If you are considering opening a restaurant business, it’s likely that you have heard all of the terrifying statistics about failing in the first year, and the horror stories of Britain’s high street chains closing at an alarming rate.

However, the reality is, if you have a good solid business plan, and a clear and realistic idea of restaurant start-up costs, it’s more likely that you will succeed- assuming of course, that you also offer great food and service!

Many would-be restaurant owners seriously underestimate startup costs of opening their first venture or simply don’t realise that certain expenses even exist. With this in mind, we explore the costs of opening a restaurant. 

Restaurant Premises Costs

One of your biggest expenses is likely to be the rent on your premises, and the more popular the location, the more it’s likely to cost. For example, renting a restaurant in central London is likely to cost in excess of £70,000 in rent alone. This is without including the costs for service charges and business rates which you will also need to pay.

As part of your business plan, it’s important to balance choosing a location that will work for your restaurant concept, and a space that is the right size for the number of covers needed, with the costs involved in servicing such a space.

You will also need to ensure that the space that you let has the right planning licence – to serve hot food you will require an A3 planning licence – read more about UK commercial property use here. 

Restaurant fit-out costs

This is possibly one of the most variable costs that you are likely to face. To put it in perspective, the fit-out of Sexy Fish in Mayfair reportedly cost £15million, while an average high street chain tends to spend around £500,000 - £800,000, on the fit-out. 

While fit-out costs are a true restaurant start-up cost, generally only being needed at the outset, they are also a major expense for a small business. 

Whether you are renting a restaurant which already comes with kitchen equipment and furniture or starting completely from scratch, there are still likely to be considerable costs in getting your space looking how you want it. Of course, by renting a space which is already a restaurant you are likely to save a lot of costs when compared to fitting out an empty space.

Don’t overlook items such as signage, art, lighting fittings and flooring, as these can be the touches which make your restaurant feel unique and stand out from your competitors. 

What kitchen equipment do you need for a restaurant?

What type of kitchen equipment you need will very much be driven by your concept. A high-end establishment is likely to require more types of oven, kit and utensils (think all of that sous vide cooking on MasterChef). On the other hand, if you think of your standard pizzeria – it’s a single pizza oven with perhaps a hob. 

Restaurant space is again important here, as you will need to ensure that there is adequate kitchen equipment, space (and room for chefs) to be able to service the number of covers you expect, so the kitchen size should match this.

It is possible to keep the costs down by choosing to purchase second-hand commercial kitchen equipment, however, it’s still worth keeping in mind that even professional chef’s knives and other utensils can all add up. 

Technical costs

Taking payment these days is about more than a cash till, and it can be worth choosing specialist restaurant ePOS systems which allow your staff (and you) to easily manage orders, payments and even rotas. 

Additionally, in a world where companies like Deliveroo and Uber Eats offer delivery from restaurant to door, it can be savvy part of your business model to include take away, however, you will need the tech in place to be able to provide this. 

Staffing Costs

A common mistake almost all business owners make is to underestimate staffing costs – and when it comes to restaurants, many owners also underestimate how many staff are needed. Too few staff and you risk your reputation, too many and you will be paying for someone to sit twiddling their thumbs.

While it’s likely that you will take special care in selecting your chef, great waiting or serving staff are worth their weight in gold and maintain the ambience of your restaurant. 

Another mistake is to think that you can do it all yourself – be the chef, restaurant manager, front of house, cleaner and all-round superstar! The truth is, by taking on too much, you risk burnout and also falling out of love with the business you so carefully chose to be in.

When looking at staffing costs, don’t forget to take into account NI contributions, holiday pay, sick pay, and pension top-ups. Hospitality can be a fickle industry too – so don’t forget to include recruitment costs as, for some roles, it may be harder to find reliable staff than you think.

Food costs

The cost of ingredients can change all the time as produce goes in and out of season. And if you’ve been anywhere near a supermarket for your own shopping in the past year or so, you’ll be aware that prices have skyrocketed. Therefore knowing your approximate food costs (and thus making sure your pricing structure is right) is important.

Remember, the more items that you have on your menu, the more likely it is that you will have food which will go to waste (will go off before being used), so in certain cases it can be best to start with a specific, seasonal menu, although of course, this will very much depend on your restaurant idea. 

Read this great article to help calculate your food costs and how much you should charge. 

