Starting a new restaurant is the dream of many entrepreneurs, but the reality is, it's truly very difficult for an unsavvy or inexperienced restaurateur to be profitable. Many new restaurants are not profitable for several months or years after they open, and of course some restaurants never see a profit before closing. How long it takes to make money with a newly opened restaurant depends on many factors.
As a general rule of thumb, many new businesses do not start to turn a profit until their second year of operation. This is due to the fact that many expenses are incurred during the start-up phase of the business. A new restaurant has to pay for the cost of setting up a location, advertising, buying food and purchasing equipment for the first time. Depending on how well a business does, it can take some time to recoup these costs.
Although you may be interested in how long it will take to make a new restaurant profitable, there are no guarantees that it will ever be profitable. In fact, many businesses are not ever profitable and end up going out of business within a very short period of time. As many as half of all new businesses do not stay open for more than three years, and 70 percent of new businesses will be out of business after five years.
Monthly Operating Expenses
To determine how long it will be before you are profitable, you can look at your monthly operating expenses and then see how many customers it would take to break even. To figure this out, total up your fixed operating costs like rent, utilities and insurance. Then multiply this number by 2.4 to come up with an estimate for how much your costs will be each month. You can then divide this number by the size of your average ticket to see how many customers you need to get in the door to break even.
When starting a new restaurant, it is important to have some cash reserves so that you can cover any losses that you experience. It often takes time to develop a regular client base that you can count on to pay the bills. Every restaurant is different, and you have to look at factors such as the location, the type of menu you offer and the prices that you charge. The right mix of factors could lead you to being profitable in a few months. Some restaurants take multiple years to get to profitability.
Luke Arthur has been writing professionally since 2004 on a number of different subjects. In addition to writing informative articles, he published a book, "Modern Day Parables," in 2008. Arthur holds a Bachelor of Science in business from Missouri State University.