It’s the age-old question haunting every small entrepreneur, who can’t get their concept for the next great small restaurant in their neighborhood out of their heads. You’ve got the idea. You’ve picked out a name. Maybe you’ve even been daydreaming about logo ideas and menu designs. But sooner or later, you need to be able to start assigning some hard and fast numbers to your ideas. In other words, you’ll need to figure out how much it will cost to open?
I opened a restaurant last year and am acutely aware of the laundry list of expenses that accompanies starting even a small, take-out focused restaurant like mine. All in, it cost me $8,000 to get the open the doors to Ancho Honey in Tenant’s Harbor, Maine. And yes, you read that figure right. I invested less than $10,000 to open the doors to the restaurant below.
You probably won’t be able to open a business for that small of an investment. I live in a tiny fishing village in coastal Maine and found a location that was pretty turnkey. The rents here are also extremely low too. I live in a coastal town that is extremely busy in the summer months due to tourism, but only locals during the long winters.
I should point out that I put in more than a fair share of sweat equity to get this business off the ground. I called in literally every favor I could to help get my external sign made, painting walls, and getting door resized. To reduce startup costs, you’ll want beg for help from friends and family too.
One of the biggest expenses can is contracting out paid labor. You’ll need to hire out some aspects like plumbing and electrical to the professionals. But things like a new coat of paint, you can probably figure out on your own.
Ahh.. But you’re probably here to estimate the cost of opening your own restaurant, not read my personal story. I’ve added details about the main costs associated with opening an ma-and-pa restaurant below, including the wildly variable costs to consider. If you simply want to download the cost analysis spreadsheet so you can get busy figuring your own numbers, you can jump straight to that section below.
Table of Contents
- One-time costs
- Recurring and operational costs
- Variable costs
- Download the restaurant startup cost spreadsheet
Let’s begin by organizing our expenses into two main categories: One-time costs, and recurring or ongoing expenses.
These costs represent one-time expenses that you’ll need to expect to pay when you’re getting started, which may not necessarily arise again in the life of your business. Obviously, there are some caveats here; for example, spending 10k on a commercial kitchen range may seem like a one time cost, but as the years wear on, it may need to be replaced. Plates break, silverware gets thrown away, and table linens get soiled; these are all technically one-time costs needed for getting the doors open, but which may come up again at some point in the future.
First/Last Month’s Rent and Security Deposit. The amount of money you’ll need to come up with may vary slightly depending on where you live, and some brokers or landlords describe these costs differently; some may refer to “first, last, and security,” while others may ask for the first month’s rent plus a security deposit equal to one or two month’s rent, which is refundable at the end of your lease term, provided the space is undamaged. For most commercial tenants, the total amount you’ll need to come up with will range from $3,000 to $30,000, and that’s just to get the keys.
Business Licensing and Permits. Again, this will vary depending on the location and type of establishment you want to open, and may be based on additional factors including whether or not you plan to serve alcohol, your hours of operation, and your location. In general, you should plan on obtaining city and state operating licenses, a food handler’s safety license (such as those offered by ServSafe), and a liquor license. Schedule a call with the health inspector and code enforcement officer in the municipality you plan to open, to find out more about specific requirements. In general, you should plan to budget between $100 and $1000 to get all of your paperwork in order.
City level business registration fees
Insurance. You’re diving into a high-risk business, with a lot of potential for people getting hurt (or at least, claiming to). In addition to the inherent risk of selling a product that customers put into their bodies, you’ve got a whole host of additional general liability concerns: Slip and falls on freshly-mopped floors, or a broken wrist on an unshoveled snowy driveway can shut your business down in a hurry.
You’ll want a good general liability policy, to protect yourself and your business in the event of a customer complaint, and unlike renter’s insurance or other personal policies, most commercial policies need to be paid up front in a lump sum. Your quote will vary slightly based on the number of seats in your restaurant, your alcohol policy, and the type of food you serve, but you should budget between $1,000 and $2,000 for insurance.
Download Now: The Food Business Startup Kit is Free and Includes a Business Model Canvas.
Improvements and Remodeling. A big part of transforming a leased commercial space into the restaurant of your dreams lies in rennovations and remodeling. Unfortunately, this can be a very difficult number to pin down, sinc