 Licencing

If you plan to serve alcohol, play music, or even offer live music, you are likely to need a licence. 

The amount you will be charged will be based on the rateable value of your property, and application fees currently range from £100 to £1905 depending on the fee band of your venue. While the premises licences tend to have an unlimited duration, an annual fee is usually payable. 

You can be fined up to £1,000 for failing to produce your licence on request.

If you carry out any licensable activities at your premises without a premises licence, you can be fined, sent to prison for up to 6 months, or both, so it’s of vital importance that you know which licences your premises need. 

Utility Costs For a Restaurant

It’s easy for restaurant owners to underestimate just how much utility bills can add up to. Again the size of your venue can have a huge impact on costs – as heating and lighting a larger space will cost much more, whereas for a small restaurant costs will be lower. 

Additionally, the hours that you are open will also impact your utility costs – and it goes beyond simply being open to the public – from the moment there are staff opening up your premises, the utilities will be being used.

Don’t forget the costs for things like broadband (you will need something reliable) and telephone lines too.

Also, while not strictly speaking a utility - don’t forget that you may need to put aside money for refuse collection, as this is not often included in your business rates. Pest control is also often required. 

Insurance

Like most businesses, you are likely to need general business insurances such as public liability and employers insurance, however, unlike many other business types, a restaurant does tend to carry more risk than say, a one-person office thanks to the fact that food, cooking equipment and the general public are involved!

Learn more about what business insurances you may need here.

Marketing

While you may have the best concept in the world alongside a great location, the chances are that you will need to set aside some budget for marketing your new restaurant, after all, you need those who are in the local area to know that you exist.

According to the 2019 restaurant success report

• 67 percent of restaurants pay for social media ads
• 53 percent pay for community, event or charity sponsorships
• 42 percent pay for Google or search engine ads
• 32 percent pay for newspaper or magazine ads

Therefore it’s wise to put aside some budget for advertising your new venture if you want to make a splash. 

By fully understanding both what running a restaurant requires and the restaurant startup costs, you give your business the very best chance of succeeding in the long term.  

If you’re looking to rent quality restaurant space, take a look at our available restaurants to let in London and beyond. 

If you are considering opening a restaurant business, it’s likely that you have heard all of the terrifying statistics about failing in the first year, and the horror stories of Britain’s high street chains closing at an alarming rate.

However, the reality is, if you have a good solid business plan, and a clear and realistic idea of restaurant start-up costs, it’s more likely that you will succeed- assuming of course, that you also offer great food and service!

Many would-be restaurant owners seriously underestimate startup costs of opening their first venture or simply don’t realise that certain expenses even exist. With this in mind, we explore the costs of opening a restaurant. 

Restaurant Premises Costs

One of your biggest expenses is likely to be the rent on your premises, and the more popular the location, the more it’s likely to cost. For example, renting a restaurant in central London is likely to cost in excess of £70,000 in rent alone. This is without including the costs for service charges and business rates which you will also need to pay.

As part of your business plan, it’s important to balance choosing a location that will work for your restaurant concept, and a space that is the right size for the number of covers needed, with the costs involved in servicing such a space.

You will also need to ensure that the space that you let has the right planning licence – to serve hot food you will require an A3 planning licence – read more about UK commercial property use here. 

Restaurant fit-out costs

This is possibly one of the most variable costs that you are likely to face. To put it in perspective, the fit-out of Sexy Fish in Mayfair reportedly cost £15million, while an average high street chain tends to spend around £500,000 - £800,000, on the fit-out. 

While fit-out costs are a true restaurant start-up cost, generally only being needed at the outset, they are also a major expense for a small business. 

Whether you are renting a restaurant which already comes with kitchen equipment and furniture or starting completely from scratch, there are still likely to be considerable costs in getting your space looking how you want it. Of course, by renting a space which is already a restaurant you are likely to save a lot of costs when compared to fitting out an empty space.

Don’t overlook items such as signage, art, lighting fittings and flooring, as these can be the touches which make your restaurant feel unique and stand out from your competitors. 

What kitchen equipment do you need for a restaurant?

What type of kitchen equipment you need will very much be driven by your concept. A high-end establishment is likely to require more types of oven, kit and utensils (think all of that sous vide cooking on MasterChef). On the other hand, if you think of your standard pizzeria – it’s a single pizza oven with perhaps a hob. 

