a restaurant’s account. Make regular estimations and cut down on real spending.
Before making big decisions, consult your business ideas with government-backed institutions such as the Business Finance Guide.
4. Come Up With A Logo Design
Imagine all your favourite places to eat. Think about what sort of images spring to mind. If you’re picturing any logos and graphics, welcome to the restaurateur’s subtle craft of image crafting.
Serious work needs to go into every restaurant’s logo and image. Without this, restaurants can create the wrong impression, dissuading customers from deciding to eat out with them.
Hire an expert for the job. Freelance graphic designers are always ready to work, to bring your restaurant’s image to a professional standard. Browse comparison websites to meet your needs and budget.
5. Project Finances
Forecast gains, losses, and stick according to a plan. Restaurants may witness a tiny amount of growth during the first few months — and that’s okay. Learning to be realistic about the long haul in sustaining a hospitality business is important.
Proper research is key. Analyse the facts about restaurants in the same boat as you. Do start-up restaurants tend to succeed or fail in the first months? Do they struggle with staffing? What is the ratio between the number of restaurant jobs available in your area to the number of people out of work?
6. Decide How to Market Your Restaurant
Image is important. In the US alone, businesses invested over $280 billion into advertising and marketing imagery. With such figures in mind, restaurants must pay attention to the impression they intend to create in the minds of others.
To start, Forbes magazine recommends dining out in all your neighbouring restaurants to get a flavour of the local competition. Observe the strengths that your neighbours relish in. Location is also customer dependent — for instance, what sort of person comes to that area in the town or city? This will give you the unique ability to cater your restaurant’s marketing to their needs. After all, in urban settings, restaurants are head-to-head with their neighbours for customer’s money.
7. Perfect the Menu
Menus are the bedrock of international restaurant culture. It sells your restaurant’s produce, food, and drink. So they deserve careful attention.
Collaborate with your chefs and kitchen to craft enticing dishes. Pull inspiration from mainstream interests. For example, many customers today think a lot about the environmental, social, and sustainable practices that go into the making of a restaurant’s dishes. Try to incorporate transparency and provide key information on menus to keep up with this demand.
Style, presentation, and — most important — pricing all need to go into the crafting of a menu. Minimising jargon is commendable, but remember that your menu must coincide with your restaurant’s overall image. Strike a balance between meal and drink costs — prices too high or too low can both have negative effects on customer decisions.
8. Treat Customers Like Royalty
Starting up a restaurant is a challenge, but rewarding when done right. Having the right technology to meet customer demands is a big help, especially when customers can enjoy themselves either waiting in a digital waitlist or making stress-free dinner reservations.
Find out how you can promote customer satisfaction with a restaurant app, saving restaurants time. How about reading about our client experiences? Our latest article on Poormanger, a popular restaurant in Turin, Italy, illustrates positive experiences with Carbonara App, cutting down on restaurant start up cost checklists.
Disclaimer: The information contained on this webpage is for general purposes only. Carbonara App does not accept any liability that results from information provided.