Starting up any business from scratch is ambitious and daunting.
Starting up a new restaurant is something that many have tried and many have sadly failed at. It is of course incredibly exciting and we would never want to put anyone off of their dreams of starting up their own restaurant. And that is exactly why we have put together a list of some things that you should think about when it comes to the costs of starting a restaurant.
Why would we do that?
Because as a professional bookkeeper, we have worked with many restaurants over the years. And through this, have built up a solid understanding of what should be done, what shouldn’t be done and so many of the other various challenges associated with starting a restaurant. Whether it’s getting paid by your customers on time, completing your VAT returns, processing payroll or submitting your annual accounts and tax returns, the demands on restaurant owners can seem endless. And it’s almost certainly not why you got into business in the first place. It is, however, exactly why we got into business. We do the things you avoid because where your business is concerned, you do the cooking, we do the paperwork.
1 – Staff Costs
When you start a restaurant you may assume that you can do it all yourself. You can’t. You need staff and they are a ajor outgoing cost for any restaurant. Running a restaurant that is good enough to survive for more than a year requires a front-of-house team including waiters, chefs, bar staff and cleaners.
You need to know how many staff you will have and what you can and will be paying them and don’t forget to factor in any recruitment costs, HR costs and training costs.
2 – Legal Costs
Running a restaurant is not all about delicious meals and fine wine. When you start a restaurant business, you need public and employee liability insurance, buildings and contents insurance cover. Even stock insurance should be factored in. And there is no ‘one price fits all’ option with this. The costs all depend on the size of your restaurant, the type of food you serve, how many staff you have, your opening hours, your locations and of course whether you sell alcohol or not.
It can seem quite daunting and that is why you may want to hire a solicitor to handle this for you. In which case, you need to pay their fee.
3 – Marketing Costs
While some established restaurants can operate on word of mouth alone, all new restaurants have to have some form of marketing spend to get customers through the doors. You may think that you will handle your own social media costs but have you considered:
- Social Media Ads
- Local Charity Sponsorship
- Google Ads
- Newspaper/Magazine Ad
- Online Directory Costs
- Print Marketing such as flyers and business cards
4 – Premises Costs
In order to serve customers hot food, you need an A3 Planning License. They are a high demand and essential license for any restaurant wanting to open a site in the country. But they are not cheap. There is the cost of your lease/rent with a landlord and there are so many other outgoings related to the location of your restaurant including:
- Rent Costs
- Pest Control
- Gas Costs
- Electricity Costs
- Property Tax
- Waste Management Costs
And this is all the monthly things you have to consider. We haven’t even mentioned the costs to renovate your space to make it look nice and inviting for you customers on opening night.
5 – Gross Margins
Finally we can talk about the positives of opening a restaurant. Making money. It is incredibly important that you can calculate your gross margins into a menu. While different restaurants operate to different rates, anywhere between 55 & 70% is currently the average in Scotland. That means that if you sell a meal for £15 with a gross profit margin of 60%, then £9 of that meal is profit and £6 is the cost of the ingredients to make it.
This is not just important for understanding your profit margins. This is important to track usage, waste and even theft. If you are using very expensive ingredients to make your meals or you have a large menu with lots of meal specific ingredients then you are spreading things too thin and your profit margins will be lower.
The Gross profit of course is then what you have to play with to pay the many other things you need to cover in your restaurant.
How we can help you build some momentum.
Covering the full range of bookkeeping services that the typical business would require, Momentum Bookkeeping goes the step further by offering not just what you expect, but what you need (even if you didn’t know you need it).
From VAT returns and payroll services to custom built MySQL databases as part of our Bespoke Services; from a once a year service (such as annual accounts) to a daily interaction service into your business; we can be as integrated with your business as you want us to be.
As every business is different, we work in a way that is easiest and most convenient for you, and we will customise our reports to match your needs and to ensure they make sense to you. That way, we can maximise the value of our service to you. We work with a range of industry leading partners, whether that is Dext (previously Receipt Bank) to streamline the process of collecting your paperwork, to Telleroo if you want us to make facilitate payments to your staff of suppliers. Or, we can go old school, and just pop in to collect your paperwork at regular intervals.
We know that every business is different, which is why we will always take the time to get to know your business and to shape our service accordingly.