This article was written by our expert who is surveying the industry and constantly updating the business plan for a restaurant.
Our business plan for a restaurant will help you build a profitable project
Opening a restaurant from scratch requires substantial financial planning and preparation.
The total startup costs for restaurants typically range from $95,000 to over $2 million, with an average of $450 per square foot for complete setup. Understanding these costs upfront is essential for securing adequate funding and avoiding financial surprises during the launch phase.
If you want to dig deeper and learn more, you can download our business plan for a restaurant. Also, before launching, get all the profit, revenue, and cost breakdowns you need for complete clarity with our restaurant financial forecast.
Restaurant startup costs vary dramatically based on location, size, concept, and quality finishes, with most entrepreneurs investing between $95,000 and $2 million.
The largest expense categories typically include construction and renovation, kitchen equipment, and working capital for the first few months of operation.
| Cost Category | Typical Range (USD) | Key Considerations |
|---|---|---|
| Lease/Purchase (upfront) | $40,000 – $350,000+ | Location premium, foot traffic, square footage |
| Construction & Renovation | $85–$300/sq ft ($250k–$1M+) | Level of finish, complexity, permits required |
| Kitchen & Bar Equipment | $40,000 – $200,000+ | Menu complexity, scale, new vs used equipment |
| Dining Furnishings | $4,000 – $16,000+ | Quality level, custom vs standard pieces |
| Licensing & Permits | $2,000 – $10,000+ | Location requirements, liquor license needs |
| Working Capital (3–6 months) | $50,000 – $250,000+ | Monthly burn rate, revenue ramp-up timeline |
| Contingency Fund | $50,000 – $250,000+ | Unexpected delays, equipment failures, slow sales |
How much does it typically cost in total to open a restaurant from scratch?
Opening a restaurant from scratch typically costs between $95,000 and $2 million, with most establishments falling in the $175,000 to $750,000 range.
The total investment depends heavily on your restaurant's size, location, concept, and target market. A small casual dining restaurant in a suburban area might cost $175,000 to $300,000, while a full-service fine dining establishment in a prime urban location can easily exceed $1 million.
Industry experts recommend budgeting approximately $450 per square foot as a baseline for all startup expenses. This figure includes everything from lease deposits and construction to equipment, permits, and initial working capital. For a 2,000 square foot restaurant, this translates to roughly $900,000 in total startup costs.
The largest cost drivers are typically construction and renovation (often 30-40% of total budget), kitchen equipment (15-25%), and working capital for the first 3-6 months (20-30%). Location costs, including lease deposits and buildout requirements, can vary dramatically between markets.
You'll find detailed market insights in our restaurant business plan, updated every quarter.
What are the average lease or purchase costs for restaurant locations?
Restaurant lease costs vary dramatically by location, ranging from $3,000 to $25,000+ per month, with annual rates averaging $159 per square foot.
In suburban markets, expect monthly rent of $3,000 to $8,000 for a mid-sized restaurant space. Urban locations command significantly higher rents, often $10,000 to $25,000 monthly, especially in high-traffic areas with strong foot traffic and visibility.
Most restaurant leases require substantial upfront payments, including first month's rent, last month's rent, and security deposits. These combined costs typically range from $40,000 to $350,000 depending on the space size and market conditions. Prime locations may also require personal guarantees and proof of substantial liquid capital.
Purchasing restaurant real estate averages $178 per square foot, though this varies widely by market. Many restaurateurs choose leasing to preserve capital for operations and equipment, especially for their first location.
Lease negotiations often include tenant improvement allowances, which can offset some buildout costs, and percentage rent clauses that tie rent increases to revenue performance.
How much should be budgeted for interior design, construction, and renovations?
| Project Scope | Cost per Square Foot | Total Cost (3,000 sq ft) | Key Components |
|---|---|---|---|
| Basic Renovation | $85 - $150 | $255,000 - $450,000 | Minimal structural changes, standard finishes, basic lighting |
| Mid-Level Buildout | $150 - $225 | $450,000 - $675,000 | Custom millwork, upgraded flooring, enhanced lighting systems |
| High-End Construction | $225 - $300 | $675,000 - $900,000 | Premium materials, complex layouts, specialized ventilation |
| Luxury Fine Dining | $300 - $500+ | $900,000 - $1,500,000+ | Custom everything, architectural features, high-end finishes |
| Design Fees | 10% of construction | $25,000 - $150,000 | Architect and interior designer professional fees |
| Permits & Inspections | 5-8% of construction | $12,500 - $72,000 | Building permits, health department approvals, fire safety |
| Contingency | 15-20% of budget | $38,000 - $270,000 | Unexpected issues, change orders, timeline delays |
What are the estimated costs for kitchen and bar equipment, including installation?
