6 Hidden Costs of Opening a New Restaurant That You Probably Didn’t Know

expenses opening restaurant

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.

5 Unmistakable Signs That Your Business Is Profitable

One of the main goals for any entrepreneur wanting to start a business is that the business enjoys financial success. Getting a business to the point where it is genuinely profitable is a tricky thing indeed. Although it is usually the core motivation of a business, it can be one of the harder things to achieve. It can be useful for anyone in this position to know some of the signs that mean that the business is ready to turn a profit. Knowing as early as possible means that you have more chance to change things around if something has gone wrong. It also enables you to prepare for any success which might be coming your way. To that end, we have put together a list of some of the clearest signs that your business is truly profitable. This can be useful to think about at just about any stage in the business. In the early days in particular, it can prove helpful to help you plan the next stages for your business. Let’s take a look at those telltale signs.


The Market Is Showing A Need For It

The majority of businesses do not do as well as they had hoped to do. Why this might be could be down to a number of different factors, and would warrant an article by itself. However, one thing is clear. There is a huge difference between the majority of businesses which merely float along, and those which really excel. It goes without saying that you want your business to be one that really excels. As such, it is essential that the business is something which is really needed by the business. It can be hard to determine whether a business is in this kind of position. One of the easiest ways is that you seem to almost immediately have a monopoly on whatever it is that your business does. If there really is nobody else out there doing what you are doing, then that is a very good sign indeed. But besides that, it might be that your business is simply alone in its own corner of the marketplace. This, too, can prove to be a very clear sign that things are going to go well. A business in this position is likely to enjoy some serious continued success.


You Are In A Strong Financial Position

So, the finances of the business are always going to be hugely important. One of the clearest indicators that the financial side of things is going to be strong is that your personal finances are in good shape too. This is a reliable sign for a number of reasons. First and foremost, if you are the kind of person who keeps their finances in order, then that is always going to bode well for the business you run. But there is more to it than that. The better your own finances, the more likely it is that your business has some real support behind it. While you always want to keep your business’ finances separate from your own, they are never entirely separate. There is only so much you can do to keep them apart, but that is something of a mixed blessing. If you are in a strong position personally, then that reflects well on your business, and vice versa. This is particularly true when it comes to matters such as credit rating. If you have a poor credit rating, then your business might struggle to build trust in suppliers and clients. With a good credit rating, however, you should have no trouble at all. If you are in a position where you need to dramatically improve your credit rating fast, then there are many ways of doing that. Some entrepreneurs find that using an emergency line of credit is one of the quickest ways to go about this. However, this might not always be the best option – it all depends on your situation. Either way, it is always worth trying to improve your credit score if you have a business in your name.


Your Business Plan Works

All businesses need a strong and detailed plan in order to operate as well as possible. This is clear to most business owners. What is often less obvious is how exactly to ensure that it is a business plan which will work. This is partly because this is the kind of thing which takes a considerable amount of practice to get it exactly right. Knowing how to write a successful business plan is a difficult matter indeed. However, the main rule of thumb is that it is as detailed as possible. That way at least, you can be sure that you have done everything in your power to make it as good as possible. You know that your business plan is working if the results you expected to see are coming through on or ahead of schedule. This alone is always enough cause for celebration. However, it is doubly so in terms of your profitability, for it means that your business will probably continue to trade in a great way. Having a business plan which really works means that you can, to a certain extent, put your feet up and relax with your business.


You Don’t Need To Rely On Backup Cash

It is a wise move indeed to always have some spare cash for the business, just in case something untoward happens. You never know quite what will happen in the world of business, so it really pays to prepare for it as best as you can. Having an emergency fund is always going to be a good idea in this way. However, a clear sign that your business is going to continue to do well is that you rarely or never have to rely on that emergency cash. If you find that the pot just keeps growing and growing, without having to take anything from it, then that is a really good sign. It is also an opportunity to put even more money aside, so you may as well while you have the chance. Knowing that it is there for the future is a real sense of safety surrounding your business. It is well worth trying to get to this point as quickly as you can.


The Brand Does What A Brand Should

There are many different sides or faces to your business, and the brand is one of the most important. The brand image is the public face which the business presents to the world. It is vital that this image is as close to what the business represents as possible. Otherwise, it is not really doing its job. But when it goes right, it means that your business is likely to be on a good path. A great brand draws people in in an engaging way. This means that your business has an increased interest, which translates into profitability. If you find that your marketing is really working, then it is likely that your brand is doing its job as it should. This puts you in a good position for the future, as it means that you have the brand to rely on. The stronger the brand image gets, the more powerful it is to use in your marketing. Once you hit onto a brand which works, it makes sense to stick it out for as long as it will last. This will ensure that your business remains profitable for much longer.

Living Without a Mortgage

Tiny houses

Living without the stress of a mortgage payment is the dream of so many Americans. A house is likely the most expensive purchase that you will ever make, and you make payments on it for decades. Entrepreneurs like Don Gayhardt understand the hard work and devotion required to quickly pay off your home. If you are truly determined, there are ways to live mortgage-free.

Build Your Own Home

It takes money to make money, and building your own home is by no means a small expense. To be sure you’re in control of every penny spent, consider crunching the numbers to see if it’s a cost-effective alternative for you.

  • Zoning, permits and local laws come into play anytime you’re building a structure. Research these front and back so that you’re not hit with any unexpected surprises later on in the process. This is to be your home, not a backyard treehouse!
  • You are given the freedom to plan and spend as you please while you’re building your own home, but remember not to cut corners when it comes to anything related to safety. You want your house to be built for generations.
  • Expecting the unexpected is the absolute thing to remember in any construction project. Things can easily go from great to terrible in a heartbeat, so be sure to have money set aside for those “just in case” emergencies.

Try a Tiny House

If you’re a single person or even a married couple with no kids, a tiny house might be in your best interests. Tiny houses are a hot new housing trend in America thanks to their affordability, but remember that the word “tiny” means exactly what it says. A tiny home is usually no bigger than 500 total square feet.

  • Whether you own property or not, tiny houses are oftentimes portable and can be towed from place to place. This means that you can travel to the country, but take your home with you.
  • Tiny houses are very cost-effective. Averaging at only $25,000 to $35,000 for the entire home, you can save hundreds of thousands of dollars from buying a traditional house.
  • Living in one of these houses means serious downsizing. If you are a materialistic person with a lot of hobbies, this lifestyle might not be for you.

Pay Your Mortgage Twice a Month

House payments are so much money, but if you’re able to, it’s worth changing up the way that you pay for yours. Instead of making one large payment once a month, why not make two, twice a month? Seeing an amount of $600 is easier than seeing $1,200, and you might feel more comfortable making larger principal payments in smaller amounts. Adding $100 to half your mortgage payment feels less threatening than making a $1,200 payment into a $1,300 payment.

There are solutions to living without a house payment, and none of them are easy. Take the opportunities given to you as lessons in thriftiness and making your money stretch. One day you will achieve the dream of owning your home free and clear. Until then, work hard to make that dream a reality.