Estimating costs for a new restaurant is a lot like looking at housing prices. $300,000 could buy a lovely four-bedroom home in central Illinois. But in Los Angeles, you may not even find a studio condo for that price!
One survey showed that the median cost to open a new restaurant was $375,000, or $113 per square foot. Breaking the cost into square feet can help you to estimate how much your restaurant will cost based on the size.
But beyond the size, your market and restaurant style will also be major factors in your final opening costs.
As you create your business plan and start to explore funding options, here are the restaurant startup costs that you’ll need to consider.
Estimated Restaurant Startup Costs
- Leased restaurant space: $3,000 – $16,000 initial payment (rent + security deposit) OR Purchased restaurant space: $150,000 median cost
- Permitting, licensing, and legal fees: $500 – $15,000
- Remodeling and renovations: $50 – $400/sq ft
- Restaurant equipment and cooking tools: $40,000 – $200,000
- Restaurant furniture and supplies: $40,000 – $80,000
- Pre-opening food, beverage, and labor costs: vary
- Marketing costs: $5,000 – $10,000
Buying versus Leasing Your Restaurant Space
Your upfront costs for buying a restaurant space will be much higher than if you rent one. And of course, the cost of that space will vary dramatically based on the square footage and market. Here are some cost details for both leasing and buying.
Leasing Your Restaurant Space
Estimated Cost: $3,000 to $16,000 initial payment 1
Rents for commercial spaces are often calculated on a dollar-per-square-foot basis. In an expensive market like Chicago, you’ll find commercial space averaging between $28 and $40 per square foot per year. For a 2,000 square foot restaurant, the rent would be between $56,000 and $80,000 per year, or $4,667 to $6,667 per month.
In a more affordable market like Salt Lake City, Utah, restaurant space rentals are more often between $16 and $28 per square foot per year. So your rent for the same sized space will be closer to $32,000 to $56,000 for the year, or $2,667 to $4,667 per month.
In general, you can expect to pay between $1,500 and $8,000 per month for your lease. For your first payment, you’ll be responsible for at least the first month’s rent and a refundable security deposit (often equivalent to the first month’s rent) upon signing.
Buying Your Restaurant Space
Median Estimate Cost: $150,000 2
If you plan to buy your restaurant space, expect to pay much more up front!
The median cost of buying a restaurant is $150,000, but again that can vary wildly by size and market. Expect to pay around 15% to 30% of the purchase price upfront, plus closing costs (3% to 5% of the purchase price) before the seller hands over the keys.
Permitting, Licensing, and Legal Fees
Estimated Cost: $500 – $15,000, depending on the state 3
To cover your legal bases, you’ll need to comply with certain permitting and licensing rules. And some of these come with a cost.
To start, you may need a business license. The fees for these vary by state, and can range from $50 to several hundred dollars. Check with your Secretary of State to learn about your local business license requirements.
You may need a Certificate of Occupancy from your local building inspector when any construction is complete, which can cost around $100. You’ll also need some licensing in order to serve food, usually from your local health department. And if you plan to serve beer, wine, or spirits, you’ll need some kind of liquor license. Food manager permits can cost a few hundred dollars, and liquor licenses range from $100 (in Idaho) to nearly $13,000 (in California).
You may also have to pay entertainment fees if you plan to play music or sports broadcasts, or install gaming equipment like pool tables or gambling machines.
And finally, hiring a lawyer to help you navigate all of these legalities is a good way to avoid missteps. Business lawyers charge $200+ per hour, but they can save you major headaches down the line.
Remodeling and Renovations
Estimated Cost: $50 – $400/sq ft.
Once you’ve secured your space, you’ll probably want to do some renovations to make it your own.
These costs will vary widely based on the market, size of the property, and the standard of your renovations. For example, a fast-casual restaurant will probably use less expensive finishes than a fine dining restaurant.
One estimate says that the national average cost for “mid-level” finishes is about $160/sq ft for a 2,000 sq ft property. You can use this construction estimate calculator to get an idea of the cost for your market and finish standard.
Kitchen Equipment and Cooking Tools
Estimated Cost: $40,000 – $200,000 4
This has the potential to be the largest line item in your cost planning. Reliable kitchen equipment is vital to anyone who plans to serve food! You will probably need ovens, flat tops, and fryers for cooking, a hood vent for ventilation, a commercial dishwasher, refrigerators and freezers, and more.
