It is no secret that the restaurant business is one of the most popular businesses of this century. If you dream to open a restaurant business then you must know that starting a restaurant business is not an easy task. Let alone starting a restaurant business, just making a budget for starting a restaurant business requires quite a lot of research and effort. But if you want to open a small restaurant and are wondering how much does it take to open a small restaurant then this content is for you.
Unlike average restaurants, small restaurants require less budget. Still, the budget depends on several different sectors. Each of these sectors like food cost, labor cost, location cost, decoration cost, furniture cost, etc can make the budget go up and down. According to experienced restaurant owners, small restaurants are the most successful restaurants in the world. Small restaurants with less seating allow chefs and kitchen staff to focus on their cooking and food preparation. Besides serving quality food, you should also focus on making good revenue. Because the main focus of every business is to make money. So you should spend as little as you can at the start of the business. But at the same time, you must spend enough time to prepare everything perfectly so that you can do your everyday tasks smoothly.
Let’s make a budget for your dream restaurant without overspending and find out how much does it take to open a small restaurant.
As we discussed before starting a small business requires a lot less expense than a large restaurant. Also, the success ratio of a small restaurant is higher than any average restaurant. Because the start-up cost is less and also the chef and other restaurant staff have less pressure on their shoulder and can focus on preparing food with all concentration. As a result food quality is never compromised. Some experts consider that a restaurant owner or any business owner should not spend too much money on the beginning of a business. First, you need to start your business with minimal startup cost and then if you see good results or make good revenue in the next six months, expanding your business can be a good decision.
The first thing you need to decide when you are starting a restaurant business is the location or the storefront of your restaurant. Your expense will vary depending on whether you want to own a place or rent. Secondly, you have to make sure electricity, water, and gas are working. Thirdly you need to renovate the restaurant. Fourthly comes the furniture expense. Then adds up the kitchen equipment cost, food expense, and most importantly employee expenses. Moreover, you can’t ignore technology and marketing costs.
Let's calculate how much does it take to open a small restaurant and make a budget before you open your most awaited restaurant.
The first step of opening your restaurant is to choose a storefront for your restaurant. And choosing a location is very important. You have to choose a location wisely because it will determine your future success or failure. The main thing you should look for when you are choosing a location for your restaurant is popularity. You should choose a location where many people visit. This will help you get many customers. Another important thing to look for when choosing a location is you should not choose a place beside some famous eatery. If you chose a location where one or more than one popular restaurant exists then customers will more likely visit famous restaurants and not yours. Consequently, you might have to shut down your restaurant for not getting any customers or few customers.
The expense of location mainly depends on two factors. They are renting or buying. Firstly if you want to rent a place you might need to spend less. Secondly, if you chose to own a place you have to spend a lot more than renting. But if you want to buy land and build a restaurant then the expense will be even higher than buying an already-built place. Another factor that can cause the expense of the restaurant location to fluctuate is the area. Some areas have higher land or house prices as well as higher rents. Some areas are the opposite. So you should wisely choose a location. For a startup business, it is wise to choose a location where rent or real estate price is less. But also you need to choose a location for your restaurant where there are more people. Otherwise, you might not get many customers which will affect your business. Choosing a location can be very tricky.
You might need to spend 40k to 150k dollars annually for the location of an average restaurant which means you have to pay almost 150 to 160 dollars per square foot if you chose to rent a place for your restaurant. And you have to pay almost 170 to 180 dollars per square foot if chose to buy a place for your restaurant. You might have to pay 10 to 30 percent downpayment when you select the option of buying a place for your restaurant. So considering all these factors you might need to spend almost 30K to 90k dollars annually for a small restaurant based on area-wise buying or renting expenses.
The second expense of comes to mind when you are trying to figure out how much does it take to open a small restaurant is utilities cost. Utilities like electricity, water, gas, internet, etc should be working before your restaurant’s grand opening. Utility cost is not a one-time cost but a recurring or ongoing cost of your restaurant. It can cost almost 3 to 5 percent of the complete restaurant's functional cost which is almost 1.5k to 2.5k dollars every month.
But a small restaurant needs less energy or electricity for lighting the whole restaurant. Also less gas and water for food preparation. As a result, the utility cost of a small restaurant can be a lot less than 1.5k a month.
The renovation cost is the third important thing when you are trying to figure out how much does it take to open a small restaurant. You need to do exterior and interior design before you start your restaurant business. A good exterior and interior design can help you stand out from the crowd in the most competitive industry of the restaurant business and attract customers at the same time.
People might visit restaurants for food but also seeks a comfortable and relaxing atmosphere. In order to create a comfortable and relaxing atmosphere inside and eye catchy and unique design outside an average restaurant spends 5k to 8k dollars. But a small restaurant's interior and exterior decoration can cost a lot less which is almost 2k to 4k dollars. It is a one-time investment and it is obviously worth it.
