Restaurant Start up costs - Realistic?

[Zuber Ali]

Hi all i am looking into the early stages of starting up a small restaurant/cafe. approx 60m2 in size in London how realistic does my cost breakdown look. I appreciate this is a how long is a peice of string question, but i am hoping for some rough guidance. Have i under valued anything, what other costs are missing

Also i have provided all costs as annual although i would never have enough capital to put down in one go, therefore is it recommended that startup costs are based on annual cost or smaller i.e 3months, 6months and if the business works the income generated would cover the following quarters/6 months expenses.

Thanks for any help in advance.

Rent: £15000
Staff: 2 staff hired £57879 working 11 hour days 7 days a week.
Business rates £7200
Insurance £550
Gas £3600
Electric £2400
Water £600
Waste collection £500
Phone: £100
Solicitors fee £800
Accountant £1000
Chairs £598
Tables £ 467
Plates/cutlery etc £250
Shop sign £1000
Commercial fridge £1000
Commercial freezer £1000
Till £100
basic decorating £2200
Shop front £2400
Griddle £1000
Coffee machine £2000
Deep fryer £1000
Cooker/oven £2000
Milkshake mixer £400
other kitchen equipment £500

 

[Scalloway]

By 2 staff hired working 11 hour days 7 days a week I presume you mean that this will actually split into different shifts.

 

[Chris Ashdown]

The landlord will want you to pay for the building insurance probably about £1000

You need a better till than that so you can analyse sales information

Solicitor to oversea lease essential

Display units and till units

Drink Fridge display unit

Food preparation area in stainless steel

Decoration quoted is very cheap

Floor covering

Better to have four part time rather than two full time maybe even 6 part time, remember holidays, pregnacy's etc

 

[Mr D]

The staff bill - you have factored in the wage for the multiple staff members plus employers NI plus your payment to staff pension? Limit on staff working hours and you will need to have cover during breaks.
If its you working then you will need cover when doing other work - ordering supplies, collecting stock, etc. Add in a cleaner?

What are you planning on deferring until you make some money? And what happens if you don't make enough money in a time period?
Looking at that list of stuff to buy for a café I'm not sure what you will be waiting until later to buy.

And will you be a café or restaurant?

 

[Stedurham]

15k rent seems cheap to me for London decent cafe on good area on north east will be that much
Chairs and table seem far to cheap for that size
You can get second hand as new appliance etc pretty cheap lad I know did restaurant kitchen for about 20k and that was burners big ovens etc
Plates and cutlery also seems cheap to me
Good luck tho at least most costs are realistic

 

[Mark T Jones]

Firstly; well done on a fairly comprehensive list, though there is no mention of lecences which are time consuming and an additional cost.

as others have said many of your costings look rather optimistic. There are areas where you can save, but don't compromise reliability / durability.

Cashflow is everything; I've seen far too many cafe/restaurants spending all their money prior to opening and therefore being on the back foot from day 1. Do a detailed cashflow analysis based on researched figures.

 

[The Byre]

https://www.nisbets.co.uk/cheapcateringequipment

Read up everything on the subject - restaurants are very expensive to start up and require a long time to become profitable. The restaurant trade is also one that eats outsiders and spits them out. Even experienced chefs come unstuck in the worst possible way, as knowing how to cook is just one-third of the game. The rest is knowing how to run a restaurant and knowing how to run a business.

And I agree with the above - your costs are hopelessly unrealistic.

 

[Zuber Ali]

By 2 staff hired working 11 hour days 7 days a week I presume you mean that this will actually split into different shifts.

correct, split into multiple shifts, multiple staff

 

[Newchodge]

Your staff costs look like about £14.50 per hour. How much are you planning to pay staff per hour? Are these waiting staff/kitchen porters or does it include a chef?

Definitely go for 4 or 6 part timers - perhaps 4 @ 20 hours each, so you have trained people available to cover holidays sickness, etc.