Kitchen and bar equipment costs range from $40,000 to $200,000+ depending on your restaurant's size, menu complexity, and quality preferences.
A basic kitchen setup for a small casual restaurant typically costs $40,000 to $75,000, including essential items like commercial ovens, refrigeration, prep tables, and dishwashing equipment. Mid-scale restaurants with more complex menus often invest $75,000 to $150,000 in kitchen equipment.
High-end establishments and those with extensive menus can easily spend $150,000 to $200,000+ on premium commercial-grade equipment. This includes specialized cooking equipment, multiple refrigeration units, advanced ventilation systems, and backup equipment for critical functions.
Bar equipment adds another $10,000 to $25,000 for establishments serving alcohol. This covers ice machines, glass washers, beverage dispensing systems, and storage equipment. Fine dining restaurants with extensive wine programs may need additional wine storage and serving equipment.
Installation costs typically add 10% to your equipment budget. Professional installation ensures proper setup, code compliance, and warranty protection, making this additional expense worthwhile for most restaurant operators.
How much does it cost to furnish the dining area, including tables, chairs, and décor?
Dining area furnishing costs range from $4,000 for basic setups to $16,000+ for high-end custom pieces, depending on your restaurant's size and style.
For a 1,500 square foot dining area with 20 tables, 60 chairs, 8 booths, and 10 bar stools, budget approximately $4,100 for economy-grade furniture. This includes basic commercial-grade pieces that meet durability requirements but offer limited style options.
Mid-level furnishing packages cost around $9,050 and include upgraded materials, better design options, and enhanced comfort features. These pieces typically offer better longevity and customer experience while maintaining reasonable costs.
High-end dining areas with custom or reclaimed wood furniture, designer pieces, and premium décor elements can cost $15,700 or more. This investment level is common for fine dining establishments where ambiance significantly impacts customer experience and pricing power.
This is one of the strategies explained in our restaurant business plan.
What are the licensing and permit costs required to legally operate a restaurant?
Restaurant licensing and permit costs typically range from $2,000 to $10,000+ depending on your location and the type of establishment you're opening.
Basic requirements include business licenses, food service permits, health department approvals, and fire department clearances. These foundational permits usually cost $500 to $2,000 in most markets, though some high-regulation areas may charge more.
Liquor licenses represent the largest single permit expense for many restaurants. Beer and wine licenses typically cost $1,000 to $5,000, while full liquor licenses can range from $3,000 to $15,000+ depending on your state and municipality. Some markets have limited licenses available, creating additional costs through license transfers or auctions.
Additional permits may include signage permits, outdoor seating approvals, music licensing, and specialized permits for cooking methods or late-night operations. These can add another $500 to $3,000 to your total permit costs.
Most licenses require annual renewal fees, typically 25-50% of the initial cost. Budget for these ongoing expenses in your operational planning to avoid surprises during your first year of operation.
What is the typical initial inventory cost for food, beverages, and disposables?
Initial inventory costs for restaurants typically range from $5,000 to $20,000, depending on your menu complexity, storage capacity, and expected opening volume.
Food inventory usually represents 60-70% of your initial stock investment. Plan for 1-2 weeks of projected food costs to establish your opening inventory. For a restaurant expecting $30,000 in monthly food sales, this translates to approximately $7,500 to $15,000 in initial food inventory.
Beverage inventory costs vary significantly based on your alcohol program. Restaurants serving only non-alcoholic beverages might spend $1,000 to $3,000, while establishments with full bars often invest $5,000 to $15,000 in initial alcohol inventory. Wine programs can add substantial additional costs.
Disposable items including to-go containers, napkins, cleaning supplies, and paper goods typically cost $1,000 to $3,000 for initial stocking. These items have longer shelf lives but require adequate storage space.
Industry best practice suggests maintaining inventory costs at 25-35% of projected monthly revenue. This ratio helps ensure adequate stock levels while minimizing waste and capital tie-up in perishable goods.
What should be allocated for technology systems like POS, reservations, and security?
Technology system investments typically range from $2,000 to $10,000+ for comprehensive restaurant operations platforms.
Point-of-sale (POS) systems represent your largest technology expense, with hardware costs of $700 to $1,000+ per terminal and ongoing software subscriptions of $60 to $250 monthly. Most restaurants need multiple terminals for efficient order processing and payment handling.
Reservation systems for table service restaurants typically cost $50 to $200 monthly, depending on features and table capacity. These systems often integrate with your POS for seamless operations and customer management.
