You’re done dreaming. Now it’s time to take the bull by the horns and begin taking the first concrete steps toward making your restaurant a reality. And that’s got you wondering: Just how much is this going to cost when all is said and done?

Unfortunately, there’s no great answer to that question. Restaurant start-up costs vary depending on many different factors. Your location, the concept, and the generosity of your investors can all impact the final price tag. Some restaurateurs will tell you it takes over $450,000 to open a restaurant, while others make it happen with $13,000 or less.

In fact, the median range for starting a restaurant is roughly $3,046 per seat (or $3,734 if you purchase property instead of renting). But restaurant start-ups tend to go over budget: the average cost overrun totals 33% over the initial budget. Per-square-foot start-up costs run from $45 to $178. You can see from this range why it’s difficult to ballpark costs; however, here’s roughly what you can expect to spend to get your restaurant off the ground.

 

Monthly Rent: $6,914 on average

Occupancy costs — a fancy term for your rent or mortgage — are another example of how expenses can vary from restaurant to restaurant. In surveys, restaurant owners said their average rent was around $6,914 a month. But as with any rental, you may be required to put down your first and last month’s rent, along with a deposit, before your landlord will hand over the keys.

However, unlike renting an apartment, restaurant lease terms are often up for negotiation. For instance, you may be able to delay your first payment until after opening day and then prorate your rent after that.

Most restaurant lease agreements have long terms; five to ten years is relatively standard, so you want to choose a location with longevity in mind. There are areas where you can potentially shave start-up costs, but this is not the place to skimp. We recommend locating a site with an annual rent that falls between 6 to 10% of your expected yearly earnings. Do your homework and choose a spot that will best suit your needs, concept, and budget.

 

Construction and Remodeling: $49,500 to $350,750

Unless you luck out and score a fully furnished space, construction and remodeling costs will probably form the bulk of your start-up budget. For some establishments, these fix-out expenses make up over two-thirds of the total cost to open.

Certain expenditures are unavoidable — like having your appliances installed — but there may be room to save on restaurant decor. While that custom chandelier or vintage farmhouse table may be enticing, you probably don’t need it to sell people on your space.

Customers will be there first and foremost for your food, and it’s certainly possible to create a warm, welcoming environment on a shoestring budget. Some chalkboard paint and DIY light fixtures can go a long way with diners, especially in fast casual and quick service restaurants. And these solutions are easy to implement with a little elbow grease.

If you have to choose, spend your money where it counts, such as your restaurant’s heating and air conditioning system or remodeling the restrooms. Customers will notice that you can be sure!

 

Kitchen and Bar Appliances: $30,000 to $150,000

There’s no restaurant without restaurant appliances. Appliance costs will vary depending on your format and menu, but most restaurateurs wind up spending somewhere between $30,000 to $150,000. Some restaurants require a full kitchen complete with fryers, ovens, and multiple prep stations, while quick service restaurants may be able to get away with less.

Choose appliances carefully, as this is one area where first-time restaurant owners tend to overspend. You can derail a tight budget if you spring for all the latest, greatest equipment.

Fortunately, it’s also one of the areas where you can save. Restaurant appliances can often be leased until you’re ready to purchase, which can cut back on costly start-up expenses. Vendors may also allow you to use equipment like coffee makers for free as long as you sign a contract for their products.

You can also opt to purchase appliances secondhand. Many restaurant suppliers and distributors buy back used equipment from failed restaurants and will sell it to you at reduced prices. Keep in mind that when you buy used, your appliances will not be under warranty, so it’s a gamble in some ways. Still, if it shaves several thousand dollars off your opening costs, it may be worth the risk.

 

Food Outlays: $5,000 to $25,000

Technically, food and beverages are the most important items on your budget — after all, you’re here to sell meals. But compared to other start-up costs, initial food purchases are cheap, adding up to around $5,000 to $25,000 for your first order.

Food and beverage outlay will be lowered substantially if you decide not to serve alcohol, but then again, so will your earning potential. The markup on alcoholic drinks (particularly beer) can be a lucrative source of profits, helping you to absorb costs on other, less cost-effective necessities. Like all the decisions you’ll make when starting a restaurant, it’s a matter of weighing your concept and budget against the costs.

 

Permits and Licensing: Several Hundred to Several Thousand Dollars

Just when you thought you were done spending money on your restaurant, now you’ll have to sink a little more into permits and licensing. Requirements here differ depending on local regulations, but in most areas, restaurants are required to obtain several different kinds of licenses and permits to operate legally.

Typically, restaurants are required to hold a business license, certificate of occupancy, building health permit, employee health permit, food service licenses, and seller’s permit. You may also need to apply for a sign permit, liquor license (if selling alcohol), and dumpster permit, in addition to sanitation and food safety inspections. Each of these permits costs money, which means you’ll need to budget for them.

Costs for various licenses depend on your area. In New York City, for instance, you’ll spend around $280 just for a food service establishment permit. You may also have to invest some labor hours since many areas require you to take classes, such as food handler’s courses, to apply.

 

Insurance: Several Thousand Dollars

Most restaurant owners choose to invest in an insurance policy, which represents another expense. However, it may be difficult to predict exact costs for insurance since the final tally depends on the type of restaurant and the kinds of liability protection you need.

At the very least, you’ll probably want to budget several thousand dollars for general liability and property insurance, which covers kitchen equipment and other property you own. You may also want to invest in worker’s compensation insurance, automobile liability (if using company vehicles) and property insurance, especially if you have a mortgage on your restaurant.

 

Technology and POS: Varies

Only the right applications and systems allow you to achieve higher operational efficiency and give your restaurant the digital polish it needs to succeed in today’s market. In fact, businesses that choose their technology carefully often find that the resulting efficiencies generate a significant return on investment.

There’s the internal tech, which will include a POS system, inventory and ordering applications, scheduling and accounting software, and other tools to make the business of running a restaurant easier. Then there’s the customer-facing tech: your website, online ordering systems (if applicable), email marketing services, and loyalty programs.

If cost is a concern, you don’t necessarily need to invest in these all at once. However, before you open, you should at least have installed a POS system and built a primary website with your hours, contact information, and menu.

Naturally, there may be other costs as well. Some restaurateurs choose to pay for professional services such as accounting, legal assistance, marketing services, graphic design, or website development, which can raise start-up costs substantially.

You’ll also need some spare capital to draw on for the first few months. It often takes between six and 24 months for restaurants to become profitable, and in the meantime, you need to be able to keep the lights on.

It is costly to open a restaurant, but the good news is that you don’t have to pay for it all out of pocket. With investors, loans, and/or credit accounts, you can fund a restaurant start-up without cashing in your life savings. The more precise you can be in your budgets and forecasts, the better equipped you’ll be to create business proposals and apply for loans — and make it through those first few months with flying colors.