Sep/090
Start up Costs for Opening a Restaurant
Start up costs for a restaurant are substantial when compared to other industries and it can be difficult to get started for under $100,000. Let's consider some of the set up costs that you will be facing as you plan to launch your restaurant and how you should go about carefully budgeting to make the most of your start up funds.
A lot of restaurant entrepreneurs run out of money during the first year of their restaurants existence and are forced to go bankrupt due to the fact that they did not reach profitability as fast as they had imagined. Keeping enough funding in reserve to prepare for this situation is wise.
Set out a budgeting plan for buying only what you need as your business grows and look into used options to save money where possible.
The main cost related to setting up a restaurant is location. You will either have to let premises or pay a mortgage on a space that you own. Refurbishing expenses for a restaurant can be significant and you also have ongoing building related expenses such as utilities.
Leasing could be the best option right at this time and with the economy still bad, but slowly starting to recover, you could negotiate a lease at a reasonable rate and be set up and ready for when the recovery finally arrives.
Make sure that you are aware of how to comply with local regulations and what they will cost.
Your restaurant will need liability insurance as well as a general policy to protect you against losses or damage to your business assets. You also require health and safety equipment too like fire extinguishers.
You will need to completely kit out a commercial kitchen. As soon as you understand more about the seating capacity and the menu that you intend to provide you can seek recommendations from a chef about equipment needs.
Outside of the kitchen you will need to kit out a full dining room with tables, linen, plates and cutlery just to name a few things.
Many systems can be installed in restaurants nowadays to control and protect stock and avoid stealing, to accurately take and communicate customer orders and to collect takings and keep financial records. Systems like this can be costly to get set up but can help you to run your business smoothly and to minimize unnecessary losses.
You need to create a brand and work this in with your theme, on exterior signs and on your menus and on business cards and other materials. Advertising is also important and you need to allocate a substantial budget for this to ensure good exposure.
It is easy to fail to see some of the less obvious (and more important) expenses associated with setting up and running a restaurant. Talk to restaurant owners, read some guides on the subject and make observations when you visit restaurants so that you remember all of the important details.
Set up costs will be different depending on if you are creating an upmarket fine dining environment or a place with a more relaxed family dining experience.
Many restaurants include the first few months of operating expenses when they work out their total startup costs.
Stick with safer financing options at first such as loans from family members or banks. Leave higher risk options like credit cards debt as a last resort.
Get your business off to a great beginning by ensuring that you are fully aware of all the restaurant startup costs that you will be facing and by ensuring that you have a plan in place to allow for them.