restaurant startup costs

Getting your restaurant idea out of your dreams and into the real world is a challenging project, but it can also be incredibly rewarding. As with most big decisions in life, the question after “How do I open a restaurant?” is “how much does it cost to open a restaurant?"

There are a lot of startup costs to consider, and dozens of variables, which makes it a challenging question to answer. But in this guide, we'll review all of the restaurant startup costs you will need to prepare and budget for, and you can use our customizable restaurant opening calculator to find out the specifics for your business.

how much does it cost to open a restaurant?

The average total cost to open a restaurant will range from $95,000 to over $2 million. The total cost of opening a restaurant will depend on the cost of rent, furniture, construction costs and any permits required to operate a new restaurant business.

restaurant opening cost based on square footage

For the space alone, according to BudgetBranders.com, you can expect to pay around $178 per square foot if you buy your location; if you decide to lease your location instead, expect to pay around $159 per square foot – but this can vary widely depending on your location. Sage Accounting reports that restaurants can expect to pay between $2000 and $12000 a month on rent.

On average, the overall cost to open a restaurant — with all expenses accounted for — is between $100 and $800 per square foot, according to FreshBooks.com, with costs varying based on location, concept, size, materials, new or existing location, and equipment. That's a median cost of $450 per square foot. For a restaurant operating out of hundreds or even thousands of square feet, that number can add up quickly.

You might purchase a 1,500 square foot restaurant that’s going out of business with all furniture, fixtures, and equipment for $6,000, and then only put an additional $20,000 into it. Conversely, you could build a restaurant from the ground up and spend over $1,000,000 on a 5,000 square foot location. The cost to build a restaurant is going to be exponentially higher than finding an already established building.

Remember, these are just the average cost to open a restaurant – there are many variables involved, and these numbers can change from business to business. Keep in mind that it's wiser to use an equation – or a custom restaurant opening calculator – to figure out your anticipated costs based on your specific scenario and concept.

restaurant startup costs to expect

There are many variables involved in opening a restaurant — there is no one size fits all answer to how much you can expect to pay. But having a thorough understanding of the areas where you intend to spend your money will offer you more clarity on final expected costs.

Failing to plan properly is the best plan for failure. When starting out, you and your team should take the necessary time to plan your course — which includes knowing how you’ll pay for every aspect of starting your restaurant.

By nature, restaurants work on very small margins and have many moving parts, so if you start with a poorly designed layout, you may lose thousands in additional labor and lost customers. An uncomfortably seating area will discourage people from lingering and ordering a second drink. Spotty construction and poor equipment choices can cost you twice as much down the road.

Here are some of the biggest restaurant startup costs and restaurant expenses you can anticipate.

startup costs breakdown

Use this restaurant startup costs checklist to get you going as you begin budgeting for your new project.

Utilities

While you won’t be fully operational during your restaurant’s buildout, utilities such as gas, water, and electricity need to be. Restaurant utilities costs can add up quickly: for a restaurant of 4,000-4,500 square feet, expect to pay an average utility cost of between $1,000-$1,200 a month.

Price Range: $1,000-$1,200 minimum; allocate more if your restaurant is bigger than 4,000 square feet.

location

One of the most important decisions you’ll have to make when opening your restaurant will be its location.

Generally speaking, it's wise to spend the money on a better location that has good foot traffic, rather than have to rely solely on marketing to drive guests into your restaurant.

Depending on your concept, you might also be in a position to consider a few different options:

Building from the ground up and investing in new construction

Opening in an existing building and purchasing an operating restaurant

Converting an existing commercial space to a restaurant space

Each of these options have their pros and cons and will dramatically affect your upfront costs — there are no right or wrong answers here — but with diligent research, you can make an informed decision on which option is best for you.

Interior Finishes and Equipment

This is where all the little things start to add up.

You know that you need kitchen equipment and large kitchen appliances. Your restaurant will also need furniture and decor to bring your brand to life for your guests. And don't forget the back-end requirements like signage, lights, a music system, and a phone system.

It's easy to get carried away here, so careful budget planning is essential to controlling your opening costs. The biggest driver of the price range here is kitchen equipment and furniture, largely depending on the size of your kitchen and dining room, respectively.

Price Range: $20,000-$400,000

Pre-Opening Expenses

Everything needs to be ready to go the second you unlock the doors for your restaurant's grand opening.

You'll need to invest in a proper training program to ensure your staff is ready and efficient. You'll also need to have plenty of inventory ready in your back of house and freezer to get you through your opening period. This inventory includes food, plates, drinks, cups, water pitchers, and whatever items will help you create an exceptional guest experience.

Price Range: $20,000-$120,000

capital and contingency

Even if your restaurant becomes a hit, it will still take some time to get things up and running. You need to plan for gradual sales growth and realize that your customers will take a while to become regulars. Put aside some much-needed capital and contingency funding for your restaurant to get you through at least six months of unpredictable or low sales volume.

