Before starting your restaurant, you need to take the time to thoroughly think through and budget your initial expenses. This can help you to experience a smooth and successful launch whether you are starting from scratch or buying an existing restaurant.
It’s no secret – starting a restaurant is not a cheap endeavour. There are a variety of cost factors to consider when developing a restaurant concept and it is imperative that an aspiring restaurateur measures the cost difference between purchasing an existing restaurant, taking over a vacant restaurant space, starting a restaurant from scratch, or buying into a franchise model.
The riskiest scenario, which will require additional planning and, in all likelihood, additional funding, involves starting a restaurant from scratch.
Using this start-up model as an example, we can break down the different cost categories that many will overlook.
Restaurant type: Before planning your expenses, you should first identify the type of restaurant that you wish build. This is because expenses vary for each type.
Building expenses: This is the most expensive part of your project. Whether you want to start your restaurant from scratch or buy an existing restaurant, you will face many hurdles. Starting from scratch will require more expenses than buying an existing restaurant. Among the benefits of both, the immediate cash flow is possible if you buy an existing restaurant. There are other options as well such as you can buy an already constructed space to start your restaurant. That might involve rent expenses.
Licenses and Permits: For opening a new restaurant, you need to purchase a business license or permit. You also have to obtain food safety license, health/trade license, eating house license, liquor license (if you are going to serve liquor), to name a few.
Insurance expense: The property that you have bought for opening the new restaurant needs to have insurance to prevent property damage. So you need to buy insurance.
Marketing: Before opening your restaurant, you need to first launch your marketing campaigns. These campaigns also involve a lot of cost so you need to be careful on choosing your channel of marketing.
Wages for employees: Irrespective of whether you are building your restaurant or buying an existing one, you need to be think hard on the personnel employed. It is better to start with less staff and then increases their number gradually as cash flows in.
Kitchen Equipments: It is important to understand that buying all kitchen equipments will have drastic affect on costs. So it is better to first decide on the menu so that you are very clear about the equipments you require. Once that is decided, involve a vendor or supplier to provide you with the equipments to start off. Choosing a vendor is much like choosing a new employee. You should not decide a vendor on the basis of his price but checking their references. You should decide vendors depending on their delivery, work and the kind of good working relationship with you. It is also important that you don't employ too many vendors as that can affect your cost.
Restaurant Furniture: In case you are building a restaurant from scratch, you need to be ready with the expenses on basic furniture. In case you have bought an existing restaurant, the fixture may be included with the cost.
Working capital: When you will open your restaurant, you need to have some cash reserved for the start-up period – a crucial period. During this period, instead of incoming cash flow there is only outgoing expenses.
Technology: You need to have at least a personal computer with accounting software installed for duty managers, a phone and a LAN connection.
You should not take anything for granted during the start-up period. So everything needs to be taken into consideration when planning for startup costs.