Restaurant space is again important here, as you will need to ensure that there is adequate kitchen equipment, space (and room for chefs) to be able to service the number of covers you expect, so the kitchen size should match this.

It is possible to keep the costs down by choosing to purchase second-hand commercial kitchen equipment, however, it’s still worth keeping in mind that even professional chef’s knives and other utensils can all add up. 

Technical costs

Taking payment these days is about more than a cash till, and it can be worth choosing specialist restaurant ePOS systems which allow your staff (and you) to easily manage orders, payments and even rotas. 

Additionally, in a world where companies like Deliveroo and Uber Eats offer delivery from restaurant to door, it can be savvy part of your business model to include take away, however, you will need the tech in place to be able to provide this. 

Staffing Costs

A common mistake almost all business owners make is to underestimate staffing costs – and when it comes to restaurants, many owners also underestimate how many staff are needed. Too few staff and you risk your reputation, too many and you will be paying for someone to sit twiddling their thumbs.

While it’s likely that you will take special care in selecting your chef, great waiting or serving staff are worth their weight in gold and maintain the ambience of your restaurant. 

Another mistake is to think that you can do it all yourself – be the chef, restaurant manager, front of house, cleaner and all-round superstar! The truth is, by taking on too much, you risk burnout and also falling out of love with the business you so carefully chose to be in.

When looking at staffing costs, don’t forget to take into account NI contributions, holiday pay, sick pay, and pension top-ups. Hospitality can be a fickle industry too – so don’t forget to include recruitment costs as, for some roles, it may be harder to find reliable staff than you think.

Food costs

The cost of ingredients can change all the time as produce goes in and out of season. And if you’ve been anywhere near a supermarket for your own shopping in the past year or so, you’ll be aware that prices have skyrocketed. Therefore knowing your approximate food costs (and thus making sure your pricing structure is right) is important.

Remember, the more items that you have on your menu, the more likely it is that you will have food which will go to waste (will go off before being used), so in certain cases it can be best to start with a specific, seasonal menu, although of course, this will very much depend on your restaurant idea. 

Read this great article to help calculate your food costs and how much you should charge. 

 Licencing

If you plan to serve alcohol, play music, or even offer live music, you are likely to need a licence. 

The amount you will be charged will be based on the rateable value of your property, and application fees currently range from £100 to £1905 depending on the fee band of your venue. While the premises licences tend to have an unlimited duration, an annual fee is usually payable. 

You can be fined up to £1,000 for failing to produce your licence on request.

If you carry out any licensable activities at your premises without a premises licence, you can be fined, sent to prison for up to 6 months, or both, so it’s of vital importance that you know which licences your premises need. 

Utility Costs For a Restaurant

It’s easy for restaurant owners to underestimate just how much utility bills can add up to. Again the size of your venue can have a huge impact on costs – as heating and lighting a larger space will cost much more, whereas for a small restaurant costs will be lower. 

Additionally, the hours that you are open will also impact your utility costs – and it goes beyond simply being open to the public – from the moment there are staff opening up your premises, the utilities will be being used.

Don’t forget the costs for things like broadband (you will need something reliable) and telephone lines too.

Also, while not strictly speaking a utility - don’t forget that you may need to put aside money for refuse collection, as this is not often included in your business rates. Pest control is also often required. 

Insurance

Like most businesses, you are likely to need general business insurances such as public liability and employers insurance, however, unlike many other business types, a restaurant does tend to carry more risk than say, a one-person office thanks to the fact that food, cooking equipment and the general public are involved!

Learn more about what business insurances you may need here.

Marketing Your Restaurant

While you may have the best concept in the world alongside a great location, the chances are that you will need to set aside some budget for marketing your new restaurant, after all, you need those who are in the local area to know that you exist.

According to the 2019 restaurant success report

• 67 percent of restaurants pay for social media ads
• 53 percent pay for community, event or charity sponsorships
• 42 percent pay for Google or search engine ads
• 32 percent pay for newspaper or magazine ads

Therefore it’s wise to put aside some budget for advertising your new venture if you want to make a splash. 

By fully understanding both what running a restaurant requires and the restaurant startup costs, you give your business the very best chance of succeeding in the long term.  

If you’re looking to rent quality restaurant space, take a look at our available restaurants to let in London and beyond.