Many people know that restaurants operate on razor-thin margins, but what does it actually cost to get a business up and running in the first place? After all, restaurants are a different beast than other sorts of startups, so it makes sense that they’d have different costs involved in getting launched than other industries.
If you’re planning on opening your own restaurant, you’re going to need a budget. Having a full financial picture of what costs you’re going to have to cover in order to get your business up and running is crucial because any surprises that crop up can result in major setbacks for your restaurant. Here’s everything you need to know about restaurant startup costs.
Price Out your Kitchen Equipment
One of the first things you’ll want to figure out in your budget is your restaurant equipment prices. From ovens and griddles to commercial dish washing equipment, knowing how much commercial cooking equipment you’ll need to outfit your kitchen is crucial if you want to create high-quality dishes. Without the right equipment, you won’t be able to keep up with your guests’ demand. Don’t forget to price out smaller food preparation equipment, too, since utensils like knives and blending equipment are just as important as the larger appliances you’re shopping for, too.
Determine How Much your Lease Will Be
What sort of space you wind up renting for your restaurant will be one of the biggest determinants that have what sorts of costs you face on a monthly basis. A lower rental rate and lower property taxes will obviously make it less expensive to run your restaurant from month-to-month, but it’s just as important to think about what comes with your commercial property when you sign your lease, too.
For example, some commercial real estate properties will come with some kitchen equipment or restaurant space already built out. This can be particularly advantageous if you don’t want to spend a lot of money on the outset of your business when it comes to renovating a space to have an appropriate layout for service. That being said, if you want to create a totally customized experience, finding a bare-bones property may be worth the extra costs.
Factor in Staffing Costs
Perhaps more than any other type of business, a restaurant lives and dies by its staff. Without friendly and professional servers, chefs, and hosts, you won’t be able to create the kind of rapport you need to in order to attract repeat customers.
In order to attract top talent, you’ll need to pay a competitive wage. This necessitates having enough money to hire and retain staff who uphold your restaurant’s values and standards of quality. You’ll also want to think about how to go about addressing concepts like tips in your restaurant. For example, some restaurants are experimenting with getting rid of tips in order to provide an even fairer wage for their employees, while others pool and share their tips amongst every employee working a certain shift.
Understand Business Tax Law
Tax compliance is another factor that many entrepreneurs don’t think about when considering some of the costs associated with starting a restaurant. That being said, if you don’t have a clear understanding of business tax compliance, you may wind up having to pay more in annual taxes at the end of the year than you expected.
That’s why it’s a great idea to talk to and retain a financial professional who can advise you on how different tax laws and industry regulations affect your bottom line. It’s also a good idea to brush up on your own knowledge of tax law by reviewing the resources available to you so that you can better forecast how certain shifts affect your operations.
