If you’re starting a restaurant, we’re pretty confident we can read your mind. What’s it all going to cost? It’s the question on each and every new restaurant owner’s lips when they decide to take the plunge and open their own establishment.
We get this question in our showrooms each and every day, so we think it’s time to share some of our insights. But before we get too carried away, there’s a fundamental we should cover – this is by no means a definitive guide. Each and every food service business is different, and no two start-up operations are going to cost the same, even if they’re selling the same food in a similar location using the same ingredients. But you already guessed that, we’re sure.
What we’re about to go through are ballpark considerations, but we hope they’ll help you set off down the right path.
Location location location
What you probably know already is that your biggest upfront expenses are going to be your property, construction and interiors. Unfortunately it’s also the area we’re least able to advise on in this short article. There are just too many variables here: things such as the location, surrounding properties, building type, size and condition of the property you’re renting or purchasing can really effect the cost of your project.
Don’t be afraid to contact us as we are happy to help with your selection of the location as there are many items that can get a new restaurateur caught out. Our team is qualified to spot these small details that can be missed by the untrained eye. Finally don’t forget that the wrong shop can add thousands to the start-up costs of a new business.
What we can say here and now is that the décor of your new establishment defines your customers’ perception of you. You can have the best food in the world, but if it’s served in a room that looks like somebody’s mouldy basement, you’re going to struggle getting customers through the door. If nobody enters the building, nobody will ever know how great your food is.
And don’t forget back of house either. Make sure that you have the space you need for equipment, and the services necessary to run them. Things such as workflow, storage space and local council requirements will need to be taken into consideration.
As a broad rule of thumb, we suggest you can expect to allocate about half of your total budget towards bringing your location up to scratch.
After your location and construction costs, equipment is probably going to be your next biggest expense. But what we’re about to say next might shock you – you don’t need to break the bank to fit out your business.
That’s correct, we sell kitchen equipment, and we’re telling you not to spend too much. You read that right.
The fact is that planning will go a very long way here. You need to know exactly what you’ll need to succeed, and you need to get it purchased, fitted and churning out great food as quickly as possible.
A trap for new players is picking the wrong equipment for the wrong job. With a bit of our help you can fit out your dream kitchen with the correct equipment to get the job done right. This is also an area where we can use our leasing or rent-to-buy arrangement to take out the cost of the equipment from the equation.
By using finance you can have your equipment making you a profit to pay itself off, this may be a slightly more expensive solution to buying it outright, (finance works out to be about 7% out of pocket after tax) but this way your coffee machine can be making you the money to pay it off.
Speaking to an expert on this is going to help you a lot. Speak with our team for some advice and a quote on your equipment costs based on your requirements.
Some food for thought
It’s hard to start a food service business without food. You’d be genuinely surprised how many start-ups underestimate the costs of this or (believe it or not) forget to factor it into their budget altogether.
As soon as you have your menu finalised, you need to start investigating how much your produce is going to cost, and how much you’ll need up front. How much stock you’ll need on hand at any given time. How much it will cost to replenish, and how frequently this will need to be done.
As a rule of thumb, your food and beverage costs should be no more than 25 to 40% of your revenue once operational, but factoring where that will fit into your initial budget is a trickier equation.
One thing you should take into account is that plans change. Most new restaurants we work with report that at least 25% of their menu is changed or tweaked according to what customers want. Being able to cater to your market can be a make-or-break point for your venture.
Spreading the word
How you market your new business initially, and how much of your budget you allocate to this, is one of the toughest decisions you’ll have to make. All too many new restaurants blow a huge chunk of their budget on marketing, when really they need to focus more on the quality of their food, service and décor.
Equally, just as many food start-ups forget about marketing altogether, which means all that hard work and expense on creating the perfect venue goes unnoticed. Getting the balance right is difficult, particularly if you’re more comfortable with a fry pan than a social account.
Social media is a powerful tool for the start-up, because compared to traditional advertising the costs are significantly lower. Consider building a following among friends and family first, and encouraging them to share it with their networks too. Once you’ve got everything you can out of that, it’s time to start with paid advertising on social media, which is a must for continued engagement in an increasingly crowded online environment.
However, don’t expect people to follow or engage with you just because you exist. You need to give them a reason to. Offer deals, post high-quality pictures of your menu items, host events and spread the word.
Also don’t underestimate the value of a full shop in your opening week. If you have ever been to an old fashioned Italian restaurant you may have noticed that they always sit the first clients of the night outside or at the window. A busy shop will attract clients over a quiet one, so if it means getting some of your family and friends down for the first couple of days it can be worth the investment.
In terms of how much to spend on this, it should be a factor of your overall budget, but not your largest one. You may also want to speak with a marketing agency, or hire someone to your staff who has a proven track record of understanding best practices in this area.
Lawyers and kitchen hands
As usual, we’ve left the boring, practical stuff until the end. Also as usual, it’s a very important step you cannot forget about.
Starting a new food service business involves making sure a bunch of regulatory and legal requirements are met, and we’re sorry to say that none of that comes free. Don’t forget to account for legal services and regulatory licensing in your budget.
There are also your staff costs to consider, because if you can’t pay the people who work for you, they’re not going to be around for very long. Your staff requirements are going to vary a lot depending on the type of business you’re starting, so we would recommend speaking to others who own similar businesses to get an idea of what’s required.
The bottom line
If you’re thinking of starting your own food service business, more power to you! We would never want to discourage anyone from joining this great industry. But there are costs you’ll incur, and it will take some time before you start making a profit. Plan it out carefully, know what you need and what you don’t, and don’t be surprised if you spend more than you intend to. With the right plan in place and 18 months up your sleeve, you’ll do just fine.
If you need any further advice, our consultants are always happy to help! Pop into one of our showrooms for a chat or give us a call on 1300 000 323.