You decided to open a restaurant! First of all, well done on the initiative and the entrepreneurship and the will to take your dream one step forward. The first thing you need to do is close the restaurant concept at the general level: menu, differentiation and uniqueness, location, size and so on.
In the second stage you will need to build a budget for setting up the restaurant and estimate the investment you need. On the investment, it is recommended to take into account:
the cost of setting up the place, plus the cost of operating and running the restaurant for a period of at least half a year with no expected revenue.
So let's get going and start calculating the cost of setting up a restaurant.
The setup cost is divided into several parameters. Not everything is required in every restaurant; it depends on licensing requirements, the condition of the property, the location and the concept.
The costs shown are an estimate based on market prices, and the range varies between a small and a large business, a single venue and a chain, and of course between an expensive and a cheap professional, and between expensive and cheap materials.
The costs refer to new equipment only and to setting up a medium sized restaurant from stage 0 (not renovating an existing business), with between 50 and 100 seats (between 150 and 200 square meters), on a general budget of ₪1,500,000.
How much does it cost to open a restaurant? Cost planning:
1. Planning cost (consultants and professionals)
a. Branding (between ₪10,000 and ₪20,000)
The branding company professionally defines the business according to the concept:
what the place will look like and what the message will be to the customer who walks in.
Defining the concept and its branding is the basis for all the other parameters
b. Menu (between ₪10,000 and ₪20,000)
A chef is responsible for building the menu, while meeting the food cost targets (FOOD COST), and for training the team
to produce the chosen dishes.
c. Architect (between ₪20,000 and ₪30,000)
The architect is responsible for planning the business, taking into account the tradespeople and all the requirements of the professional consultants
d. Design and graphics (between ₪5,000 and ₪10,000)
Planning the design elements and graphics of the chosen name, business cards, the website and so on, in line with the branding
e. Lawyer (between ₪10,000 and ₪15,000) lease agreement, employment agreements
f. Financing: a fee to a capital raising company, if a loan with a state guarantee is needed (about ₪5,000 fee + 5%
of the loan obtained), collateral for the lender (about 30% of the requested amount)
g. Guarantee (between ₪30,000 and ₪45,000)
A bank guarantee to the property owner, usually 3 months of rent
h. Various consultants
i. Business licensing: ₪7,000
ii. Safety and construction: ₪5,000
iii. Air conditioning: ₪5,000
iv. Electricity: ₪5,000
v. Lighting: ₪5,000
vi. Sound: ₪5,000
vii. Accessibility: ₪5,000
i. Restaurant consultant (between ₪5,000 and ₪50,000) a professional restaurateur who accompanies the project (planning, setup and operation), the scope of guidance according to need
2. Renovation cost (between ₪5,000 and ₪15,000 per square meter of the business)
a. Infrastructure (contractor: construction, flooring, paint, sanitation)
b. Air conditioning
c. Electricity
d. Fire protection
e. Exhaust hood
f. Carpentry
g. Stainless steel
h. Metalwork
i. Low voltage and communications
3. Contents cost
a. Kitchen equipment: depends on the concept and the needs of the menu (between ₪20,000 and ₪100,000)
b. Refrigeration equipment: depends on the concept and the needs of the menu (between ₪20,000 and ₪100,000)
c. Kitchen and bar utensils: depends on the concept and the needs of the menu (between ₪1,000 and ₪10,000)
d. Serving and hosting ware: depends on the number of seats (between ₪200 and ₪400 per set)
e. Furniture: depends on the number of seats (between ₪1,000 and ₪5,000 per set)
f. Design, decoration and miscellaneous items (between ₪5,000 and ₪50,000)
g. Office items (computers, registers, office equipment and so on) (between ₪5,000 and ₪10,000)
4. Inventory cost: depends on the concept and the needs of the menu (between ₪5,000 and ₪20,000)
a. Food
b. Drinks
c. Cleaning and maintenance materials
5. Training cost: depends on the concept and the needs of the menu (between ₪5,000 and ₪20,000)
a. Recruitment
b. Kitchen team apprenticeship
c. Service team apprenticeship
6. Cost of running the place: the cash needed to keep the place going in the first months when income
is not enough to cover expenses until the budget breaks even
a. Ongoing operations
b. Advertising
c. Marketing
Cost of setting up a restaurant: summary:
It is important to make an estimate in advance as close as possible to reality of what is required, and to prepare enough money for the whole project, including "air" for the start. Otherwise, and this is an unfortunate phenomenon that happens in most food businesses, the business closes for lack of cash flow even though it has a chance of succeeding later on.
For help building a financial budget for setting up a restaurant, contact us.
