Why one-number estimates mislead
A food truck, a counter-service cafe and a full-service dining room have very different needs. Your concept, square footage and market set the real number.
Headlines about what it costs to open a restaurant mix very different businesses together. Rent in a major downtown is nothing like rent in a small town. A leased space with an existing hood system costs less to open than a shell that needs ventilation, plumbing and electrical work.
Instead of one number, build a budget in categories, get at least two quotes for each major item, and add a contingency. If you are weighing whether to start at all, see our complete guide to starting a restaurant.
The one-time costs
One-time costs include lease deposits, construction, kitchen equipment, furniture, signage, point-of-sale systems, licenses and professional fees.
Work through the list:
- Lease and deposits. Security deposit, first month, sometimes last month.
- Build-out. Walls, floors, restrooms, hood and fire suppression, plumbing, electrical, HVAC.
- Kitchen equipment. Ranges, refrigeration, prep tables, dish station. Buying used can cut cost, but check warranties.
- Front of house. Furniture, smallwares, decor, lighting.
- Technology. POS, printers, online ordering setup.
- Licenses and permits. Business license, health permit, food handler certificates, liquor license if serving alcohol. Check with your city and state.
- Professional fees. Attorney, accountant, architect, designer.
- Branding and opening marketing.
The costs people forget
Pre-opening payroll, training meals, insurance, opening inventory, utility deposits and delays are often left off first budgets.
You pay staff before revenue starts. You also buy food for training and test service, pay insurance before opening, and keep paying rent while permits or inspections run late. Delays are the biggest budget killer: every month of delay costs rent, loan payments and sometimes staff.
Include a contingency of at least 10 to 20 percent of build-out and equipment. Our article on the seven things that kill a restaurant business covers other common traps.
Working capital: the cushion that keeps you open
New restaurants rarely break even right away. Hold several months of fixed costs in reserve so slow early weeks do not close you.
Estimate monthly fixed costs: rent, base payroll, utilities, insurance, loan payments, software. Multiply by the number of months you expect to take to reach break-even. Keep that sum available beyond your build-out budget.
| Category | Your quote | Notes |
|---|---|---|
| Lease deposits | $____ | Ask about free rent during build-out |
| Build-out | $____ | Get two bids |
| Kitchen equipment | $____ | New vs. used vs. financed |
| Licenses and legal | $____ | City and state fees |
| Opening inventory | $____ | Include training food |
| Pre-opening payroll | $____ | 2-4 weeks |
| Contingency | $____ | 10-20% of build-out |
| Operating reserve | $____ | Months of fixed costs |
Prime cost: the number that tells you if the menu works
Prime cost is food cost plus labor. Many operators try to keep it near 60 to 65 percent of sales, a common rule of thumb rather than a law.
Cost out every dish. If a plate costs $6 in ingredients and sells for $18, food cost is about 33 percent. Add labor and see where you land. If prime cost runs too high, you either raise prices, trim the menu, cut waste or schedule tighter.
Start-up budgets should assume it takes time to dial this in. Track it weekly from day one. For ways to lift revenue once open, see how to boost restaurant sales.
Paying for it: what fits and what does not
A brand-new restaurant has limited funding options. Established restaurants can use equipment financing, working capital and lines of credit.
Be realistic. Many funders, including ROI Funder, require 6+ months in business and $20,000+ in monthly revenue, so we cannot fund a restaurant that has not opened. Startup money usually comes from savings, partners, family, SBA loans or equipment sellers. See restaurant financing options beyond SBA loans.
Once you are open and trading, ROI Funder can help with equipment financing, a second location, a renovation or seasonal cash gaps through working capital. We consider 500+ FICO and show payback before you sign.
Frequently asked questions
How much does it cost to open a restaurant?
It depends heavily on concept, size and location, so build a line-by-line budget with quotes instead of using an average.
How much working capital should a new restaurant keep?
Many owners hold several months of fixed costs in reserve. Multiply your monthly fixed costs by the months you expect to need to break even.
Can ROI Funder fund a restaurant that has not opened?
No. ROI Funder requires 6+ months in business and $20,000+ monthly revenue. Open restaurants can apply for equipment financing or working capital.
What is prime cost in a restaurant?
It is food and beverage cost plus labor cost, often tracked as a percentage of sales. It shows whether your menu and staffing can make money.