Planning on starting a restaurant? Congratulations! Now open your wallet and get ready to spend. Just how much? An article from Toast says the median cost for opening a new restaurant is about $450 per square foot.
So depending on factors like the size of your restaurant, your location, the materials you use, and the concept you develop, your restaurant startup costs could range from $100,000 all the way up to $2 million and beyond.
But there are a few free resources for new restaurant owners and a number of government agencies and nonprofit groups that offer small restaurant startup support at little to no cost. Not only that, but the right technology can also provide extremely valuable low cost help starting a restaurant.
“There are quite a few resources out there, each with its own goal,” says Head of Back of House Nick Florek. He advises doing your own research to see what support your new restaurant might qualify for. He also offers some practical tips for tapping into these resources in order to keep your restaurant startup costs down.
5 Ways To Get Help With Your Restaurant Startup Costs
From economic development funds and specialized grants to low-cost loans and affordable tech, we take a closer look at some proven strategies for controlling your restaurant startup costs.
1. Research Economic Development Funds
This is an option you might want to look into before you pin down a location for your new restaurant. That’s because you may be able to qualify for funding from your city or state depending on where you choose to open your doors. If you are willing to set up shop in a designated area, you may be able to access Economic Development Funds.
Nick explains that these “specialized funds will likely come from a local municipality or economic development group in a specific area. The goal for a lot of these groups is to revitalize commercial activity in underserved areas or to build up a new business section in a city.”
These funds are usually earmarked for promising businesses that are willing to be part of these revitalization or growth initiatives. If you believe your new restaurant concept would be a good fit in an area primed for revitalization, you may want to look into these free resources for restaurant owners.
You can start by looking for economic development funding options through your state and municipal government websites as well as your local chamber of commerce.
2. Explore Criteria-Based Grants
Grants are another promising source of funding. Business grants can come from an extremely wide range of sources, including nonprofits, community organizations, for-profit investors, and more. These grants can also serve an extremely wide range of specific groups.
As Nick explains, “Small business grants are usually meant to support underserved populations and underrepresented groups, which means funding is often targeted to specific criteria like women-owned businesses, veteran-owned businesses, or minority-owned businesses.
“See what's available to you based on who you are,” Nick advises. “Find out how to qualify. Some groups do pitch competitions. Others request more traditional grant proposals and applications. Each group has its own mechanisms for awarding money.
“In any case,” Nick advises, “if you do find an organization that’s a good match for you, it’s also a good idea to get involved at a higher level. This could be a great source for ongoing small restaurant startup support as you work toward opening your doors.”
3. Take Out a Small Business Loan
In addition to the free resources for restaurant owners highlighted above, there are a few funding options that can help lower your startup costs. Small business loans are particularly popular for independent startups. There are a few reasons why.
Small business loans are backed by government funding and are meant to help stimulate small business growth. As a result, the terms are designed to be particularly favorable for small and independent business owners.
These terms usually include a lower down payment than traditional loans – typically in the range of 0-10% down. Many small business loans also offer longer repayment periods (sometimes up to 25 years) and capped interest rates.
“If you’re thinking about taking out a small business loan for your restaurant,” says Nick, “the Small Business Administration (SBA) is well worth looking into.”
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4. Consider Soft-Launch Options
One of the best ways to keep your launch costs down is to preempt expensive mistakes by really doing your research first. Nick advises, “Spend as little money as possible to get answers to your key questions.”
Key questions include the following:
- Do people want my food product?
- Will people pay for my food product? How much?
- Will they come back and pay again? Will they tell their friends?
The best way to really answer these questions is to test your concept out in a real-world setting.
“This could mean organizing pop-up or one-time events, doing a guest appearance at a specific restaurant, or even opening up a food truck or a temporary market space before going full brick-and-mortar,” advises Nick.
“Ultimately,” Nick says, “having confidence in your ‘product market fit’ and having tangible evidence of how much revenue you can make will spare you costly missteps as you open your new restaurant.”
5. Take Advantage of the Tech
Once you are ready to go full brick-and-mortar, you’ll also want to think about making a few savvy investments in your startup tech. Putting some of these key pieces in place right up front can help you make smarter cost-management decisions from the start.
“Have a way to capture customer data from the beginning,” Nick advises. “Know who your customers are, why they buy, and what they buy the most of. Understand the most effective ways to talk to and engage with them, both online and offline.”
“Your POS [point of sale] system is critical here,” Nick continues. “So is a robust direct online ordering platform that captures this invaluable data about customer behaviors, preferences, and demographics for you. This data is absolutely critical for helping you make informed decisions about your menu, your marketing, and the customer experience.”
What Other Tech Do You Need To Launch Your Restaurant?
Your POS system will be the foundation of your restaurant’s tech stack. But there are all kinds of other valuable solutions that can help you control costs as you get your business off the ground including inventory management systems, staffing software, website building tools, and much more.
Not sure where to start? Check out our free Tech Starter Kit to help you chart a path to success.