Security systems including cameras, alarms, and access controls usually cost $1,000 to $5,000 for initial installation. Monthly monitoring fees add $50 to $200 to ongoing operational costs but provide essential protection for equipment and inventory.
Additional technology considerations include Wi-Fi infrastructure, sound systems, digital menu boards, and online ordering platforms. These can add another $2,000 to $8,000 depending on your restaurant concept and customer expectations.
How much should be planned for hiring and training staff before opening?
Staff hiring and training costs typically require $10,000 to $30,000+ depending on your restaurant size and service style.
Pre-opening training usually involves 2-3 weeks of paid training for all staff members. For a typical restaurant with 15-20 employees earning an average of $15 per hour, this represents approximately $18,000 to $36,000 in training wages before generating any revenue.
Recruitment costs including job postings, background checks, and interviewing time typically add $1,000 to $3,000. High-turnover markets or specialized positions may require additional recruitment investment or agency fees.
Uniforms, name tags, and initial supplies for new employees usually cost $100 to $200 per person. For a 20-person team, budget approximately $2,000 to $4,000 for initial staff outfitting.
Training materials, certification programs, and management training can add another $1,000 to $5,000. Many restaurants invest in comprehensive training programs to reduce turnover and improve service quality from day one.
What are the projected utility deposits and initial utility setup fees?
Utility deposits and setup fees typically cost $1,000 to $3,000 for new restaurant establishments.
Electric utility deposits usually range from $500 to $1,500 depending on your projected usage and local utility company requirements. Restaurants with high-power equipment may face higher deposit requirements based on estimated consumption.
Gas deposits for commercial accounts typically cost $200 to $800, depending on your cooking equipment and heating needs. Water and sewer deposits usually add another $200 to $600 to your initial utility costs.
Setup and activation fees for new service connections can add $300 to $1,000 across all utilities. Some locations may require infrastructure upgrades that significantly increase these costs.
Additional services like waste management, grease trap servicing, and pest control often require deposits and setup fees totaling $500 to $1,500. These services are essential for restaurant operations and health code compliance.
How much working capital should be set aside to cover operational expenses for the first 3 to 6 months?
Working capital requirements typically range from $50,000 to $250,000+ depending on your restaurant's size, location, and projected expenses.
Calculate your monthly operational expenses including rent, payroll, utilities, insurance, loan payments, and ongoing supplies. Most new restaurants need 3-6 months of these expenses in working capital to navigate the initial ramp-up period when revenues are building.
A typical mid-sized restaurant with $25,000 in monthly operational expenses should maintain $75,000 to $150,000 in working capital. This cushion helps manage cash flow fluctuations and seasonal variations common in the restaurant industry.
Revenue ramp-up typically takes 3-6 months as restaurants build customer awareness, refine operations, and establish steady traffic patterns. Working capital bridges this gap between opening expenses and sustainable cash flow generation.
We cover this exact topic in the restaurant business plan.
What contingency or emergency fund should be included to handle unforeseen expenses during the setup phase?
Contingency funds should match your working capital allocation, typically $50,000 to $250,000+ to handle unexpected expenses and delays.
Construction projects frequently encounter unexpected issues like outdated electrical systems, plumbing problems, or structural complications that can add 15-25% to renovation costs. A robust contingency fund prevents these surprises from derailing your opening timeline.
Equipment failures, permit delays, and supply chain disruptions are common challenges during restaurant launches. Having adequate contingency funding allows you to address these issues quickly without compromising your opening schedule or operational quality.
Market conditions can also impact your startup timeline and costs. Economic fluctuations, labor shortages, or regulatory changes may require additional investment or extended timelines that contingency funds help manage.
It's a key part of what we outline in the restaurant business plan.
Conclusion
This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult with a qualified professional before making any investment decisions. We accept no liability for any actions taken based on the information provided.
Opening a restaurant requires careful financial planning and realistic budgeting across multiple expense categories.
Success depends on securing adequate funding, maintaining sufficient working capital, and preparing for unexpected costs throughout the startup process.
Sources
- Toast - How Much Does It Cost to Open a Restaurant
- FreshBooks - Restaurant Construction Costs
- Sweeten - Restaurant Renovation Cost Breakdown
- 7shifts - Restaurant Rental Costs
- RestoraPOS - Restaurant Space Leasing
- Dojo Business - Fine Dining Restaurant Budget
- Samtell - Restaurant Kitchen Equipment Costs
- Tables Chairs Barstools - Restaurant Furniture Costs
- Acclime - Thailand Food License
- Credibly - Restaurant Working Capital