Restaurant Start-up Costs and Tips

Starting a restaurant business has its challenges and also its rewards.

The cost of opening your own restaurant business is one very important matter to be dealt with and often the hardest to determine because, to a great extent, it depends on the type of restaurant that you desire to open. 

New restaurant ventures have a notoriously high failure rate, a fact of which financial institutions are well aware.  Your restaurant start-up costs are outlined as expenses incurred for the acquisition or creation of your restaurant business. 

A restaurant’s costs generally include the following expenses:.

Start-up costs, which often exceed $200,000 per restaurant, include recruiting, training, relocation and related costs for developing management and hourly staff for new restaurants, as well as other costs directly related to the opening of new restaurants.  Start-up costs are composed of any incurred amounts or out-going capital in relation with your restaurants activity.

Expenses will usually include employee salaries, advertising, rent, supplies, delivery expenses, utilities, taxes, insurance, maintenance, professional services, loan payments, inventory, etc.  The remainder comprises taxes, insurance, and restaurant start-up costs, among other items.

Unless you're starting an old-fashioned diner that runs on grease-stained order slips, you'll also need a point-of-sale system to collect money and manage the floor and the kitchen. You’ll need money for location assessment, vendor establishment, procurement, hiring/training and much more.

As is currently the practice for many upscale, highly customized and "theme" restaurant entities, your company could defer its restaurant start-up costs and then amortizes the costs over a 12-month period immediately following the opening of the respective restaurant.

Be sure to research financial history when purchasing a division of a company.  There's a chance that the company will be providing a full balance sheet and cash flow statement in future earnings releases.

Some Tips

Private investors are the way that 90% of restaurants are opened, and the rest is with personal money.  “The Money Guy” can help you out.  Go to www.one-for-the-money.com  Provide for plenty of money for your venture and plan your income conservatively at the beginning.  Also plan your expenses on the high side. 

It’s always good to beat your plan and adjust it accordingly, and in the business world that is the prudent thing to do. If the income generated fails to cover expenses including loan repayments, the business can quickly get into difficulties.

Learn to use optimum staffing scheduling, maintain up to date recipe costs and evaluate the overall profitability of your menu, and invest in some good restaurant business planning software.

Provide your new restaurant with significant operational efficiencies so that they make more money. Focus your restaurant team on delighting the customer instead of "dealing with the headaches". 

A wide variety of seminars are held throughout the year throughout the U.S which focusing on management skills such as: marketing, food safety, labor management, food-cost management and workplace harassment. 

Choose the right location and neighborhood for your restaurant business.

Securing a business involves the mastery of the four P’s of marketing:

Product

Price

Place

Promotion

Good Luck!