“How much does it cost to open a restaurant?” If you’re looking to open a restaurant, this is probably the first question that comes to your mind. And a very important one at that. The cost of opening a restaurant largely depends on two factors, the size of your restaurant and the city you’re planning to open it in.
According to a report by the National Restaurant Association of India, the Indian foodservice industry is estimated to be Rs. 5.99 trillion by 2022-23. Clearly, the coming years will see a growth in the restaurant industry.
What is the average cost of opening a restaurant in India?
Everything from renting a place to buying the most basic kitchen equipment requires you to plan your restaurant’s revenue carefully. Let’s look at some of the basic start-up costs that you need to keep in mind before opening a restaurant. Again, these costs may differ with the type of establishment and the city you’re going to run your restaurant in.
1. Rental costs
The cost per square foot is dictated by the location, size, the material used and type of restaurant you run. According to the global restaurant consultants, Aaron Allen & Associates, rents for a typical restaurant ranges between $150 – $750 per square foot, in the US. A Quick Service Restaurant or Cafe don’t necessarily take up a large space and therefore their cost of rent will be low. Casual family restaurants are built to accommodate many people hence it’ll be built on a larger area.
The average space required to open a restaurant is 1500 sq.ft. Different cities have a different cost of land per square feet. There are two ways to go about it. You could either purchase space or rent one for opening your restaurant. The average cost of purchasing space could be anywhere between 50L to 1Cr. Whereas, the average cost of renting a space for your restaurant would cost you approximately Rs. 30,000 – Rs. 1,00,000 a month.
2. Licenses cost
According to the NRAI India Food Services Report 2019, out of the 2.49 billion food business operators, only 467,000 have an FSSAI license.
Your restaurant must have all the required permits and licenses. The cost of each license is different. Some of them may even have a renewal fee that you are required to pay monthly or annually.
- FSSAI License –
It’s a 14 digit registration number that’s given to restaurants. Annually, the central license costs Rs. 7500/-, State license is Rs. 2000- Rs.5000 and registration cost is Rs. 100/-
Read here to know all about getting an FSSAI license for your restaurant.
- Liquor License –
If you’re a restaurant that serves alcohol, you’re required to pay Rs. 5,000 while submitting the various documents. Additionally, a sum of Rs. 50,000 is to be paid for liquors such as whiskey, rum, gin and more.
- Health/Trade license –
This is a very important license that your restaurant requires. The cost of getting it ranges between Rs. 500 – Rs. 50,000 depending on your restaurant’s requirements in that particular state.
- Eating house license –
The registration cost for obtaining the eating house certificate is approximately Rs. 300 and it’s valid for three years.
- Shop and Establishment License –
This license needs to be obtained within 30 days of starting your restaurant business. The cost ranges from Rs. 200 to Rs. 4,000 per year. This may differ depending on the number of employees and location of your restaurant.
- Music License –
Depending on the seating capacity of your restaurant, the annual fees range between Rs. 3,500 – Rs. 10,000. This license is issued by the Phonographic Performance Limited (PPL).
There are few other licenses that your restaurant must have like the certificate of Environmental Clearance, Signage License, Lift Clearance and more. Read here to know more about them.
3. Restaurant design and furnishing
In an article by the Times of India, a survey conducted by the National Restaurant Association of India states that dining out is the most popular trend followed by takeaways and home deliveries. This should be reason enough for you to carefully invest in designing your restaurant.
Typically, 30%-40% of the budget is reserved for furniture and fixtures. Out of which 10%-20% goes in design and architecture. QSR’s don’t have lavish furniture as people tend to spend less time there. On the contrary, fine dining establishments focus heavily on the kind of chairs and tables they’re going to keep. This also includes the costs of electrical appliances.
The cost range of basic interiors is Rs. 3L to 5L.
4. Operational Costs
Your restaurant needs to be well equipped with every kitchen equipment before it starts. Choosing the best quality equipment for your restaurant kitchen is a must. It may seem a little heavy on the pockets initially but, it’s going to prove beneficial in the long run. The equipment cost also varies according to the type of restaurant. A bakery kitchen wouldn’t necessarily require a grill. Restaurant’s linen, cutlery, and crockery also fall under this.
