How Much Does it Cost to Run a Restaurant Per Month?
Whether you are a first-time restaurateur or an experienced veteran, you will need to estimate how much it will cost you to operate your new business every month. Here are some of the major costs involved in owning a restaurant:
Cost of construction
In addition to choosing the perfect location for your new establishment, determining the correct square footage is essential. While you should research cheap supplies and hire talented staff, the most critical consideration when it comes to opening a restaurant is the cost of construction. Listed below are some costs associated with construction. Read on to learn how to estimate your restaurant’s total cost. Then, use that estimate to develop a realistic budget for each phase of the construction process.
Time is an indirect fee that should not be overlooked. Since a restaurant is not open immediately after construction, the amount of time required will determine whether or not you can open your business on time. To minimize this factor, consider a design-build construction model. The process allows different phases to move at the same time while maintaining high quality standards. Once you have an idea of the cost of construction, you can begin planning your restaurant’s design.
You should budget approximately $20,000 for a 1,500-square-foot restaurant. That cost includes the kitchen equipment, fixtures, and furniture. If you’re going to remodel the entire space, you’ll need more capital. Adding up the costs of materials and labor will total $20,000 or more. A restaurant built from scratch may cost as much as $1 million. However, you can save money by purchasing an existing restaurant.
Cost of utilities
Running a restaurant requires a lot of money, but you must pay certain utilities, such as gas, electricity and water. The cost of these utilities can vary greatly from one location to another, and it is a good idea to estimate the total before opening your restaurant. Typically, the cost of utilities to run a restaurant is around $3.75 per square foot per year, and if your restaurant is four thousand to five hundred square feet in size, you can expect to spend up to $1,200 per month on gas and electricity.
The cost of utilities for a restaurant varies based on your location, and it varies depending on whether you are in a temperate or hot climate. If you are in a hot climate, your bill will be higher than if you open in a temperate climate. To save on your energy bills, install occupancy sensors. These sensors will turn off your equipment automatically when the restaurant is empty. They will cost you a little money up front, but the savings can be significant. You will see a difference after a few months.
Developing the menu is a huge part of the cost of opening a restaurant. Developing a menu is only half the battle. Developing standards and implementing a quality restaurant design take 10,000 man-hours. You can either hire cheap hourly labor or hire highly experienced professionals with extensive experience. The latter will cost you more upfront, but they are more likely to get the job done properly. It’s important to avoid the temptation of rushing to open the restaurant in a hurry, as this could cause additional expenses that are not covered by the restaurant’s revenue.
Cost of kitchen equipment
Setting up a restaurant can be expensive. A small restaurant can run you $50,000 in equipment and construction costs, while a larger restaurant can cost $150,000 or more. Equipment is necessary for proper refrigeration and cooking, including a commercial dishwasher. Restaurant owners tend to overspend when buying these pieces of equipment, but used equipment can be cheaper. Check out the Restaurant Manager’s Handbook for tips on how to save money on this expensive equipment.
Buying used restaurant equipment is an affordable way to start a restaurant without breaking the bank. Many convenience stores have auctions for old restaurant equipment, and you can often get good deals by purchasing these items. However, you must be aware of the disadvantages of used equipment. There is no guarantee that the items are still in good working condition. Also, you will not know the history of the equipment. Used equipment may be unreliable and may not be worth the money spent.
If your menu will feature specialty items, then consider investing in a specialty kitchen. A cotton candy maker, for example, may be a great addition to your menu. A waffle iron and station may help cut down on time spent plating food. Investing in efficient workspace can also reduce your costs. Regardless of the type of food preparation, make sure that you have enough space for all of the equipment you need.
Cost of social media
Whether you’re running a small business or a large chain, social media is a great way to reach a wide audience at low cost. By keeping your restaurant at the forefront of customers’ minds, you’ll grow your follower base and gain more recommendations. But the question is, how much should you spend? The good news is, there are many ways to improve the reach and ROI of your social media campaigns.
Traditional advertising blasts out your marketing message to a large audience, which is costly and often ineffective. Social media marketing is much more targeted and results-driven. The cost of each post depends on the platform used and your desired return on investment. For example, Facebook ads can cost between $100 and $300 per click. Social content boosted with Facebook’s Ad Manager allows you to customize the targeting of your ads and maximize the impact of each piece of content.
To get started with your social media marketing strategy, you must set up profiles on three major platforms. Depending on your budget, you can spend as little as $300 a month on a social media management company. The more channels you choose to advertise on, the more you can expect to pay. However, make sure you look at the pricing plans of social media management companies before you choose a company. If you want to make the most of your social media campaigns, you should hire a social media management company.
Cost of payroll
When a restaurant looks at its budget, they might find that payroll is one of the biggest expenses. Depending on the size of the operation, this could be anywhere from 15 to 30% of the total expense. Overtime wages are another big expense. Paying staff for time and a half can quickly balloon your payroll. Staff scheduling software can keep an eye on overtime hours, and alert managers to them when a staff member goes over their allotted hours. Another unexpected labor cost is turnover.
Keeping track of payroll can be a challenge in the restaurant industry, which has notoriously low profit margins. It is therefore crucial to monitor and optimize your expenses in order to increase your bottom line. For example, one of the challenges restaurant owners face is high turnover. According to the National Restaurant Association, a restaurant loses as much as $150,000 every year due to turnover. Another big problem is poor employee morale, which can also add up to payroll costs. Luckily, employee mobile apps and anonymous employee surveys can help keep staff engaged.
Labor costs in foodservice typically fall between 30 and 35 percent of revenue. The exact percentage varies widely from restaurant to restaurant, and is likely to be different in a fine dining establishment than in a fast-casual one. However, keeping labor costs in check can help you manage your cash flow and determine whether to adjust your food prices. To keep payroll costs at a minimum, try to keep payroll costs to around 30% of sales. Depending on your business model, menu, and location, the percentage you need to budget will vary.
Cost of marketing
The cost of marketing your restaurant can vary widely. Larger companies can afford to spend thousands on TV and radio ads, while smaller restaurants may have a lower budget. However, if your restaurant’s target market is over 50, you’ll have to consider a more modest budget. Direct mail ads are another option, but may require more upfront costs. These ads are sent directly to people in the surrounding area and often include menus, promotional coupons, and flyers about upcoming events.
The return on ad spend is an excellent way to determine the effectiveness of your advertising campaign. Many marketing studies have shown that direct mail marketing can increase check averages by up to 21%. But, if you’re only marketing to attract new customers, this method may not be worth the money. Moreover, it’s not possible to measure the return on investment if you don’t measure your expenses, such as food, labor, and other costs.
In addition, your marketing plan should include ongoing costs and investments, such as promoting sporting events or printing the weekend menu. Keeping an eye on price inflation can be beneficial for your business, but be sure to consider your profit margin and your competition when establishing a budget. A good marketing plan will allocate a reasonable portion of your budget to a loyalty program that helps repeat customers. As a result, customers will be more likely to return to your restaurant, increase their order values, and increase the size of their parties.