Can You Afford to Start Your Own Restaurant?

A restaurant can be one of the hardest businesses to open and run. With regulations, codes, competition, and fluctuating food prices, restaurant owners normally have to clear many more hurdles than other ordinary retail locations. After going through the process of launching a restaurant, just getting to opening day can feel like a victory. Famed television chef and personality, Anthony Bourdain once stated that “If anything is good for pounding humility into you permanently, it’s the restaurant business.”

 

Opening up a new restaurant takes guts. It also usually takes a good bit of money. From new equipment and appliances to possible construction or renovation, a new restaurant business owner can incur any number of startup costs. Once the business is ready to open, the daily operating costs will also need to be managed. For these reasons, the restaurant business can be a high-risk gamble, and there are many investors that are leery of wading into the industry. Aside from ambition and skill, the cost of opening a restaurant should weigh heavily on any decision to jump into the restaurant industry. Let’s take a look at the financial situation of opening a restaurant to help you decide if you afford this venture.

Equipment and Supplies

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Starting any business can require a great amount of time, energy, and money. Due to the nature of the restaurant business, however, launching a new establishment can require additional effort and money. With an estimated average startup cost of around $250,000, opening up a new restaurant can be a significant investment.

 

One of the biggest financial considerations is the equipment and supplies that will be needed. Kitchen appliances, such as a stove, oven, freezer, or dishwasher can be extremely costly. The price of restaurant equipment makes restaurants far more expensive than many other small businesses to open. Restaurant equipment financing can be a helpful option for securing new equipment for your business. If you don’t have the cash flow to shell out all of the upfront costs, you can look at finance options and weigh them with your personal situation. Whether looking at monthly payments or paying the full purchase price upfront, your commercial kitchen and supply costs will be a significant portion of your startup budget. You’ll need to be sure that you have the resources and financing solutions for making this investment.

Upfit and Outfit

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When you set out to open your restaurant, you’ll likely have a vision in mind of what your space will look like. Unfortunately, many spaces are not move-in ready upon lease or purchase. Often, even a building that was used as a restaurant previously and is set up for kitchen equipment, refrigeration, and running water could require renovations to create the space that is appropriate for your vision.

 

Like any veteran of popular home renovation projects can tell you, remodels can add up quickly in paint, window treatments, flooring, and more. When looking for your property, one way to save money is to try and find a place that is outfitted for food service. Otherwise, the upfit cost of turning a space into a kitchen might be prohibitive. A customized kitchen build could cost in excess of $100,000 and could be an expense new restaurant owners aren’t prepared to accommodate.

 

When deciding to open up a new restaurant, significant expenses such as equipment, supplies, and construction can drastically inflate the budget. Other expenditures, such as insurance, permits, marketing, point of sale technology, and real estate fees should all be factored into the startup cost. As discussed, opening a restaurant is not a cheap nor easy adventure. It takes guts and determination for such a large undertaking. It also takes a strong financial commitment. When considering a leap into the restaurant industry, be sure that you have the will and drive, but also that you have the budget to sustain your endeavor.

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