The Webstaurant Store, which is in the business of outfitting restaurants with equipment, estimates costs of $75,000 to $115,000 for the average restaurant to get their equipment. You may be able to save by buying second-hand equipment or leasing some larger items, like your commercial dishwasher or walk-in cooler.
In addition to your equipment, you’ll need to supply your kitchen with smallwares and utensils. Pots and pans, spatulas and spoons, sheet pans, mixing bowls, knives, scales, and more must be purchased in advance, so your cooks have the right tools.
Point of Sale (POS) System
Your POS system is how the servers and bartenders communicate with the kitchen. It also ensures that customers get checks with the right totals, and it will let you run financial reports at the end of the day, week, and month.
This cost will depend on how many terminals and how much sophistication you need. A small counter deli may just need one basic terminal, while a larger restaurant may have half a dozen terminals, plus handheld ordering tablets for the servers. Expect to pay $2,000 to $20,000 for your POS, depending on your needs. 5
Restaurant Furniture and Supplies
Estimated Cost: $40,000 – $80,000 4
This is another area where your restaurant style and size will have a major impact on your costs. You’ll need to outfit your dining room with tables and chairs, barstools, server stations, and a host stand. You’ll also need plates, silverware, glassware, and possibly linens. A chic fine dining restaurant will want to spend big on these customer-facing items to create the right ambiance. But a casual soup-and-sandwich lunch spot can have much more simple and affordable furniture and supplies.
Just consider plates! You can get plates for just a few dollars each, or you can get them for $35+ each if you want to splurge.
As for size, a small lunch cafe could only seat 30, so it may not need a high volume of supplies. A huge restaurant like The Cheesecake Factory, on the other hand, can seat hundreds and needs a much larger volume of tables, chairs, and smallwares.
Estimated Cost: Varies based on cuisine, market, size of staff, training required, etc.
Costs like food, beverages, and labor will be recurring monthly expenses. But you’ll also have to invest in these costs before you open your doors.
Food must be purchased before you open, so you’ll have something to serve. But you may need to buy ingredients even further in advance if your chef has to work on recipe development, and so he or she can train the rest of the kitchen team.
You’ll also need to stock your bar—whether you serve alcohol or not. Even if you only serve water and soda, you’ll need to contract with a soda provider to get a soda machine, CO2 dispenser, and syrups.
And you’ll have labor costs, too. As you hire your new staff, you’ll have payroll costs while they complete their training in preparation for the grand opening.
Estimated Cost: $5,000 – $10,000 6
It’s easy to let marketing costs spiral out of control if you’re not careful. But this is also where you can DIY some of the work as you get on your feet.
At a minimum, you’ll need a website and social media presence, to help spread the word about your new restaurant. You can use a website builder like WordPress or Squarespace to design your own site without paying an expensive web designer. And for social media, you can take photos yourself and post inexpensive ads on Facebook or Instagram that target people in your area.
You can also reach out to media like the local news, food influencers and bloggers, and food magazines to let them know that you’ll be opening soon. They may be willing to feature you at no cost.
There is absolutely value in hiring experts for these tasks. But if finances are tight, you can DIY much of your marketing. Then as your sales start to grow, you can hire pros to raise your marketing to the next level. A good benchmark is to spend between 3% and 6% of monthly sales on continued marketing.
Finding Funding for Your Restaurant
These resources can help you to fund your restaurant.
- Loans – Local banks, credit unions, and the Small Business Administration provide loans to new businesses
- Grants – Local or national organizations may offer grants to new restaurants
- Investors – Investors provide funding to new businesses in exchange for a percentage of the profits
- Savings or Retirement Funds – You can self-fund if you have savings or a retirement account that you can draw from
- Crowdfunding – Request donations from friends, family, and the public to get your restaurant off the ground. Offer an incentive, like a free meal or VIP treatment for certain levels of contribution
Know What to Expect by Getting Educated
As you plan out your new restaurant, it’s important to know all of these cost categories and what’s reasonable in each, so you can ensure that your restaurant can bring in enough income to cover them all and still make a profit.
It takes most restaurants 3 to 5 years to be profitable, so make sure to look long term as you’re assessing your concept’s viability.
And to get a better grasp on business concepts like profit and loss, entrepreneurship, and profitability, consider a degree or diploma in Culinary Arts or Food & Beverage Operations from Auguste Escoffier School of Culinary Arts!
To read more about food entrepreneurship, try these resources next:
- 4 Roadmaps to Becoming a Food Entrepreneur
- The Pros and Cons of Becoming an UberEats Restaurant Partner
- Escoffier Alumna Tiffany Moore Gets Her Restaurant Funded