How Much Does it Cost to Open a Restaurant?

Startup costs for a new restaurant typically range from $95,000 to more than $2 million. The actual amount it costs to open a restaurant depends on factors like rent, furniture choices, and renovation goals. Typical expenses include one-time purchases like furniture and equipment alongside recurring payments like rent and utility bills.

Lack of capital is one of the primary reasons restaurants close, so it is crucial to ensure you have a realistic picture of your costs before opening your restaurant. Here’s a downloadable template that lists all the common expenses a new restaurant owner might expect, so you’ll know exactly how much money you need.

New Restaurant Budget Template

The estimates below can help you ballpark your opening costs. We based these estimates on data compiled from groups like the National Restaurant Association and price comparisons from several suppliers and service providers. Your actual costs will vary depending on your location and restaurant type.

Professional Services

Operating a business, especially one as complex as a restaurant, has a lot of moving pieces. You will need various professionals to help you along the way. You’ll need a business attorney to advise you on your business structure and prepare documents to establish your business entity. An accountant will assist you with your business plan financial projections and help track expenses. If you have renovation or construction plans, you will need a general contractor and possibly an architect.

Professional Service Estimated Costs

Business Attorney

It is imperative to have a business attorney on hand to advise you on selecting the appropriate business structure and filing the necessary paperwork. Your business attorney will also review lease contracts and draft agreements with your investors. They will also advise and assist on other legal issues like obtaining licenses and drafting agreements between your business and potential investors.

A business attorney usually charges between $150 to $325 per hour. Their rates typically vary depending on the attorney’s qualifications and experience. Most new restaurant owners will spend $500 to $5000 in attorney’s fees. You should budget on the higher end if you have several investors or a plan for a complex restaurant operation.

Legal services are not the ideal place to scrimp. If you are hoping to save money, you can take care of some preliminary items like filing incorporation paperwork yourself via a legal site like RocketLawyer. Sites like these are also useful for finding an attorney in your area.

Accountant

An accountant is one of the most critical people you’ll work with as you prepare to open your restaurant. Accountants can provide services that range from preparing tax returns, to setting up payroll processes and figuring metrics for your business plan. When you begin the search for the right accountant, consider what you can do yourself versus what services you need.

You should expect to spend $30 to $300 per hour for an accountant. Like attorneys, accountant’s rates vary depending on their experience and qualifications. For example, if you have a small staff, you may be able to handle weekly payroll and daily bookkeeping yourself. The more work you can perform yourself, the less you will pay an accountant.

An accountant can help guide you through business projections.
(Photo by Scott Graham on Unsplash)

Architect

If you are renovating a space to convert it to a restaurant, you will need an architect. Architects specialize in broad structural design like placing columns, beams, and staircases that keep your building sound. They do not handle smaller details like color schemes or lighting plans. An architect only handles the actual structural designs; they do not supervise construction teams. For that, you will need a general contractor.

An architect generally charges between $80 to $150 per hour. Your total costs, however, will vary depending on the scope of work you require. Total fees for a new restaurant typically range between $4,000 to $15,000.

General Contractor

A general contractor organizes the various teams of carpenters, electricians, plumbers, and ventilation technicians that may be required to build or renovate your restaurant space. A general contractor will also typically handle the building permits and ensure that your restaurant is up to local building codes.

Some general contractors charge a flat fee, though most charge a percentage of the completed project’s overall cost. This is usually 10% to 20%, including the cost of materials, labor, and permits. Rates will vary depending on the scope of work you require. Most new restaurants spend $150 to $750 per square foot on renovations. To determine your estimated contractor costs, apply these numbers to the square footage of your space, and allow 20% of the total.

Permit Expeditor

Restaurants require many permits, especially if you have ambitious construction plans. Some restaurants, especially those in large metropolitan locations like New York and Los Angeles, will employ a permit expeditor. An expeditor is usually a retired city inspector from the building or health departments. They know their way around the bureaucracy of obtaining permits and licenses. Some specialize in building permits or liquor licenses, but most will handle all of your permitting needs.

