They sometimes say the way to make a small fortune in business is to start with a large one. This witty insight seems to apply when it comes to the unexpected costs of opening a restaurant.
Surprise expenses can decide the fate of your new establishment. The more you know about what costs you may face, the more you can plan and weather the financial storm. Here are five unexpected costs to be aware of when opening a restaurant:
1. Construction Surprises
If you are having a restaurant built or remodeled, cost overruns can make a mockery of your original builder estimate. Labour problems, material delivery delays, finding something unexpected behind a wall you’re tearing down, and so on – they all add up to huge expenses even before you’re open for business.
2. Design Materials
Often restaurant owners start out wanting to achieve a certain look with their businesses – a look that can cost them far more than they planned. They might, for example, decide that a design material they chose doesn’t really work, but their replacement idea comes at a far steeper cost.
3. Deposits, Deposits, Deposits
When you’re starting a new business, many people expect you to pay money upfront, whether it’s for insurance or setting up utilities. Like water torture, the drop, drop, drop of deposits can wear you down.
4. Food Costs Will Give You Indigestion
New to the food industry? Chances are food will cost you a lot more than you thought, even though you are buying in bulk. And there’s all the side stuff. A hamburger isn’t just meat; it’s seasonings, buns, condiments, side dishes, garnishes . . . need we go on?
Plus, your menu might change down the road to something more expensive (fresh farm to table, for example). Or you might hire a chef who has extreme ideas about the high-class dishes he or she intends to serve.
5. Credit Card Processing Fees
Credit cards seem like a good idea. A diner can pay for a large meal without cash in his or her pocket. But credit card companies charge processing fees, usually between 1.8 and 2.5%. Plus, they sometimes charge you a deposit of hundreds of dollars to set up a merchant account (see Deposits, Deposits, Deposits above).
With so many expenses involved in opening a restaurant, it’s good to control costs where you can, especially with some of your biggest purchases: kitchen equipment. With Silver Chef, you can rent a full range of equipment for 12 months, with our Rent-Try-Buy solution, and then choose to upgrade the equipment, buy it outright, and continue to rent at a lower cost or just return the equipment for no further obligation.
With your savings, you can put your extra liquidity towards the unexpected costs sure to crop up.