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Restaurant Start up Costs: What You Need To Know

If you are passionate about making people happy, you’re obsessed with food and drink and you can lead a team well, starting a restaurant might just be a good idea for you. If you’re reading this then you probably think so too! Here’s what you need to know about the costs involved with a restaurant.

Managing the budget for a restaurant right from the start will ensure that you stay on track as much as possible and meet your financial targets. The costs you will have to manage, vary from insurance to utilities, service charges, and taxes and can quite look quite daunting, but remember, if you’ve got your business plan right, then you have a profitable business to look forward to when you open. Read more about restaurant business plans if you’re unsure about yours or need to write one from scratch.

Read about writing a restaurant business plan or read more articles about opening a restaurant.

 

Licences and insurance

Opening a restaurant in the UK requires a special licence called an A3 planning licence. Although all types of commercial property come under A1 or D2 categories, the licensing requirements for restaurants are a little more specific. The A3 licence is specific for restaurants and cafés where hot food is served to the customers. The A3 is part of the Planning Use Classes Order. It specifies the use of a building or other land. The A3 licence is primarily a ‘Use Class A3 – Food And Drink’. It is part of the town planning rules that specify properties for restaurants and cafes.

If you start a restaurant in an area classified as A3, you will not have to pay any additional fees. However, if you plan to build a restaurant in another location, you will have to pay application fees ranging from £100 to £1,905. This directly affects your aggregate restaurant startup costs.

Read more about the application process.

This licence allows you to carry out the following activities on your premises:

As an owner, you must take on the role of a designated premises supervisor (DPS) when you apply for a premise licence. For example, A DPS must have a personal licence to sell alcohol. These additional premise licences will allow you to carry out other activities such as

If you do not get these licences you may get a penalty of to £1,000 for failing to produce your licence on request.

Read more about personal licenses.

 

Quick break – download our free guide to nail your next EHO inspection. This is everything you need to know to achieve a five star rating.

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Rent

The cost of your rent will vary dramaticaly depending on the size of the venue and the location. If you’re prepared to lease a smaller space which is off the main high street, then you will save significantly – but remember that this will also effect your organic footfall which passes by your venue.

Cheaper venues can be found for a couple of around £250 per week whereas a larger venue could face bills of £25k, £50k a year or more. It’s really important to choose a site which fits your ambitions and your budget.

 

Utilities

The utilities that you will be using every single day can include electricity, gas, and water (some sites will not use gas).

Electricity Consumption

The electricity consumption of small restaurants ranges from 15,000 to 25,000 kWh of electricity per year, whereas a medium business uses between 30,000 kWh and 50,000 kWh. The utility bills for small restaurants spend £2,367 – £3,660 per year on electricity, whereas medium-sized restaurants spend £3,774 – £7,234 on average.

Gas Bills

As far as gas bills go, small restaurants pay £820 – £1,458 a year, whereas a medium culinary business pays £1,458 – £2,239 on average

 

Customising A Kitchen

Some spaces may have a kitchen that is ready for use. However, if you buy or rent a building that was initially not built for commercial use, you will have to expand the kitchen premises to accommodate the staff and service providers. The cost of a customised kitchen can vary from £10,000 for a small venue all the way up to £200,000 for a larger operations . If you have a executive chef or a head chef, you can consult with them to customise the space.

 

Waste Management

As a restaurant owner, you will need proper facilities to get rid of the daily waste. You can use recycling for organic waste and plastic items. If you start growing your vegetables and fruits, you might be able to reuse the roots and leaves of the store-bought fruits and vegetables.

Bin Hire And Collection Cost

A bin hire costs are the money you pay for disposing of one or two sacks of waste daily. These costs are only as high as the amount of waste you produce. The following is a layout of bin hire prices based on size, capacity, and cost per year. Once you have a bin hire, ensure your waste is collected in time before it causes a nasty stench.

Bin Size Capacity Bin Hire Cost per Year Bin Collection  Cost per Year
120 litres 2 to 3 sacks £40 £140
240 litres 3 to 5 sacks £50 £255
360 litres 5 to 7 sacks £80 £370
660 litres 10 to 12 sacks £150 £650
1,100 litres 15 to 20 sacks £250 £1000

 

So if you can reduce your waste to 2 or 3 sacks daily, you can reduce the bin hire costs down to £40 per year.

Waste Transfer And Landfill Tax

The cost of transferring waste to a landfill or a recycling unit mostly ranges from £150 to £250. The cost of landfill tax set by the authorities from 1st April 2022 ranges from the lower rate of £3.15 per tonne to the standard rate of £98.60 per tonne.

You can minimise this part of your restaurant startup costs by recycling and reducing waste right at the restaurant. For example, you could cut the cost of wasting food by feeding the leftovers to the homeless people and deserving individuals in your vicinity.

Type Of Waste Price Per Tonne Minimum Charge
Mixed General Waste £150 To £250 £50
Dry Mixed Recyclables £50 £30
Cardboard And Paper Free Free
Mixed Glass £12 Free
Green Waste £50 £30
Wood £100 To £200 £40
Inert/Inactive Waste £50 £30
Food £70 £40

 

Property Tax

The property tax for a restaurant is mostly managed by the landlord. But if you want to own your restaurant property, you must consult with your letting agent, mortgage lender, or financial advisor to calculate the property tax. These costs can range from £1,500 to £5,000.

 

Staffing Costs

The people who run your kitchen and restaurant are the lifeblood of your business. Make sure you hire a sufficient number of staff members, such as 3 to 5 line cooks per shift. You can hire 4 employees per 50 guests in a small restaurant for the waiting staff.

Staffing costs can sometimes be considered bleeding (losing money continuously) if the staff is wasting time on things that aren’t the most time efficient. This puts a dent in the business operation efficiency.

According to the latest numbers, the average salary of a restaurant staffer in the UK amounts to £25,568 per year. According to Indeed, the per hour salary of each staff member on an hourly basis is as under

Type of Staff Per Hour Salary
Team Member-Customer Service £9.25
Server £9.96
Crew Member- Cook £9.98
Cashier £9.93
Host/Hostess £10.25
Front of House Team Member- Hosts or waiters £9.63

 

 

 

 

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