Price Range: $20,000-$250,000

exterior finishes

The restaurant shouldn't just look spectacular on the inside. If you have any control over the exterior of your building, you may want to make investments in outdoor design, lighting, and landscaping. And if you have an outdoor dining space, you’ll definitely want to make the most of it during patio season.

Even without control over the exterior, you’ll still need signs outside of your restaurant to let your new guests know that you're open for business.

Price Range: $1,000-$40,000

organizational and development costs

This is probably everyone's least favorite part of opening a restaurant, but it’s one of the most important. You'll definitely need to file and pay for your restaurant licenses and permits, make your insurance deposits, and make utility deposits for gas, electricity, and water.

This might take up time as much as it does money, so start brushing up on the necessary licenses and permits you’ll need to open your restaurant.

Price Range: $2,500-$200,000

professional costs

First-time restaurant owners likely shouldn't dive in without some helping hands. A restaurant consultant — not to mention expert advice from professionals like architects, lawyers, and designers — would be wise to invest in for a strong start and opening of your restaurant.

Price Range: $0- $50,000

technology

Your technology stack that will allow your restaurant to run smoothly. All restaurants need a restaurant point of sale system and — depending on your concept — you'll likely need other features and technologies to help your restaurant go off without a hitch.

Full service restaurants might want a handheld POS system to turn tables faster, and quick service restaurants might want a strong customer loyalty program. After 2020, it’s become clear that just about every restaurant could use a great online ordering system, and those looking to try a new service model are investing in Order & Pay at the Table technology.

food cost

As this is literally the bread and butter of your restaurant (pun intended), you’ll want to ensure that you have everything needed for a successful opening. Running short of food items — especially in the beginning — sets the wrong impression with guests. In addition, a well-stocked inventory guarantees that the back of the house has everything they need for seamless service. As with everything, the average food cost per month will vary, depending on the type of cuisine and menu offerings.

Price Range: $5,000-$25,000

licences and permits

The cost of a business license ranges from $75 to $7,000 or more, depending on your location and local requirements. The initial cost of a food-handling service license is around $100 to $1,000, and a liquor license costs around $300 to $14,000, depending on state regulations.

Get a Business License

Apply for EIN

Get a Certificate of Occupancy (COE)

Apply Food Service License

Obtain Food Handling Permit for the staff

Liquor License

assembling your startup dream team

We all know that restaurants tend to fail when they are underfunded. Undercapitalization will make an already challenging business more difficult to keep afloat. In order to avoid the pitfalls, you have work with professionals every step of the way.

Here is a list of trades and professionals that you should consult as you plan to open your restaurant:

Real estate agents

Attorneys

Accountants

General construction contractors

Marketing firms

Architects

Enlisting the help of professionals like the ones above will ensure that you’re doing things right. If possible, seek out professionals that have experience working specifically with restaurants.

restaurant startup costs videos

What Are Restaurant Startup Costs - How to Run a Restaurant Business

What are restaurant startup costs? A better question is what does every restaurant have to have in place before they can be truly successful? In this video, I cover the costs you must consider when starting up a restaurant.

How to Calculate Start-Up Costs | Restaurant Business

Let's talk about calculating the start-up costs of your restaurant. This is a place where you can not be too detailed. Everything is important. Even the box of pencils that you buy to do your staff training. Every little detailed cost will come into play, because unfortunately you won't get revenue until you open, and you're going to need to pay for all of those things without any income to offset them. And also, in the beginning of the life of a restaurant, it's rarely as busy as you want it to be, or as it will become.

One of the most significant start-up costs will be construction. Now if you're taking over an existing restaurant, your construction costs might not be too great. But if you're starting with a raw space, the engineering, the ventilation, the plumbing, all will add an extraordinary amount to your construction costs. And unfortunately, it's usually more than you want it to be.

19-Year-Old Chef Opened A NYC Restaurant With A $155 Tasting Menu

Flynn McGarry is the chef of Gem, a restaurant in Manhattan's Lower East Side. His $155 tasting menu is served in the style of a dinner party, hopefully making you feel like you're not at a restaurant at all. The young chef has been working full time in professional kitchens since he was 12.

in conclusion

Before making the big decision to open a restaurant, calculate how much capital you have to spend and how much you're willing to allocate to each area. For example, you might want to spend more on renovations than advertising.

Budget smart and try to be precise as possible. While you could end up spending way more or much less than you had planned, starting a restaurant with a reasonable, well-considered budget will better set you up for success.

If you’re looking into how to start a restaurant, you likely have many questions. Among the more urgent is cost. What are the restaurant startup costs and the expenses associated with being a new restaurant owner?

The answer isn’t straightforward and varies based on a number of factors, such as the restaurant type you want to open, where you want to operate, and how large a restaurant you are planning. Do you want in-restaurant dining or exclusively takeout and delivery services? Fast food or fine dining? Narrowing down these elements and understanding the expenses of opening and running a restaurant will help you navigate how to increase restaurant sales.

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