If you have staff earning £10 per hour for 20 hours you will have to auto enrol them ina pension scheme. You will need to run payroll or pay someone to do that for you.

 

[Zuber Ali]

15k rent seems cheap to me for London decent cafe on good area on north east will be that much
Chairs and table seem far to cheap for that size
You can get second hand as new appliance etc pretty cheap lad I know did restaurant kitchen for about 20k and that was burners big ovens etc
Plates and cutlery also seems cheap to me
Good luck tho at least most costs are realistic

thanks for the post. I have found a number of premises within my area asking for 15K for the size i am looking for. I have also found tables and chairs cheaper than the price i have quoted. i have added a bit of contingency onto my figures. i am not looking at the higher end market as the location is more within a mid to low income area.

any recomendations on where i can look at second hand appiances

 

[Zuber Ali]

Your staff costs look like about £14.50 per hour. How much are you planning to pay staff per hour? Are these waiting staff/kitchen porters or does it include a chef?

Definitely go for 4 or 6 part timers - perhaps 4 @ 20 hours each, so you have trained people available to cover holidays sickness, etc.

If you have staff earning £10 per hour for 20 hours you will have to auto enrol them ina pension scheme. You will need to run payroll or pay someone to do that for you.

staff costs were slightly off based on national minimum wage on the highest wage band £7.83 should actually be about £62K. how did you work it out at £14.60 per hour.
all waiting staff. i have kitchen staff covered by a business partner.

thanks for the point about part timers. i had already accounted for this

 

[Zuber Ali]

The landlord will want you to pay for the building insurance probably about £1000

You need a better till than that so you can analyse sales information

Solicitor to oversea lease essential

Display units and till units

Drink Fridge display unit

Food preparation area in stainless steel

Decoration quoted is very cheap

Floor covering

Better to have four part time rather than two full time maybe even 6 part time, remember holidays, pregnacy's etc

Is it common for the landlord to request for building insurance. my research indicated it wasn't, but i might be wrong.

a simple till should be fine to start out with, i am trying to minimise cost and haven't been able to find anything which isn't close to £700-800. The last 5 restruant i worked in had something similar to what ive priced for. out of curiosity what is the benefits of the tills with all the bells and whistle. for the scale of establishment i am doing i cant seem to think what i would need it for, but i may be just being a dunce.

wouldnt require a fridge display unit.

i believe i accounted for a solicitor already.

food prep are is a good point. will add that

in regards to decoration, any idea how i could get a somewhat accurate figure for what it would cost. prior to signing a lease.

 

[Zuber Ali]

The staff bill - you have factored in the wage for the multiple staff members plus employers NI plus your payment to staff pension? Limit on staff working hours and you will need to have cover during breaks.
If its you working then you will need cover when doing other work - ordering supplies, collecting stock, etc. Add in a cleaner?

What are you planning on deferring until you make some money? And what happens if you don't make enough money in a time period?
Looking at that list of stuff to buy for a café I'm not sure what you will be waiting until later to buy.

And will you be a café or restaurant?

Is employers NI required for part time staff. I intend to split the shifts to multiple staff. 4-6 staff in total

 

[Zuber Ali]

Firstly; well done on a fairly comprehensive list, though there is no mention of lecences which are time consuming and an additional cost.

as others have said many of your costings look rather optimistic. There are areas where you can save, but don't compromise reliability / durability.

Cashflow is everything; I've seen far too many cafe/restaurants spending all their money prior to opening and therefore being on the back foot from day 1. Do a detailed cashflow analysis based on researched figures.

I intend to lease a premises with a existing licence. If i was to apply for a licence any idea what i would be looking to pay, or does it vary greatly between councils.

If possible could you outline where you feel my costs are optimistic.

