Dr. Paul Borosky, DBA, MBA
Business Plan Writer · Business Consultant
How Much Does It Cost to Open a Restaurant? Budget for Staying Open, Not Just Opening
Most first-time owners ask how much it takes to get the doors open. The better question is how much it takes to keep them open until the regulars find you.
Written by Dr. Paul Borosky, DBA, MBA
The Definition
What Does It Cost to Open a Restaurant?
The cost to open a restaurant is the total startup capital required to launch it: equipment and build-out, one-time startup expenses such as permits, licenses, deposits, and training, plus working capital and opening inventory to carry the business until sales cover its bills.
Startup cost = equipment and build-out + startup expenses + working cash and opening inventory
“Price the oven, the tables, and the sign. Then price the permits and the first truck of food. Then put enough in the bank to pay the rent while the neighborhood figures out you exist. Most owners stop after the first step.”
Need the answer fast? Read the gold Short Answer boxes and the numbered steps. Want the full picture? Follow Startup Steve the monkey from Dr. Paul’s Fabled Forest, as he prices a new noodle bar and forgets the part that keeps it open. The story shows up in a few short gold notes along the way. The math sits in one section, clearly marked.
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Meet Steve: The Grand Opening Budget
Some lessons stick better as a story. Dr. Paul’s Fabled Forest is his business school told through a forest full of small business owners. Doctor Owl, a dry-witted consultant who lives in the Lone Oak, helps them fix the same problems real owners face. Today he finds Startup Steve the monkey, a forest owner who has launched more businesses than he can count, sketching his newest idea on a banana peel: a noodle bar.
STEVE: (waving the banana peel) Doctor Owl! Look. Noodle bar. I priced everything. The stoves, the tables, the big lantern sign out front.
DOCTOR OWL: Everything?
STEVE: Every last chopstick.
DOCTOR OWL: And on opening night, after the stoves and the sign are paid for, what is left in the bank?
STEVE: (turning the peel over, then back) Left?
DOCTOR OWL: The first month, the room will be half full. Friends, family, the curious. Who pays the rent that month?
STEVE: The customers?
DOCTOR OWL: Which ones? The ones who have not found you yet?
Steve looks at the banana peel. There is no room left on it.
DOCTOR OWL: You budgeted for the grand opening, Steve. You forgot the grand staying open.
An original Fabled Forest moment. Similar stories about Doctor Owl and the forest’s owners are in Strategy for Small Businesses, Book 6 of Dr. Paul’s Fabled Forest Business School.
Steve has a decision to make. Keep reading. You’ll see what he does, and why it works for your restaurant too.
Similar stories in Strategy for Small BusinessesDr. Paul’s Fabled Forest Business School, Book 6 See the Books →
The Three Buckets
What Goes Into a Restaurant Startup Budget?
Every restaurant startup budget has three buckets. Most owners fill the first one carefully, guess at the second, and leave the third one empty.
Equipment and build-out
The things you buy once and use for years. Kitchen equipment, the dining room, the bar, restrooms, furniture, smallwares, the POS, and the sign.
Startup expenses
The one-time costs of getting open. Permits, licenses, inspections, deposits, legal fees, staff training, and opening marketing.
Working cash and opening inventory
Food, drinks, and supplies on the shelf on opening night, plus money in the bank to pay the bills through the slow first weeks.
Steve had the first bucket down to the last chopstick. The third bucket was blank. That is the one that buys time.
The Forgotten Costs
What Costs Do First-Time Restaurant Owners Forget?
None of these costs are big on their own. Together, they always are. Go through the list line by line. If a line does not apply to you, cross it out on purpose.
- 1
Permits, licenses, and inspections
Health permit, business license, certificate of occupancy, fire inspection, sign permit, and the liquor license. A liquor license can cost far more than first-time owners expect, and rules vary by state and city.
- 2
Deposits
The security deposit on the lease, utility deposits, and sometimes a deposit with your food distributor.
- 3
Legal and professional fees
An attorney to read the lease. An accountant to set up the books and the company.
- 4
Paying staff before you open
Training, the soft opening, the friends-and-family nights. Your crew is on the clock before a single guest pays.
- 5
Opening inventory
Food, beer, wine, liquor, paper goods, and cleaning supplies, all on the shelf before night one.
Show the Math
What Does a Restaurant Startup Budget Look Like?