A permit expeditor is not always necessary; you can certainly file your permits without one. Expeditors just speed up the process. A good permit expediter will charge $35 to $70 per hour, depending on your market and your specific requirements. Some will alternatively charge a flat rate for a half or full day of work. They will usually also pass on their costs of copying documents and driving between city offices.

Graphic Designer

Graphic designers can create your restaurant logo, design your website, and even your menu layout. You can find a designer easily via freelancing sites like Fiverr or 99Designs. Costs for a graphic designer vary significantly depending on their level of expertise and the amount of work you need. You should plan for a budget between $500 and $5,000 for a new restaurant’s graphic design needs.

A graphic designer can design menus.
(Photo by Catherine Heath on Unsplash)

You can save money on a design by using a designer who is beginning their career. There are also a great number of design templates available for free on the internet that can give you an inexpensive place to start. Choosing either of these routes will likely take you more time, so if you are in a rush, it’s best to hire a professional.

Incorporation & Organization

Your attorney and accountant will help you organize your documents to register your business identity with the relevant authorities. Still, you will also need to pay the state and federal filing fees. You will need business licenses, several types of insurance, and possibly a trademark. These things all have various fees attached.

Incorporation Documents

If you are doing business as a partnership or a limited liability company, you will need to file documents with your state to establish your business entity. The primary cost of incorporation documents will be your state’s filing fee. These fees range from $40 and $500, depending on your state. The restaurant’s attorney usually does this, but restaurant owners that want to save money on attorney’s fees can use a service like Incfile or Rocket Lawyer.

Restaurant Website

In the age of online ordering, some web presence is necessary for most restaurants. Some restaurant owners choose not to build a website and instead rely on third party ordering and delivery platforms. However, if you intend to build your own in-house ordering and delivery system, a website is a must.

The cost to build a website for a small restaurant could be less than $1,000 or more than $10,000, depending on the style and functionality you want. You can do it yourself using a site like WordPress for around $100-$200 per year with web hosting and domain mapping. For a guide to doing yourself, you can read our guide to designing a restaurant website.

Trademarks & Branding

Small restaurants in rural markets probably don’t need to go to the trouble of trademarking their brand. If you have a unique name, unique concept, or hope to franchise your business in the future, filing a trademark is a good idea. You can register for a trademark in your state alone for a fee of $100 to $200. Filing on the federal level will expand your trademark protection nationally. A federal trademark typically costs $275 to $375.

Insurance

The cost of insuring a restaurant can be considerable. The risk of damage, injury, and loss can be higher in restaurants than any other business. Besides the protection that you’re required to purchase by law, you will need to look into different kinds of coverage based on your restaurant style. For example, a restaurant that does a lot of delivery business needs automobile insurance. Restaurants with bars need liquor liability.

Unemployment Insurance

Unemployment insurance covers benefits for employees who are laid off. You don’t purchase unemployment insurance through an agency; you pay it in the form of payroll taxes to the federal government and the state tax authority. The amount of unemployment insurance you need to budget for varies based on the number of employees you have, their pay rates, and your state.

The Federal Unemployment Tax Act (FUTA) sets the federal unemployment tax rate at a flat 6% of the first $7,000 of an employee’s salary. You do not have to pay FUTA on wages over $7,000. If your state requires you to pay state unemployment tax (SUTA), you can usually claim a 5.4% credit, bringing your federal rate down to a rate of 0.6%.

Each state sets its own requirements for state unemployment tax (SUTA). Most state rates vary based on the number of employees you have fired, and how many of those employees have filed unemployment claims. Unlike FUTA, however, SUTA can apply to wages beyond the first $7,000. You will typically receive information about your state policies when you register for your State Employer Identification Number.

Workers’ Compensation

Workers’ compensation insurance covers employees’ medical costs, damages, and lost wages due to injuries on the job. You purchase workers’ compensation Insurance through a commercial provider. The premiums vary from state-to-state and industry to industry.

Workers’ comp rates are based on a specific dollar amount for every $100 of your business’s payroll. Workers’ comp rates for restaurant employees are generally around $2.25 per $100 of payroll. Your cost for workers’ comp coverage costs will depend on your business location and your number of employees. If you previously owned a business and held a workers’ comp policy, any previous claims against you will also affect your costs.

