The Real Scoop on Costs of Running a Restaurant


photo credit: milspa

By Deagon B Williams

The answer to the question of “How much does it cost to run a restaurant?” is A LOT. But that isn’t really helpful, now is it? Okay, so let’s break it down into manageable and understandable terms.

Looking at the costs of running a restaurant in categories will allow us to wrap our minds around the real expenses more easily.  The categories are;

1)     Startup costs

2)     Fixed costs

3)     Variable costs

4)     Labor

5)     COGS

6)     License and insurance

7)     And the infamous “Misc”

Start up costs come in the beginning, are the most concerning because they are high and spent before customers can come in the door help you make the money back. Start up is by far the most expensive part of running  a restaurant.  But it can be okay if the costs are planned for, and you have reasonable sound projections to recuperate the costs through future sales.

Fixed costs are also significant- but again if planned for and manageable should not be impossible, let along daunting.  Fixed costs should total less than 30% of gross sales.

Variable costs often refer to labor and food (aka COGS) but those two categories are so big and significant that they should be looked at and considered on their own. Other variable costs are the fees of a triple net lease, hourly employees, worker’s compensation

We’ll look into fixed labor costs and COGS in another post. (For more information on labor costs see this post. And for more information on COGS, see this post.)

And, my recommendation on the infamous “Misc” category is to eliminate it as fast as possible.

Standard financial break down of the costs of running a restaurant is that the broad stroke equation to ta restaurant is: 30/30/30/10. 30% fixed, 30% labor, 30% food costs and 10% profit. All of those categories can be altered to increase profit but it is a great starting point from which to understand the costs of running a restaurant.

Like this post? Get more where that came from- join us on Facebook, or sign up for our RSS feed. Plus, we love comments, so leave us your thoughts! Thanks for reading.