| 💸 What are the greatest costs of opening a restaurant? | Property charges, premise costs fit-out costs and staffing costs are usually the most significant costs of opening a restaurant |
| ❓Which is more profitable, a pub or a restaurant? | Though pubs have similar costs compared to restaurants, they tend to have lower maintenance costs, creating greater profit margins |
| 📈 How do I invest in a restaurant without capital? | If you don’t have the funds to invest in a restaurant yourself, you can request a small business loan from a bank or find an investor. |
If you’ve always wanted to operate a restaurant and nothing will stop you from realizing your dream, you undoubtedly asked yourself: How much does it cost to open a restaurant? Every entrepreneur and business owner asks themselves this question in the beginning, and oftentimes the high cost to set up a restaurant can be discouraged from the endeavor once they have a firmer understanding of the amount of expenses associated with opening a restaurant.
But take heart! Despite the high start-up costs you’ll incur, the majority of restaurants end up being successful. Indeed, no matter how difficult the economic climate is, you can still succeed with your restaurant, and the first step in that direction is taking stock of start-up costs and how much to open a restaurant.
Opening a restaurant in the UK: what costs to consider
How much does it cost to start a restaurant? The average cost to open a restaurant will depend on its size and location. Here are a few expenses that you should take into consideration if you are thinking about opening a restaurant in the UK.
Property Charges
A primary cost to open a restaurant, you must pay your estate agent’s fee in order to find a location for your restaurant. You will also need to pay the surveyor you employ to create a report on the site’s energy efficiency. Agents may charge differently, but you should budget anywhere from £1,500 to £5,000 overall.
Premise Costs
Rent will be the biggest restaurant financial issue you’ll face. The rent will increase as the area becomes more well-known. For instance, you could anticipate paying more than £70,000 to operate a restaurant in the heart of London.
Choose a location that will fit the concept or subject of your business and a space that can accommodate customers and service costs without putting you in financial peril because your restaurant will be a start-up initially. Additionally, confirm that the location has a planning permission that is appropriate, such as A3, which permits restaurants to serve hot meals.
Fit-Out Costs
Although this cost is relatively unpredictable, it might nonetheless turn out to be a significant launch cost for a restaurant. Fit-out costs can be expensive unless you are wise about them, regardless of whether your restaurant already has a kitchen or you need to have one created later to meet your vision.
Choose solutions that can ultimately pay for themselves in the long term rather than going for things that may not initially help your restaurant. This includes the lighting and signs that can set your restaurant or café apart from other businesses.
When considering restaurant finance, you should give priority to kitchen equipment as well. The cuisine and theme will impact how much money you come up with. Therefore, if you wanted to operate a pizzeria, you could definitely get by with just a pizza oven. However, if your restaurant serves upscale meals, you’ll need to spend money on a variety of tools, silverware, and kitchen supplies that can handle the extensive menu. But how much does it cost to open a pub that doesn’t serve food? In this case, the limited menu of the pubs often makes for higher profitability.
Here, having enough restaurant space is crucial because you’ll need to set aside space for your chefs and cooking equipment. The amount of customers you anticipate every day, especially on weekends, should also factor into how big the kitchen should be.
If you have a limited budget, buying used equipment will help you keep prices or restaurant finance low. Just be careful to swap them out with fresh stock as soon as your restaurant starts to make money.
Legal Charges
Depending on the lawyer you choose to represent you, the legal expenses you end up paying to make your restaurant lawful may be expensive. Additionally, you will be required to pay for contracts that your landlord or estate agent will request, as well as license applications that can be made through the local government. You will also need to pay for the partnership agreement for your business.
Depending on your circumstances, the price may vary, but you may anticipate paying a solicitor an average of £100 per hour for consultations, £10 per call, and £20 per letter or application. Just make sure you have the money set aside to cover these expenses without getting into debt.
