Starting a restaurant can feel like taking a leap of faith, especially when it comes to the money you’re investing. Fortunately, having the right financial knowledge can make the process a lot less stressful. By making sure you have a good sense of the costs involved, you can pave the way for a more accurate budget—and increase your chances of success.
If you’re planning to open a restaurant, here are some of the major expenses you’ll encounter…
Rent & Utilities
In the restaurant business, rents can vary greatly. The average in Canada sits at around the $6000 mark. Of course, the same space is going to come with a very different price tag depending on whether it’s in Toronto or Waterloo. Even from one neighbourhood to the next, the difference is often staggering.
Utilities are another major ongoing expense, one that can cost well over $2000. Remember that it’s not just light and central air you’ll be paying for—you also need to cover the power for all of your kitchen equipment.
Renovations and decor
Before you open your doors, you’ll almost certainly want to modify and redecorate your space. The cost for these updates will depend on a few factors. If you’re undertaking renovations, how extensive will they be? How many square feet is your space, and what style of eatery are you opting for?
The truth is, you could easily spend $50,000 on tables and chairs alone. If you need new lighting, you could be looking at over $100,000. That’s why finding a designer and contractor who can work with your budget is key.
Equipment and supplies
This one is easy to underestimate. Before your kitchen gets cooking, you’ll need to make sure it’s fitted to do the job. From ovens and grills to fridges and freezers, a lot of the equipment is obvious. Just make sure you don’t forget about other necessities, like prep tables, storage, and heat lamps.
The cost of equipment and supplies could exceed $100,000, depending on what you need. In other words, budget wisely!
Insurance, permits, and licenses
When you’re opening an eatery, due diligence is crucial. Part of taking precautions is getting insurance—and knowing how much that’s going to cost you. From general liability to coverage for issues related to serving liquor and worker’s compensation, you’ll likely pay thousands annually.
Then there are permits and licenses. They can vary from one city to the next, so do your homework. No matter what, you’ll need a business license. Applying costs about $500, and renewals are about $300.00 each year. If you opt to serve liquor, the license will be between $925 and $1,005 for two years.
Recruiting, staff, and wages
Labour costs are one of the biggest expenses a restauranteur has to contend with. Conventional wisdom says you should try to keep them within 20 and 30 per cent of your total revenue. In an industry where turnover is often high, that can be a tall order.
The key is recruiting the right people. Once you understand how much it costs to train a new employee, you’ll want to ensure that the hiring process is done with care!
Marketing
Marketing your restaurant is essential. Many experts recommend allotting around 5 per cent of your projected sales to the task.
One of the most important steps is building a website, which can cost you anywhere from a few hundred to a few thousand dollars. Be aware that you often get what you pay for!
From there, you’ll need to decide whether to use traditional or digital marketing methods—or a combination of the two. If you’re on a tight budget, keep in mind that social media is an inexpensive way to get the word out.
The financial side of starting a restaurant can seem pretty daunting. The good news is, by performing research, doing the math, and shopping around for what you need, you can get a handle on your spending—and pave the way to a successful launch!
Ready to lease the ideal restaurant space? Reach out to learn how I can help you navigate the process!
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