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6 Hidden Restaurant Costs While Opening a Restaurant Business

There are different Restaurant costs to account when starting your own Restaurant Business. While having your own business restaurant requires management and organizational skills, it is also important to know your numbers and finances. And even though you have a good business and marketing plan with all the budget forecast, there’s still a big chance of you going over budget. 

Close up businessman using calculator on documents Unrecognizable finance  use calculate about cost at office

With this article, we’ll be able to provide the costs you need to check out to prevent you from over spending your budget and for you to use your budget wisely.

EQUIPMENT COSTS

It is imperative for a starting restaurateur  to know the basic needs of his restaurant, and one of these is equipment. You have to have an idea on what specific equipment and the right model you’ll be needing for your restaurant business. It should align according to your niche. 

Work surface and kitchen equipment in professional kitchen

Knowing the basics for your equipment could help you save more as you’ll be avoiding future costs should you buy a sub par equipment. For obtaining equipment, you can either buy a new one, lease, or check second hand models. 

  • Buy –  If you opted to buy a new one, you’ll be offered lower interest but expect that it would cost more than if you chose lease or second-hand models.
  • Lease – It offers higher interest but this gives you more flexibility with your cash flow.
  • Second-hand models – This is the most advisable if you’re starting a restaurant business. These equipment are mainly from restaurants that have closed down thus it has mostly proven their worth. You can score these from auction sites or second hand shops)

Your POS, and utensils are also included under this cost. Researching is important for you to know which suppliers are worthy and what range should you budget for this cost. 

Note that it is also important to map out and visualize the workflow or system within your restaurant business to see where things and equipment should go because equipment could alter electricals and this leads you to the second cost to watch out.

BUILDING COSTS

This cost usually depends on the space and location that you’ve chosen. It is quite understandable that the larger the space, the higher the cost for renovation. Now it is not always the case as you can minimize your building cost according to what type of concept you’re planning to. A grab-and-go concept requires minimal renovation compared to dine-in concept. You may also try to choose a location that previously serves as a restaurant or has a good space to work on (has an existing bathroom, kitchen, and etc.). 

man climbing on ladder inside room

You have to build your budget for renovations and remodeling around on what experience you want to deliver to your customers. Be smart in rebranding. 

Tip : Bring your general contractor with you while checking the location or space you want to work on. It is important to discuss your plans and they can identify what’s needed in your space. They can also offer you an estimated cost for you to budget. You can also talk to them about other factors like rewiring. This is where your equipment matters, as choosing a wrong equipment could cost you more regarding your electricals. Knowing your equipment and how much power supply it needs could save you a good amount of effort and resources in the future as there’ll be no adjustments needed to be done. 

STAFFING COSTS

Building a restaurant is about food service thus you need to provide an outstanding service. Again, staffing costs could also depend on your concept. There’s a huge difference between the needed staff if you’re doing a dine-in concept and a grab-and-go concept. As a restaurateur, you should be able to identify the talent that you need. Anticipate how many should be employed during a specific hour, day, or week. Start tracking your traffic through systems like POS, and identify your peaks. 

Two Barista boy and girl looking at laptop in a coffee shop. Training Intern

From there you’ll be able to schedule, monitor, and budget properly for your staff. Staffing costs could be distributed to different levels as well, starting from recruiting to training and lastly retention. It is obvious that you would have to spend in training your staff (takes up to 3 weeks), but your restaurant business should be able to reap what their training sow. A well-trained staff is a liability if they don’t stay to work for you. 

Make sure to spend time with them and make them feel like they’re part in making organizational decisions. Set weekly meetings to know what are their insights and how are things going with them and their workflow. Having a good relationship with them will most likely make them stay. It is also advisable to offer them refresher training for them to stay on top of their game.

LEGALITIES COSTS

Starting a restaurant could be simple or complicated, depending on how you handle factors like legalities. It is crucial for you to know what permits to process and what licenses you need to be approved for. You should be able to acquire your local government permits, and for licenses there are food handling licenses, food service license, liquor license, and what you chose to deliver to your customers. 

Close-up Of Person Hands Using Stamper On Document With The Text Approved

You should also get insurance for your restaurant business as well. Now this may look a huge cost and cut to your budget but getting it fixed upon planning saves you much more than you think.

Note : There are permits and licenses that need to be renewed, take note of that.

MARKETING COSTS

Marketing cost always comes last in starting a restaurant business, this practice needs to stop to avoid over spending your budget for this section. There are also chances that a restaurateur opted for bigger marketing firms for them to do their marketing for them, while this is a good choice you may minimize this cost if you leverage the internet. 

People Connecting and Sharing Social Media

Social media and internet ads are most used right now. They cost lower compared to those marketing firms. You may hire a social media manager for better monitoring and operation of your accounts, you can make them check with your website as well. 

It is also wise to hire a local designer from your community to design your logo and other marketing materials. They usually have lower rates and this could be an opportunity for you to connect with the local community.

Tip : Allot a percentage of your monthly revenue for marketing for you to budget your way wiser. 

TECHNOLOGY COSTS

While we’re living  in a Digital Era, it is expected that there would be an amount of costs for Technology. Your restaurant business should be able to adapt with changes fast and effectively. Just like how restaurants nowadays adapted online and delivery systems when the pandemic arise. 

POS terminal in coffee cafe waiter's hand when serving customers and touching screen of a tablet with software interface to take order and print receipt.

Budgeting your technology costs also boosts your productivity. It helps your restaurant business to function efficiently. For example POS, with reports from POS you’ll be able to identify how many people come into your restaurant, how much they spent, what time the traffic is high, and etc. Accounting systems and inventory management technology should also help your starting business.

It is important to understand how the technology would help your restaurant business and what outcome it offers. You should subscribe according to the need of your business.

Restaurant business is not just overseeing the costs of goods sold, inventory of supplies, and revenue. You should also check on menu choices and food choices as it could also cost you in the long run. 

Utilities is also one thing to look out for. Make sure that before signing a contract, all the utilities are settled, be it from the previous owner or from the utility company. This should save you from surprise costs.

Doing a good market research and business planning could help you account better and save you from going over your budget. It is preferable for every restaurateur to forecast and prepare for at least a year-cost of monthly expenses to support their starting restaurant business. 

Knowing these costs,  what you’re doing and making sure that you’re investing to the right thing is a basic for opening a restaurant business. 

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