How Much Money Do I Need to Start a Restaurant?

Running a successful restaurant can be a richly rewarding experience, but at the start, it can be a very expensive endeavor. Opening a restaurant is a risky proposition, and it requires a large initial investment on your part. Estimating start-up costs accurately is critical so that you can secure the right amount of funding.

No Land Purchase

One way to start a restaurant involves not purchasing any real estate but instead leasing a building, which can save a substantial amount of money. According to a survey by RestaurantOwner.com, the average start-up costs for a restaurant owner that didn't buy land was $451,966. The upper quarter of survey respondents had start-up costs average about $550,000, while the lower quarter averaged at $125,000.

Land Purchase

Starting a restaurant requires hefty capital reserves. If you choose to buy a property, expect a significant amount of money added to your start-up costs. Typically, you have to invest in prime commercial real estate to open a successful restaurant. According to the same survey by RestaurantOwner.com, the average start-up costs for restaurant owners who bought their own land was $700,866. The upper quarter of the survey spent about $850,000 while the lower quarter spent about $175,000.

Type of Restaurant

The type of restaurant you open also will determine your costs. An upscale restaurant that serves gourmet food will cost more to start than a small cafe because of the pricier ingredients and higher labor costs associated with skilled waitstaff and chefs. You could try to save on the initial costs of any type of restaurant by purchasing less expensive furnishings. However, the look of your establishment plays as much a part in attracting clientele as the quality of your food.

Reserves

Besides the initial costs of starting up a restaurant, you should also take into consideration how much you need for reserves. Having somewhere between 6 and 12 months of expenses in savings would be advisable in this industry. You never know how long it will take before your restaurant becomes profitable. In some cases, it can take several months before you develop a customer base that will come back on a regular basis.

Advertising

Advertising your new restaurant can be expensive, but it's necessary to let potential customers know that you're open for business. Reach a broad audience with ads in newspapers and on the radio. If you're a more upscale restaurant, consider running a commercial on TV. Create a website with links to your restaurant's social-networking accounts, which eventually can lower your advertising budget as social-networking sites typically are free. Other advertising ideas include passing out fliers and issuing coupons.

References

About the Author

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.