Opening your Restaurant – Part 2 – Creating a Projection – Budget

Before we move on to creating a projection, let’s start with creating a budget. First question you should be asking yourself is “Do you have a enough budget?” and this matters. Many people do not fully understand how much it would cost to open up a restaurant or maintain it. So many unknown issues can come up, for example, construction could be delayed, equipment problems, gas and electricity connection problems, permits can be time consuming, violations with different departments, and more. One of the biggest hurdles you will face is having a opening team. It is very difficult to keep opening team members, especially if for some reason your opening is delayed. Not many people will stay without getting compensated while you are preparing to open the restaurant. If you already have a business then you may be able to get some team members to come in and help you during opening but without it, you are starting a new team and most of the time, more than 25% leave before opening, and less than 50% stays after opening. Also, you must think about the rent, utilities, and other expenses while you are preparing to open. Without officially opening your business, you are incurring a loss every day. That being said, let us review some of the items that should be included in your budget:

1. Opening Budget:
   1. Rent & Down payment
   1. Professional fees – Lawyer, Accountant, Consultant, Architect
   1. Construction
   1. Permits & Fees
   1. Equipment
   1. Initial food/drink inventory
   1. Manager/Chef
   1. Team Members
   1. Insurance/Worker’s Compensation
2. One Year Budget:
   1. Rent
   1. Professional fees
   1. Repair & Maintenance
   1. Food cost
   1. Labor cost
   1. Other expenses

The Opening Budget would be the amount that you would need to open the store, from the moment you decide to start your restaurant business to the grand opening of your restaurant. This budget will consistently change every time you seek different locations, design, or any parts of your restaurant including menu. You need to have a template that will help you quickly assess the total amount of budget needed just to open your restaurant.

The One Year Budget would be the amount that would be needed to keep the business open for at least one year. Some restaurateurs run short on budget and before their restaurant is well known to the public or starts to generate a profit, they end up closing down the business which is very unfortunate. Therefore, it is very important that you have a budget to survive for at least one year. To be clear, that does not mean you build a budget to pay for entire expense for whole year. You will have to create a realistic budget with P&L projection so you can safely estimate how much money will be needed to keep your restaurant open. During this stage, it is important that you consider many different scenarios and even consider the worst case of scenario so that you are prepared. All business starts with a dream, and it is good to work towards success, but you must remember all business comes with a risk although success will reward you handsomely.