The price tag for starting a full-service restaurant can start in the low hundreds of thousands of dollars or cost more than $1 million, depending on where you choose to locate, what building option you select and your outfitting costs. If you’re creative in your business planning, you can launch a local eatery for less than six figures, but this most likely will require leasing a defunct restaurant and working with the owner to provide you with financing.
You have two choices for choosing where you want to locate. You can buy an empty space and turn it into a restaurant, or you can buy or lease a fully outfitted restaurant space, taking over the property of an eatery that has gone out of business. The former gives you more control over your location and how you want your restaurant laid out. The latter lets you launch more quickly and reduce your start-up costs. According to Inc., restaurateur John Kunkel, owner of the Florida Lime restaurant chain, estimates the cost of renting or leasing a new restaurant space at $22,250 to $26,250 for the first month. That includes a $10,000 to $12,000 security deposit you won’t have in subsequent months. If you’re building the space from scratch, add another approximately $250,000 to $350,000, he says.
Outfitting a restaurant can include the following major costs: remodeling, kitchen equipment, point-of-sale computers, furniture, dishes, flatware, linens and table settings. Kunkel estimates these costs to be approximately $120,000. In addition, you’ll have the costs of maintenance and office equipment. If you lease a space that’s fully equipped, you won’t have outfitting costs, but will pay a higher monthly rent than if you take on a bare building. If you can find a cheap enough empty space and need limited kitchen and dining-room equipment, you might be better off outfitting your restaurant. Contact local restaurant supply companies in your area and check Craigslist to determine what your outfitting costs might be.
Once you’ve launched, you’ll have to pay for food supplies each month. Contact local suppliers who can help you estimate your monthly food costs. You also will need to pay common business expenses, such as marketing, labor, insurance, bookkeeping, phones and taxes. These costs will depend on what local vendors charge in your area and what the going rate for cooks, dishwashers, servers and bartenders are. Labor costs vary tremendously from one part of the country to another. Keep a close eye on these costs and calculate them to the best of your ability well before you launch. Many restaurants set their menu prices by using a formula that takes into account overhead expenses and food costs as specific percentages of each meal served.
If you don’t have hundreds of thousands of dollars to launch a new restaurant, your best bet might be to find a defunct restaurant and approach the owner, which could be a bank, to discuss leasing the business. You’ll have no build-out or furnishing costs and can plan your budget based on overhead, food and labor expenses. According to Forbes, restaurateur Chris DuPont was able to launch his Birmingham, Alabama, Tau Poco restaurant in 2013 for approximately $13,000, leasing a defunct restaurant space for $1,000 per month and making interior upgrades himself.
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