If you’re thinking of opening your own restaurant, you’ve probably been warned about the number of projects that fail, or how UK restaurant chains keep disappearing from the high street. However, the reality is a little different. Although there are no guarantees, a comprehensive business plan and a realistic idea of your startup costs will put you in a strong position to succeed — provided your food is delicious and your service top-notch, of course.
Many prospective restaurateurs underestimate the costs involved with launching a restaurant. While it’s extremely difficult to estimate exactly how much this type of endeavour will cost, we’ve had a look at the main expenditures involved to give you an idea of what to budget when opening your own restaurant.
The premises
Unlike many modern businesses, a restaurant isn’t something that can be run online. You’ll need a physical premises, something that’s likely to be your biggest expense. Unless you’ve inherited a property or have some serious savings, you’ll likely have to rent somewhere. The cost of doing so depends on where you’re based — for example, it costs well over £2,000 per square foot per year in London’s West End, but this figure drops to around £100 in Bristol. As well as rental costs, you’ll also need to consider the various other expenditures involved with having a physical premises. These include:
Insurance
Restaurant insurance will protect your business financially in the event of incidents like fires and theft. How much you’ll pay is situation-dependent, as insurance provider Brisco Business Insurance notes: “The price of restaurant insurance policies varies depending on the provider and the level of cover you have. Cost will be determined by things like the size of your restaurant, the number of staff you have, turnover and any previous claims over the past five years.”
Business rates
Business rates are the tax you pay for occupying a non-domestic property. Like with rent, what you’ll pay is heavily dependent on where you’re based — expect higher business rates in more popular and populated areas. We recommend checking out gov.uk’s business rates calculator to see roughly how much it’ll set you back.
Utility bills
From water and electricity, to gas and the internet, you’ll need to take into account your utility bill costs too. These are likely to be higher than what you pay at home considering the premises will probably be bigger and use more resources. According to Utility Bidder, small restaurants spend around £2,367 to £3,660 a year on electricity, while medium-sized businesses fork out £3,774 to £7,234 on average. For gas, the figures are £820 to £1,458 a year for small premises and £1,458 to £2,239 for larger premises.
Other costs you’ll need to bear in mind are waste management fees, service charges to the landlord for upkeep of the property and your A3 planning licence. This is required by law for businesses selling hot food and costs anywhere between £5,000 and £100,000.
Delivery service costs
With the rise of apps like JustEat, Deliveroo and UberEats, more and more restaurants are teaming up with them to offer food delivery. While this does remove many of the headaches involved with planning your own delivery offering, you will have to pay these companies commission for doing so on your behalf — up to 35% in some cases. Although you can charge extra for food to help make up for this, it’s still an additional expense to bear in mind.
Your employees
You simply can’t run a restaurant on your own. You’ll need to hire some staff to get your operation going. It’s important to bear in mind that this will likely be your biggest expenditure alongside your premises, so you need to consider your staff budget wisely. Among the employees you’ll require are chefs and other kitchen employees, front of house staff, managers (unless you’re taking on this role yourself) and cleaners. To give you an idea of how much this will set you back, here is the average pay for some of these jobs:
Chefs: £27,271
General restaurant staff: £18,574
Restaurant manager: £27,460
It’s also important to take into account aspects like recruitment and training costs, which is why we recommend talking to a recruiter to see roughly how much this will cost you.
The equipment
If you rent somewhere with an existing kitchen, then you might not have to spend very much on equipment at all. However, should you need to convert an empty room into a commercial kitchen, you could be looking at an outlay of up to £400,000 in larger properties.
As well as your kitchen, you’ll also have to buy equipment and furnishings for the rest of your restaurant, such as chairs and tables, decorative items and a point of sale (POS) system.
Marketing costs
Once everything is set up and you’re ready to open your eatery, it’s time to market your business to attract customers. You really can spend as much or a little as you like on this, though Gourmet Marketing recommends setting aside around 3% to 6% of your sales for marketing purposes. Online marketing can technically be done by yourself for free, but you’ll be taking away precious time from other aspects of the business, and you may be better off relying on marketing professionals. For more information on this topic, check out this guide to restaurant marketing by On the Line.
