Entering into a restaurant business has become a fad now. The cost of building a restaurant involves a lot of factors - concept, location, products, marketing and revenue generation. Here's a guide that may help you in understanding the concept of the restaurant building.
A restaurant is built mainly on six main categories - Kitchen, Interiors, Furniture, Professional fees, MEP (Mechanical, Electrical and Plumbing) Services and Contingency.
Considering the broader concepts - QSRs (quick-service restaurants, casual dining and fine-dining restaurants), here are the details of the cost of building the business in Indian metro cities, especially.
The basic assumption cost of building a restaurant is for 500-2500 sq ft area restaurant that includes a broad category of QSR, Casual Dining and Fine Dining.
The capital expenditure of a QSR starts from Rs. 15,00,000-30,00,000 for an area of 100-500 sq ft. This doesn't include franchise fees, kitchen, royalty or real estate.
While the restaurant building cost for a casual dining outlet of 1000-2000 sq ft area lies between Rs 45,00,000 to 1 crore. On the other hand, a unit of fine-dining restaurant costs Rs 1-2.5 crore for an area of 2500-4500 sq ft. However, some of the fine-dining restaurants in metro cities run in 1500 sq. ft space; the cost of such restaurants is Rs 1 crore ++. It is important to note that, mostly, the restaurant consultants charge one-time fee and architects charge a total 10% of the project.
Chief Enabler at BDT Ventures, Dipal Thakker, says, "On an average, for a 500-2500 sq ft area restaurant, it takes three to 12 months to complete - from feasibility to training; this depends on the size, format, location and other complexities at hand."
Selecting a Location
Location plays an important role in contributing to the growth of a restaurant, be it QSR, casual or fine dining. If you are new to the industry, you may want to consider the following locations for your business - shopping centres or malls, heritage buildings or local smaller areas.
Shopping centres or malls only because of the restaurant and the service it offers. Nilesh Limaye, founder of ABC (All Bout Cooking) says, "I know some of the shopping centres which didn't have a good footfall but they were known just because of the restaurant. People go to shopping malls so that they can choose from the various restaurant options available." The product i.e., the food served at your restaurant must do the talking.
If the food is good, your restaurant will certainly get recognition to be it at a heritage site or in a shopping centre, tells Nilesh Limaye. "The location matters when all the equations come together in a correct way."
If a heritage building is at a main commercial road or a busy area, then there will be more footfall.
"There are many examples in Lower Parel where restaurants do not have good footfall because the food they serve isn't good enough," tells Nilesh Limaye.
One should look into other aspects as well, like who is the target audience for that particular location. If the heritage building is a tourist spot, then it is a must-know whether the people are backpackers or luxury-oriented. If they are backpackers, you need to go ahead with a budget restaurant while if the visitors are more luxury-oriented, you need to plan your business concept accordingly.
If you are looking for smaller sites, the cost per sq ft may increase because the total fee will be more.
Location's impact: "The bottom line is - if it's a restaurant, the food and service has to be good in addition to what you are bringing to the table. When it is a busy street or a popular mall, the restaurant has an edge over other places. If everything is good even smaller sites work very well," tells Nilesh Limaye.
Tips to Achieve Lower Budget of Your Restaurant
"If you are paying Rs 4 lakh as rent and get a revenue of Rs 40 lakh per month, then it's a saviour. If you are paying 4 lakh as rent and revenue generated is around Rs 15 lakh then you have to cut the corners," says Chef Nilesh.
- The most important killer of any restaurant is the rental. If the rentals are too high, your business might be at risk. If you consider a prime location like the main shopping mall, it will cost more but if you try to get a place in the backyard, the cost will decrease.
- Decide on whether your staff will get the travel allowances.
- If your restaurant has a huge area and the ceiling is high then AC, lights and running costs will be high.
- To achieve a lower budget, one has to be very calculative. While drafting the budget plan, note down the cost of the capital expenditure, computers, parking, marketing, advertising, PR agency, stationery; even the minute details count.
- You must have a properly-planned menu and you should know your department and the inventory costs.
- If it's a QSR the takeaway packaging products get costly; you need to order them in bulk to cut costs. Be sure of what type of restaurant you want to open.
- Do a market and competition analysis before you get into the business.
- The first restaurant shouldn't be delegated to someone else; it should be looked by you only.