Dreaming about opening a fast food restaurant and actually establishing one are two different things. However, if you want to bridge the gap between fact and fiction, you need to consider the different types of fast food business startup costs. The expenditures will include the initial costs, merchandise inventories, administrative expenses, and recurring fees for services. Let’s take a closer look at each aspect below:-
Key Takeaways
- You’ll find out how much does it costs to begin a fast food restaurant.
- The key factors that influence fast food business costs.
- Detailed breakdown of a fast food restaurant’s expenses.
- An answer to how you can reduce total expenditure without compromising quality.
How Much Does It Cost To Open a Fast Food Restaurant?
The actual cost of opening a fast food restaurant can range from $95,000 to even $2 million. This wide range is dependent on a variety of factors. These factors include whether you are starting a franchise or an independent restaurant, the size and location of the space, and the extent of renovations required.
Key Factors That Influence Fast Food Startup Costs
The core components that influence fast food business startup costs are as follows:-
1. Franchise vs. Independent
Having a franchise fast food restaurant will provide you with a tried and tested business model along with impeccable brand recognition. But it will come with a high initial investment that includes a one-time franchisee fee and ongoing royalty fees.
On the other hand, an independent fast food restaurant will ensure that you have complete control over the creative and financial aspects. Due to this, your fast food business startup costs will significantly decrease as you won’t have to pay any franchise or royalty fees.
2. Location & Real Estate
The location of your fast food outlet is one of the most crucial things that can decide whether your restaurant will succeed or not. However, a location that has substantial foot traffic will have a rent that is considerably higher.
Alongside this, the square footage of your restaurant will directly impact the money you’ll have to pay. The major reasons behind this are the rent, utilities, equipment, and furniture you need to pay for your fast food restaurant.
In case you want to lease a space for your restaurant, the initial investment will be on the lower end, but you’ll have to shell out monthly payments. On the other hand, buying a property will require a big upfront down payment.
The condition and quality of the space that you’ll opt for will significantly affect your costs later on.
3. Equipments
If you buy new equipments, it will have warranties and guarantees, but this equipment will be on the expensive side. However, buying high-quality used equipment will save you thousands of dollars.
The equipment that you require will depend on the cuisine that you serve. Even so, a basic equipment set consisting of grills, fryers, refrigerators, and ovens can cost more than $100,000.
4. Working Capital
You need a substantial amount of working capital to take care of your initial operating expenses before your fast food restaurant becomes profitable. You need to have at least six months’ worth of operating costs as savings that you can use as and when required.
Detailed Breakdown of Fast Food Startup Costs
Here’s an elaborate account of fast food business startup costs:-
Property Costs
The true cost of renting or buying the property depends a lot on the city and the neighbourhood, along with the land area. As a matter of fact, rent is one of the largest expenses that any fast food restaurant incurs. Moreover, busy locations such as shopping malls and tourist locations will be much more expensive in terms of rent.
Equipments
Did you know that the purchase of the kitchen equipment, furniture, and decoration can eat up a big portion of your fast food startup’s costs? However, the total costs will depend on the total area of the premises and the services offered by your fast food restaurant. Alongside this, the spending on interior fittings must also be factored in.
Merchandise Inventories
The stocks of merchandise that you will buy in the beginning must be included in your launch budget. It includes the raw materials that are required to cook delicacies. Some of those materials are farm-fresh ingredients, drinks, and even packaging materials. You need to analyze all of your requirements so as to minimize losses and ensure that there’s the right type of management of all the resources.
Management Tools
The accounting and human resource management software tools can cost a lot, depending on their functions. You must factor in all of these bills if you’re serious about automating certain aspects of your fast food business. The most wonderful thing about these tools is that you will be able to improve your restaurant’s efficiency and smooth out your operations.
Rent & Energy Bills
One of the biggest expenses that you will have to pay on a monthly basis is none other than rent. Alongside this, you’ll have to take into account the bills that you’ll have to pay every month. Some of them are internet bills, energy overheads, and maintenance charges. These costs are bound to fluctuate a lot, as per the capacity of the restaurant and the business scale.
Salaries
Salaries of your employees, along with those of the chefs, are a considerable expenditure for any fast food restaurant. You’ll need to pay the salaries of managers, cooks, serving staff, and cleaning service providers as well. This list can go on if your fast food restaurant is quite big. As your fast food restaurant grows, you will also require the services of a chartered accountant and other service providers.
Raw Materials
Raw materials for any fast food restaurant can eat up a big proportion of the overall budget. That’s why there must be proper inventory management so as to avoid any kind of wastage and maximize profitability. In case there are price fluctuations with regard to raw materials, you should diversify your sources of supply to lessen the risk and take advantage of the best available prices.
Marketing
The budget that you will allocate for marketing your fast food restaurant will ensure its visibility and growth. In today’s day and age, if your fast food restaurant doesn’t have a robust online presence, your chances of success are pretty limited. That’s why you need a visually enticing website, engaging social media presence, etc., for your fast food restaurant. You can even implement a traditional marketing campaign with the help of printed flyers to increase your restaurant’s foot traffic and online orders.
How to Reduce Fast Food Business Startup Costs Without Cutting Quality?
Here’s how you can cut down on your fast food startup costs, and that too, while maintaining quality services:-
Be Strategic About Your Location
You can opt for a second-generation space, which was a well-functioning restaurant earlier. Another approach can be to have a takeout-focused business model or a drive-thru, which will require a lot less space. You can even consider a cloud kitchen that operates solely for delivering fast food, and that too, with the help of third-party service operators.
Opt for Used Equipment
You can buy used equipment from reputable suppliers and buy the essential equipment first. Investing in a good maintenance plan for taking care of the used equipment will prevent costly breakdowns during peak hours.
Improve Team Performance
Hiring the right kind of team members whose temperament is exactly what your fast food business is looking for can go a long way. Cross-training your employees in different domains of your business can make the team a lot more adaptable. So, investing in high-quality training can help you save a lot of money sooner or later.
Follow a Minimalist Approach
If you are able to follow the concept of minimalism appropriately in your fast food restaurant’s operations, your operating costs will come down considerably. For this purpose, you can focus on creating a limited menu with a few signature dishes, as it will reduce your raw materials requirements. Another approach can be to negotiate with a few primary suppliers who can offer you bulk discounts and favourable payment terms. At last, opt for local and seasonal ingredients as they are more cost-effective than other available options.
Conclusion
Your fast food business startup costs are dependent upon a lot of factors. However, if you keep your expenses in check as per your budget, you will be able to have smooth operations. So, it’s time to make your fast food restaurant’s budget as per your requirements and then take it from there!
Are you looking to get an exact quote about how much it will cost to open a fast food restaurant? If your answer is in the affirmative, our experts at SrveUP can help you a lot. All you need to do is get in touch with us, and we’ll provide you with a quote at the end of our free consultation. Contact us now!
