5 Costs You Don’t Expect When Running a Restaurant
Deposits
You may have dreamt about waltzing through your restaurant on a Saturday evening, greeting smiling guests who are enjoying your meals in soft lighting, but have you thought about the initial deposits? There are many things you need to get squared away before you fist open your doors: security deposits, first month rent, first month utilities, and other city and state deposit requirements. If you buy to own, you will have to build everything from the ground up, including the kitchen. Other smaller amounts include insurance, restaurant signage, menus, and the list goes on. Start on the big things such as location and insurance, and then go down the line.
Construction Costs
Now, you may have accounted for construction, but make sure you have an emergency fund to back up any surprise costs. Whether you own or rent a property, you never know what bizarre issue will bubble up to the surface. Perhaps the property has bad pipes, or you discover a plague of termites in the wall. Plumbing equipment may be faulty, or there were other details that were not covered in the walkthrough. You will not always encounter a nightmare scenario, but chances are there will be something—even one thing—that will pop up. Be prepared and have as much reserve funds as possible to cover costs.
Licenses
You will find that you seemingly need a license for everything. There are businesses licenses, food handling and safety licenses, trademark licenses, alcohol licenses, and even a music license if you want to play music. It is crucial to obtain these, lest you leave yourself open to lawsuits or other major legal issues. Fortunately, there are companies out there that can handle much of the busy work. Companies such as License Locators, Inc. can offer their services to find a liquor license, for example, which can be a headache in itself. Look for ways to outsource your responsibilities and make sure everything is done correctly.
Design
Every aspiring restauranteur has a vision as to the aesthetic ambiance of their restaurant. Items such as tables, furniture, art, flooring, you name it—will all cost you. This can be a tricky business to set out on your own. If you are trying to cut costs, you would be wise as to which parts of design you decide to cut. Remember: cheap materials will often look cheap and may wear out faster. To get the best of both worlds, it is advantageous to hire a designer who will meet your needs. A good designer will listen to you, offer suggestions, and design an outline that will best suit the design of the business within your budget.
Food
Keeping track of food costs can be a baffling task. That is because produce has a shelf-life—you better use it quickly, and once it’s gone, it’s gone. If you do not come into the business with much knowledge of the restaurant industry, you will potentially make the mistake of underestimating the cost of what it takes to get the produce to the plate. Meat, for example, is very expensive, and to get the best fish you need to go know the fish monger’s schedule. It is the same with the butcher—make a strong relationship with your protein dealers and they can give you the best cuts and the greatest deals. Another strategy is to buy seasonally. Contrary to our hopes and dreams, certain foods just won’t taste good all year round, and the cost it will take to import them from other countries likely won’t be worth the higher prices you pay. The tomatoes may come in from Spain, but if they were picked in the winter their skin might be tougher and not taste the same; not to mention that the long voyage can ruin their shelf-life and flavor. As you can see, creating a budget for this cost can be extremely difficult. If this seems perplexing to you, consider getting a degree in restaurant management. You won’t be disappointed—the knowledge can save your business and your money.
James is an internet entrepreneur, blogging junky, hunter and personal finance geek. When he’s not lurking in coffee shops in Portland, Oregon, you’ll find him in the Pacific Northwest’s great outdoors. James has a masters degree in Sociology from the University of Maryland at College Park and a Bachelors degree on Sociology from Earlham College. He loves individual stocks, bonds and precious metals.