If you are interested in opening a new restaurant, you will need to include certain items in your budget. Having enough money for construction, permits, equipment, furniture and design fees is vital. We have seen the cost of construction and equipment rise quite substantially in the last two years. In this post we will focus on construction costs alone, which do not include any of the other items mentioned above. People new to building a restaurant from scratch often lump construction costs in with the costs of permits, kitchen equipment, and furniture, but in reality, those costs are all different, and must be line-itemed separately from the get-go. It may not be obvious at first, but the money for each type of item goes to different parties, and seen in that light, you should get it right from the start.
According to the RS Means Construction Cost Data Report, which is where most of the industry (including building departments) reference construction costs, building a restaurant costs on average $238.12 per square foot (and let me repeat… this does not include equipment, furniture, permits or design fees!).
We have found that amount to be fairly accurate. For a completely “vanilla” space (nothing you’d see on our website) the cost seems to hover around $165.00 per square foot, and for a space made to a “high design” level you can expect to pay $238.12 per square foot. At the very least, and for a healthy project expect to pay $200 per square foot.
The one segment of construction where we have seen the highest increase in cost has been mechanical, which includes hoods and ducting, air conditioning and heating, gas lines and plumbing. This portion of work can take up to 40% of your budget if you have to start with a space not already fitted with this work. This wasn’t always the case but, the shortage of mechanical contractors has driven up the cost.
Another thing to keep in mind is that the smaller your space, the higher the cost per square foot for construction. You will most likely pay more per square foot than a larger space because you won’t be able to take advantage of quantity discounts.
There are a lot of factors that make up a construction budget so once you have a space in mind, contact a design professional to walk through the space and help you understand what is necessary to get the it up to code, and how much work it will take to get you operational. Later, once a design is in place, architectural drawings can go out to bid to a few general contractors to firm up the price.
We suggest that when you are working on your business plan that you budget with a 10-20% contingency margin so that you have the opportunity to build out the space how you want it. Very often, construction budgets are too small and we have to bear the bad news that the owner can’t afford their vision, or that they need to find additional investors. All in all, allowing for the average per square foot cost of $238.12 in your front end planning is a good idea for the healthy completion of your project.