How Much Does It Cost to Start a Restaurant?

Here are some estimates and a startup costs checklist

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How Much Does It Cost to Start a Restaurant

The beauty of a restaurant business is like a dream for many.

The fast hustle and bustle of an established kitchen as wait staff fly in every which way in a fragile dance of hot plates, and hungry appetites stir the desire for an organized business.

But how much it costs to start a restaurant and making one hustle are two very different things.

Today we’ll take an in-depth look at how much it costs to start a restaurant, complete with the startup costs checklist. Let’s dive right in.

The costs to start a restaurant can vary extensively. The average price to start a restaurant ranges from just a few thousand dollars to millions of dollars with an average of $250,000. Factors such as location, location condition, size, and type of restaurant are all variable and can affect costs dramatically.  Keep reading for more details about restaurant startup costs…

Restaurant Startup Costs Checklist

Note: The following list is an estimation of costs. These costs will vary depending on several factors.

  1. Location Lease or Purchase – from $250,000 to $2,000,000 or more
  2. Building Renovations – from $10,000 – $1,000,000 or more
  3. Cooking Equipment (examples)
    1. Ovens – Pizza – from $300 to $90,000
    2. Ovens – Standard – from $400 to $10,000
    3. Cooking Surface – Ranges – from $1,500 to $15,000
    4. Cooking Surface – Griddles & Grill – from $1,000 to $8,000
    5. Deep Fryer – from $2,000 to $9,000
    6. Rotisserie Oven – from $2,500 to $7,500
    7. Dishwashers – from $1,000 to $7,000 
  4. Exhaust Equipment – from $1500 to $9,000
  5. Refrigeration Equipment – from $3,000 to $100,000
  6. Cash Register POS System – from $4,500 to $10,000
  7. Security System – from $2,500 to $5,500
  8. Tables & Chairs – from $5,000 to $25,000
  9. Interior Decoration – from $10,000 to $250,000
  10. Signage – from $2,000 to $40,000
  11. Marketing – from $5,000 to $20,000
  12. Licensing – from $2,000 to $5,000
  13. Food / Product – from $5,000 to $20,000
  14. Dishes, Cutlery, Glasses from $5,000 to $40,000

>> How to Name Your Restaurant in 6 Easy Steps

Location Lease or Purchase

The building is going to be the most significant expense you have. Whether it’s owned or leased, one will likely have a hefty payment every month unless you own it outright. There are benefits to owning over leasing when it comes to a restaurant.

If a restaurant business has not previously occupied a building, there will be extensive renovations required. And depending upon the condition of the building, even if it was a restaurant formerly, it may need serious repair.

The restaurant’s desired size and design, as well as location, will determine the restaurant’s budgetary outcome. Some areas might be relatively inexpensive, while an equal size in a busy metropolis will cost multiple times more. And if it is a prime location, get the checkbook out.

The property and building should demand a large portion of your time researching the restaurant venture you want to establish.

According to Restaurant Engine, the median cost can be $3,734 per seat when calculating the value of having a restaurant and owning the building. So, if you intend to have a restaurant in a building owned by your company that seats 60 people would cost you an average of $224,040.

This number would be a lot higher in a good location, for example, on the main downtown street in a metropolis. 

Putting a number to this is sort of like shooting darts in the dark while blindfolded. And the target is moving silently in the distance. It will entirely depend upon the location and the state of said building.

>>Bakers check out my startup guides for your State:
How to Start a Profitable Baking Business in California
Texas Bakery Startup Guide

Building Renovations

As we were just discussing the building location and its condition, next, we will discuss renovations. Again, this is sort of a difficult task to attempt to answer without writing a book on the subject. However, we can throw some numbers around and see where we land, yes? Let’s begin with a building that had a restaurant previously.

In our example, we will assume that extraction equipment is installed, the kitchen needs a minor facelift, and the dining room needs to be renovated with a new interior look. But wait, there’s more!

>> How to Name Your Restaurant in 6 Easy Steps

There may or may not be washrooms adequate to meet local regulations and codes for the number of guests. One must also consider parking. A business must have a certain amount of parking spaces located close to the door and marked as handicapped parking.  

It may not be the case everywhere, but it shows that it is good to measure to research all the ins and outs of the location before you commit.

There will be water requirements as well. The water supply will need to meet specific standards, and hence there might be extensive plumbing renovations required.

If the existing space did not have a kitchen prior, you might need to install an extraction hood for deep fryers or a grill. Extraction hoods can cost tens of thousands of dollars when including installation, where one does not exist.

Building inspections can also cost extra unforeseen expenses. For example, if the renovations a building requires will need a permit, there are some requirements for permitting, which might be a surprise.

For example, many municipalities require that you have a copy of the deed and a copy of the survey for a building before being awarded a permit to do the necessary renovations.

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Land and building surveys can cost thousands of dollars extra to your renovation budget and delay the process for potential gravely long periods.

