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Restaurant startup cost

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					Restaurant startup cost




This is one of the most frequently asked questions in starting a restaurant, and one that
people often get wrong by seriously underestimating the actual answer.

That may not be a problem, if there is plenty of cash in reserve and sales pick up quickly,
or it may be a devastating problem if there was very little reserve, the estimate was way
off, or sales are much slower than expected in taking off.

Because many restaurant entrepreneurs have no real experience in these matters, it may
seem like a difficult job to accurately estimate the cost to start a restaurant. It doesn't have
to be. Using good financial projection software, designed specifically for a restaurant can
give you the exact cost answers you are looking for when presenting your plan to a bank
or investors.

Here are the main cost considerations for startup costs when starting a new restaurant:

Lease

This includes not only the monthly payments, from the time of taking the keys, but also a
deposit that may be required, which could run anywhere from a few hundred dollars to
several months worth of payments.

Leasehold Improvement

Once you have the space, you may need to make changes to the interior, including adding
or removing walls, rewiring, replumbing, adding finishes, lighting, shelving, fixtures, etc.
to make the space into your actual business.

Beginning Inventory

This is includes all the food, beverages and liquor you will have on hand to be ready on
your opening day. Depending on the terms you can get with yourvendors, you may be
able to finance some or all of this cost. Being a new restaurant, however, getting good
terms right from the start will be more difficult and depend on your good credit and
business experience and to some extent your industry knowledge and contacts.

Printing

Virtually every restaurant requires some printing. This may be as little as business cards
and menus, or it may be much more.

Restaurant Equipment
You will need to buy or lease the necessary equipment to operate it. Don't forget the
small things, like fax machines, phone systems, computers, desk chairs, filing cabinets,
etc. which every restaurant needs, and although no one thing costs a lot, the collection
will add up.

Utilities and Deposits

You will need to turn on the electricity, phone and any other services you need to operate.
Some of these will require a deposit or hook up fee, or both, that will make the first
payments double or more of the typical payment you can expect.

Permits/Licenses/Taxes

While not usually an excessive amount, you will need to budget some money to cover
your business license, health permit and any other permits or taxes you will be required to
pay. Some states require a deposit for your sales taxes. If you incorporate or form an
LLC, there will likely be fees and taxes associated with the registration.

Professional Services

If you use a lawyer, accountant or other professional services in starting up, there will be
expenses associated with these services. Most restaurants can avoid these, unless there is
a complicated investor relationship or partnership agreement needed.

Your Staff

You may start your business alone or with only partners, but if you need more help then
you will have the cost of employees. You will also have the added expense of payroll
taxes, social security, etc. which adds an additional $.20 or more cents to every dollar of
payroll cost.

Marketing/Advertising

You will be spending money on whatever kind of advertising you do for your new
restaurant. You might buy yellow pages ads, do a mailing, put up a website, buy a sign
for the front of your building, or even do radio spots, trade journal ads or any of a variety
of other options. Most of these expenses will come up before the advertising actually
takes place, which means they can't be funded from the revenue they produce.

Insurance

There are several types you will need, depending on the size of your business. Generally
you can pay in installments, which helps lower the cost.

Other Costs
All restaurants have extra costs that come up. By planning your restaurant carefully you
will be able to accurately estimate how much they will cost when you get started.

The only mistake you can make is not planning at all, because then you will certainly get
it wrong and that almost always means coming up short on cash and having to close the
doors on what might have otherwise been a very successful restaurant.


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