Starting and opening a restaurant is an exciting and fun venture, but can be a big challenge and usually requires a large investment of both time and money. Knowing what areas of your restaurant to spend your precious money on can be a daunting task.
There are two main types of restaurant costs: the initial one-time startup costs and the ongoing operating costs. Both of these types of expenses include restaurant labour costs, equipment costs, food costs, rent costs, utility costs and many more different types of costs. It is important to have a restaurant budget and be aware of how much the restaurant startup costs and the restaurant operating costs can be.
Therefore YesGroup have created the Ultimate Restaurant Costs Breakdown guide to simplify the financial costs of starting and running a restaurant.
Restaurant Startup Costs Breakdown
When opening a restaurant or catering establishment, there will be some initial expenses to expect, but most of these would usually be one-time costs, the things which you only normally have to buy once.
They can include purchases such as kitchen equipment, tables and furniture, security deposits, business licences and initial marketing costs. Below are the restaurant startup costs breakdown.
Restaurant kitchen and cooking equipment costs: £25,000 – £40,000
If you are creating a restaurant from scratch, then for smaller restaurants, you can expect to pay £25,000 – £40,000 to buy restaurant equipment and restaurant kitchenware.
For larger restaurants, then you can expect to pay £60,000 – £100,000 but this depends on the equipment type, whether it is used or new, or if you are buying or leasing the equipment. Used equipment can be significantly cheaper than new equipment, but might not last as long.
Furniture, interior design & decorations costs: £15,000 – £35,000
Before your grand opening, you will need to invest in restaurant furniture, interior design and restaurant decorations so your restaurant can show a consistent brand and delight your guests.
This will include restaurant tables, chairs, restaurant crockery and front of house catering supplies. Depending on the size of your restaurant and how much furniture and decorations you require, you can expect to pay between £15,000 – £35,000.
Deposit for property: £2,000 – £5,000 (for renting) or £25,000 – £50,000 (for buying)
If you are renting the property, then it is usually a deposit of 1 month or 2 months worth of rent, which would usually be between £2,000 – £5,000 depending on which property you choose to rent.
However, if you are buying the property for your restaurant, then the usual deposit is 10% of the asking price to get a mortgage to purchase the property, but you can give 15% or even 20% deposit if you can afford it. This can be between £25,000 – £50,000. The higher the deposit amount you give, the less money you have to pay back each month for the mortgage.
Initial marketing costs: £2,000 – £5,000
Many restaurants spend some money on marketing before the official restaurant launch and this can include flyers, advertisements like banners and billboards, social media advertising, creating a website and other online advertising.
Depending on how much initial marketing you’d like to do, pre-launch marketing costs are usually between £2,000 – £5,000 but if you want to make a bigger impact for the grand opening, then expect to pay £10,000 – £20,000.
Ordering and payment systems: £1,500 – £2,000
All restaurants require ordering and payment systems, also known as POS (Point of Sale) systems such as Epos Now. They allow you to manage inventory, take and process orders, as well as collecting payments from guests. The POS systems include the hardware like tills, components like the barcode scanner, credit card readers and receipt printers, and the software.
In total, the POS systems will likely be a fixed cost of about £1,500 – £2,000 or you can purchase the POS systems on a monthly deal for about £100 – £150 per month, depending on the quality of the POS systems you choose.
Building renovations and improvements costs (not essential): £40,000 – £100,000
This only really applies to those who will be buying a property for their restaurant. If you are buying a cheaper property to save money, it is likely you will have to pay for some building renovations and improvements before the grand opening of your restaurant.
Depending on how much work you want to get done, the renovation costs for your restaurant can range from £40,000 – £100,000.
Restaurant Operating Costs Breakdown
After the initial restaurant startup costs comes the ongoing restaurant operating costs that are usually paid every month. They include food and drink costs, labour costs, mortgage or rent costs, utility costs, marketing costs, insurance costs and licencing costs.
Below is a breakdown of the restaurant operating costs.
Monthly food and beverage costs: 25% – 35% of food and drink sales
Your food and beverage costs will be a large part of your total costs, and even though you want the highest quality ingredients for your customers, it is always good practice to buy from wholesalers to help minimise your food and drink costs.
Food and beverage expenses usually amount to about 25% – 35% of your food and drink sales and price of your food, depending on the type of restaurant you have.
Monthly employee salaries / labour costs: £2,100 per employee
Employees are an important part of any business and for restaurants, labour costs are usually around 30% of the restaurant’s revenue. The average salary of a restaurant worker in the UK is about £25,200 for the year, which comes to about £2,100 per month.
Based on the role of the employee, the salary will vary slightly. Here is a breakdown of the average yearly salaries of restaurant workers in the UK, based on their role:
- General restaurant manager – around £31,000
- Restaurant assistant manager – around £23,000
- Head chef – around £27,000
- Sous chef – around £25,000
- Waiter / waitress – around £23,000
Monthly rent or mortgage payments: £2,000 – £5,000
If you are renting the property of your restaurant, then you will have to pay rent monthly to your landlord. But if you have bought the property with a mortgage, you will have to pay monthly mortgage payments to your mortgage provider (assuming you have a mortgage). Either way, these would likely cost between £2,000 – £5,000 each month depending on many factors such as the size and location of your restaurant.
Monthly utility costs: £1,000 – £1,500
Every restaurant will have monthly utility costs which includes electricity, gas and heating, water, trash removal, phone and internet. If you are renting, some of these costs may be included in the rent. Utility costs vary depending on many factors such as the size of your restaurant and the area your restaurant is in, but usual utility costs are around £1,000 – £1,500 per month.
Monthly marketing and advertising costs: £500 – £800
Every business requires some sort of ongoing marketing and advertising to gain new customers and even retain customers. Marketing for your restaurant can include advertising on leaflets, billboards, radio and tv, and in more recent times it includes more modern digital marketing such as Google ads, social media marketing, Search Engine Optimisation (SEO) and website management.
Depending on the extent of your marketing campaigns, ongoing monthly marketing costs can be around £500 – £800.
Yearly insurance costs: £750 – £1,500
Insurance is a cost that many restaurant businesses do not factor in when calculating their ongoing costs. Property insurance, inventory insurance, liability insurance and other types of insurance can mount up, and can cost around £750 – £1,500 for the year, depending on which types of insurances you choose for your business.
Yearly business licence and registration costs: £250 – £500
There are licences and registrations that are required for opening and operating a restaurant. You would need to apply for a food business registration that covers all food operations and food premises approval from your local council if your catering business would be handing meat, fish or dairy products but these licences would not cost anything.
Your restaurant would also likely need a premises licence that covers selling alcohol as well as providing entertainment such as live music, recorded music and sporting events but this usually costs between £100 – £200 for the year.
If your restaurant also has a bar area, you might want to consider buying a TV, and with it you’ll need a TV licence which will cost around £160 per year.
For marketing purposes, you might also want to consider a permission to distribute leaflets licence to distribute leaflets, flyers, other printed material or even to display takeaway menus. Overall, licences usually cost between £250 – £500 per year depending on the number of licences your restaurant requires.
When opening a brand new restaurant and keeping it going, there will be a numerous amount of costs that can be difficult to get your head around initially. From renting costs to furniture costs, from food and drink costs, to marketing costs, understanding where your restaurant expenses lie is critical to managing your restaurant’s expenses and ensuring your business stays within your initial budget.
Hopefully this restaurant cost breakdown guide has helped you understand the main restaurant start-up costs, as well as the main restaurant operating cost.