You can only know your anticipated workers’ comp costs by obtaining estimates from insurance providers. When you are ready to begin that process, you may find it helpful to start with the providers listed in our 7 Best Workers’ Compensation Insurers guide.

Business Liability

The average premium for a complete restaurant Business Owners Policy, or BOP, costs between $1,150 and $10,000 per year, depending on the size of the restaurant. This type of policy usually includes general liability, property coverage, liquor liability, product liability, business interruption, and employment practice liability.

Some states hold restaurants liable for damage caused by intoxicated patrons after they leave a restaurant’s premises. If you serve alcohol, you will also need liquor liability insurance. Talk to a reputable agent who’s experienced at handling policies for restaurants. We’ve listed our top recommendations in this guide.

Commercial Automobile Insurance

If your employees drive company cars, you need a commercial automotive policy. If, on the other hand, your staff will drive their personal vehicles, you’ll need a Hired-Not-Owned policy. The drivers’ individual auto insurance policies won’t cover them if they get into an accident when using their personal vehicles for work.

A restaurant owner should budget for $600 to $2,400 annually per commercial vehicle. Hired Not Owned policies generally range from $100 to $200 per month. An annual cost of around $1,800 would be typical. If you need commercial auto insurance for your restaurant, see our top recommendations to the best commercial auto insurance providers.

Health Insurance

Currently, in the US, nearly one-third of restaurants offer health insurance to employees. However, full-time employees like chefs and managers typically expect to be offered health benefits as part of their compensation. These benefits can add a considerable expense to your opening budget, so a small operation may not be able to offer it right away.

The costs will vary depending on the number of employees you wish to cover and the percentage of the monthly premium you intend to pay. This guide to small business health insurance can give you a better idea of what to expect.

Permits & Licenses

Depending on the size of your restaurant operation, you need to secure dozens of permits and licenses from foodservice licenses to federal and state employer ID numbers, to building permits. Some licenses require inspections, and some will need to be renewed annually or bi-annually. Some permits are only issued to a licensed contractor, while you will be on your own to secure others. This guide lists the various permits and licenses you may need along with a checklist to track your progress and log costs.

You can also get an idea of your total permit and license costs by using a license lookup service. For example, for $99, Incfile’s business license research service will provide you with a comprehensive list of all the licenses you need, along with all the application forms you’ll need to file.

Franchise Fees

Some new restaurant owners opt to buy into an existing restaurant franchise rather than build their business completely from scratch. Franchise owners pay fees to a restaurant franchise company for the right to use the name, business model, and products of that company. McDonald’s is probably the most recognizable restaurant franchise in the US.

If you choose to start a franchise restaurant, you will need to budget for two kinds of fees: the initiation fee and on-going franchise fees. Both of these fees vary from franchise to franchise. Initiation fees are one-time payments that generally range from $20,000 – $35,000. After your restaurant opens, you will also pay the franchisor a percentage of gross revenue. This percentage can be anywhere from 5% to 50%, depending on the concept.

McDonald’s is a popular restaurant franchise.
(Photo by Thabang Mokoena on Unsplash)

You can get a good idea of franchising opportunities and costs in your area by searching a franchise listing site. Franchise Gator is a good one. This site allows you to search franchise opportunities by location, and will provide you with a free cost estimate report on individual franchises so you can budget appropriately.

Location Costs

There are a host of costs associated with securing your restaurant location and setting it up for a food and beverage operation. Most restaurants lease commercial space. Once leased, that space may require renovation to suit it to your needs. With or without construction, you will need to obtain furnishings, fixtures, and equipment (FF&E) for your kitchen, bar, dining room, and back office.

Commercial Lease

Generally, a restaurant lease should be no more than 5% to 8% of the restaurant’s total revenue. When you open a new restaurant, you should determine your target lease rate based on your projected sales. Detailed projections will help you here. For example, if your accountant projects your annual revenue of $500,000, you won’t want to pay more than $40,000 annually, or $3,333 per month.

You should have a business attorney review any commercial lease agreements before you sign. Getting locked into an unfavorable lease can destroy a restaurant’s future profitability. An attorney will read through the lease contract to identify any clauses that could negatively affect your business’s profitability. He or she will draft new terms where necessary, and negotiate with the property owner on your behalf.

