If you’re considering entering the restaurant business, there’s a lot to think about when it comes to costs. In fact, restaurant owners have to pay for food, labor, leasing, and advertising. And that barely scratches the surface! Most restaurants offer both indoor dining and takeout, but some operate as ghost kitchens and only do online food orders to cut down on operations. This begs the question, “How much does it actually cost to open a restaurant?”
Below, we’ll break down some of the costs you may encounter. So, if you’re looking to open a new restaurant or want to learn more about the restaurant industry, this page is a great place to start.
Location and Renovation
Commercial space is necessary regardless of whether you will be operating a ghost kitchen or a traditional full-service, dine-in restaurant. But how do you know you aren’t overspending on your new restaurant? You have to consider several factors. How does the rent compare to your neighbors’? Are there are any competitors within the same area? Are there any renovations necessary? Typically, leasing a space can range between $1 to $5 per square foot. Renovations can easily climb up to $100,000 and $200,000. These are just some of the factors to think about for restaurant costs.
Technology (POS and Scheduling Systems)
In today’s world, technology is a crucial component of any restaurant business. One of the biggest necessities is an efficient online food ordering system like Cuboh. Its key to success here is the ability to integrate your point-of-sale system with incoming mobile phone orders or online orders, whether it’s for pickup or delivery. Hungry customers want the ability to order through a food delivery app like Grubhub or pay with a credit card on the restaurant website seamlessly. There are different pricing tiers for online ordering systems, ranging from $80 to $250 a month.
When you’re starting from scratch, it can be expensive to purchase appliances. The most affordable way to tackle this is to finance restaurant equipment instead. It can be difficult for small business owners to invest in kitchen equipment from the get-go, but leasing from manufacturers like The Restaurant Warehouse allows for flexible financing anywhere from $1,000 to $100,000 worth of equipment. It’s great to know that as a restaurant owner, you can choose lower monthly payments over big upfront costs.
Marketing and Advertising
How do you expect new customers to find your restaurant? Well, the best solution is by running plenty of promotions and establishing an online presence on social media or on food delivery apps. To most customers, a restaurant without its own website is a huge red flag. Having an official website also opens up the avenue for more online sales. Keep in mind, loyalty programs are also part of marketing costs. Lower-budget marketing can run anywhere from $1,000 to $5,000 annually.
Permits and Licensing
There are a lot of legalities involved with opening a restaurant, including leasing contracts and permits. You may also need a restaurant lawyer to review any documents and ensure that you’re operating legally. Although a typical business license is only about $50, expect to spend anywhere from $500 to $3,000 for all permits and licensing.
The average startup costs for a restaurant can be anywhere from $175,000 all the way up to $750,000. The cost per square foot depends on a variety of factors: whether you’re going to open up a full-service restaurant, if it will be casual or upscale, if you’re leasing or purchasing a property, and if the building is a new construction or if it will involve some remodeling. There’s also the factor of purchasing your own kitchen equipment and paying for labor. But at the end of the day, if the restaurant business is your life’s passion, then breaking into this industry could be well worth the cost.