How to write a restaurant business plan: fit out costs

11 Feb 2019

 

This is the fourth guide in the series on writing a business plan for your restaurant (there are 10 in all).  Make sure to go back and read the introduction and previous guides if you have missed them.  A new cash flow model which accompanies this guide is on our website hospitality page - go and download it now.

 

Once you have saved up your money, found a site that works for you and finally managed to acquire it, you then need to turn that unit into the restaurant you see in your mind's eye.  

 

Or at least as close as you can get it with the cash you’ve got left.

 

In this guide we’ll cover:

  • How much you can expect to spend on a fit out

  • Equipment you will need

  • What kind of professional help you’ll need

  • Building all this into our cash flow

 

The ‘F’ word (fit-out)

 

Restaurant fit outs cost a lot of money.  At the high end, fit outs can run well in excess of £10m (Sexy Fish in Mayfair reportedly cost £15m to fit out).  

 

High Street chains tend to spend around £550k to £800k on fit outs.  

 

And you hear of some small great independents managing to open an 80 cover restaurant for less than £80k.

 

So why does it differ so much?  It really depends on a number of factors;

 

 

Size of the unit

The bigger they are, the more stuff you need to put in them.  That’s not to say you get the smallest one you can get, as then you may not be able to make enough money to survive.  You need to find the size which makes most sense for your concept (given the available sites in the area you want to open that is!)

 

 

 

 

Previous use

What was in the unit when you acquired it make a massive difference to how much you need to spend on your fit out.

 

In general, a completely new shell unit costs the most to fit out, whilst a unit which had something else in (a shop for instance) will be a little bit cheaper.  The cheapest option is something that is already the same as you are putting in (so if you are opening bar, a unit that was previously a bar).

 

Why is this?  Some of the most expensive bits of the fit out are the basic infrastructure (electrics, aircon, extraction, plumbing - we'll cover some of this later in the guide).  The less stuff you need to change on these items, the less you need to spend).


 

Structural work required

Pretty obvious this one, but if you need to take down walls or add a mezzanine to make the space workable you are going to be paying your builders a lot of money.  

 

It seems like an easy one to avoid, but things come up, especially when you are changing the use of a site - you may find that you need to add a bin room or rework the layout of the site due to fire escape routes.  

 

 

Type of venue / offering

The type of venue you operate will impact cost of the fit out.  The more complex your restaurant is going to be the more equipment and furnishings you need.  In general, it costs more for a full service venue than a takeaway venue.

 

In order of most expensive to least expensive;

 

  • Full service restaurant

  • Bar

  • Quick service / single concept restaurant

  • Cafe

  • Takeaway

 

There are a few reasons for this, one major one is the size of the venue that the different concepts require.  But equipment and furniture is also a significant factor.

 

 

Finish required

Your concept will determine what kind of finish you need - the more you expect people to spend per head, the more expensive your fit out tends to be (people aren’t buying food, they are buying an experience).  


 

 

Your concept

By this point in the guides I hope you are getting the idea that you need to be clear about what your concept is.  Is it full service? Is it mid market? Does it have a specific cuisine? What will it do so well that it will keep customers coming back for more?  

 

Your concept drives this business plan - and therefore drives how much money you will need - so you need to have a real focus on what it is you are trying to create.  I’ve seen some brilliant touches to concepts get shelved (damaging the overall concept) which could have been retained if planned out properly.

 

You need to be adaptable, as you are unlikely to have the resources you need to do everything you want to do, but if you are clear on your concept you’ll get far.

 

 

Kit

 

Let’s take a look at some of the kit you are going to need and some of the works you’ll be getting the builders to sort out.

 

Infrastructure

Electrics / toilets / lights / phone lines & broadband / aircon - let’s assume the basics of all in place as you will generally be getting a site that has been a shop or a previous hospitality venue.

 

If you are converting a shop there will be a lot to do on the electrics and lighting - expect to pay anything between £5 to £30 per square foot (of the site you are looking to acquire) for electricals, lights and wiring.

 

 

 

Extraction

If you are running a kitchen you are going to need proper extraction (this is not a choice, you won’t be allowed to serve food without adequate extraction).  This can be a very expensive business with full service kitchens costing between £10k and £35k - but so much of this is to do with the type and size of kitchen you have, as well as how much venting you need to run to get to a suitable extraction point.  I have seen extractions cost way way more than £50k - Renting a unit which currently has extraction in place makes your life a lot easier.

 

 

Fire alarms
You are going to need a fire alarm system that keeps the fire office happy and the people in your care safe.  You may also need fire suppression (sprinklers) depending on you lease / insurance / personal attitude to fire.  You may also need new fire doors. This all can vary from £500 for not much needed to over £5k for the whole lot.

 

 

CCTV

Depending on your alcohol license, you may need to get CCTV (you may also want CCTV for potential insurance claims and incidents).  CCTV used to be quite a scary number, but you can get cheap reliable systems for around £1k now.

 

 

EPOS

You’re going to need tills.  And a cash drawer and various printers and potentially wi-fi to help that all hang together. EPOS costs are now very varied as there are so many new entrants in the field using tablet based EPOS.  The big boys will set you back in excess of £5k, but you can find something that will work for you for £1k-£2k or less.   