Construction & Renovation

Construction and renovation costs for a new restaurant vary a lot. Your costs will depend on your building’s square footage, the quality of materials you desire, and the type of construction performed. Frequently, these costs are referred to collectively as “build-out” costs. Restaurant build-out costs typically range from $100 – $800 per square foot.

Construction costs can massively increase you opening costs.
(Photo by Henry & Co. on Unsplash)

The best way to save money on restaurant construction is to lease a space that has previously been a restaurant. If the only changes you want to make are cosmetic things like changing the paint color and lighting fixtures, you can do a lot of the work yourself. If you are moving your restaurant into a raw commercial space, or need to install specialty equipment like a wood-burning pizza oven, you will need to plan for a large budget here.

Utilities

Restaurants must budget for the essential utilities like gas, water, and electrical power. They also must pay for waste removal, which can involve recycling, composting, and grease trap cleanings. According to a study by National Grid, The average restaurant spends $2.90 per square foot on electricity and $0.85 on natural gas alone. These costs can add up to 3% to 5% of a restaurant’s total operating costs.

Water studies have found that restaurants use an average of 25,000 gallons of water a day. The average price of water in the US is $1.50 per 1,000 gallons. So you can figure that you’ll spend around $1,100 – $1,500 per month on water alone. Waste disposal can run $80 to $250 per month. The range depends on your location, the volume of waste your business generates, and the type of waste handling you require. Adding recycling and composting will increase your costs.

Most full service, dine-in restaurants are between 2,000 and 4,500 square feet. The monthly utility estimates in the chart below are based on those numbers. Smaller operations without a dining room will have lower utility costs. Your specific costs will also vary based on the rates charged by utility providers in your area.

Furnishings, Fixtures & Equipment (FF&E)

Furniture, Fixtures, and Equipment (FF&E) includes all the furnishes that are not permanently installed into the building’s structure. You can lease or buy most FF&E, though most restaurant accountants will encourage you to buy large items like dishwashers and refrigerators. Like any long-term assets, large FF&E items depreciate over time, which adds to your annual tax write-offs.

Restaurants need a lot of different equipment and furnishings. To get an accurate idea of the full costs, consider each area of the restaurant separately. The areas that are open to customers—or the front of house (FOH)—need tables and chairs for customers. Your FOH also needs a point of sale (POS) system for your staff to send orders.

The kitchen—or back of house (BOH)—will need dishwashers, refrigerators, and cooking equipment. Restaurants also have a back-office that will require essential equipment like a computer, filing cabinets, and a safe.

FOH FF&E

The customer-facing areas of your restaurant have different needs than the kitchen. FOH FF&E is a category where you really can blow your budget, or be frugal. In the FOH, you’ll need to pair sturdiness with quality finishes that reflect your restaurant’s service style. For example, a quick-service restaurant might be able to pay $3.50 for a sturdy all-purpose drinking glass. A luxury restaurant, however, may spend $20 per glass to meet their customer’s expectations.

Frugality can be useful, but it is important not to be so frugal that you injure your operation, or compromise the customer experience. For example, if you don’t buy enough glassware, your customers may wait for drinks while glasses are being washed in the middle of a busy dinner rush. You will quickly run through whatever money you saved on materials paying for extra water, detergent, and employee labor.

POS System

The POS is one of the most important equipment decisions you will make for your new restaurant. A basic POS can communicate orders to your kitchen and process credit card payments. Robust POS systems can handle everything from reservations, online orders, employee scheduling, and inventory management. POS Systems range from $60 to $300 per month, with initial hardware bundles costing between $450 and $1,500 per register.

Restaurants of all types use a POS system.
(Photo by Blake Wisz on Unsplash)

POS systems are highly customizable to your restaurant’s needs. That’s the good news and the bad news. This high degree of customization can make a search for the perfect POS feel overwhelming. The quiz below can help you find the right-size POS solution for your restaurant. It is only four questions, takes less than a minute, and will provide a result without redirecting you to a new page.

