How Much Does It Take to Open a Small Restaurant

Just making a budget for starting a restaurant business requires research and calculation. If you want to open a small restaurant then how much does it take to open a small restaurant. In the United States, the average small restaurant opening cost ranges between $175,000 and $375,000. In the UK a small restaurant opening cost ranges from £150,000 and over £1 million. 

It is noted that restaurant start-up cost relies on location, restaurant size, number of food items, restaurant furnitures, etc. Indeed, small restaurants require less budget but $175,000 is not a cheap amount. So, budget or finance plays an essential role in beginning and continuing a restaurant business.    

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.

How Much Does It Take to Open a Small Restaurant

A restaurant expense depends on Fixed expenses (Rent, Insurance,  Internet service, employee salary, etc.) Variable expenses (utility bill, labour cost, food cost, etc.). 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 restaurant startup cost. If you see good results or make good revenue in the next six months, expanding your business can be a good decision.   

However, let's calculate how much it takes to open a small restaurant and make a budget before you open your most awaited restaurant.

1. Restaurant Location Cost

The first step of opening your restaurant is to choose the best location for your restaurant. Location determines your future success or failure. You should choose a location where many people visit. That will assist you to get many customers. Another important thing is never 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.

However, the expense of location mainly depends on two factors: renting & buying. 

1.1 How Much is the Location Cost?

Restaurant location cost depends on area, restaurant space, building type, etc. In the USA, restaurant location average cost is around $100 to $800 per square foot.  

• Maitland Florida restaurant leasing costs around $1,000 - $65,976/ SF for 2 to 10 years in the USA.
• Atlanta Georgia (GA) a commercial restaurant kitchen location costs around $18.07 SF / month (it is the best for (a ghost kitchen, or cloud kitchen).
• In Hollywood Blvd Los Angeles, California (CA), the location costs around $3.50 - $4.25 SF / month.
• In New York, the restaurant location costs around $230 SF / year.

Look at the above section. This amount fluctuates depending on location. Fixd your budget relying on your location. So you should wisely choose a location. So considering all these factors you might need to spend almost 30K to 90k USD annually for a small restaurant based on area-wise buying or renting expenses. 

1.2 How to Choose Cheap Restaurant Areas?

Choosing a location is very tricky. For a startup business, it is wise to choose a location where rent or real estate price is less. In that case, focus on a few strategies such as 

• Choose your food items and find a low rent but high crowd area.
• Research and get ideas from competitors.
• Find location from goodish steps from a city or town.  
• Avoid where available restaurants and competitive areas.

So, focus on the above things to choose a cheap restaurant area. Remember one thing, your chosen location must be crowded because restaurant profit depends on mass people. 

2. Utility Cost

The second expense that comes to mind when you are trying to figure out how much does it take to open a small restaurant is utilities cost. Utility costs include electricity, water, gas, internet, and others. That should be working before your restaurant’s grand opening. 

To cover 4000 to 5000 square feet (SF) the average utility cost may be around 1,000 USD to 1,200 USD. 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 USD every month.

Indeed 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 USD in a month.

3. Restaurant Construction & Design Cost

Restaurant construction or renovation cost is the third important thing when you are trying to figure out how much does it take to open a small restaurant. Restaurant decoration and design is the most necessary part to increase a restaurant ambiance. A good exterior and interior design can help you stand out from the crowd in the most competitive industry of the restaurant business. 

However, a small commercial restaurant design average cost ranges from $85 to $500 per square feet and some where it may rise up to $100 to $800 per SF. This amount can be changed due to restaurant space, decoration ideas, and location as well. In most cases, a commercial small food serving restaurant and fast casual restaurant interior and exterior decoration can cost around 2k to 4k USD. It is noted that it is a one-time investment and it is obviously worth it. 

4. Furniture Pricing 

Furniture is the fourth thing to consider when you are trying to figure out how much it takes to open a small restaurant. Furniture is used in indoor and outdoor seating areas, tables, chairs, sofas, bookshelves, and others are required for good decoration as well as to create an amicable atmosphere. 

You also need other stuff like tablecloths, vases, pillows and cushions for sofas, lamps, curtains, etc. 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. However, they average restaurant furniture cost can ranges up to $20,000 to 80,000 USD

In most cases, the average cost of furniture for a restaurant is approximately 80k USD. It is noted that this pricing can fluctuate according to a restaurant space, furniture market price, country, etc. Indeed, for a small restaurant the furniture cost goes $20,000 (more or less).

