What Are the Different Types of Restaurant Startup Costs?

Alex Tree

Some different types of restaurant startup costs are getting and setting up a place of business, systems to manage money, and food. Buying a building and commercial cooking equipment is a large investment, one that can set up the owner for failure if too much money is spent. Having a point of sale system makes processing payments smoother for employees and guests alike. In addition, among one of the most important restaurant startup costs is food, since it's best to stock everything on the menu. Also, it is necessary to set aside money for payroll because employees expect to be paid soon after starting, and the business likely cannot run without them.

Consumable supplies, such as wine stock, and employee salaries are part of a restaurant's expenses.
Consumable supplies, such as wine stock, and employee salaries are part of a restaurant's expenses.

Buying a building to house the business and setting it up are two of the most expensive restaurant startup costs. It is usually cheapest to purchase a building that was once a restaurant and still has some of the necessary equipment. Otherwise, it is sometimes more than three times the amount to buy everything new. If renting an old restaurant, a restaurateur should keep in mind that rent is often higher because the place is established rather than newly built.

Pots and pans are essential for starting a restaurant.
Pots and pans are essential for starting a restaurant.

Most modern restaurant startup costs include money for a point of sale system. This system helps employees manage orders, keep track of bills and tips, and process credit cards. These systems usually have large upfront costs, plus processing a credit card transaction can have a flat flee and cost up to 2.5 percent of the total bill. Some restaurants can do record-keeping with pen and paper if they exclude credit and debit card transactions.

Table settings and other elements that add to decor are part of a restaurant's start up costs.
Table settings and other elements that add to decor are part of a restaurant's start up costs.

The restaurant startup costs for food largely depends on the type of food being sold. In general, expensive foods like steak and lobster cannot be marked up as much as pizza or burgers and still sell well. On the low end, food costs are usually about 25 percent of the restaurant's revenue. When selling expensive food items, the food might cost more than 40 percent of the revenue.

Professional quality kitchen equipment is a major expense.
Professional quality kitchen equipment is a major expense.

Payroll also needs to be taken into account. Many people expect to be paid within two to three weeks of starting a new job. The business might also owe taxes to the local government because of employees and may be required to provide health benefits if the employee works full time. It is also important to have a regular schedule to pay employees, not only because it might be the law or part of the employees’ contract, but because they may lose faith and morale in the business otherwise.

New restaurateurs often focus on the large start up costs, but there are many smaller costs that can add up when establishing a restaurant. Many localities require licenses to operate a restaurant, and cost will vary by area. A menu needs to be developed and printed, which may necessitate hiring a graphic designer and printer. Decor can range from simple to elegant, and how extensively the restaurant will be redecorated dictates how small or large the decorating budget should be. Equipment such as kitchen tools and appliances, as well as furniture, plates, glasses, paper goods and silverware are all necessities. Owners will need to get the word out about the new restaurant, so a marketing and advertising budget will be part of the start up costs as well.

Key expenditures when opening a restaurant include employee wages and other labor costs.
Key expenditures when opening a restaurant include employee wages and other labor costs.

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