The kitchen and other electrical appliances would cost around 5L.
5. Labor costs (Cost of hiring and training)
Your staff helps you run your restaurant smoothly and it’s only fair that you compensate them well for their job. Front-of-house and Back-of-house functions are clearly defined and you need people at both these ends. Training is very important as it helps reduce the annual attrition rate of a restaurant.
Labor costs are kept between 20% to 30% of the total revenue. You need to hire managers, wait-staff and kitchen staff.
Read here to know how to hire the best team for your restaurant.
Your job doesn’t end once your restaurant is established. You need to market your brand in order to get customers. There are two kinds of marketing, paid and unpaid. You can run paid ads on printed collaterals and social media platforms like Facebook, Twitter, and Instagram. Building your restaurant’s own website and the app helps market your brand tremendously. Designing a menu card is also a part of marketing. Depending on the agency or team you choose, restaurant marketing could cost up to 1 lakh.
Want to know the different marketing ideas to implement in your restaurant? Read here.
You need a professional consultancy for planning your restaurant’s layout design, menu, marketing and much more. At each of these steps, you’d need people to help you plan your restaurant. Menu designing and digital marketing also need professional assistance. If you’re a new restaurant owner, getting legal advice is also suggested. To help you get started you need professional help in all these areas till you’ve established your brand.
8. Restaurant Technology
You NEED the latest restaurant technology at your restaurant that will automate the majority of your operations. Basically, make your life simpler. Your restaurant needs a well-integrated Point of Sale system that has features like inventory management, CRM management and more. Apart from the POS system, Kitchen Display System, iPads or tablets (with POS integrations), kiosks, etc.
9. Food cost
This falls under the category of recurrent cost. Getting fresh products and ingredients for the food that is prepared in your restaurant. It is important that you buy quality products for your restaurant. Buy vegetables and meat from local vendors at negotiable prices.
Food costs take up 25% to 40% of your restaurant’s revenue.
10. Maintenance and miscellaneous costs
These include any hidden costs that occur in the process of opening a restaurant. Any glitch during the construction or designing, unforeseen delays in the kitchen or electrical appliances, could require financial assistance. Make sure some amount is reserved in such cases.
Have a restaurant plan ready
Opening and running a restaurant is a serious business. Having a business plan ready and in hand is a must. That way, there will be a systematic approach at each step. This must include an estimate of all the different areas of starting a restaurant. Typically, a restaurant plan consists of information about everyone who is associated with your brand. Investors, business partners, lawyers, designers, architects and more.
Having a restaurant plan will give you a better insight into what others are doing. Incorporating unique ideas in your brand will give you an edge over other restaurants. This prevents any roadblocks,
How to save while opening a restaurant?
While opening a new restaurant can be heavy on your pockets, there are a few things you can adopt in your strategy so as to not overspend.
- Buying brand new kitchen equipment that may not be of frequent use at your restaurant is unnecessary. Buying equipment that hasn’t been heavily used by someone else, can help reduce the cost. You could also use rent/lease out equipment at half the actual price.
- If you focus more on unpaid advertising you wouldn’t have to spend a lot on paid ones. Marketing your brand on social platforms like Facebook, Twitter and Instagram will help your restaurant followers organically.
- Keep a lookout on fellow investors who are willing to run a restaurant with you. This will help split the startup cost. These could be people from within your network. There are plenty of loan opportunities that you could go for. This will give you that initial kick-start.
- It might be a good idea for you to start by opening a food-truck, delivery kitchen or catering business. Once you’re up and running, you could expand into a full-scale restaurant.
- Use budget-friendly plants, traditional artwork, etc., while designing your restaurant interiors. Using recycled material is not only cheap but also makes it environment-friendly for you.
You’re now ready to open a restaurant
It is important that you know your financial capacity before opening a restaurant. Once you have an estimate, you can make the necessary changes in your plans. It’s only then that you can prevent any irrational expenditure.