When you are penning the details of opening a restaurant there are always certain costs that skip your mind. It doesn’t happen as much if you are a seasoned restaurateur or already have experience managing a restaurant for someone else.
However, for people with no experience, success often depends on getting the expenses right. Not ballpark figures, no approximations, but exact estimates. Usual costs of opening a restaurant, such as rent, employee salaries, buying/renting furniture, and maintaining an inventory of ingredients are fairly obviously.
This post is about those not-so-obvious expenses that creep up on you when you least expect it. Here are 6 hidden expenses you probably didn’t know about opening or running a restaurant.
Restaurant Insurance Cost
Restaurant insurance is a term used to describe a bundle of insurance policies that are relevant to a restaurant. This mainly includes property insurance and liability insurance. Property insurance covers damages that occur to the property or any equipment or assets in the business location. Liability insurance protects you against customer lawsuits or to cover the cost of injuries that may have occurred in your premises. Restaurant insurance cost can be anything from $25 per month to hundreds of dollars depending on the size of your restaurant and how many people you serve.
Scavenging Materials for Decor
While you probably have a contractor assigned to design and build your restaurant’s interiors, but what about the little things. Picture frames, posters, wall hangings, clocks, and all the small items that give your space a homely feel. Everything from flowers at the table to the fancy tablecloths. Even if you are scavenging these decor items you will probably end up paying way more than expected.
Hiring a Restaurant Marketing Expert
If you are starting off, a significant portion of your monthly budget should be dedicated to promoting your restaurant. A qualified marketing expert starts from scratch, right from creating a theme-appropriate website to spreading the word on social media channels. Marketing experts also help you design your print marketing materials and manage your offline marketing campaigns. Restaurant marketing teams also ensure your restaurant get listed on all the local food apps to boost home delivery sales. All of this knowledge and expertise do not come cheap.
Cost of Licenses, Certificates, and Permits
Restaurants need many licenses and permits to operate in the United States. The number of licenses can increase depending on what you are offering. For example, if you serve alcohol, then you need a liquor license. Almost all restaurants need fire certificates and should always be ready for inspection. Restaurants that play music, also need music license or they run the risk of getting sued by record producers. Restaurants also need Food Handler’s permit along with a regular good old-fashioned business license. Getting all these licenses and permits require both direct and indirect costs. Direct cost is the cost of the licenses and permits themselves and the cost of renewing them. Indirect cost is the stuff you need to buy in order to get the license. This may require buying a larger fridge to store all ingredients at the right temperature or buying chef’s hat for everyone in the kitchen. The specifics really boil down to the guidelines of each permit and licenses.
Credit Card Processing Charge
Have you ever wondered why Visa and Mastercard generously allow you to pay for stuff without ever charging you a dime? Well, that’s because the businesses that are accepting the payment agree on paying a processing charge every time you swipe a card. Now, that you own a restaurant, you are that business owner. That means you would need to pay a processing charge every time a customer pays using credit card.
For restaurants operating in the USA, the processing fee is around 1.8 to as high as 2.5 percent of the total bill. That may not seem much but that’s definitely something you should consider when pricing the dishes.
Food Waste Cost
One of the trickiest parts of restaurant management is reducing food waste. The cost of food waste can be huge if you miscalculate your restaurant’s requirements. Many fresh ingredients need to be bought on a daily basis, which means wastage occurs on a regular basis too. The ones that hurt the most is the pre-consumer food wastage. This is the food or ingredients that get spoiled or thrown away before they end up being served to customers. While seasoned restaurant managers know how to reduce food waste, eliminating it completely is almost impossible. The only thing you can do is calculate the cost of wastage and figure out a way to donate the food before they spoil.