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How much does it cost to open a restaurant ?

You’ve got an enterprising mind and passion for food. But a number of questions arise when you decide to go for it and start your own restaurant. First and foremost : "how much does it cost to open a restaurant?" Or maybe you’re wondering : "how much does it cost to open a pizza shop or start a deli?" Or "how much it may cost to start a high-end restaurant with unique fare?" The answers to these questions vary. The average restaurant startup cost is $275,000 or $3,046 per seat for a leased building. Bump that up to $425,000 or $3,734 per seat—if you want to own the building.

Our restaurant startup cost checklist breaks down all the costs you’ll need to consider to make your dream a reality.

 

Download the restaurant startup cost Excel worksheet

Breaking down restaurant startup costs

Opening a restaurant comes with its own specific set of cost considerations. Remember, the average restaurant startup costs vary depending on size, location and the range of choices you’ll make when parsing through the smaller details. For instance, the cost of opening a sandwich shop, pop-up restaurant, or other type of takeout restaurant will be much less than the cost involved in opening a 200-seat eatery in an upscale neighborhood. Some restaurant startup owners have tested their concept as a pop-up restaurant before opening a full-fledged restaurant.

Regardless of the type of restaurant you want to launch, at first, it’s helpful to break down the costs into two categories: one-time costs and recurring costs.


One-time costs

One-time costs are exactly what they sound like—the things you only have to spend money on just once. Keep in mind that some of these are true one-time costs (i.e. the security deposit on the building), while others (i.e. kitchen and cooking equipment, tableware and linens.) may eventually need to be replaced down the line due to general wear and tear.
  • Lease security deposit/loan down payment – this cost varies a lot, mainly by size and location of your restaurant. A lease security deposit ranges from approximately $2,000 to $12,000. If you’re planning on taking out a loan to purchase the building, you’ll want to have at least 10% of the purchase price as a down payment.
  • Business licenses/permits – this includes city licensing fees, liquor permits and compliance permits such as health and safety. Cost vary, so you’ll have to find out what local permits are required and how much they are for your locality. Individual permits could range from $100 to $300.
  • Legal/processing fees – there’s a lot of paperwork and even more legalities involved in business formation. As a result, you’ll need help from an experienced lawyer to make sure your operation is legal. Expect to spend anywhere from $500 to $2,000 to have a lawyer at your disposal to review documents on your behalf. An attorney can be especially valuable when it comes to signing contracts. Always conduct your due diligence with your county’s Public Records Department, making note of multiple changes of ownership, temperature or insect infestation violations, etc. Running this information past your legal team before signing any contract may save you more money in the long haul.
  • Building improvements – this applies more to building owners, but remodeling costs are often necessary to get your space set up for your particular needs. Including your kitchen, costs to remodel a restaurant can climb to $250,000 to $350,000.
  • Kitchen and cooking equipment – starting from the ground up, you could spend as little as $50,000 for a small-scale operation or upwards of $150,000 for a larger setup. In addition to your cooking equipment (stoves, industrial mixers, griddle, etc.), you’ll also need proper refrigeration and a commercial dishwasher. Many restaurant startups can overspend when it comes to purchasing equipment. One money-saving option is to look for second-hand equipment. Some restaurants that may recently have gone out of business often sell their wares online to recover costs. Looking for quality, used equipment in good working condition can save you some much-needed capital.
  • Tables, furniture and tableware – this cost can vary based on the quantity and quality you opt for. However, on average, you can expect to spend $80,000 on tables, chairs, decor and more.
  • Ordering and payment technology (POS systems) – if you want to stay open, you’ll need a way to be paid, keep track of orders, and keep track of your inventory. Expect to pay approximately $20,000 for a Point-of-Sale (POS) system or similar type of technology.
  • Signage and advertising – you’ll want to make a splash with your grand opening. To make it really count, you’re looking at about $20,000 to $30,000 up front.
  • Accessibility to the disabled persons - if you have a sit-down restaurant, depending on your location, you may have to pay a hefty amount to ensure your restaurant has an accessible ramp and bathrooms to accommodate disabled patrons. Mike Metzger, co-owner of farm-to-table, nose-to-tail restaurant Stockyard Sandwich Co. in Philadelphia, noted that: “It would have cost $30,000 to make our restaurant accessible at the outset. This informed his and his partner’s decision to make their startup a takeout-only restaurant at the outset.”

