Having a general idea of startup costs can help restaurateurs source the necessary funds to launch their new business. Small business loans, private investments and equity firms are a few types of funding.
Many restaurateurs also seek partners to split the upfront cost. Typically, partners desire an active role in decision-making to ensure the profitability of their investment. Crowdfunding has also become a popular choice recently, which draws in the support of local consumers. To see your options when it comes to raising investments, see our article on 12 different ways to fund your business.
Land acquisition, location improvement and kitchen equipment consumes a large portion of the initial capital. According to a survey by RestaurantOwner.com, the average cost of construction for a new restaurant is $279,807, or roughly 47% of the total budget.
Moving into a former restaurant space rather than creating one from the ground up can reduce the startup cost by more than half. Doing so also reduces the risk of construction complications, which can lead to a postponed grand opening. Depending on your restaurant’s location and city ordinances, alcohol permits are sometimes grandfathered in and remain intact with the location.
If you’re leasing the restaurant’s location, consider the costs of the security deposit, first month’s rent and first month’s utilities as part of initial capital. Rent can range between $3,000 to $12,000 per month, based on location and square footage. The combination of taxes, permits, insurance and building-related costs are considered part of the occupancy cost not including rent. These expenses add upward of $15,000.
Also consider the cost of furniture, such as tables, chairs and decor, which costs around $40,000. Dishes, utensils and kitchen and bar equipment can easily add up to $80,000. Select tableware and dishes that are durable to avoid replacing them often.
Consumers often choose restaurants based on ambiance and the overall dining experience. Hire an interior design or consulting group to select the appropriate decor aesthetic, and allow them to design an inviting space that encourages loyal clientele.
Going the mobile route? Food trucks are an excellent opportunity for restaurateurs to launch a concept at comparatively minimal startup costs. Food trucks can range anywhere from $30,000 to $250,000. Startup costs and overhead are typically lower than a traditional brick-and-mortar restaurant, but can still provide an equivalent level of profitability.
Restaurant technology ensures that your front- and back-of-house teams communicate effectively. It also ensures your restaurant is running at its fullest capacity. Discover a point-of-sale system that best suits your staff, such as QuickBooks Point of Sale powered by Revel Systems. The cloud-based software runs on an iPad, which allows servers to send orders directly from the table to the kitchen. This allows for more accurate ordering and can eliminate errors. In the event of a power outage or slow internet, the “Always On Mode” still allows the user to take payment.
Consumers are becoming more aware of their digital options when dining. In a recent study by the National Restaurant Association, 35% of consumers said they often choose one restaurant over another based on tech options. Online and mobile-based ordering increases convenience and encourages consumers to dine out or order takeout more often.
Inventory and Cost Management
A comprehensive POS system will be able to track inventory levels in real time and allow you to enter recipes so that ingredient levels are tracked as dishes are ordered. Ordering as needed allows you to provide fresher ingredients and subsequently eliminate waste, which can equate to a huge loss of revenue and one of the biggest factors when it comes to cost management.
Learn the 80/20 rule when creating your menu and tracking inventory levels. The National Restaurant Association advises that “80% of your food costs come from 20% of your items.” Join a large purchasing group, and negotiate prices on the 20% that create the most revenue. By signing a contract with a large purchasing group, you’ll avoid sudden price increases caused by weather patterns or transportation costs.
Keep your first order lean to eliminate waste. This initial supply should hover around $8,000. Once you develop more cash flow, order greater volume to accommodate your growing business. Assess the quality of ingredients you are ordering. Sometimes, featuring different cuts of meat and seasonal produce allows you to ensure quality while keeping costs at a minimum.
It’s commonplace for restaurants to provide meals for their staff. Ensure your crew is accurately tracking their meals to account for inventory.
Click here for tips on how to improve your inventory management.