How Much Will it Cost?
The Concept of Budgeting
Budgets go from the very general (cost per square foot or “rough” estimates) to the highly detailed line item list of everything you will spend money on before you open for business and generate any revenue.
Budgets affect every decision. Even if you have ample funds, you want to spend your money wisely. With restaurant development, you are often forced to commit to a space or sign a lease before you know the true cost of your project. What do you do?
Start with your schematic plan. You need to be sure the space you are considering works for your concept. You don’t need to invest in a full set of construction documents to understand if the space works or to arrive at a working budget. But you do need a plan showing the kitchen, bar, rest rooms and other design features. This will help you determine if the space can accommodate your back of house needs and required seating capacity.
Know the scope of work you will be paying for. Your space will typically be turned over to you with an agreed upon level of finishes and utilities. You may also negotiate a tenant finish allowance to help offset your construction costs. It is essential to know what you are getting, what the landlord / developer has agreed to furnish and what is your responsibility. There is no standard. Working with a professional leasing agent, attorney and project manager who understands what you need and what to ask for will save you thousands of dollars. Repairing roofs, upgrading mechanical systems, repairing drain lines or adding electrical power can be very expensive. Know the condition of the existing space and what is required to meet your needs.
Get realistic budgets. Work with a general contractor and his sub-contractors to generate budgets based on your conceptual plans. This includes mechanical, electrical and plumbing work, added exhaust systems, air conditioning, up sized gas, water or electrical service, added drains, grease trap and commercial grade water heaters. As discussed in earlier blog posts, structural issues and the roof condition must be inspected. Some contractors will work with you on budgets if you contract with them to do the work on a negotiated fee basis. Their subs may also assist knowing they will be working on this project. The alternative is to pay them separately for this phase of work.
Construction costs are just one part of the budget. Your FF&E (furniture, fixtures and equipment) budget will be a major expense. Working with a food service design professional or dealer who can, based on your conceptual plan, build a working budget is essential. Chairs, tables, specialty lighting, are just some of the items to be budgeted. There are books and online lists of what should be included in your Capital Expenditures Budget. These lists are comprehensive and will help provide the overall picture of your budget.
The overall construction budget is just one piece of your overall budget. Pre-opening operating costs – all the expenses you will incur before you open for business – can add up to big dollars.
Committing to a space before you understand what it will cost for you to open and operate is risky. Make the effort to develop and refine a realistic cost for your venture.