You can also begin narrowing your search for the perfect POS by checking out our favorite systems for various types of restaurant businesses:

• 8 Best Restaurant POS Systems
• 6 Best Bar POS Systems
• 5 Best POS Systems for Pizza & Food Delivery

Additional FOH FF&E

You will also need to purchase furniture, china, glassware, silverware, or disposable serving ware for your customers. Most restaurants also need a sound system to play music in the dining room. Bars and casual spots may opt to add televisions as well. Depending on your concept, menu boards may be a prominent feature. Finally, most every restaurant benefits from some type of security system.

Furniture

It is not uncommon for a sturdy restaurant chair to cost around $100. A high-end or high-volume restaurant might spend closer to $500 on a single chair. Multiply that by 50 to 100, and you have a massive investment. Tables are typically even more expensive than chairs. The budget you need for FOH furniture will depend on your restaurant style.

The best way to save on restaurant furniture is to buy used furniture that is still in good repair. An excellent place to find such furnishings is to tap into your local restaurant network. Restaurants that are updating their concept or going out of business would be eager to sell the supplies they no longer need.

Bar Equipment

Restaurants with bars will need refrigerators, ice bins, hand wash sinks, and floor drains in the FOH. If you expect to do a high volume of bar business, you will also want a dishwasher behind the bar to keep the beverage service flowing. You could spend between $10,000 and $35,000 on bar equipment alone. Your costs will depend on your expected sales volume, type of bar program, and desired finishes.

Bar programs tend to be well-supported by liquor brands and beverage companies. While you won’t get a gin brand to buy you an ice machine, they will likely provide you with rubber mats to line your bar top.

China, Glass & Servingware

The amount of serving pieces you need will depend on your projected business volume. A three to one ratio of serving ware to customers is a good guideline for most new restaurants. You can get a ballpark idea of your projected costs by adding up all the seats in your restaurant and multiplying it by three. This ratio allows one plate to be in use, another to be in the wash, and another to be on deck for new orders. This ratio ensures that you have enough plates, forks, and glasses to get through business rushes, and extends the life of your servingware.

If you choose to use primarily disposable serving ware, the amount you need will also depend on the delivery schedule from your supplier. If the supplier delivers once a week, you’ll want to have enough stock to cover a week’s worth of service—plus one week’s worth of backstock, if you receive a large order or an unexpected business rush.

Security System

If you are spending thousands of dollars to open your restaurant, you will want to protect that investment. Some commercial buildings may have security systems that cover public areas around your restaurant. Still, you will want a plan to cover your entrances, cash registers, safes, and liquor storage. Baseline costs for a restaurant security system start $150 for equipment and $25 per month for monitoring with a self-installed solution like Simplisafe. A professionally installed system that a local firm monitors can cost $3,000 for installation and $200 per month for monitoring services.

Music & TV Systems

Restaurants typically always have music of some kind. Bar and grilles usually also have televisions for game watchers. Costs for these items will vary based on your needs. Sports-themed restaurants, for example, should plan to reserve quite a budget for televisions.

If your system is complicated, you may also need an electrician to install your audiovisual equipment. If you plan to play copyrighted music, you will also need to purchase a music licensing permit.

BOH FF&E

The back of the house has massive equipment needs. Prep tables, ranges, ovens, refrigerators, freezers, and cooking equipment add up. Kitchen equipment for a new restaurant can easily run up to $80,000. You can, of course, save money if you lease a space already equipped with a commercial kitchen. You can also save by leasing restaurant equipment rather than buying, though you should consider the pros and cons first.

Pros and Cons of Leasing Equipment

Typical BOH FF&E

Commercial kitchens must be able to safely cook food, store it at safe temperatures, and clean and sanitize cooking and dining implements. It is not unusual to spend $50,000 to $80,000 to install a full, new commercial kitchen. A single oven can cost anywhere from $1,100 to $5,500 brand-new. All of your ovens and ranges will need hoods to vent smoke and cooking fumes. In most locations, fire code also requires that you have a comprehensive fire suppression system.