As you can see, there is much more to renovations than putting a single number to it. Plan for the worst-case scenario in terms of budget when it comes to repairs, and you’ll hopefully be just fine.  

To sum up, it is best to practice trust for a professional building inspector to check a building before you buy, or proceed with leasing and renovations.  

Cooking Equipment

Assuming you get the building figured out and renovations, one needs to determine the equipment required to have a functioning kitchen for the restaurant at peak capacity. One should never get stuff based on the median amount of cooking needed. That could be disastrous.

When it comes to which cooking equipment one will require, the determination will be by the type of restaurant you are in the process of starting. For example, a bakery-style restaurant will have a much different set of equipment than a shawarma and french fries fast-food restaurant.

The menu will determine the required equipment. However, one should also consider any type of menu expansion one will take within the first year or two. For example, it would be a shame to renovate the kitchen and not put in a fume hood when you plan to add deep fryers in a year.

A little planning is a good idea when it comes to the equipment required.

Because there is such a variety of different equipment for a kitchen, we’ve put together this list of some of the basics for a commercial restaurant kitchen.

The lower end price range is just above residential quality equipment (which is budget-used restaurant equipment). The higher range of pricing is for new, commercial-grade equipment.

Restaurant Equipment Examples:

As you may discern from the list, the cost of initial equipment can be relatively minimal for a small restaurant and quite extensive for a larger restaurant with a broad menu.

To sum up, the restaurant equipment can cost anywhere from $8,700 to $146,500 or more. And that is only assuming stuff from the essential list above. It does not include blenders, mixers, microwaves, steamers, or any other specialized kitchen equipment.

If much-specialized equipment is required, the cost can quickly get upwards of half a million dollars.

Exhaust Equipment

An essential consideration for having indoor commercial cooking equipment is what to do with all the heat, fumes, and exhaust in the case of gas-powered equipment. For example, a grill and deep fryer will quickly clear a restaurant of guests without a powerful exhaust system. Not to mention it would be breaking several laws, I’m sure.

The exhaust equipment can be a significant expense when setting up the kitchen. When the material is not in place, as in a building not used previously as a restaurant, the renovations to add an extensive exhaust system can pile on the costs.  

Just for the equipment, the costs can be from $1,500 to $9,000 for a 12’ fume hood. Add installation and shipping, and it can easily cost up to $15,000 or more.

Refrigeration Equipment

Obviously and essential to any restaurant, is a refrigerator and freezer. These can be smaller, like a reach-in style model or walk-in, which can cost more than $10,000, not including installation. 

Reach-In Refrigerators – $3,000 – $10,000

Walk-In Refrigerators -$10,000 – $100,000

Walk-in refrigerators will require extensive renovations for installation if one does not exist in the building. These units are not cheap by any means. But medium to large-sized restaurants require the space to store the amount of food needed to be successful.

Cash Register POS System

The cash system in a restaurant should be one that is quick and easy to use. The last thing you want in a dinner rush is a crashed or slow POS system. Your serving staff needs to be able to punch in orders fast and on the fly.  

The POS system for a restaurant can be relatively inexpensive at only a few thousand dollars for a smaller establishment. But, in a larger dining restaurant, the POS may cost as much as $4,500 per terminal.

If you have two terminals, one in a bar and one in the dining area, add a few portable card readers for your wait staff, and you could quickly be spending over $10,000 for your POS. 

Security System

Restaurants are known for exchanging a large number of transactions at mealtimes when it is busy. With that in mind, some criminals think that restaurants would be accessible cash grab opportunities. Then there are the issues of theft and’ dash and run’ type of situations.

Having some security cameras and a security system is just smart business. It is also a point of strength to defend you against unlawful opportunists. And good security might even get you an insurance discount.

A primary commercial system could cost you as little as $1,000 installed. A more sophisticated system with multiple cameras inside and out might run you as much as $8,000. The number of exterior and interior cameras, quality, features, sensors, and more variables determine the required security’s overall price.

Tables & Chairs

The capacity will determine how many tables and chairs you need. Will your restaurant use booths? How about a bar within the restaurant? One would require bar stools in this case.

The capacity plays into the number of tables, chairs, bar stools, and or booths required, but the style and type you choose will also play a significant factor in determining the cost.

Many restaurant chairs go for between $70 and $200 per chair. The tables typically run between $200 and $1,000 depending on quality and type.

Bar stools are similar in price to chairs. The booths are a bit more expensive and usually come in the same range as tables, from $200 to $1000.

So, how many of each do you need? Let’s do an example together. We’re going to determine how much for a 56 person seating area that uses four booths and eight barstools with the rest of the seating tables and chairs.

In this scenario, the restaurant would need the following: 

8 x booth benches

4 x booth tables

8 x regular tables

32 x regular chairs

8 x bar stools

If the benches are $450 each, the booth tables $250each, the regular type of tables $250 each, the chairs $150 each, and the bar stools also $150 each; then, we have a total of $12,600 in furniture alone for this modest establishment.

