Are you thinking about creating a casual dining experience for locals? Or, have you ever thought about what it would cost to launch the next best fast-food chain? Well, we’ve got you covered.
Quick service restaurants are a groundbreaking solution within the restaurant industry. For the business owner, it’s a profitable generator of revenue. For customers, they serve quick and inexpensive food.
Before we jump into the cost to open a quick service restaurant, let’s begin by outlining what exactly makes a quick service restaurant in the first place. Continue reading to learn all you need to know.
The acronym QSR stands for “quick service restaurant.” The term is interchangeable with fast-food. The QSR meaning is in the name, referring to the ability to receive food in record time.
Nowadays, quick service restaurants consume a large sector of the food and beverage industry. We’re beginning to see quick service restaurant chains in numerous styles, serving various types of menu items. From coffee to dinner, consumers can purchase various food items on the go.
But how much does it cost to open a quick service restaurant? Are fast-food restaurants a profitable business venture? Continue reading to discover the cost breakdown of everything you’ll need.
Cost to Open A Quick Service Restaurant
The following six expenses will make up the majority of your quick service restaurant business plan. However, keep in mind that the cost to open a quick service restaurant can differ depending on the deals, equipment, and strategies you choose.
1. Cost of Inventory
A quick service restaurant should have enough inventory to serve customers for two to three weeks. This figure may change depending on the restaurant’s demand, but it’s a safe ballpark to be in.
Expect to invest roughly $6,000 per month in inventory. As you add this figure to your budget, consider the benefits of inventory management techniques.
If you manually take inventory for your restaurant, you’ll find that it can be a costly and time-consuming task. Thankfully, BlueCart offers a user-friendly app to manage your restaurant inventory management processes on one platform.
Viewing an entire wholesale directory and placing orders to multiple sellers simultaneously is key to streamlining operations. Not only will it save you time, but it will also cut expenses.
Book a demo today to learn how an inventory management app can sustain steady growth and simplify standard processes.
2. Cost of Labor
The labor cost will likely be one of the highest recurring expenses. However, it’s something that you can set a fixed portion of your budget aside for by hiring a certain number of employees.
On average, your labor expenses should fall between 20% and 30% of the restaurant’s gross revenue. It will differ from one business to another, so be sure to hire small teams during the early stages of business.
For your quick service restaurant, you’ll have to hire the following roles to make up your team:
- A restaurant manager
- Various types of chefs or baristas
- An accountant or bookkeeper
- A maintenance crew
An efficient way to cut costs over time is using self serving kiosks. If you typically have more than one cashier on duty at a time, this will allow you to decrease labor costs.
Consumers use kiosks as a way of ordering their food. The order goes straight to the kitchen staff and operates as a payment processing device. Kiosks also streamline restaurant operations by removing the middle person taking the order.
3. Cost of Integrated POS Systems
To accept orders, your quick service restaurant must acquire a POS system. Consider opting for a system that allows numerous forms of payment. These payment methods include cash, card, and mobile contactless payments.
An integrated POS system with mobile food ordering options will also help escalate the restaurant profit margin. Once your restaurant becomes available across mobile ordering apps, your target audience becomes significantly greater.
The right POS system will also include features like loyalty programs and data storage. By collecting valuable insights, new technology in restaurants can boost performance.
The hardware s of an integrated POS system should include:
- Card devices
- Pay at table devices
Set aside about $5,000 for your integrated POS system. There will be a startup fee, in addition to a monthly cost afterward. Plus, it’s always safe to allocate more funds than you might have to pay.
4. Cost of Menu Boards
Outdoor menu boards are essential for quick service restaurants. If anything, they’re what sets them apart from traditional restaurants.
When you’re shopping for a menu board, keep a few things in mind:
- You’ll need to pay for installation.
- A monthly fee will usually exist to keep it active during operating hours.
- Some menu boards integrate with the restaurant POS system, which is a must.
