How much money is needed to start a restaurant?

Every entrepreneur and aspiring business owner asks themselves how much it’ll cost to set off on a new business venture. When it comes to restaurants, the costs can seem daunting at times. However, roughly 80% of start-ups in the UK continue beyond their first year, so odds are it’ll be worth it.

Still, understanding what costs may be involved and how big they’ll be is the best way to prepare yourself and make sure you have the budget to start your restaurant. This guide will explore how much money you need to cover the following costs:

• Premises
• Licenses and permits
• Legal
• Technology
• Kitchen
• Marketing 

Unless you’ve inherited a commercial property that you can use for your restaurant, your premises will likely be your highest monthly cost. 

Rental costs for a restaurant space will vary depending on your location and what the market is like at the time. However, on average, you can expect to pay £47 per square foot in London, £28 in Edinburgh, and £5-10 per square foot in smaller towns.

When serving hot food, you’ll need something called an A3 Planning License. Additionally, if you plan on serving alcohol or having live music at your restaurant, you’ll need to apply for special permits.

The government website has more information about premises licenses and permits for England and Wales, and for Scotland, including how to apply for a license in your local council.

Starting a restaurant requires a bunch of admin work, which mainly revolves around what permits you have and whether or not you can pay your rent or mortgage for the premises. This red tape comes with certain costs.

When starting a restaurant, you’ll need to set aside money to:

• Pay for building, contents, stock, inventory, employers liability and public liability insurance policies. You can find out more about what insurance you might need in this guide.
• Hire a solicitor to help you cut through the red tape and legal admin. You might need to pay up to £100 per hour for their time. However, a good solicitor will be worth their weight in gold since they’ll help you save time, energy and money by recommending the best deals on insurance and more.

The days of manual, paper-based systems are gone. These days, restaurants need WiFi, electronic point of sale (POS) systems and maybe even mobile payment terminals to run successfully. 

Your WiFi needs to be fast, reliable and easy to connect devices to. Depending on your provider and speed, you can expect to pay between £15 and £100 for your connection.

These days, POS systems are an absolute necessity as cash use has been dropping by 15% every year since 2017. Most providers offer POS systems for a fixed monthly fee that can be as low as £30, including terminal rental and software support. If a provider asks for an upfront fee for POS hardware, you can usually expect to pay between £1,000 and £1,500 per unit.

Finally, you’ll need to invest in mobile payment terminals to accept contactless payments. The number of contactless payments rose by 12% in 2020, which means that 83% of people in the UK now use contactless, with no age group or region falling below 75%. A good starting point is speaking to your bank as they might offer a solution or refer you to a partner that can. 

According to Cardswitcher, devices will probably cost around £19-50 each, with transaction fees typically ranging from 1.5% to 2.5%.

To run a restaurant, you need a kitchen to cook your food. You might get lucky enough to find premises with a kitchen that’s ready to go, meaning you only have to invest in a couple of pieces of equipment that aren’t already there.

However, oftentimes, you’ll find premises that either don’t have a kitchen or have one that needs work. In this case, you’ll need to convert an empty room into a kitchen, which might cost you anywhere up to £190,000. Therefore, it’s vital to keep that cost in mind when budgeting for your restaurant venture.

When starting any new business, you need to get the word out to the public to attract customers or clients. For restaurants, word of mouth can be enough once you open if your food and concept are spectacular. It worked for Five Guys! However, Five Guys started out in 1986, meaning marketing looked different then. 

In our digital world, it’s probably a good idea to cover your bases online as well. You might start by spending 3-5% of your revenue (money earned from sales) on marketing. If you haven’t opened your restaurant yet, you can choose how much you want to spend on marketing.

The cheapest way to get the word out is to create social media accounts and spread the news about your new restaurant this way. You can pay for Facebook, LinkedIn or Instagram ads (even TikTok if you want to reach a younger audience) to tell everyone about your grand opening.

Bookkeeping and tax admin is necessary for any new business. While it can be stressful, especially if you’re new to it, Countingup can simplify it and make your business more efficient.

Countingup is the business current account and accounting software in one app. It automates time-consuming bookkeeping admin for thousands of business owners across the UK. With automatic expense categorisation, receipt capture tools and cash flow insights, you can confidently keep on top of your business finances everyday and spend more time focussing on the road ahead. 

Find out more here and sign up free today.