5. Kitchen Equipment Price

Kitchen equipment is mostly necessary for a restaurant. You must add kitchen equipment to the budget list. However, Kitchen equipment includes kitchen cabinet, shelves, kitchen counter, sink, chimney, ventilation, dish washer, oven, stove, pans, pots, spoons, forks, spatulas. Therefore, different types of knives, cutting boards, mixers, beaters, blenders, coffee makers, cups, plates, mugs, jugs, water pitchers, freezers, trays, etc. 

Arranging those things requires a large amount of capital. A restaurant kitchen equipment cost relies on some crucial factors like energy efficiency, market price, size of the equipment, country, etc. An average cost can range from $40,000 to $150,000. This amount can vary for the small restaurants. 

6. Restaurant Ingredients or Food Cost 

The 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 perishable or raw food materials like raw fish, meat, poultry and dairy, vegetables, fruits, etc. Therefore, other food ingredients like spices and many more as well.  

Restaurant food cost depends on ingredients pricing, amount of required food on a daily basis, locations, ingredients purchasing ways, food cost, etc. The average food cost can range from $5,000 to $25,000. Ingredients cost is the major part of expense and 25 to 35% restaurant expense goes for that in every month. 

7. Restaurant Licenses & Permits Cost

Restaurant license is an authentic document that allows you to do business and serve food. Before starting a restaurant business ensure that you have a trade license, food safety license, and food serving license as well. This license is collected from the local government health department. 

However, as a restaurant owner, you may have a business insurance license. It will cover your unexpected business loss (robbery, stolen equipment, etc.). So, what would be the cost for those things? These vary depending on some crucial factors. However, Let’s see the approximate charge for a small restaurant in the USA.

• Business license cost: $50 to $250
• Food serving license: $100 to $1000
• Incorporation license fees: $50 to $300
• Insurance license Cost: $1000 to $10,000 

8. Restaurant Staff Expense

Restaurant staff expense is another big investment on the behalf of the restaurant owner. The restaurant business is all about preparing and selling food. In order to prepare delicious and quality food you need to hire a qualified restaurant chef and to properly host, manage and serve customers. You need a group of experienced waiters also . A restaurant owner needs an accountant to manage your restaurant’s finances as well. 

Moreover, restaurant manager is also needed 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. So, how much should a restaurant owner spend for restaurant staff? Depending on the employees, and restaurant activity, a small restaurant requires 

Employee expenses can range up to 30 percent of the total restaurant’s operational cost on an average restaurant which is almost $65k in 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 per month.

Employee cost is an ongoing or recurring monthly cost. But employee cost does not only stop on monthly employee salary. Rather 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.

9. Restaurant Management System Cost

Restaurant POS system cost ranges from $59 to $800. POS system price becomes higher due to features, softness, security, smooth operation, branding, company policy, etc. Nowadays everything is technology based and almost every type of business adapts technology and upgrades its technologies over time. 

Unlike any other business, the 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 sales 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. 

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.    

10. Marketing Budget

A restaurant marketing budget depends on the restaurant owner, customer appearance in the restaurant, advertising channel, etc. An average for a small restaurant advertising cost is estimated around 3 to 5% of the total monthly revenue.  

However, 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 $35000 dollars on marketing. As a small restaurant owner, you can start marketing by spending as little as 100 dollars. But marketing cost doesn’t depend on the size of a restaurant but the type of marketing campaign or strategy.  

Small Restaurant Opening Cost in the USA, UK, and UAE

Opening a restaurant is challenging because of many factors involved, such as location selection, market research, business planning, budgeting, etc. Indeed, restaurant business investment differs according to country, location, restaurant space, etc.

• A small restaurant opening in the USA is around $175,000 to $375,000 or more.
• In the UK, a small restaurant opening costs approximately £150,000 to £1 million.
• In the UAE a restaurant opening cost can range from AED 800,000 and 1,000,000.

It is noted that commercial restaurant opening costs and café or coffee shop opening costs are not the same. So, before opening a restaurant, research a market and fix your financial budget as well.

How Much to Rent Out a Restaurant?

Restaurant rent-out cost depends on location, restaurant space, building structure, etc. However, in the USA an average restaurant costs $3,000 to $10,000 per month. In the United Kingdom, you should pay £2,000 and £5,000 per month depending on a few factors.

Most Expensive Part of Owning a Restaurant

We have said several times business startup is not an easy task. As an entrepreneur, a business owner must go through a strategic way. There are many expensive things of owing the restaurant business such as

• Purchasing or leasing a building.
• Interior decoration.
• Restaurant equipment.
• Employee costs.
• Ingredient costs.

Final Thought 

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.

Disclaimer: We have given an estimation of restaurant opening costs in different countries. This cost can be different or varies with the situation, market trend, location cost, and equipment cost as well. In that case, Restorapos will never be responsible for those things.