Here is a sample budget for a 70-seat full-service restaurant moving into a space that was a restaurant before. These are illustration numbers only. Your city, your lease, and your concept will change every line.
| Bucket | What is in it | Amount |
|---|---|---|
| Equipment and build-out | Kitchen equipment, dining room and bar, restrooms, furniture, smallwares, POS, sign | $243,000 |
| Startup expenses | Permits, licenses, liquor license transfer, deposits, legal | $12,500 |
| Startup expenses | Staff training and opening marketing | $11,000 |
| Working cash and opening inventory | One month of fixed bills ($22,600) + slow-weeks cushion ($5,900) + opening inventory ($15,000) | $43,500 |
| Total startup cost | $310,000 |
Working cash = opening inventory + one month of fixed bills + a cushion for the slow first weeks. Fixed bills are the ones that do not change with sales: rent, loan payments, insurance, utilities, the bookkeeper.
Where to Save
How Can You Lower the Cost to Open a Restaurant?
You can cut almost anything in a startup budget. Cut the right things.
- 1
Take over a former restaurant space
A hood, a walk-in, and a grease trap that already pass inspection save more than any other single decision.
- 2
Buy used where it lasts
Stainless tables, shelving, and ranges are nearly indestructible. Buy refrigeration new, or get it inspected. A dead walk-in on a Saturday throws away a weekend of food.
- 3
Open with a shorter menu
Every dish needs its own ingredients on the shelf. A tight menu cuts opening inventory, waste, and the equipment list.
- 4
Make a “month six” list
The patio furniture, the custom sign, the second POS terminal. If the restaurant is on track by month six, buy them out of profit.
Steve’s FixThe big lantern sign went on Steve’s month-six list. The money moved to the bucket that pays the rent.
- 5
Never cut the working cash
It is tempting, because it is the only bucket that does not buy anything you can see. That is exactly why it matters.
From Dr. Paul’s Work as a Business Plan Writer
The Line a Business Plan Writer Defends Hardest
When Dr. Paul builds a restaurant startup budget, the working cash line is the one owners most want to shrink. It does not buy a stove or a sign. It just sits there.
Lenders read it differently. A plan with no working cash tells a banker the owner is betting everything on opening week. A plan with a real cushion tells them the owner has thought about February.
The restaurant you can afford to open is not the one you can afford to build. It is the one you can afford to keep open until the regulars show up.
From Dr. Paul’s Fabled Forest
What Steve Did Next
Steve came back a week later with a second banana peel. This one had three columns.
STEVE: Stoves and tables. Permits and training. And this one. Staying open.
DOCTOR OWL: (reading the third column) And the lantern sign?
STEVE: Month six. If the noodles are selling. A smaller menu, too. Fewer things on the shelf.
DOCTOR OWL: And the slow first weeks?
STEVE: Paid for before I open the door.
The lesson for your restaurant: Budget three buckets, not one. The bucket that keeps you open matters more than the one that gets you open.
In Your Business Plan
How Does the Startup Budget Go in Your Business Plan?
Your startup budget becomes the use-of-funds table in your funding request. Lenders read it line by line. Related guides: Should a Restaurant Lease or Buy Equipment? and How Do You Write a Restaurant Executive Summary?.
- 1
Show all three buckets
Equipment and build-out, startup expenses, and working cash. A missing bucket is the first thing a lender spots.
- 2
Use real quotes
Contractor bids, equipment quotes, and listings. Not guesses.
- 3
Show your own money in the deal
Lenders want to see you have real savings at risk.
- 4
Tie it to your projections
The working cash should carry you until your forecast shows sales covering the bills.
This is one piece of the full plan. See How to Write a Restaurant Business Plan for every section, start to finish.
Want your startup budget built into a plan a lender trusts?Dr. Paul writes the plan, the startup budget, and the projections around your concept and your space.
Dr. Paul has written plans like this for real owners, including a Memphis food truck owner opening a restaurant (Memphis business plan writer), a Richmond cafe by day and brewery by night (Richmond business plan writer), an Austin chef moving from pop-ups to a permitted kitchen (Austin business plan writer) and a soul food restaurant moving into downtown Washington DC (Washington DC business plan writer).
Questions
Restaurant Startup Cost Questions
How much does it cost to open a restaurant?
It depends on your concept, size, city, and whether the space was a restaurant before. Build three buckets: equipment and build-out, startup expenses, and working cash with opening inventory. Price each one from real quotes.
What costs do new restaurant owners forget?
Permits and licenses, deposits, legal fees, paying staff to train before opening, opening inventory, and working cash for the slow first weeks.
How much working capital does a new restaurant need?
A common rule is opening inventory plus at least one month of fixed bills plus a cushion for the slow first weeks. More is safer, especially if your concept will take time to build a following.
Beginner’s Guide to Restaurant Financial Statements and Financial Ratios
What it really costs to open, where the money comes from, and how to keep the doors open, in plain English.