http://www.thelagoodtimes.com/commercial-dough/
Cost of Opening a Restaurant by Blake
Many people dream of opening a restaurant of their own. Unfortunately not many people understand the large cost associated to do so. I have read several articles about costs of opening restaurants online and none of them seem to be accurate. I have been involved in the restaurant equipment industry for over 20 years. I have seen thousands of restaurants come and go and I have constructed and supplied over 10,000 restaurant on my own. Hopefully I can help you understand what costs are truly associated in opening your very own restaurant.
Obviously not every restaurant is the same. I have designed some of the highest end restaurants in the nation and some of the cheapest ma and pa restaurants in the nation also. The price difference between these two is quite significant. Understand that not every situation is the same when reading this article and depending on your location you may be looking at much higher cost. The costs associated below are not put together to scare you out of starting up a restaurant they are just to inform you of the costs associated in doing so. Some prices may be slightly over stated depending on what type of restaurant you want to open.
Your concept.
A lot of people already know what style of restaurant they want to open and what type of food they want to serve. Putting together a restaurant menu is surprisingly a lot more work than you would think. Just because you know what type of food you are going to serve doesn’t mean that you aren’t going to have costs associated with printing menus, testing items on the menus, getting drug facts on cretin items, or even bringing in chefs to prepare a complete or partial menu for your restaurant. These costs can vary significantly so I can’t really help you here. Just make sure you have the extra cash to get through this whole process.
Finding a Location
Finding the perfect location is tough. There is so much that needs to go in to finding the perfect spot. A lot of restauranteurs believe that their great food or excellent service will bring customers to their location even if it is not in the best place or building, but this is completely wrong. You have to get customers in your doors and trying your food before they realize they like your restaurant. The more you spend on your location the better your chances are of making it. Studies show that around 50% of restaurants fail within 3 years. Location has a huge role in this massive failure percentage. For a good location expect to spend between $3,000-5,000 a month or at least $250,000 if you decide to buy the building.
Restaurant Equipment
Now this is where I can really help you. I have been a new and used restaurant equipment dealer for over 20 years. The first decision you have to make is if you want to buy new or used equipment. I generally suggest that if it is your first time building a restaurant, especially with such a high failure rate, you try to find equipment that is slightly used. You can save over 50% on equipment that has been taken off of a showroom floor if you decide to buy slightly used. The big expenses you are going to look at are what type of power you have to run into the building to power your equipment, a walk in cooler, then hoods and fire suppression. If you have to run three phase into a restaurant that only has single phase this may cost up to $7,000. A good sized walk in cooler/ freezer combo box new runs around $20,000 installed but you can find them used for closer to the $7,000 area with installation. Then hoods depending on how large of a hood you are looking at and if you need a makeup air system could run you between $10,000 and $30,000 new and $2,500 and $10,000 used.
Then you need to take into consideration your actual equipment. The average new restaurant we have supplied for standard equipment is around $40,000-60,000. But we have supplied restaurants that run as high as $150,000. Here is where you can save a ton of money by buying used. If you wanted to go with a slightly used package you could look at spending around $20,000-40,000. I have never build a restaurant using only used equipment where the customer has spend more than $50,000 on used equipment. Also remember custom stainless steel in your kitchen for corners, behind hoods, tables, and counters. Plan on spending around $2,000-10,000 here. And to think that other articles I have read believed that you could put a full restaurant together for $20,000 or less!!! If you want to find the best deals on new and used restaurant equipment be sure to check out the free classifieds at http://RestaurantEquipmentListings.com.
Build Out
Remember that you have to hire someone to come in and make your restaurant look like a restaurant too. Keep in mind that you have general contractors, plumbers, electricians, carpenters, and several other workers to hire. Plan on spending at least $4,000 for build out for your restaurant if it was perviously a restaurant and significantly more if it was not. Also keep in mind that you need to buy restaurant furniture like booths, tables, and chairs. Depending on how many you are looking at seating you should expect between $12,000-20,000 for new booths, tables, and chairs new. Used boots are significantly less expensive so if you wanted to take this route expect something closer to $5,000. Great general contractors, equipment dealers, technicians, and other restaurant service workers can be found on the free classifieds section on http://RestaurantEquipmentListings.com.
Advertising and Signage
You have to make sure people know you are out there. So how much should you expect to spend on your advertising and signage? Well advertising is completely up to the owner but I would spend at least $700 a month. This will get your name out so people at least know where to find you. But you need to look at an initial $3,500-10,000 on just signage and branding for your restaurant. You need signs that say your name everywhere you can get them. The more you spend here the better known your company is. TV and radio commercials always pay off!!!
Cost of food
Remember that you have to order food before you can ever make any money. There is a saying in this business that goes if its made out of dough you can make dough. This means that your margins are much greater when you make your own product from scratch. If you buy your food from venders like US Foodservice or Sysco you are going to have significantly smaller margins. I can’t help you here very much because the range of how much you are going to spend a month on food is so large. Expect at least $2,000 per month if you are buying your food form a food source.
Employees
Hiring employees is extremely expensive also. If you wanted to hire a 3 employee staff, this would be an extremely small restaurant, including the restaurant manager expect to spend around $5,000 a month on labor. The average restaurant requires quite a few more employees.
Total Costs
Expect to spend no less than $40,000 just to open your doors at a small time restaurant. That is assuming you get your equipment at a great price and rent your space. I have build restaurants where the budget was well over $1,000,000 with land and building though so keep in mind what type of restaurant you want to open and where the location will be also.
Hopefully the figures listed above don’t scare you out of opening your very own restaurant. Several personal friends of mine have opened restaurants and later sold the franchise for multi millions of dollars and a very close friend sold his concept just a few years ago with six restaurants for over $70,000,000. When you look at that these costs are quite small. I wish you luck in any business venture you plan on taking. Remember if you need to find restaurant equipment or restaurant services visit http://RestaurantEquipmentListings.com.
About the Author
Blake has been involved in the restaurant industry for over 20 years. He has seen restaurants come and go as times get better and worse. He has personally been involved in over 10,000 restaurants that have been constructed or needed equipment. Blake is also the owner of the restaurant equipment classifieds and services site http://RestaurantEquipmentListings.com.
Rejected commercial jingle “Cookie Dough”
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