Interior Decoration

The interior decoration can inspire your clients to relax, and that goes for their wallets as well. A lot of big restaurants know this and take full advantage. Ask yourself if you’ve ever been somewhere with a great interior and whether you want to go back. The fact that you remember any restaurant due to its memorable interior proves that the concept works.

However, interior decoration can be a bit of a rabbit hole when it comes to budget. Style can cost much money and may not prove to provide an adequate function.

The interior decoration is entirely up to you unless you are buying into a franchise restaurant chain, in which case you won’t choose. In this instance, the larger corporate parent company would dictate to you as a franchise owner, what colors, types of furniture, and other design concepts are required that you must provide.  

For a new restaurant, the interior decoration could be as little as $1,000 for a few framed images splashed about a newly painted dining room and some unique vintage rugs or as much as millions for a gold-laced interior splashed with diamonds and a fine antique floor centerpiece. The point is that the price depends on the choice of interior decoration and is thus subjective.

Signage

Signage may be slightly related to decoration, but it is more of a media and location announcement. The sign says to the world, “Hey, this is my business, here I am.” The sign draws in people’ off the street’. The sign lets people looking for your physical business find it easier when transporting themselves to your restaurant. After all, you need customers to find you easily.

A well-lit sign will likely cost you between $2,000 and $40,000. A large, stand-alone lit sign like that on a big box restaurant that is a sign 40 feet tall sign that you can see for blocks is going to cost a pretty penny. Everyone will know where the business is, so a sign is an excellent investment for a restaurant. Never underestimate the power of the sign.

Marketing

Marketing will be slightly subjective as there is no set rule for how much one should spend. But consider that you will need to do a restaurant media launch. It is typical of new restaurants, where one invites media, local celebrities, and even pays event staff to take part as pretend guests. The food will be all free, and typically there is some sort of open bar included.  

 As these media launches can quickly run into the tens of thousands of dollars, consider the extent that you will go to for your restaurant launch and factor in at least $5,000 to $20,000. A successful launch can get you some pretty serious media exposure and keep your tables for full weeks.  

Licensing

Licensing will cost at least $2,000 to $5,000. It will include incorporating your business (a must due to liability) and paying for health inspections to get your license to operate a restaurant.  

If you are selling alcohol on-premises, another license will likely be required as well. Check with your local authorities or your secretary of state for the requirements where you want to open up your restaurant.

Food / Product

Food and products are a tricky topic to put a number towards when budgeting. It will ultimately depend upon your menu and offerings, as well as your seating capacity.

Many new restaurateurs struggle with the dilemma of how much food to store on hand. Unless one has spent years in a kitchen, it’s tough to gauge. But, you can do some simple estimations to figure this out.

A great way to start with a new restaurant is to make your menu simple. Only offer a few types of meat and a few sides of each type. Consider if you had to feed your full capacity, and they had a choice about what to eat.  

In other words, if you have 50 people and everyone chooses chicken, you need 50 portions. But that’s only one seating. Now, consider the number of times you can flip a table over dinner. Say 4-5 times over the same amount of hours. So now you need enough chicken to feed 250 people. See where we’re going with the math?  

Do this sort of scenario for each type of offering on your menu, and you should be able to estimate how much you need to start roughly. Remember, better to have a bit more than you need than to run out.

For a small restaurant, it would be wise to budget at least $5,000 in food to get things started, but it is subjective, and based on your menu and capacity.

Dishes, Cutlery, Glasses

It’s a restaurant. People need plates to eat on, glasses to drink from, and cutlery to boot. It could run you from $5,000 to $40,000 or more. If you have a large dining room and a bar, expect this number to be significantly higher.

This category might also include your linens such as napkins, serviettes, and tablecloths.

Other Necessities

There are a dozen other items you could consider for a restaurant. Things like sound systems in case you want music to play in the dining room, or perhaps you want a live entertainment night. Other things may include unusual lighting for a dancefloor area if you’re going to host events in your restaurant. 

Be sure to read my guide on how to calculate startup costs for your business here

Sources

  1. https://www.rewardsnetwork.com/blog/how-much-does-it-cost-to-start-a-restaurant/
  2. https://restaurantengine.com/startup-restaurants-typically-overspend/#:~:text=Average%20restaurant%20startup%20costs%20vary,%24425%2C000%20or%20%243%2C734%20per%20seat.
  3. https://www.lightspeedhq.com/
  4. https://www.shopkeep.com/blog/restaurant-startup-costs-breakdown#step-1
  5. https://www.entrepreneur.com/article/73384
  6. https://www.webstaurantstore.com/article/40/how-to-start-a-restaurant.html
  7. https://www.sage.com/en-us/accounting-software/startup-costs/restaurant/
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