Photography by Kevin A. Roberts
Ask George: How much does it cost to open a restaurant these days? —Tom J., St. Louis
A lot…and a lot more than you think. If I had a dollar for every starry-eyed person who thought they could open a restaurant for 50-grand, I’d have 50-grand. Fifty large will buy you a nice exhaust hood. How’s that for starters?
The question involves two different scenarios: building a new restaurant (from a white box) or opening more of a turnkey operation.
Sticker shock hits the hardest in the former case. Even a chain-type, fast food operation costs hundreds of thousands of dollars per unit. In 2000, I was a partner in an Imo’s Pizza store in a new strip center. The cost? $320,000. Today, a good working figure is closer to $400,000.
Independent, non-cookie-cutter restaurants begin at that amount and grow into numbers so ridiculous one wonders if payback is even possible. When ARAKA opened in Clayton in 2007, locals swooned at the build-out but also at the price tag, rumored to be $2 million. A new restaurant, 801 Chophouse, will open in its place before year’s end. Some observers find it a shame that 801 elected to gut and remodel what was already a spectacular space (most likely spending another $2 million in the process) instead of retrofitting it. Fact is, ARAKA didn't look like a chophouse.
Which brings us to the second scenario: locating and buying an existing restaurant. In this case, most of the major expenses have been borne by the former tenant, so this is the cheaper option by far. Most of the time…
The value of a “used” restaurant is the value placed on the contents. Eager owners-to-be think they can get the doors open for exactly the amount of money they offered the prior owner. It never works out that way. For example, one local restaurateur paid a prior owner $40, 000 for his equipment, furniture, and fixtures. Doing a lot of the work himself, his cost to open was still $200,000. Then the used equipment he’d purchased began behaving like a junker car on a used car lot and it had to be replaced. (It’s often cheaper in the long run to just buck up for new, warrantied equipment and be done with it.)
In this scenario, it’s the “unexpecteds” that inflate original projections—major plumbing, sewer, structural, or HVAC issues. In another example, when several experienced partners opened a restaurant here not long ago, having traveled this road before they set aside a massive dollar amount for “contingencies.” A structural issue arose, burning through all the contingency money, causing the partners to seek out more investors. The restaurant opened several months late…which also cost them money.
On the eve of a new year, this was an excellent question. There is never a shortage of naïve souls ready to plunk their life savings into a very risky venture. When you hear how expensive and difficult it is to open a restaurant, believe it.
