How much does it cost to open a restaurant ?

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 the 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. Costs 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, décor 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 upfront.
• Accessibility to 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.”

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.

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 over-hire 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!

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.