Depending on your menu, you may need grills, deep fat fryers, large scale pressure cookers, or pizza ovens. You will want to ensure that you have enough cooking space so your cooks can prepare foods during your busiest meals efficiently. You’ll also need refrigerators, freezers, and small tools like blenders, food processors, and storage containers. Finally, you must have a dishwasher with enough power to clean and sanitize all of the small wares that your cooks and customers use.

Used equipment can be less expensive. You should only buy used commercial cooking equipment if you are confident that you can assess its quality. When purchasing used equipment, you risk the equipment breaking down without a warranty, or needing a lot of maintenance. If you aren’t confident assessing the quality of used equipment, make friends with a chef who is.

Another cost to consider alongside your equipment is the energy each piece will use. Electricity is expensive, and these appliances require a lot of it. Appliances like refrigerators and freezers run 24 hours a day, every day of the year. Buying new equipment may be more expensive upfront, but if new equipment runs more efficiently, it could save you money on energy bills in the long run.

Back Office FF&E

Your restaurant back office is the nerve center of your restaurant. Setting up the back office is usually not a massive cost of opening a new restaurant, but it should not be overlooked. You need a few essential tools like a computer that can handle administrative functions and menu updates. A full-color high volume printer will enable you to print menus quickly. If you process cash payments, you will need a safe to hold the cash until you can deposit it in your bank.

Most restaurant owners also find that bookkeeping and accounting software is an absolute necessity. Software tools like QuickBooks and SurePayroll enable restaurant owners to stay on top of payroll and tax obligations and track payments to suppliers.

Your costs for additional software will vary depending on your tech needs and the amount of work you can perform yourself. For recommendations based on your restaurant type, you can check out our rankings of the best restaurant payroll software and best restaurant accounting software.

Some restaurants may choose to add software tools like online ordering tools, reservation and waitlist programs, or delivery software. Costs for these tools vary depending on whether they are free-standing tools, integrated with your POS, or featured as additional modules of your POS system. Generally speaking, however, they range from $25 to $75 per month per tool.

Phone Systems

There are two major types of phone lines available to restaurants; standard “landline” phones that operate via copper cabling, or Voice over Internet Protocol (VoIP) lines that operate via an internet connection. Restaurants that receive a high volume of phone calls may choose to add an internal system to manage the phone lines and route calls via a key system unit (KSU). A KSU system requires professional installation that can cost between $150 and $300 per phone.

Key service unit (KSU) telephones are specialized telephones designed specifically for business use. They can handle between five and 40 telephone lines, and allow you to dial extensions within your building. A KSU connects all of your restaurant’s phones to a centralized unit that connects to your telephone service provider’s equipment.

A VoIP phone system makes phone calls through an internet connection instead of a traditional landline phone. This allows VoIP systems to handle SMS text messaging functions alongside phone service. If your customers prefer text communications, VoIP is an excellent option for you.

If internet service is unreliable in your area, then VoIP might be a challenge. However, if you have good connectivity, VoIP telephone service rates tend to be much lower than traditional phone services.

Back Office Computer

Every restaurant needs a computer in the back office. You and your managers will use it to draft reports, send and receive emails, and handle basic functions like editing menus and posting job opportunities. To save yourself headaches, get a back-office computer that uses the same operating system as your POS. If your POS operates on iPads, your back office computer should be an iOS based system. If your POS is housed on an Android system, go for a windows based computer.

If you will be updating a lot of graphics or using your back office computer for lots of menu design work, you will need a computer that easily handles those tasks. Your back office computer can come from any consumer source. Your costs will depend on the degree of functionality you need.

Printers & Office Supplies

Most restaurants print their menus on-site. This makes it easier to update your menus when there are changes. This also means, however, that you will need a printer that is capable of printing the menu you have designed. A high volume, full color, high-speed printer can range in price from $600 to $6,000.

You will also need basic office furnishings like desks, shelving, and filing cabinets. The back office is also, typically, where restaurants house their safe. A small safe with a basic electronic keypad will run you around $65. For a more versatile safe that can handle blind cash drops from employee tills and managers, you can expect to spend closer to $700.

