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How Much Does It Cost To Open a Restaurant? Restaurant Cost

By
Nicole Georgiev
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    Opening a restaurant and becoming a restaurant owner is part of many people鈥檚 dreams. Turning that dream into a reality can be challenging, but also rewarding. It鈥檚 a big decision and with every big decision comes the question of, 鈥淗ow much does it cost to open a restaurant?鈥

    The startup cost to open a restaurant is significant. There are many factors to consider which can make it a tough question to answer. However, this article will provide you with the information you need to start budgeting for your restaurant.听

    So, how much will it cost to start a restaurant? Let's find out!

    Download the link to the cost of opening a business eBook

    Average Cost to Open a Restaurant

    The average restaurant opening cost can be hard to come by. The answer will vary based on the type of restaurant you want to open, the location, and the size of the business. Other factors include whether you鈥檒l want to offer a dine-in experience or operate a ghost or and offer takeout and delivery options.听

    Once you narrow down these factors, you鈥檒l get a better idea of the normal expenses of running a restaurant. This can also help you understand.听

    Restaurant costs can vary, but they range from $170,000 to $750,000. However, these numbers shouldn鈥檛 discourage you from bringing your dream restaurant to reality. There are several ways to reduce and plan ahead.听

    Typical Restaurant Startup Costs

    Not all restaurants will have the same startup costs. However, you should consider the different areas where you plan on spending your money in order to get clarity on your final expected costs and what to expect to pay.听

    Properly planning out your restaurant business can help you avoid losing thousands in additional and potential customers. Poor restaurant equipment choices and construction can end up costing you twice as much as time goes on. Below are some essential startup costs and expenses for opening a restaurant.

    Breakdown of Restaurant Startup Costs

    The following restaurant opening costs can help you budget for your potential new business project:

    Utilities

    Even though your restaurant won鈥檛 be fully operational during the building stage, you鈥檒l still have utility expenses. These include water, gas, and electricity.

    It鈥檚 common for these expenses to add up quickly. Average costs can range from $1,000 to $1,200 per month depending on the size of the property.听

    Location

    Picking a location for your restaurant is one of the most crucial decisions. It鈥檚 beneficial to pick a location that has good foot traffic, but these spots can be pricey. When choosing the location, you鈥檒l have to consider the following options:聽

    • Investing in a new construction property
    • Converting an existing commercial property or space per sqaure-foot into a restaurant
    • Purchasing an existing and/or operating restaurant

    Each of the options above has pros and cons. Choosing the right option will require thorough research.听

    Finishing Touches and Equipment

    It鈥檚 true that the little expenses start to add up. These include interior finishing touches and your kitchen equipment. From kitchen tools to restaurant inventory software, it鈥檚 all something to consider. The equipment like the lighting, signage, phone systems, and music systems are also crucial.听

    Finishing touches like decor and furniture are what help bring life to your restaurant and make the space appealing to guests. Don鈥檛 forget that everything needs to be ready in terms of restaurant inventory such as food, plates, cups, utensils, and cookware. All in all, these costs can range from $20,000 to $400,000.听

    Marketing

    Marketing is a restaurant opening cost that can be minimal or expensive, depending on your needs. Franchise locations might have the advertising part taken care of. However, new restaurants might need to be advertised more, especially in a saturated market.听

    The costs for this can vary based on the channel or niche market you鈥檙e targeting. A new brick and mortar restaurant might benefit from professional marketing from an agency. Smaller establishments might only require some social media marketing efforts to achieve O2O success.

    Marketing and PR costs can depend on your competition and restaurant concept. In most cases, similar costs will equal about 3-6% of your sales. Continuous marketing is necessary in order to keep business moving.听You may also want to consider incorporating a loyalty program.

    Development and Organizational Costs

    Obtaining the necessary licenses and permits is one aspect of opening a restaurant that people dread. However, it鈥檚 essential.

    You鈥檒l have to file and pay your restaurant licenses and permits as well as pay for all utilities. The average licensing cost of this can range from $2,500 to $200,000.听

    Technology

    Restaurant technology will help your business run smoothly. You鈥檒l need to have a point of sale system, like a for your restaurant, and you鈥檒l likely want to incorporate. These include restaurant QR code menus, ERP accounting system (see ERP meaning), and restaurant inventory management software. It's also crucial for restaurants to understand the benefits of ERP in this case.

    Food Costs

    No restaurant is complete without food. A successful restaurant opening will call for fully stocked pantries, refrigerators, and freezers. If you run out of food items, especially at the beginning of your business venture, it can give guests the wrong impression.

    Keeping your inventory stocked can guarantee that you have all you need to provide seamless. Some restaurants consider having safety stock on hand. Your average per month will likely vary based on the menu offerings and the type of cuisine you serve.听

    This is when the formula can come in handy so that you have your food and finished goods profits.听

    好色TVt online marketplace for restaurants

    Common Restaurant Startup Mistakes

    Being aware of potential mistakes or problems before they arise can help you better plan and prepare to avoid them. Even some of the best business owners and best coffee roasters can make mistakes. Below are three common mistakes that can occur when opening a restaurant:聽

    Not Having a Solid Business Plan

    A solid business plan is essential for a restaurant startup. Anyone can come up with a good idea, but you should make sure that your idea and plan are feasible. A business plan can help you outline your business and understand how it will operate. It's also easy to seek out investors or eCommerce banks for small business loans with a business plan. This will also help you avoid sticky situations in the future.听

    Not Focusing On the Location

    Location is a crucial factor when opening a hospitality business. You should always choose the location that is first on your list, given that it鈥檚 within your budget to do so.

    Be sure to consider your target market, where they tend to spend time, and a location with decent foot traffic. If you find a location that meets all three characteristics, strongly consider it.

    No Financial Planning

    If you don鈥檛 plan out your finances, you might underestimate the amount of money that is required. This can result in a lot of problems down the road. Unexpected expenses can come up, and it鈥檚 good to be prepared for this by having money set aside.听

    Download the link to the cost of opening a business eBook

    Frequently Asked Questions About the Cost of Opening a Restaurant

    What Is the Average Cost of Opening a Restaurant?

    The average cost of opening a restaurant can vary depending on numerous factors, but it tends to range from $170,000 to $750,000. These factors can include the type of restaurant you open, the location, and the size of the restaurant.听

    What Costs Should Be Considered Before Opening a Restaurant?

    The costs that you should consider before opening a restaurant include:聽

    • Utilities
    • Location
    • Finishing touches and equipment聽
    • Marketing
    • Development and organization
    • Technology
    • Food costs

    What Are Common Restaurant Startup Mistakes?

    The common restaurant startup mistakes that people run into include:聽

    • Not having a solid business plan
    • Not focusing on the location of the restaurant
    • No financial planning
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