Restaurant Startup Costs

There aren’t many people who can get a blank check to open a restaurant. And while it takes discipline to live within a budget, there are ways to work within its limits that won’t compromise your vision.

Create a Realistic Budget From the Start

The easiest way to stay on budget is to have an adequate budget in the first place. “Contingency funds shouldn’t make up for budget shortfalls,” says Connie Dickson, FCSI, principal at foodservice design and consulting firm Rippe Associates, Minneapolis.  

“Make sure your budget is complete,” says Chris Tripoli, a Houston-based hospitality specialist who teaches a course called, ‘So You Want To Open A Restaurant’. “It’s hard to estimate actual restaurant startup costs until you dig into it and talk to operators with similar concepts.” 

Tripoli also recommends finding a good restaurant startup costs checklist and talking to experts, like foodservice consultants or the product consultants at equipment dealers like Central Restaurant ProductsGetting estimates on hard costs such as foodservice equipment or construction materials is relatively simple. The soft costs, however, may not be as obvious.

Some of the restaurant startup costs you should make sure your budget covers include:  

  • Fees for your design team—architect, engineer, consultant/designer, interior designer
  • License fees
  • Permit fees, including a surcharge for expedited services
  • Attorney fees to set up your business’s legal structure
  • Accountant or bookkeeper fees to set up your books
  • Graphic design fees for your logo, packaging, menus and additional print or digital marketing materials
  • Utility deposits, often required from new businesses in addition to monthly bills
  • Insurance binders, typically a 25deposit on policies for liability and workers compensation
  • Pre-opening inventory for production recipe testing, staff tastings and soft opening events, including paper products, chemicals and cleaning supplies, and liquor in addition to food
  • Payroll for management, advance hires that you want to retain and/or staff during training and soft opening events
  • Costs for office equipment and supplies, including back office computer able to tie-in to your POS system
  • Operating reserves to cover expenses while restaurant gets up and running; you should have at least enough to cover three months’ worth of expenses, including everything from utilities to food and supplies 

Scaling Back Your Vision

If you don’t secure the amount of capital you’d hoped for, or problems arise that make it clear you’ll exceed your budget, there are ways to scale back your vision without compromising your concept. 

Right-sizing the restaurant early on is the key, Dickson says. You need enough seats to produce enough revenue to turn a profit, but you have to match those with a large enough back-of-the-house operation to produce food for those seats. If they’re not in balance, scale back one or the other.

Another way to scale back, Tripoli says, is to find a former restaurant space with infrastructure built in instead of building from scratch. Or, if you’re set on a new facility, scale back on your choice of finishes on walls and floor, go to markets to find off-brand or used furniture and decor, or consider leaving some space unfinished and building it out after you’re up and running. 

Rethink Your Equipment Needs 

“Equipment is a big cost piece of any project,” says Dickson. “Take the 10,000-foot view. Variability runs the gamut in terms of durability and cost.

Don’t sacrifice your peace of mind with inexpensive and potentially unreliable restaurant equipment, but instead of a heavy-duty cooking suite, maybe you can get by with a few of the individual pieces of equipment, she suggests.

Some ways to save include dealer programs like our lightly used restaurant equipment discounts that offer new equipment at reduced prices if they have blemishes. Since most of your customers won’t see the equipment in your kitchen, a few dents can be well worth the savings.

You also might consider financing equipment separately rather than lumping it into your capital budget. It’s possible that your monthly payments could be less that way than what you have to pay back to investors or the bank. Another option is leasing equipment versus purchasing it. Central Restaurant Products offers free net-30 terms and additional payment options to be as flexible as possible for first-time operators.

Avoid Change Orders

Any changes you make to the original construction drawings that additional work may cost you money. Make sure you get a good construction manager to communicate everything that’s happening on-site, and when you need to be available or have money for permits, inspections, drawing reviews, etc., so they don’t come as a surprise (Read 7 Secrets to a Successful Install for more tips).

“Try to include code officials in your design process so they can red-flag any items that look questionable to them,” Dickson says. “It’s much less expensive to correct a mistake in the design phase than during construction.”