What Costs are Involved in Opening a Restaurant?

Have you always dreamed of opening your own restaurant? Maybe you’ve been following the success stories and want to see if you can follow suit?

Whether you want to take your hobby to the next level, or you’ve worked in the industry for a while and feel ready to take the leap, one of the key things you’ll need is money. So what costs are involved? And how do you find the funds to open the doors?

To answer your questions and set you off on the path to fulfilling your dream, here’s a guide to financing your eatery.

What to pay for

There are several expenditures that you might need to factor in if you’re seriously considering launching your own restaurant. It’s important to have a clear idea what these are so you can begin to count up how much you’ll need:

Premises

Do you know where you’d like your restaurant to be located? The rent you pay for the premises will be a significant expense, so you’ll need to think carefully about where you can realistically afford to be.

As well as rent, you’ll need to pay for service charges, and waste management. You might also need to pay out for business rates and buildings insurance.

Also, you need to account for the cost of an A3 planning licence. This allows you to serve hot food and usually comes with a premium that can be anything from £5,000 to over £100,000, so it’s important to check this carefully before you commit to the premises.

Food

The price you charge for the food you serve will depend on how much the ingredients cost and where you’re located. For example, a simple fish and chips in Liverpool won’t be as expensive and the same dish in London. This is because premises are be more expensive in the capital so this needs to be accounted for.

Staff

The majority of serving staff are paid by the hour, although if you’re going to be the manager, you’ll pay your assistant manager through an annual salary. Once you know how many staff members you need, you can work out how much you’ll pay them. Remember to account for national insurance and other employee benefits.

Extras

The previous three points are your main outgoings, but there are more costs that are worth considering. Check you have accounted for the insurance you need and have a budget in place for any refurbishment you need to do on the space you’re basing your restaurant in, whether that means adding new equipment in the back of house or updating the design front of house.

Common pitfalls

While all the above is essential, make sure you don’t overspend. For example, while it’s crucial that you have clean, functioning equipment, try shopping around for deals rather than paying a fortune for the very latest tools. Similarly, if you’re refurbishing the premises before you open, set a budget and stick to it.

Find the funds

There are several ways to pay for all of this. Firstly, like other new businesses, you could rely on family and friends. This is a good way to avoid dealing with banks but has the potential to sour relationships if things were to go wrong.

You could also try crowdfunding. Using dedicated sites, the general public either opt for peer-to-peer lending or take their own stake in the business in the form of shares or equity. This can take up valuable time, however.

There is also the option to speak to banks about taking out a loan or explore the alternative small business loans that are available.

Take your time to work out how much you need and then consider the funding options carefully. This is a big investment, but if you get it right, it can pay off.

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