Ii of the well-nigh frequent questions I'1000 asked at a seminar, workshop, or when educational activity a restaurant development course at New York University are; "how much money practice I need to open up a eating place, and how do I get the money?" This is the first installment of a two part article answering those questions.

Before nosotros can address how to fund your restaurant, we demand first to sympathize what we're edifice and its toll. The type of eatery you're opening will determine the amount of money you need. In add-on, the kind of eating place will affect the type of funding and who may have an involvement in investing or supplying a loan. Additionally, you lot'll need to evaluate how much of your ain money yous need to provide. That's because part of the process necessary to convince an investor, banker, or private lender is that y'all're genuinely committed to the projection. You know the expression, "put your money where your rima oris is"

For the sake of this discussion, let's say you're opening a fast-casual eating house. Not a franchise but an independent concept that you have developed on your own. This type of project may crave a conventional business loan or an SBA loan. In many cases, investors other than family and friends may not be interested in investing in a brand new concept with no track record of success. Information technology becomes further complicated if this is your start foray into the restaurant industry.

Fast-coincidental restaurants typically price between $250,000 and $400,000 to "plow the fundamental" and open the doors for business. The various costs associated with opening a restaurant will range depending on factors such as location, size and status of the space, everything from security deposits to the reserve capital letter you'll demand to conduct possible shortfalls the first few months y'all're open.

Investment Costs to Consider

  • Professional fees: This is ordinarily necessary to set up your business entity, whether a corporation or LLC. Also, yous'll want to accept a lawyer review any charter you may sign to hire a space where yous will construct your new restaurant.
  • Security deposits: This may be one to iii months of rent paid to your landlord. In addition, many utility companies crave deposits to set upwardly electrical, water, and Net connections.
  • Equipment: The toll for all of your kitchen equipment. Items include hoods, grills, ovens, stoves, stainless steel prep tables, shelving, hot tables, cold tables, a Bespeak of Auction (POS) arrangement, and a walk-in refrigerator. In addition, small wares, things similar scoops, ladles, fry baskets, flatware, dishes, spectacles, and other small items y'all demand to prepare your menu and serve your guests. At present let'south move to the front of the house. Additionally, you lot'll be looking at piece of furniture and fixtures, countertops, workstations, tables, chairs, decorative shelving, and other items. These are the items you use in the front of the firm to create the surround that volition best suit the concept you've created.
  • Leasehold improvements: In most cases, this volition be your nigh meaning expense. Leasehold improvements are generally construction costs for electrical installations, hood venting, plumbing, heating, and air-conditioning. These items are referred to equally "the mechanicals." And let'south non forget building one and, in many cases, two ADA-compliant bathrooms. Also, installing the proper ceiling, flooring, millwork, painting walls, and other elements that we typically call back of every bit structure. On a side note, you can take advantage of opportunities due to the abundance of restaurants that have closed during the pandemic. These empty restaurant spaces are referred to as "2d-generation restaurant spaces." You lot can save thousands of dollars if yous notice and secure a space that was formerly a eatery. In many cases, you will find the mechanicals have remained in the edifice. These 2d-generation restaurant spaces assist to reduces your cost if you lot don't need to install a hood, venting, plumbing, electrical, and restrooms.
  • Signage: Properly identifying your restaurant will mean you will demand to sign for your storefront. As well, consider that y'all may demand lighted signs in the windows and other signage throughout the restaurant.
  • Starting time-up inventory: This is probably the most extensive inventory order you lot'll ever place. This initial order is for nutrient, paper, beverages, and other supplies you'll demand in your eating place daily. You'll replace these inventory items as y'all use them, but when you first start, you lot'll need to stock your eating place from scratch with every single thing for the first time.
  • M Opening Advertizing: This is an item that most restaurateurs neglect. Y'all'll desire to launch your eating house by making a large splash in the neighborhood. To do this, you need the proper upkeep for social media, print, and other forms of advertising & marketing then yous can go the word out.
  • Reserve Capital: As I mentioned earlier, you volition need to reserve cash in the bank. This reserve cash is required to meet shortfalls that may occur when you lot first open your new eatery. You may not suspension even for months. Therefore, it would be wise to exist prepared to encompass payroll, inventory, utilities, and other costs incurred equally you operate.

Understanding the actual cost of opening your restaurant is vital. An investor or bank will want to meet that you've practical critical thinking to the project by taking fourth dimension to evaluate the start-up cost honestly. In addition, you lot will need to prepare a business plan and projections to secure bank financing or satisfy an investor. Properly evaluating the required investment will lead to accurate budgeting these key startup costs.

So at present that you have an understanding of toll, you should be prepared for a banker or investor to inquire how much of your own money you're willing and able to invest into your business. In many cases, the SBA, private lenders, or conventional loans through a bank will crave that you supply somewhere between 15% and 25% of the total amount necessary. As an example, if yous projection a cost of $400,000 to open your new restaurant, y'all volition demand between $80,000 and $120,000 in cash. Your cash investment demonstrates to the depository financial institution or investor that you have "pare in the game. "I take never seen a bank or investor finance a new restaurant 100%.

Now that we've covered the investment information necessary to open a new eating place, nosotros'll tackle the second question in our next commodity. We'll dig into funding methods such as a conventional concern loan with a bank, an SBA loan, a private investor, and of course, family unit and friends.