How Much Does It Cost To Open A Fast Food Restaurant?
How much does it cost to open a fast-food restaurant? Expenses related to venue costs and initial staffing are included in a business plan. Other startup costs include initial marketing, hiring of staff and suppliers, and delivery fees. Shopping centers also charge additional fees for security and other services. All of these expenses will be included in your business plan. Listed below are some of the expenses related to starting a fast-food restaurant.
Expenses of opening a fast food restaurant
There are two main categories of costs associated with a fast food restaurant. Some of these costs are fixed and some are variable. Hourly wages and food are among the variable costs. You need to project the number of employees you’ll need to run your business and how much each one will cost. You should also estimate how much payroll will cost per week and month. As a rule of thumb, you should have several months’ worth of payroll saved up.
The initial startup costs of a fast food restaurant can range from $786,025 to $2,250,000, depending on the type of restaurant you plan to open. On top of that, you’ll need to pay salaries, inventory, and leasehold improvements. Then, you’ll need to pay staff and suppliers, and do some initial marketing. As you can see, the costs of starting a fast food restaurant are high, and you’ll have to carefully consider your finances.
Another large component of operating costs is labor, which is the cost of hiring and training workers. This cost includes the wages of your employees, vacation pay, sick days, and payroll taxes. However, you should remember that labor costs will vary based on the local market conditions, the availability of labor, and the size of your business. In general, you’ll want to keep labor costs at 25% to 30% of your gross sales.
Another important expense is the location of your fast food restaurant. Depending on where you want to set up your fast food restaurant, you’ll need to secure a building that has a parking lot. The space itself must also be compliant with local building codes and zoning requirements. And remember that it’s also necessary to get business insurance, as well. Business insurance will protect you and your business in case of unforeseen circumstances.
Expenses of securing a property
One of the biggest expenses of starting a fast food restaurant is securing a property. In most cases, this requires putting down 10 percent of the value of the property. However, it is important to choose a prime location – a bad location could ruin your business. Alternatively, you can lease a commercial space. Then, you will only have to pay the first month’s rent and a security deposit.
Before securing a property, you must first obtain a CO (Contract of Occupancy). The CO must be applicable to the type of fast food business you plan to operate. It can also be obtained after undergoing a major renovation. To avoid paying rent until you have a valid CO, make sure to specify in the lease agreement that payments will not begin until you receive the CO. Moreover, if you plan to build your location, you must apply for a CO from the local government authority. Once you’ve obtained a CO, you should carefully check the zoning requirements and building codes in your location.
In addition to securing a property, you must also obtain business insurance. Workers’ compensation insurance is mandatory in many states. Other types of business insurance include general liability insurance, property insurance, and liability insurance. When opening a fast food restaurant, you should also secure a domain name, a business name that reflects your identity. If you have a brand name, you will have an advantage over competitors and create an identity for your business.
In addition to paying for the building, you must also pay for the utilities of your new restaurant. These expenses can be quite high. A 90-seat restaurant can run anywhere from $275,000 to $400,000 depending on the location. You should also keep in mind that utilities can cost anywhere from $1,000 to $2,500 per month. In addition, you should consider whether the property is accessible or not. This might save you a lot of money in legal fees later.
Expenses of hiring staff
The cost of hiring staff can make up as much as one-third of a restaurant’s budget. Fast-food restaurants are generally less costly to run than other businesses, because their labor costs are typically lower than other types of restaurants. In addition, unspecialized labor is less expensive to deploy. The expenses associated with workers’ compensation insurance and benefits are typically low. Expenses related to beverages and uniforms also make up a small percentage of the total cost.
While labor is a fixed cost, other expenses like marketing and insurance may be variable. Expenses related to labor are one of the largest mixed costs. The cost of labor per person is estimated to be several thousand dollars per month. If you’re hiring hourly workers, your cost per hour may be between $350 and $550. Another factor is how many employees you plan to hire each day. Hiring one person may cost $25,000 or more a year.
Payroll costs should be between 25 and 35 percent of your gross sales. If the cost is higher than this, look for ways to cut costs while increasing sales. In many restaurants, the manager is the most important employee. A manager can help you out when you’re not there, or if you’re unable to be there to oversee daily operations. However, it’s best to pay for a manager in addition to your hourly workers.
While hiring employees may be a high-ticket item, it’s vital to make sure you’ve got the proper training to ensure a smooth operation. Having ample food and beverages on hand will allow you to offer your guests a memorable dining experience. Advertising may be another significant expense. The type of restaurant you open will determine how much you’ll need to spend. Franchised restaurants may already have their advertising paid for, while new fast-food restaurants in saturated markets will need to advertise heavily to be noticed.
Expenses of securing a business license
Before opening a fast food restaurant, you must obtain all required permits and licenses. A federal Employer Identification Number (EIN) is required. You must pay sales tax on the final product, but removing it from the total cost will save you money. Another license you will need is a Building Health Permit, which verifies that the restaurant building meets sanitation and safety codes. This license is typically required only for new constructions, although some states require it for every type of business.
Before you can start opening a fast food restaurant, you will need to apply for a business license. This license will give you the authority to operate the restaurant in your area. You can find the requirements for your state by searching “business license” and “fast food” in Google. Most jurisdictions have an online form you can complete and will outline the necessary steps. In addition, you will need to obtain an employer identification number (EIN), which is basically your tax ID as an employer. This can be obtained through your state or the IRS.
Another cost you must consider is payroll. While the total cost of payroll can range from several thousand to ten thousand dollars, the costs of accounting, payroll, insurance coverage, and consulting are both important. The franchise fee, if applicable, can cost hundreds of thousands of dollars. Finally, there is the cost of utilities. It is essential to keep the lights on, the kitchen at the right temperature, and the area where you store food. These costs can easily add up, especially if you’re running a fast food restaurant.
Other costs to consider include buying stock and ingredients. The price of ingredients and other restaurant supplies is important, but the stock must be cheap and high-quality, as most restaurants mark-up their foods by about 300%. Besides the actual food costs, you also have to invest in insurance policies for your restaurant. The annual cost for insurance can easily reach $6,000.