Sep/090
How to Calculate Restaurant Set up Costs
Set up costs for a restaurant are substantial when compared to other business models and it can be difficult to start up for under six figures. Let's consider a few of the start up expenses that you will be up against if you plan to launch your small restaurant business and how you can go about cautiously budgeting to ensure the best use of your start up funds.
Many restaurant entrepreneurs run out of cash at some stage in the first year of their restaurants life and are forced to go out of business due to the fact that they did not get to profitability as rapidly as they had anticipated. Keeping sufficient capital to prepare for this situation is prudent.
Write out a budgeting timetable for buying only what you need as your restaurant grows and look into second hand options to get better prices.
Building costs are one of the main start up costs to consider. Whether you buy your own building and pay mortgage payments or you let a space and pay rent you will have considerable obligations every month. There are also interior refurbishing costs as well as ongoing expenses such as utility bills and taxes.
Leasing could be the best alternative right at the moment and with the economy still bad, but slowly starting to perk up, you could negotiate a cheap lease and be set up and running for when the economic recovery finally comes.
Compliance costs can be surprisingly excessive so it is essential to do some preliminary investigation so that you are aware of how much it will cost to get the licenses and permits that city authorities require.
You will need liability insurance as well as a general policy to protect you against loss or damage to your business property. Figure in health and safety equipment too like fire extinguishers.
The list of equipment requirements for a new restaurant is extensive and can range from industrial cooking and ventilation equipment, freezers, refrigerators and other kitchen equipment.
Dining room, greeting area and bathroom related expenses also require plenty of planning. You will need to purchase all of the fixtures and fittings, serving equipment and table settings to go with your theme.
A lot of restaurant owners notice inventory constantly being taken so you need to consider setting up systems to track and protect inventory. Systems for receiving customer orders and conveying them to the kitchen and systems for processing payments are also all part of the restaurant business these days.
Advertising costs can be considerable if you want to hit the ground running. Think about brand name development, menu design, advertising methods and signage and what they will cost you.
It is easy to overlook some of the less important (and more important) expenses associated with setting up and managing a restaurant. Talk to restaurant owners, read some books on the topic and make casual observations when you visit restaurants so that you don't forget any important details.
From toilet paper to employee uniforms, your list of estimated restaurant startup costs will depend on the extent of your operation, your theme, seating capacity and your target market.
Some restaurant owners include the first few months of operating expenses when they calculate their total startup costs.
Stick with safer financing options at first like loans from friends or banks. Leave higher interest options like credit cards debt until you really need them.
Start your restaurant off the right way be ensuring that you fully comprehend the startup and running costs that you can expect. Don't go too far into debt too soon as you might need lines of credit while you get through the difficult period that every business goes through in the beginning. Entrepreneurs that accurately estimate costs and budget accordingly have the best prospect of emerging with a profitable restaurant.
To learn more about start up costs for a restaurant and how you can quickly jump into the restaurant business visit - Start your own Restaurant