Staffing Costs
Underestimating staffing requirements and costs is one of the biggest errors new restaurant operators make. In the UK, a restaurant employee makes an average yearly wage of around £25,500. If you employ too many people, you might not be able to pay them at first. You might not be able to keep up with orders if you only recruit a small number of individuals. In either scenario, you run the risk of becoming broke and damaging your restaurant’s reputation.
This may initially appear like an absurdly high sum, but if you have the right number of employees who are properly trained, you can easily cover those salaries. Additionally, don’t forget to factor in other expenses like sick leave, vacation time, pensions, etc. In the beginning, recruitment costs should also be given top priority because it’s likely that you’ll hire employees who are either inexperienced in the field or lacking in motivation.
Marketing Costs
To spread the news about your new restaurant, you’ll need to use some good, ol’-fashioned marketing.
Many companies adhere to the maxim that marketing should account for 3% to 6% of sales income. Even if it doesn’t have to be the absolute truth, if you’ve already done some sales forecasting, this is an excellent place to start.
The fees indicated above for restaurant financing are by no means all-inclusive, but they do cover those that can’t be avoided no matter what kind of business you want to open.
Opening a restaurant vs a bar
When managed effectively, both restaurants and bars can be profitable. How much does it cost to open a bar? Though bars have similar initial types of costs compared to restaurants, the costs associated with opening and running a bar are usually lower than that of restaurants – restaurants usually require more staff to run, with tables to wait, dishes to wash and dry, and someone to cook the food. Bars also tend to have higher profit margins, since there tend to be lower operating costs, especially if the bars do not serve food.
How to save and invest money to afford opening a restaurant
How much money do you need to open a restaurant? Depending on the size and location, the amount needed can vary greatly. If you have the financial position that allows you to invest the more than £100k that you are likely to need to open an eatery, learn some strategies for how to invest £100,000 so that you are making the most of your investment.
Otherwise, if you are bent on going it alone, consider opening up a general investment account and start learning how to invest money so that you are developing an investment portfolio that is making returns that you can use to pay the high start-up costs of opening a restaurant. Setting up a Stocks and Shares ISA can be a great way to start saving.
But remember, with the high start up costs associated with opening a restaurant, it can be difficult for one or two people to find the right investment strategy for investing in a restaurant, and it can be risky to put a significant amount of your personal savings towards an investment of this type, so you should do some financial planning before making the investment, or even consider looking toward securing external financing.
Before you start contacting potential investors, you must have a viable and credible business plan in place. Lenders or investors will be interested to learn how much you anticipate spending on your startup and how much you anticipate making in the first few years, and how you plan to balance short vs long term financial needs. Private investors with an investor profile just as passionate about the restaurant business and share a similar vision can be a great place to start looking for investment.
Otherwise, small business loans are available from several banks and credit unions, especially if you already work with them. Indeed, small companies borrow frequently. Outside finance is an excellent approach to get startup cash as long as you manage your spending wisely and don’t overborrow.
Alternative sources of investment that have been proven to work are crowdfunding and restaurant incubators.
Through crowdfunding websites, many restaurateurs have opened their second or third outlets. Why not encourage your existing clientele, who already know and adore your brand, to make a little donation to help finance your upcoming location? They may get anything in exchange, including a gift card, a tote bag, and swag.
Looking into local restaurant incubators could be a smart idea if you have little money and no prior company expertise. A restaurant incubator is a shared area with all the necessary kitchen amenities. It provides you with a kitchen separate from the area where you serve food.
FAQs
What licenses do I need?
There are several licenses that you will need to open a restaurant, including Food Business Registration, Food Premise Approval, Premises License, Personal License, Restaurant Insurance, and a Music License if you plan to play music in your restaurant.
Is restaurant business profitable in UK?
Yes, while they can be profitable if managed correctly, restaurants tend to have small profit margins. The size, type, and economy of the restaurant are only a few of the many variables that affect profitability. A new restaurant must operate profitably for an average of two years.
What percentage of restaurants fail UK?
In the UK, about 80% of start-ups survive past their first year (if we flip this language to be more optimistic).