 

Recurring and ongoing costs

There are a number of ongoing costs that come along with restaurant ownership if you want to thrive. It’s true you have to spend money to make money—here are the main areas you’ll be spending on. While there a lot of expenses here, they can be managed using expense tracking software.

  • Lease/mortgage payments – the most obvious recurring and ongoing cost to running a restaurant, your monthly lease or mortgage payment, can vary according to a number of factors, including location and deal negotiation. You could be spending anywhere from $2,000 to $12,000 monthly for your space. Buying your location means you have to pay taxes on both your property and the land it sits on. Leasing, on the other hand, can limit the number of years you stay in a location, but you can always negotiate an option to renew, and renewing with a small percentage increase every month or every year you stay open. In either case, whether you choose to buy or renew, you'll still be responsible for your own insurance.
  • Employee salaries – your employees are integral to your operation, so you have to make sure they’re paid. You’re looking at $28,000 to $55,000 for a salaried manager to keep things running smoothly. You’ll be paying $1,300 to $1,800 weekly for your head chefs and $575 to $650 for your line and prep cooks. Wait staff typically earn minimum wage and get to keep their tips.
  • Food and beverage costs – this is quite literally your bread and butter, but the costs vary drastically from restaurant to restaurant depending on what kind of food and drinks you’re serving. Another way to keep costs low when pursuing a liquor license is to consider a satellite license. Some states allow restaurants to obtain a satellite license from a brewing company. A satellite license allows a licensed brewery, winery or distillery to designate up to a specified number (often between three and five) of bars or restaurants to serve as a satellite facility, allowing them to sell their alcoholic beverages, as long as these bars and restaurants are in the same state as the brewery, winery or distillery.
  • Utilities – you have to keep the lights on and the ovens cooking. Factoring in gas, electric, water, trash removal, phone and Internet, you’re looking at about $2,500 per month.
  • Marketing and advertising – for success, you’ll need to have a consistent presence. If you want to go the route of print or broadcasting, ad space is at a premium. Web advertising is typically less expensive or even free if you take to social media.
  • Insurance and permits – additional recurring expenses can add up. Insurance (building, inventory, liability) and typical licenses and permits (business, food handlers, sign, music and ADA compliance) can set you back about $10,000 when they’re up for renewal.
  • Miscellaneous expenses – these include anything and everything you might not expect. Unexpected repairs on equipment or fixtures can get costly, so you should always work the what-ifs into the budget.


Common restaurant startup myths & mistakes

There’s a lot to navigate when calculating restaurant startup costs and strategies—it’s easy to get bogged down by preconceived notions of what is and isn’t necessary. So we’ve compiled the most common mistakes new restaurant owners make to help you avoid the headache or unnecessary costs.
  1. Don’t overspend on equipment. This is the number one mistake startups make. It’s incredibly easy to go overboard when outfitting your dream kitchen. We know it’s tempting to go all out and get the newest gadgets, but you have to keep your budget in mind. For the necessities, make sure you shop around—second-hand equipment from Craigslist, eBay or the like could save you thousands.

  2. Keep your remodeling budget in check. This goes hand in hand with equipment overspending. Remodeling costs can add up frighteningly quickly. Be modest and resourceful with your decor, utilizing the Internet for design ideas. Leave space in the budget for contingencies—a solution to a problem that hasn’t happened yet may not be the most glamorous thing, but you’ll be glad to have peace of mind.
  3. Don’t go overboard with food expenses. Make sure you shop around for your supplies. You certainly shouldn’t skimp on quality, but don’t be a fool for fancy marketing either. If you’re buying in bulk consistently, vendors will often work out deals to keep the steady business. Another option to consider is striking a partnership with local farmers and co-ops for fresh, locally-grown foods. Constantly reevaluate your portions, as well as what gets wasted—only buy what you need.