 

[Zuber Ali]

The staff bill - you have factored in the wage for the multiple staff members plus employers NI plus your payment to staff pension? Limit on staff working hours and you will need to have cover during breaks.
If its you working then you will need cover when doing other work - ordering supplies, collecting stock, etc. Add in a cleaner?

What are you planning on deferring until you make some money? And what happens if you don't make enough money in a time period?
Looking at that list of stuff to buy for a café I'm not sure what you will be waiting until later to buy.

And will you be a café or restaurant?

If i understand you correctly, i would not defer on paying for equipment. i would have to pay for all that 100% by day one. i would be paying staff/rent/rates etc in increments, therefore i wouldnt be paying the annual total of these in one go. What would you consider as being the recommended starting capital for these. i.e 100% - annual, 50% 6 months, 25% 3 months.

 

[chalkie99]

I thought the minimum wage in London was £9.15 per hour.

At that rate you would have to pay Employers NI if the employee works more than about 17 hours a week.

A lot of your costings seem like guesswork and very optimistic - I would suggest a bit more in depth research.

 

[Scalloway]

I thought the minimum wage in London was £9.15 per hour

I think that is the living wage, The official living wage rates are here.

https://www.gov.uk/national-minimum-wage-rates

 

[Stedurham]

Painter just get a painter and decorator to go around and price it.
Look into flooring tho as it will need to be wide clean etc vinyl tiles are the best and you can get them for about £8-10m2 off internet try flooringsuperstore. Its the fitting that costs about £15/20m2 depending on the prep required, but this floor does last and can change a board if its damaged
If they currently have existing license I would be finding out why last people left, was it because it didn't work. Area with things like this is ket, I would spend time sitting in car seeing how many cars go past people walk past etc this is your potential customers

 

[Chris Ashdown]

The owner of the building needs assurance you will not burn the place down or any other accident, so what normally happens is that they insure the building themselves (just in case you default ) add vat ( if registered themselves) and then invoice you every year, so yoy pay them the insurance value plus the 20% vat charge

You will nearly always have to sign a personal guarantee for the rent over the period of the lease and make good any repairs needed at the end of the lease called dilapidations, which can be very costly hence the need for a solicitor to check the lease and preferably a surveyor to check the building before you sign especially if a old building

 

[Newchodge]

staff costs were slightly off based on national minimum wage on the highest wage band £7.83 should actually be about £62K. how did you work it out at £14.60 per hour.

77 hours per week, 52 weeks per year @ 57879.
57879 is 1,113 per week
1,113 per week divided by 77 hours - 14.45 per hour.

 

[Newchodge]

thought the minimum wage in London was £9.15 per hour.

That's the Living Wage - the amount calculated by concerned groups that you need to earn to live in London.

The legal Minimum Wage, which this lying government called the 'National Living Wage' is a national figure - no regional variations. If you are 25 or over it is £7.83 per hour. Younger people get paid less because it is very obviously cheaper to live if you are 24 years old (not).

 

[Stedurham]

Not convinced 2 people in a café in busy times would suffice, local one where I pop in and isn't massively busy always got 10/15 sitting eating and one serving people in sit down area. 1/2 people cooking and cleaning, dishes etc One serving on counter, That's 4 and they always look rushed off feet. Never seen less than 3 in though even when quiet. People get half hour lunches, 45 mins or maybe even hour they want to be in and out asap and wont in my experience wait
Just my penneth worth, least you realistic with things some people have no idea.
No advertising budget either? Are you going to rely on traffic to come? Always worth mail drop do it yourself, put special offer on even if you don't make much once you get them in look after them and they wont go elsewhere

 

[Stedurham]

Don't forget vat in your figures!!

 

[Mr D]

Is employers NI required for part time staff. I intend to split the shifts to multiple staff. 4-6 staff in total

Yes if the staff earn over the lower earning limit.
£162 a week.

 

[Zuber Ali]

77 hours per week, 52 weeks per year @ 57879.
57879 is 1,113 per week
1,113 per week divided by 77 hours - 14.45 per hour.

divide by 2 for 2 staff.