Employee Expenses

One of the most variable costs of starting a restaurant is hiring, outfitting, and paying employees. The number and type of restaurant employees you need will vary depending on your restaurant type. Hiring costs will depend on where you post your job openings and whether you choose to purchase advertising to boost their visibility. Your opening payroll and training costs will depend on your staff’s wages. Uniform costs will vary based on your desired uniform style.

Job Posting

Job posting sites like Indeed allow you to post job openings for free. If you want to find candidates in a hurry, you may want to boost your job opening’s visibility by spending $50 for premium placement. In competitive restaurant markets, it’s a good idea to list your job openings on industry-specific websites like Culinary Agents and Poached Jobs. Listings on these industry-based sites can cost $25 to $49 per listing.

Payroll & Training

The payroll expenses of starting a new restaurant will vary based on the type of employees you have and the prevailing wage rates in your market. You need many of your employees to perform work before your restaurant is open to the public. They may assemble furniture, stock supplies, clean the restaurant’s customer-facing areas, and develop recipes.

Your employees will also need training. Even if they have worked in restaurants before, your staff will need time to learn your menu, your restaurant policies, and how to operate your POS system. Most new restaurants also prepare the full menu for their staff to taste, which adds to your training costs. Between the costs of training supplies and wages, training a new restaurant employee costs around $1,200 per person.

Uniforms

The money you spend on staff uniforms depends entirely on your tastes and restaurant style. A casual, quick-service restaurant may allow employees to wear jeans and a nice shirt. A fine dining restaurant, however, may have an entire uniform fabricated for them.

If you plan to purchase branded shirts with your restaurant logo, plan on three per employee. You will likely only issue two shirts per employee to start. The extras will allow you a backstock to replace lost or damaged uniforms. Most uniform companies will require minimum orders of a dozen or more shirts, so you may need to round up to meet their minimum order requirements.

Opening Expenses

Now that you have all of your equipment and staff on board, it is time to let the dining public know where to find your restaurant. You will need to bring in food and beverage supplies, get your utilities turned on, and test drive your restaurant with a soft opening. Contacting local media outlets and starting some buzz on social networks will ensure that you have guests when your doors open.

Opening Inventory

Before you officially open, you will need to purchase the food and beverages you plan to sell to customers. The amount you spend on opening inventory will depend on your expected customer traffic, the type of food you serve, the amount of storage space you have, and your ability to negotiate competitive prices.

You’ll need to open accounts with food and beverage suppliers to place your first orders. As a new restaurant without a payment history, most vendors will request that you pay for your full order in advance, or with a check as soon as the order is delivered.

Marketing & PR

Ensure that when you reach the home stretch, you have funds available to let your community know about your new restaurant. You can spend as little or as much as you want on marketing your new restaurant. Purchasing targeted ads on social media platforms like Facebook and Instagram is a popular, low-cost way to announce your opening.

Placing ads in local papers or writing a press release and distributing it to local news outlets is another excellent option. This generally costs more, but it is worth it if you can afford it.

Soft Opening

A “soft opening” is a chance for most restaurants to consider soft opening costs a marketing or research and development expense. Some restaurants offer completely free food, a discounted menu, or a meal selection limited to just a few full-priced options. If you plan on charging full price, be sure to include freebies as a “thank you” for guests’ input. The amount you spend here will vary depending on what you offer your guests.

Contingency

As a new restaurant, you will have additional expenses in your early months. Until you have a sense of what your busy times are, you may over-schedule your staff. Until you see what menu items are most popular, you may over-order on supplies. You’ll need to reserve some capital to cover your initial operating costs until your restaurant begins to earn a profit.

To be on the safe side, you should set aside six months’ worth of operating expenses and reserve 10% of your total revenue for contingency. That way, your restaurant can stay solvent until it starts generating significant cash flow. As with most of the costs of starting a restaurant, how much you need for capital and contingency will vary. The table below gives you a ballpark idea of the recommended contingency amounts for different restaurant types.

Contingency Estimates by Restaurant Type

Bottom Line

How much it will cost you to open a new restaurant depends on your restaurant style and location. Whether you are moving into a raw commercial space or one that has previously been a restaurant will determine how much money you need for construction. Whatever your restaurant’s style or location, you should set aside three to six months’ worth of operating expenses to ensure you have enough cash-flow in the early days.