A Guide for Calulating Start up Costs for Restaurants

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Questions for 1 000 dolars: Within the framework of the sound management of a restaurant, what is the share of personnel costs not to be crossed? And what is the “pouring” rate acceptable? You will have understood, the restoration has management ratios to respect that a project is viable. Another imperative is to prepare an investment budget and a provisional budget. If necessary, get help from an organization or a public accountant.

Build Your Budget

 To establish the initial financing plan for your restaurant, start by listing all expenses that represent “seed investments”, to distinguish them from your “operating expenses”. This will allow you to quantify the precise cost of your project. These expenses include:

  • the expenses of establishment (fees, deeds and registration fees of your company); 
  • the first advertisement (the advertising budget for the launch of a restaurant represents on average 4% of the forecast turnover); 
  • the lease or right of lease; 
  • development work; 
  •  purchases of equipment, kitchen and bathroom equipment, furniture; 
  • deposits and guarantees (rents in guarantee); 
  • the average stock of goods and beverages that will be needed at all times.

 Realize the financing plan

Once the initial cost of your project is costed, you can consider how to finance it: personal contribution, bank loan, furniture leasing … The cost of initial investments is on average 300 000 dollars for a restaurant startup. In fact, banks rarely intervene in more than 60% of sustainable needs. They also grant loans more easily if you:

– demonstrate successful experience in the sector and the corresponding diplomas;

– demonstrate competence in team management;

– defend the credibility of the project with a market study and a financing plan;

– have already contributed about 40% of the sustainable needs expressed;

– are assisted by a network of Accompaniment (CCI, association Entreprendre …);

– benefit from a loan of honor (PCE, Adie …).

Prepare your projected income statement

Along with establishing your initial financing plan, identify all projected expenses and revenues you will be recording when your restaurant is open. This will enable you to realize the estimated profit and loss account and calculate your break-even point (minimum turnover to cover all your expenses).
Simple to remember, the fixed charges are certain and predetermined. Is it the rent, the insurance receipt, the fixed salaries of the permanent staff? Do not forget to take into account the annual depreciation allowance. Variable expenses depend on the level of activity: purchase of food products and beverages, laundry costs, “extra” salaries, etc. As for the forecast turnover, It is not easy to establish. You will have to cross-check different data (national and local statistics of the profession, field observations, evaluation of the competition …) knowing that the rotation of the customer can go from 0.8 to 3 covers per day and place. In the end, for the sound management of your establishment, the total cost of raw materials and all remuneration must not exceed 70% of your turnover

Respect the ratios of the trade

Here are the eight key ratios (maximum rate) of good

Management :

  1. Rent or occupancy cost / turnover: 10%;2. Purchases of raw materials / turnover: 30%;3. Staff costs / turnover: 30%;4. Casting (loss / break) / Turnover: 2%;

    5. Premium cost (personnel and materials, goods) / turnover: 70%;

    6. Gross margin / turnover: 70%;

    7. Promotion budget / turnover: 4% for launch, 1 to 2% at cruising speed;

    8. Net income after tax / turnover: 10% (ideal figure to be reached within three years).

    As the restoration showed a fairly low net profit (2% on average)