  4. Pay attention to the contract. If you’re buying a restaurant, make sure you look over the contract closely—ideally with the help of an experienced attorney—before signing it. There’s a ton of public record information available to you regarding the restaurant in question, and you should scour it. Often, issues the seller fails to mention will show up in public records of infestation or compliance issues.

  5. Be smart about marketing. Advertising can be a pricey endeavor, so don’t drain your budget when you don’t have to. Your best bet is to find low-cost avenues to promote your restaurant. The Internet is an extremely powerful tool to get your name out there. Make sure to take advantage of free social media platforms and consider web advertising at reduced rates.

 

Industry tip

Running a restaurant is hard work. Don’t get bogged down tracking expenses—consider upgrading to online accounting software with Sage Business Cloud Accounting to save time and money.



What restaurant owners wish they knew when starting their business

Hindsight is 20/20, so take note of these insights from restaurant owners who have been through the ringer and you’ll be ready for anything as you open your own restaurant.
  • “Get your permits squared away.” The sooner, the better. “Don’t take anyone’s word for anything—always make sure you get things in writing,” said Mike Metzger, co-owner of Stockyard Sandwich Co. in Philadelphia. “No matter what anyone says, do your own research and get approvals in writing.” City offices can often be hectic, understaffed, and different departments may not be in communication with one another. One person may say you don’t need a specific permit while another may put the brakes on your startup because you don’t have that permit. A hang-up from the Licenses and Inspections office can set a restaurant back upwards of 4 months.
  • “Don’t overhire in the beginning.” As much as you can prepare (and you should), you’ll never know exactly what to expect when your restaurant opens its doors. Hiring an excess number of employees creates confusion and adds to your overhead costs. Start small and feel out your labor needs as you get into the swing of things. There’s always going to be a learning curve—you don’t want to overstaff your slow hours or understaff your busy hours.
  • “Don’t forget the little things.” There’s a lot that goes into keeping a restaurant open. You have to be prepared for every expense when setting up your budget. “Whenever you think you have enough money, add another $25,000 to that figure. Then you should be fine,” advised Metzger, giving some down-to-earth advice to startup restaurateurs. Another point to remember is that not only will your employees pay taxes, but you will have to pay taxes on your employees as well. A credit card machine and a POS system are other commonly overlooked expenses integral to a functioning restaurant since they can help you keep track of orders, as well as inventory—and when you’re managing several thousands of dollars worth of inventory and ordering from suppliers or local farms, it’s important to be able to stay on top of it all!


How to use the restaurant startup cost worksheet

Our restaurant startup cost spreadsheets are simple and intuitive to use. Once downloaded, they’re fully customizable to fit your needs.
  • Download the free template.
  • Add or remove fields applicable to your startup.
  • Assess your needs and related costs.
  • Make note of potentially changing costs or costs to be determined.
  • Plug in your numbers and enjoy the simplified breakdown of your startup and ongoing costs.


Download the restaurant startup cost Excel worksheet

Focus on building your business, not tracking expenses—try Sage Business Cloud Accounting

Opening and maintaining a restaurant requires a lot. Day in and day out you invest your time, energy and focus into creating something amazing. So why waste your valuable time and efforts tracking expenses the old-fashioned way? Administrative tasks can now be fully automated—so upgrade your business model by deploying online accounting software through Sage Business Cloud Accounting and save yourself some time and money. You have enough on your plate. Outsource the busy work and get back to doing what you do best—making your business a success.

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Additional startup cost templates

Is our sample restaurant startup cost calculator not what you’re looking for? Then, please check out our other templates. We also offer solutions for all of your startup needs.
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The startup costs shown here by industry are merely guidelines and average estimates based on information pulled from a variety of sources. While we have attempted to present the most accurate information available, please be aware that startup costs can vary greatly according to a number of factors, including but not limited to state and local fees and contractor quotes. The information presented here is intended to help guide prospective business owners in the search for information on starting a business within a given industry, but should not be interpreted as an exact quote.

Sage provides the information contained here as a service to the public and is not responsible for, and expressly disclaims all liability for damages of any kind arising out of use of, reference to, or reliance on any information contained on this site. While the information contained on this site is periodically updated, no guarantee is given that the information provided is correct, complete and up-to-date. Sage is not responsible for the accuracy or content of information contained on this site.

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