Pro Advice:
- Persevere - don’t take no for an answer. Keep going
- Get creative - seek out different funding opportunities and
avenues
- Be bold - don’t be afraid to assert your business
requirements
- Take action - once you are ready, put your plan into action
How much does it cost to open a restaurant
As with all new business ventures, you’ll encounter plenty of costs to get the ball rolling when establishing your restaurant.
A few restaurant startup costs include:
- Construction costs: Designing a restaurant with the
appropriate layout takes capital.
- Equipment costs: Outfitting a kitchen or bar with the right
equipment isn’t cheap.
- Legal costs: Setting up the appropriate legal entities may
cost at least a few hundred dollars.
- Permitting costs: In some locations, permitting costs can
add up quickly.
- Staffing costs: You can’t open a restaurant without staff to
help you.
- Pre-Opening Marketing: You’ll likely need to spend some
money to let customers know you’ve entered the market.
According to a survey conducted by Restaurant Owner, the
median restaurant startup costs are $375,500. But of course, that number will
vary based on your unique plan.
Beyond the startup costs, it can take a few months to become
profitable in your budding restaurant business. It may take between 2 to 12 months to see a profit. You’ll need funds to cover your restaurant’s monthly
expenses until you see a profit.
As you can easily see, the costs of opening a restaurant can add up quickly. But keep in mind that the costs will vary dramatically based on your location and expectations. We highly recommend taking some time to research the costs of starting a restaurant in your area.
Creative ways to access restaurant funding
When establishing your restaurant, and working out how to open a restaurant, you’ll need to find the money somewhere. Frankly, there is no such thing as building a restaurant out of thin air. However, the funds don’t necessarily need to come from your pocket. There are several avenues to consider as you seek out the funds you need.
Restaurant loans
A restaurant loan from a bank often requires good credit and
a successful track record in the industry. But if you don’t have that
background, Fora Financial offers personalized small business loans.
Crowdfunding
Do you have a restaurant idea that connects with many
people? Crowdfunding can be a viable solution. Essentially, crowdfunding
involves collecting a small amount of money from many people online.
Check out Kickstarter, Indiegogo, and GoFundMe to explore
your crowdfunding options.
Grants
A grant can be a useful way to fund your restaurant opening
costs. A big advantage of a grant is that you won’t have to repay the funds if
you receive a grant.
Grants are available through a variety of government agencies and businesses. Start by looking at the federal grants you might qualify for. Contact your local and state governments to see what grant programs they offer for small business owners. Finally, check out grants offered by businesses, such as the FedEx Small Business Grant Contest.
It might feel daunting to apply for a grant. But it never
hurts to apply — take a chance on yourself!
Investors
Investors can provide the funds you need to move forward.
Typically, an investor will take an equity stake in your company in exchange
for the funds.
An investor can be the right fit for some business owners.
But keep in mind that any investor will want to see a return on their
investment. Depending on the investor, you might find a creative offer. For
example, the investor might offer a space for you to use in exchange for a
stake in the business.
As you seek out an investor, it is smart to consider what they may do for you beyond funding some costs. If an investor has particular expertise in the industry, see if they are willing to provide invaluable advice.
Alternative ideas for a food service business
A brick-and-mortar restaurant is not the only way to enter the foodservice business. Talented individuals can seek an alternative strategy and unique restaurant ideas when entering the market to save on costs. If your dream is to open a restaurant, these other ideas could be a way for you to build up a following and the cash reserves required.
Food trucks
A food truck is a more affordable way to get started in the
foodservice industry. Although a new food truck will cost at least $100,0000,
you can find used options starting at around $50,000.
That’s considerably more affordable than median restaurant
startup costs. You’ll have the flexibility to move around your town to find
customers that love your food.
Catering business
You can open a catering business without the upfront
expenses of opening a restaurant. But it can serve as a way for you to see how
you like running a small business. Every successful catering gig will require
some form of marketing, menu planning, pricing, budgeting, customer service,
insurance, bookkeeping, and food preparation.
Plus, a catering business allows you to explore the tastes
of your potential customers.
Delivery-only restaurants
Delivery-only restaurants, or ghost restaurants, have become
more popular lately with the increasing popularity of food delivery services.
With a ghost restaurant, you won’t have a physical location for your customers
to eat in. But customers can order for delivery as they would with any other
physical restaurant.
The best part is that you won’t need to spend money upfront
for a storefront. Instead, you can work out of your own kitchen or rent kitchen
space to give your restaurant idea a test drive.
Pop-up restaurants
A pop-up restaurant can be a unique way to showcase your
restaurant skills on a small scale. Typically, a pop-up is a temporary location
in an existing space. You might find location options in abandoned restaurants,
bars, and farmer’s markets.
Ultimately, the space is not uniquely designed for your
business. But the pop-up helps you get a feel for running your restaurant in a
physical space without the commitment of a long-term lease or specialty
renovations.
Sell products
Are you a budding chef with a specialty food product? Instead of opening a restaurant, consider selling the food product by itself. For example, let’s say you have a hot sauce that is out of this world. Try selling it before launching a brick-and-mortar location.
2 Key tips on how to start a restaurant with no money
It is possible to start a restaurant without any of your own
money. But once you have the funding in place, there are other issues that
you’ll need to tackle.
Tip #1 Create a business plan
You should not move forward without a restaurant business plan if you start a restaurant. You might wish to look further into how to write a business plan for a restaurant. A restaurant business plan is a space for you to hammer out all the details. It should include a plan for the day-to-day operations and a long-term plan for your new restaurant. Ultimately, this plan should also serve as a resource for investors, demonstrating your potential as a profitable business.
Tip #2 Design a marketing plan
You should also spend some time creating a marketing plan. A
carefully crafted marketing plan will outline how you plan to beat the
competition in your area. It is not enough to simply have a better experience.
You’ll need to find a way to get customers in the door to see what your
restaurant offers.
You’ll be better prepared to dive into restaurant ownership
with this research carefully conducted. As you navigate the process, don’t be
afraid to pivot to better meet your customers' needs.
The bottom line: You can start a restaurant without any money
Money is often perceived as a big hurdle for budding
restaurant owners. And rightfully so, it can be expensive to get your
restaurant off to a good start. But with so many creative ways for you to find
the funds you need, a lack of money shouldn’t stand between you and the
restaurant business of your dreams.
What are you waiting for? Move forward with your restaurant financing needs today.