Furniture is the fourth thing to consider when you are trying to figure out how much does it take to open a small restaurant. Furniture like indoor and outdoor seating, tables, chairs, sofas, bookshelves, payment counters, etc are required for good decoration as well as to create an amicable atmosphere. You also need other stuff like table cloths, vases, pillows and cushions for sofas, books for book selves, aquariums, lamps, paintings, curtains, etc for decoration. Also if you want to make a small kid corner for kids then you might have to add the expense of toys. All these things can cost a good amount of money. The amount of money can fluctuate depending on the quality and also quantity.
The average cost of furniture for a restaurant is almost 80k dollars. But it can be a lot less for a small restaurant which can be as less as 20k dollars at least.
The kitchen equipment is on the fifth position of the list of marking budgets before opening a restaurant business. If you are trying to figure out how much does it take to open a small restaurant, you must add kitchen equipment to the budget list. Kitchen equipment is one of the must-haves for the restaurant business. Otherwise, it is impossible to smoothly maintain the daily tasks of a restaurant.
Kitchen equipment like kitchen cabinet, shelves, kitchen counter, sink, chimney, ventilation, dish wash, oven, stove, pans, pots, spoons, forks, spatulas, different types of knives, cutting boards, mixers, beaters, blenders, coffee makers, cups, plates, mugs, jugs, water pitchers, freezers, trays, etc requires a large amount of capital to purchase.
Kitchen equipment or essentials can cost almost 40k to 200k dollars in an average restaurant. But if you want to open a small restaurant with a small menu you can bring the cost down to 20k to 40k dollars.
Food is the most important aspect when you are trying to figure out how much does it take to open a small restaurant. As restaurant business is mainly based on selling amazing and delicious cooked food. But also food safety is important, especially for the restaurant business. Food cost includes raw food materials like raw fish, meat, poultry and dairy, vegetables, fruits, etc, and other also other food ingredients like spices and many more. At the same time maintaining food safety to avoid any unexpected occurrence like food poisoning is also important.
Food cost mainly depends on the type of food and beverage sold in a particular restaurant. Still, an average restaurant spends about 28 percent to 40 percent of their total cost every month which can be more than 30k dollars every month. But a small restaurant with a small menu of limited food items can cost as leet as 5k dollars per month.
The restaurant business is all about preparing and selling food. And in order to prepare delicious and quality food you need to hire a qualified chef and to properly host, manage and serve customers you need a group of experienced waiters. Also, you need an accountant to manage your restaurant’s finance. Moreover, you need a restaurant manager to manage the whole process of the restaurant effectively. So when you are trying to figure out how much does it take to open a small restaurant, you must add the employee cost. Because obviously, you can’t run a restaurant by yourself whether it is a small restaurant or a big one. You need a team of experienced, qualified and responsible staff to run your restaurant business accurately.
Employee cost is an ongoing or recurring monthly cost. But employee cost does not only stops on monthly employee salary. But it also adds up with employee hiring costs, employee uniform costs, and most importantly restaurant staff training expenses especially when you are starting a new restaurant.
Employee expenses can range up to 30 percent of the total restaurant’s operational cost on an average restaurant which is almost 65k dollars a month. A small restaurant requires less staff so the cost of labor can be a lot less than an average restaurant but still can be almost 20k a month.
Nowadays everything is technology based and almost every type of business adapts technology and upgrades its technologies over time. Unlike any other business restaurant industry also uses technology in its business to automate its daily operations. So when you are trying to sum up how much does it take to open a small restaurant, you should add technology expense to the list. A restaurant management system is required to properly handle the daily operations of a restaurant effectively. Also, you need a reservation system so that your customers can reserve a table for them without any hassle. In present times people place online orders more and prefer to get home delivery services over dine-in services. So you can’t avoid purchasing an online ordering system that will increase your sale and help you make more revenue. Moreover, you need an inventory management system to accurately maintain your pantry and reduce food waste.
But if you don’t want all these fancy systems then at least you need a simple POS system to run your restaurant business properly. But technology cost doesn’t only end on purchasing a POS or restaurant management system. But it also includes device costs like a display menu, cash drawer, card payment system, kitchen display system, receipt printer, barcode scanner, etc.
An average restaurant spends almost 800 to 1k dollars on its technology sector. As a small restaurant owner, you might need to spend at least 150 to 250 dollars for a simple POS system.
Marketing is very important for every business as no business can exist in the market for a long time without marketing. So when you are trying to find out how much does it take to open a small restaurant, you should add your marketing expense to the list. You can reach out to a marketing agency to help you reach more people by advertising your restaurant in several sectors. You can also market your own restaurant with the help of social media. You can also create a website for your restaurant for promotional purposes.
An average restaurant spends almost 35k dollars on marketing. As a small restaurant owner, you can start marketing by spending as less as 100 dollars. But marketing cost doesn’t depend on the size of a restaurant but the type of marketing campaign or strategy.
Determine how much money you want to pay and where you prefer spending it in each aspect of your business before deciding to create a small restaurant. Having a strategy and business plan in place gives you a stable base and may help guide each choice you make during the opening process, whether you wind up investing more or less than this original budget or not. Hope this article helped you determine how much does it take to open a small restaurant and create a budget for your small restaurant.