Did you know that 60% of new restaurants fail within the first year of business? And a staggering 80% fail within five years.
While poor location is often to blame for many – if not most – of these failures, one other common reason why these food businesses fail to launch is oversight in terms of restaurant startup costs. They overspend before they even open for business.
The best way to avoid this rookie mistake and its often-irreversible consequences is by knowing exactly what to expect in terms of costs when opening a restaurant business. We’ve put together this comprehensive restaurant startup costs breakdown to help you understand the most common costs that you should anticipate when opening a restaurant:
Restaurant Startup Costs Breakdown
- Rent. Rental costs depend on a variety of factors, including location and building type. Prepare to pay for security deposits and down payments that usually amount to a few months’ rent.
- Location improvement. Construction, renovation, and decor are some of the biggest expenses a restaurant owner can expect at startup. It is also a category where they tend to overspend. One good tip in making sure you stay within budget for improvement is to save bigger improvements for later and work on a budget for the more important parts of your structure, then make less necessary improvements later on.
- Permits and Licenses. Get a comprehensive list of every permit that you need and an accurate calculation of how much each of them costs so you know how much money to set aside.
- Initial Labor and Professional Services. From your building contractors to your planning and management team, you’ll need to set up a payroll to get your business going from the ground up. You’ll also need professional services like accounting and legal services when opening a new business, so keep tabs on these expenses as well.
- Marketing and Advertising. Marketing and advertising can be tricky as many new business owners tend to overspend or underspend on them. Plan your strategies carefully and don’t that small details can have a large impact on marketing and advertising your restaurant. Take uniforms, for example.. As basic as they can be, the right choice, style, and color can impact the way your patrons perceive your business.
- Equipment. Depending on your needs and type of restaurant, the equipment you need can either be bought wholesale or from required vendors (as in the case of franchises). Looking at second-hand equipment from restaurants that ran out of business is also a popular money-saving option.
- Insurance. Aside from the usual insurance coverage needed for businesses like property and fire insurance, it may also be wise to look into industry-specific coverages like food contamination insurance that protects your business in cases where your perishable goods are spoiled or liquor liability insurance that provides coverage in an event where a drunken customer causes damage to your property/other customers.
- Supplies and Linens. Supplies and linens can easily take an enormous chunk of your startup budget. While many of the items that fall under this category are long-term items like cutlery and glassware, others have a shorter lifespan, like linens. They will need regular servicing and must be replaced every so often due to wear and tear, as well as to accommodate changing aesthetics.
Renting Restaurant Linens
While renting seems like a longer and never-ending expense as opposed to the single-occurring expense of bulk buying, it actually helps you avoid overspending on your startup costs. Renting your linens means only having to pay for what you need in a single cycle (i.e. week), compared to having a large bulk of linens to last you years. This helps you keep the numbers on your restaurant startup costs breakdown lower, thus give you opportunities to spend it on other more important things.
Explore the many benefits of renting your restaurant linens with Superior Linen Service! We have a wide array of restaurant linens and uniforms to choose from – tablecloths, napkins, back-of-the-house linens, aprons, etc. – to suit your restaurant’s needs. With us, making sense of your restaurant startup costs breakdown is a breeze.
Contact Superior Linen Service today at 253-383-2636 to speak with our consultants and find out how our services can help you build the restaurant business of your dreams!
