Starting a Restaurant Business: What It Takes to Be Successful
How much does it cost to open a restaurant? If you are interested in starting a restaurant business, learn about the equipment, materials, and experience you need.
KNOW WHAT YOU NEED
The cost to open a restaurant will vary depending on factors like size, location, and a range of choices you’ll make as you work out the details of your business and your goals. For example, the cost of opening a 150-seat high-end bistro will be much more than the cost of opening a neighborhood sandwich shop.
Starting a restaurant business entails a great deal of planning and having a sense of what you need to get off the ground will prepare you for how much money you’ll need to spend and how. Having a reliable estimate of what your startup costs is imperative and is one of the benefits of investing in a franchise.
COSTS BEFORE OPENING
A new restaurant will include one-time costs such as security deposits on restaurant space, initial franchise fee (if franchising), and payment for equipment needed to start a restaurant. Here’s a rundown of some of the expenses you can expect across the board.
Business Licensing and Permits – This includes city licensing fees, liquor and health and safety compliance permits. Costs will vary by location, but opening a restaurant with an established franchise can take out a lot of the guesswork.
Leasing Security and Utility Deposits – This is another set of costs that will vary mainly by the size and location of your restaurant. Lease security deposits typically range between $2,000 and $12,000, with utility deposits generally between $500 and $1,500.
Legal and Accounting Fees – You will likely need help from trained professionals as you navigate all of the paperwork and legalities associated with opening a restaurant. You can expect to pay $1,500 to $3,000 to have these advisors at your disposal. Employing this type of counsel at the outset can end up saving you money long-term.
Building Improvements – These costs when starting a restaurant business are difficult to estimate. Major contributing factors are specifications and needs to open your restaurant as well as the current state of the physical space. Gold Star Chili holds long-standing relationships with brokers who are familiar with the brand’s site requirements. Architects in-house project managers are also available to walk new franchise owners through the process.
Kitchen and Cooking Equipment – If you’re starting from the ground up, you could spend as little as $50,000 or upwards of $150,000 on your setup. In addition to things like stoves, industrial mixers, griddles, etc., your refrigerator, freezer, ventilation/hood and dishwasher requirements will depend on the size and scope of your operation. If you opt to go with used equipment that was either already in place on your property or purchased second-hand, be sure that it is in good working condition and will stand the test of time.
Furniture and Fixtures – Costs here will again depend on the size and scope of your restaurant. Furnishing a 200-seat fine dining establishment will cost thousands more than a 2,000 to 2,500 square foot restaurant like Gold Star Chili. These costs will cover a range of items like dining room furniture, dinnerware, and table linens, to your restaurant’s lighting and sound systems.
Ordering and Payment Technology (POS System) – Like the nervous system of your restaurant, your POS system is an integral part of what makes your restaurant operate smoothly. Expect to pay in the range of $7,000 to $15,000 for a system that will help you track sales, manage employees, order inventory, and more.
Signage and Grand Opening Advertising – You have put so much hard work and dedication into your restaurant, so of course, you want your opening day to be a smashing success! Gold Star Chili provides eye-catching, enticing awnings and signage for all our restaurants, and works with franchisees to map out an opening day marketing plan that will ensure customers on day one. This part of your initial investment is instrumental in helping your business make a great first impression.
Franchise Fee – This is obviously a cost that only applies if you buy a franchise restaurant and can range anywhere between $5,000 to $50,000 depending on the brand. Gold Star Chili’s franchise fee ranges from $15,000 to $30,000, a reasonable amount considering the amount of ongoing support and guidance we offer.
Operating costs include the items and services you will need to pay for once your restaurant has opened, including some ongoing fees. Expenses for operating any new business generally fall into two categories: non-controllable expenses (such as rent or mortgage and utilities) and controllable expenses. Non-controllable expenses are mostly fixed and don’t vary much month-by-month. Controllable expenses, include the cost of goods (food and beverage) and labor, which are essential to the success of your restaurant.
Labor costs can be broken down into three groups — Management, Kitchen, and Front of House. Finding the balance between the three is the key to ensure you aren’t spending too much on labor, while still assuring that your customers are well taken care of. The percentages may vary, but labor costs should typically range between 25 to 27 percent of your restaurant’s gross revenue.
OPENING YOUR GOLD STAR CHILI FRANCHISE
Gold Star Chili is proud to support our franchisees in every aspect of starting a restaurant business. With over five decades of franchising experience and 70 locations and growing, Gold Star knows what it takes to be successful.
To learn more about franchising opportunities with Gold Star Chili, download our Franchise Report.