Don’t Let These Hidden Restaurant Costs Surprise You

Opening a new restaurant is a leap of faith like no other. It’s no secret the failure rate for new eating establishments is 59% during the first year. One reason for the grim statistics could be the hidden costs of opening a new restaurant that catch new restaurant owners off guard.

If you plan to open a new restaurant soon, be sure to factor these expenses into your start-up costs to avoid being an unfortunate first-year statistic.

  1. Permit costs: Depending on the city in which you plan on having your restaurant, you could be taken back by permit costs. Be sure to budget for the following permits: architectural plan check fees, construction permit fees, liquor licenses, food service licenses, food handlers’ permits for all staff, sign permits, fire permits, music license fees for live music; and ADA permits. Fees can vary widely city by city and at the county level.
  2. Occupancy: These expenses include utility deposits, rental deposits, and taxes.
  3. City fees: Taxes, water/sewer fees and other city-specific costs depending on which city your restaurant is in. A quick trip to city hall will help you establish how much you should expect to pay in city-related costs.
  4. Labor: One of the largest costs for business owners is overhead, AKA labor. You’ll not only need to hire and train staff prior to opening day, but you’ll most likely need to hire someone to prepare the space for occupancy and to bring it up to code if necessary. Budgeting for long-term and short-term labor costs will give you ample opportunity to allocate the appropriate resources toward your labor costs.
  5. Insurance: Having insurance coverage in place before opening is vital. Your policy should include both comprehensive coverage and property coverage, particularly if your restaurant is in a high-crime area or a densely-populated community. Insurance is essential in protecting your personal and business assets in the event of a lawsuit.
  6. Marketing: Getting the word out via print and digital media is a must with any new business, particularly a restaurant. A well-designed social media and print campaign can generate interest well in advance of your opening day and will ensure that patrons will be lined up outside on that first night. Enlist the services of a restaurant-specific marketing team to maximize your chances of ongoing success in the competitive restaurant market. An industry-specific marketing team will have a full understanding of the restaurant business, and how to successfully market your new dining establishment.
  7. Design & Construction costs: Architectural & Engineering design fees, construction build-out costs that include equipment, fixtures and furniture. And do not forget legal fees for contract reviewing and setting the new store up properly and legally protected.

Plan Ahead For Success

Every new restaurant owner owes it to themselves and to the success of their business to dedicate plenty of time calculating all start-up costs well in advance of opening day. Doing so will ensure the long-term success of your venture in the highly competitive restaurant market.

It’s better to over-budget than to under-budget.

Don’t leave anything to chance. By knowing all the possible costs up front, you can concentrate on creating the restaurant of your dreams instead of worrying about the hidden costs of doing business.

At SCGWest, we see all too often many of these costs either completely overlooked or substantially under budgeted. Use the checklist above as a basic guideline for a new store location or opening.

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