Many restaurant tech vendors supply menu boards, so prices can vary. To be safe, estimate around $1,000 for the initial purchase and installation. Also, make sure you find out what any recurring costs will be and work this figure into your monthly budget.
5. Cost of Marketing and Advertising
Once you launch your quick service restaurant, you must find ways to promote it to the public. When you’re determining which restaurant marketing ideas will work best, consider a few questions:
- Who is the target audience?
- Do you cater to a niche market?
- What are your marketing goals?
If you find that the cost to open a quick service restaurant is higher than you thought, you can easily cut back on your marketing budget. Plus, this is one of the areas of business where you don’t need to onboard third parties.
Strategies like social media ads and restaurant SEO are popular ways to boost awareness for your business. From keeping up with food trends to diversifying your restaurant menus, there are countless ways to get creative with promotions.
When budgeting the cost to open a quick service restaurant, you should set aside about $500 to $2,000 per month for such efforts. Fortunately, this portion of the budget is flexible.
6. Cost of Licenses and Permits
Licenses and permits will easily take up the largest portion of your budget. However, legally operating a business will always have regulations and policies.
The licenses and permits you must acquire to launch a quick service restaurant include:
- Business license
- Certificate of occupancy
- Sign permit
- Food service license
- Food handler’s permit
- Building health permit
In addition to the requirements listed above, you’ll also need to register a business name and an EIN to officially launch.
The cost will vary depending on your state and county. So, what a restaurant owner pays in states like New York or California will be much greater than elsewhere in the United States. It’s something each entrepreneur will have to confirm with local officials.
To be safe, we recommend estimating around $30,000 to $50,000 to cover licenses, permits, and other legalities to open a quick service restaurant.
Frequently Asked Questions About the Cost to Open a Quick Service Restaurant
Is Opening A Fast-Food Restaurant Profitable?
Fast-food restaurants are a profitable business venture, as they have a minimal menu and a fast turnover rate.
Fast-food restaurants can serve way more customers than traditional eateries. The fast turnover rate allows the restaurants to process more payments in a shorter period, which results in excellent performance.
Another reason fast-food restaurants are so profitable is that they offer exclusivity during non-operating hours. While many traditional restaurants close at the end of the day, fast-food restaurants remain open into the early morning, if not 24/7.
What Is the Minimum Cost to Open A Restaurant?
The minimum cost to open a restaurant can land between $90,000 and $300,000; however, there are many variables to consider. Many expenses pertain to the legal aspects, which can cost a small fortune in some areas. On the other hand, business owners can minimize other expenses at first.
What Type of Restaurant Is Most Profitable?
Bars are the most profitable type of restaurant, as alcohol has the highest markup of all inventory goods. Liquor is such an effective driver of revenue, that some bars don’t even serve food.
If you’re planning to start a bar, keep these ideas in mind to save on overhead expenses. It’s always a good move to start small to continually increase bar profits. Then, you have the freedom to offer more once your financial situation allows for it.
The following breakdown serves as a rough estimate of the overall cost to open a quick service restaurant:
- Inventory: $6,000
- Labor: TBD
- POS System: $5,000
- Menu Boards: $1,000
- Marketing and Advertising: $500+
- Licenses and Permits: $30,000+
To sum it all up, the cost to open a quick service restaurant should roughly be a minimum of $50,000, though this figure can vary. Ensure you carefully calculate the correct costs as you map out your business plan.
By doing so, you’ll quickly determine your restaurant’s financial needs and projections. Such data will help you determine a realistic timeline, too.
Revolution Ordering is an off-premise, omni-channel, direct delivery-enabled ordering platform for individual, franchise, middle market and large multi-unit restaurant enterprises. Take advantage of cutting edge features including 360° order history, live order monitoring, and marketplace order insertion. Contact us for a demo now to see how our off-premise solutions can help grow revenue and earnings of restaurants. Note that Revolution demos are a walkthrough of our software, not a source of business advice.