Restaurant Startup Costs: A Guide for New and Potential Investors

Restaurant startup costs can often be overwhelming. Learn more about the average cost of opening a restaurant, the various expenses that are typically involved, and the advantages of buying a restaurant franchise as opposed to going it alone.

The Minimum Budget: It Varies

Opening a new business entails a great deal of planning, and having a sense of what you need to get off the ground will prepare you for how much money you’ll need to spend and how and where to spend it.

The minimum cost of opening a restaurant can vary widely based on several factors, including location, concept, and scale. While it’s challenging to provide an exact figure, restaurant startup costs can range anywhere from $95,000 to $2 million or more.

Startup Costs: The Essentials

The first step in opening a restaurant is to determine your concept and understand the type of eatery you want to establish. Once you have a clear vision, you can start estimating your restaurant startup costs. Here are some essential expenses to consider:

  • Location and lease: The cost of leasing or buying a property fluctuates significantly based on location. In prime areas, expect higher rents, while less central locations may offer more affordable options.
  • Renovation and decor: Depending on the condition of your chosen location, you may need to invest in renovations and interior design to create an inviting atmosphere.
  • Kitchen equipment: Commercial-grade kitchen equipment is a significant expense. The amount you spend is based on the type of cuisine you plan to serve.
  • Licenses and permits: You’ll need a host of licenses and permits to operate a restaurant legally, which often require fees and processing costs.
  • Legal and accounting fees: Trained professionals can help you navigate all the paperwork and legalities associated with opening a restaurant. You can expect to pay from $1,500 to $3,000 on average to have these advisors at your disposal, but ideally, they’ll help you save money down the road.
  • Staffing: While this aspect should be budgeted as part of your restaurant startup costs, it will also factor in as an ongoing expense. Labor costs can be substantial, including salaries for chefs, servers, and other support staff. Don’t forget to budget for training and payroll expenses.
  • Inventory: You’ll need to purchase an initial food and beverage inventory, which can be costly, depending on your menu.
  • Marketing and promotion: To attract customers, you’ll need to invest in marketing and advertising, both before and after opening.
  • Utilities and overhead: Don’t overlook ongoing expenses like electricity, water, gas, and insurance.
  • Franchise fee: This cost obviously won’t apply to independent ventures, but franchise investors can expect a fee typically anywhere from $5,000 to $50,000, depending on the concept and brand. With Wayback Burgers, the initial franchise fee for your first location is $35,000.

The cost of a restaurant franchise, unlike an independent venture, takes out the guesswork by itemizing exactly where your money is going. With the right franchise, these startup costs are more than justified as the expertise and ongoing support provided by the franchisor will be invaluable to the success of your business in the long run.

Profitability: Can Restaurants Be Profitable?

Independent restaurants are notorious for high failure rates, but this doesn’t mean it’s impossible to achieve your financial goals. Success often depends on factors like effective management, customer service, and a well-executed concept. While it can take time to break even and start making a profit, with dedication, careful financial planning, and adaptability, many restaurants achieve their goals.

And compared with independent small business owners, franchisees benefit from the resources of the franchisor, which can create higher efficiency, improved revenue, and lower operational costs. As a franchisee, you can leverage the brand’s marketing strategies and purchasing power.

Franchise Opportunities: The Smarter Investment

Here are some reasons why buying a franchise might be a smarter choice than the independent route:

  • Established brand: Franchises come with a recognized brand, which can attract customers more easily than a new, independent restaurant. Standardization allows your franchise to operate according to the established business model and operational guidelines, helping maintain the highest quality and consistency in all franchise locations to continue to enhance the brand.
  • Training and support: Franchisors typically provide comprehensive training and ongoing support, helping you navigate the complexities of the restaurant industry.
  • Economies of scale: Franchises often benefit from bulk purchasing power, leading to lower costs for supplies and equipment.
  • Marketing and advertising: Franchisees have centralized marketing and advertising efforts that create brand awareness, drive traffic to their restaurant, and save them time and resources.
  • Proven business model: Many franchises have a track record of success, giving you a better idea of potential profitability. There is also the added benefit of a network of fellow franchisees who can share challenges and triumphs, providing new owners with a better sense of what to expect from their franchising experience within a particular brand.

Wayback Burgers: A Delicious Opportunity

Wayback Burgers is a franchise that epitomizes a smart investment for any savvy entrepreneur looking for a winning restaurant concept well worth the investment. The brand name has been attracting both loyal and new customers for more than 30 years with our combination of authentic, nostalgic flavors, emphasis on friendly, hospitable customer service, and commitment to giving back to the communities we serve across North America and beyond.

To learn more about franchising with Wayback Burgers, get started.