 

[Zuber Ali]

I thought the minimum wage in London was £9.15 per hour.

At that rate you would have to pay Employers NI if the employee works more than about 17 hours a week.

A lot of your costings seem like guesswork and very optimistic - I would suggest a bit more in depth research.

thanks. will take on board but i beleive you have the wrong figures.

 

[Zuber Ali]

Yes if the staff earn over the lower earning limit.
£162 a week.

thanks. very helpful

 

[Zuber Ali]

The owner of the building needs assurance you will not burn the place down or any other accident, so what normally happens is that they insure the building themselves (just in case you default ) add vat ( if registered themselves) and then invoice you every year, so yoy pay them the insurance value plus the 20% vat charge

You will nearly always have to sign a personal guarantee for the rent over the period of the lease and make good any repairs needed at the end of the lease called dilapidations, which can be very costly hence the need for a solicitor to check the lease and preferably a surveyor to check the building before you sign especially if a old building

thanks chris. very helpful

 

[Newchodge]

Yes if the staff earn over the lower earning limit.
£162 a week.

divide by 2 for 2 staff.

Then that is a massive underestimate. Reckon that staff costs add at least 25% to hourly rate, more if you have to pay into pensions.

 

[Zuber Ali]

Then that is a massive underestimate. Reckon that staff costs add at least 25% to hourly rate, more if you have to pay into pensions.

apologies for my lack of knowledge here. but the additional 25% to an hourly rate accounts for what exactly

 

[Zuber Ali]

Don't forget vat in your figures!!

Am i correct you only have to register to pay this if your income is over £85000

 

[Newchodge]

apologies for my lack of knowledge here. but the additional 25% to an hourly rate accounts for what exactly

Costs of employing staff, employer liability insurance, payroll, sickness absence, holiday pay - all the costs involved in employing staff.

As far as employer's NI is concerned, you would receive an allowance against the first £3,000 of employer's NI, so you would not have to pay employer's NI unless the bill exceeded £3,000 in one year.

 

[Stedurham]

Yes but you yearly wage bill is already nearly 60k so assuming you will hit 85K quickly. Then its 20 percent of what you sell less what you can claim back for gas elec etc, sure that food is vat free be careful. Work cash flow profit and loss calculations off being vat registered

 

[Mr D]

Am i correct you only have to register to pay this if your income is over £85000

The business will have sales level of at least that much if you want to make money. And its done on the business.

 

[Stedurham]

I'm currently looking in opening a take away near me as for some weird reason always wanted one, it was a pub first, been there done that. Now I will have similar monthly costs to you rent, wages etc. Havent finished spread sheet yet but roughly were going to have to do 200k a year to break even. You need to do a profit and loss spread sheet and cash flow aswell, were looking at basically losing 25k in first 6 month of trading, before I get to break even

 

[Stedurham]

You will have to pay vat on goods sold but cant claim it back on produce bought as most food is vat free, depending on your other costs that you can claim vat on elec rent if applicable etc You will have to pay between £2-2.5k on month VAT that's rough est on 200k turnover. Be very careful this is where most hot food places fail and a few restaurants

 

[Stedurham]

The business will have sales level of at least that much if you want to make money. And its done on the business.

85K His wages are 60k and rent is 15k before you even start he needs sales probs over 200k to probably even break even

 

[Stedurham]

How much cash have you got to invest in this business? thanks

 

[Mark Laurie]

apologies for my lack of knowledge here. but the additional 25% to an hourly rate accounts for what exactly

12.07% holiday pay, 12% (approx) Emp NI, 3% pension cost of payroll approx £100 per month if outsourced and paid weekly etc...

 

[Mr D]

85K His wages are 60k and rent is 15k before you even start he needs sales probs over 200k to probably even break even

Agreed. So hitting £85k turnover in a matter of months after opening.