 

 

Safe / fire extinguishers / coat stands / high chairs / music / staff lockers / A boards

Loads of little bits you need - none of it massively expensive but it adds up - let’s say £1k between friends.

 

 

Kitchen fit out

This is clearly driven by your concept (and whether you have a kitchen in place when you take on a unit).  To put a brand new, ‘full service’ kitchen in a space which was not a kitchen before you can expect to pay over £50k.

 

Go and take a look at a Nandos.  Except their pot wash and some prep, most of their kitchen is out in the open at most stores.  And you’ll notice it is tiny. It is not costing Nandos north of £50k to put in a kitchen.

 

Then go and take a look at a Wagamama kitchen.  

 

Concept really drives everything.  

 

 

Other equipment

Undercounter fridges for the bar, glass washer, dish washer, coffee machine.  Depending on your concept will depend how much of each of these you will need.   I would chalk up somewhere between £3k and £8k for other equipment.

 

 

Cutlery, crockery and glassware

 

Now give this one some thought as it can land up being pretty expensive.  What you really don’t want to happen is run out of plates/forks/glasses in the middle of service.  So you need to order quite a lot of stuff. Again, this is restaurant dependent but you can see anything from £2k to £12k

 

Tables and chairs
Obviously you need these.  Say £120 per chair and £200 per table as a good rule of thumb is you are buy new, commercial standard furniture.  

 

 

Now is a good time to talk about bootstrapping - bootstrapping is a useful term which basically means getting stuff done without much in the way of resources.  It’s something most people will be doing when they open their first restaurant and furniture is one of the areas where people look to save money.

 

Bootstrapping will get you a long way - just make sure you are consistent with your concept.

 

A great website for second hand kit is 'second hand pub equipment'.  You have to spend some time but there are some real gems there which could save you a small fortune

 

https://secondhand-pub-equipment.co.uk/

 

 

People you will need to help you

 

No doubt you’ll be really involved, but you cannot do it all yourself.  Here are some of the people you will need to help you;

 

Designer / Architect

You will need some form of designer as you are going to need planning approval on your shop front (and outside seating potentially).  Also, without designs its difficult to direct builders (although completely doable).  A designer will also have a long list of suppliers and a host of good ideas, so if your budget stretches, you should get them involved in floor plans and overall design. Costs vary depending on so much but say £3k for not much help to £15k to a lot of work being done for you (and bigger sites mean bigger fees).  

 

 

Builders

If you are doing things to the walls and floor you’ll have builders (and you will be doing stuff to the walls and floors). Chances are you will be doing a lot more than just that. The cost of build work really does depend on so many factors but the cost factors we noted at the start of this guide will have an impact on your cost - how much are you changing?  Is the spec high end? Are you pulling down walls? Have you got a massive space to work on?

 

 

Planning / Health and Safety / Licensing / Fire safety consultants

There is lots of paperwork to tick off, some of it you will be doing yourself but you may need professional assistance in some areas.  For other advisors I would suggest you allow £2k on the assumption you will need some assistance, but not everything.

 

Now, of course, this is not a comprehensive list.  Each venue is slightly different so if you want to get an idea of how much the fit out is going to cost you, you need to give it some thought.  

 

I would start by looking at how much you think it would cost to fit out an existing shop if it was your idea size.  Fill this into the ‘site fit out tab’ on the cash flow to get an idea of the fit out cost.

 

 

 

 

The idea of paying a premium on an existing restaurant is probably starting to seem pretty attractive.  

 

 

 

 

Back to the cash flow

If you have not yet downloaded the cash flow spreadsheet that accompanies this guide, head on over to our website, go to the bottom of our hospitality page where you will find our sheets to download

 

montyaccounting.co.uk/hospitality

 

On the ‘Fit out’ tab, you’ll see a table which contains a lot of the items we have spoken about in this guide.  There is no ‘one size fits all’ method here. You need to spend some time running through this sheet and thinking about what you will need to open your restaurant.  

 

 

 

 

Once you have worked this out, plug in the payments in the ‘week’ columns and your main cash flow will update (as will the VAT figure on the main sheet).

   

 

Fun with fit outs

Hopefully you can now see how it is easy for fitouts to become insanely expensive so you need to plan carefully. Essentially, you need to match your concept to the money you can raise (or find a way to raise more money).

 

The plus side of the casual dining market taking an absolute battering in 2018 is there are lots of fully fitted out sites which chains have closed (or would like to close) that have not yet found a good home.  

 

That means there are bargains to be had - but don’t forget the site selection guide - if a chain is closing, the chances are the site is compromised in some way - make sure the downside of the site is one that will sink your concept.  

 

[Another way into opening your own place is a tied pub - generally fit outs are cheap as there is lots of existing equipment and breweries will often meet some of the fit out costs - it one of the more low capital options but bloody hard work - available pubs are often serving smaller communities]

 

In the next guide we are going to get on top of your overheads so you know what kind of things you'll be paying for each month (surprise surprise - there are a lot of them).  

 

If you know anyone who these guides would help - please share it with them!   And if you like what we're doing, share it on social so others can see.

 

 

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