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You have been dreaming for years of opening a restaurant in San Francisco. What’s more, you have decided that now is the perfect time to open your own restaurant in that beautiful city. However, what details will you need to hammer out?
What You Already Have
You have a few things lined up already. For instance, you have convinced a world-class chef to come and work for you. This chef is among the best and comes complete with a delicious and inventive menu that San Franciscans will love. Plus, you have your supply delivery set to go as well.
Your plan is to run a brand new, state-of-the-art, first-class restaurant in San Francisco, because you know that the people of this breathtaking city have come to expect only the finest when it comes to fine dining.
You’re excited about the fact that your restaurant will be located in lovely San Francisco because it’s a beautiful and sophisticated environment that will complement the scrumptious dishes your chef will prepare for your customers.
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What You Still Need
So, what else are you going to need? As it turns out, there’s plenty.
For one thing, you’re probably going to need a managing partner or an operating chef. Additionally, you’ll need to hook up with some quality food distributors in California. Then you’ll need to decide on the exact location for your restaurant and settle with a landlord on your lease.
Finally, you’ll need to locate some investors and persuade them to take a risk on your San Francisco restaurant.
Building Costs in San Francisco
In whatever building you decide to lease the space for your San Francisco restaurant, you’re going to have to build out your restaurant so that it works for your staff and your future customers. How much is that going to cost you?
For the sake of simplicity, let’s suppose you’ll need roughly $800 per square foot to construct the dining room and kitchen. If you have 2,300 square feet in your building, the build-out will set you back $1,840,000. Equipment purchases will bring that total to a good deal more than two million dollars.
Rent in San Francisco
In case you haven’t heard, the costs for rentals and leases in San Francisco are phenomenally high. In fact, according to a recent article in the San Francisco Chronicle, the rental cost for retail space in San Francisco now averages $81.25 per square foot. On a 2,300 square foot building, that will run you a whopping $186,875 monthly.
Are you still with us? Then let’s talk about finding those investors.
At this point, unless you already have a good track record of starting other restaurants and a great relationship with your bank, the only individuals who are going to give you as much money as you’re going to need are heavy-hitting investors. What’s more, these investors will be people who will expect a good return on their investment.
So you’re going to need a plan, and not just a good plan. You’re going to need a great business plan. This is the only way you’re going to be able to communicate your big ideas and your financial projections to potential investors.
This is important because these investors will be expecting a profitable return on their money. And if you can convince them that your San Francisco venture is worth the risk, they will be happy to take that risk.
The challenging element with investors is that not only do they want a good return on their investments, but they want their original money back out of the deal. Additionally, most of them will insist on an annual return over the life of your restaurant as a part of the original deal.
However, most of these investors will opt for the best lending rate plus 2-3%. All the same, keeping your investors happy and paying them off in a timely fashion is extremely important.
Other Costs to Consider for a Restaurant in San Francisco
You should also consider the following
approximate startup costs, which will likely be somewhat higher in San Francisco
than they might be in another city:
- Food inventory will run about $16K
- A legal professional to draw up the operating and partnership agreements should be about $15K
- Silverware and china will cost roughly $38K
- An interior restaurant designer will charge about $46K
- Fourteen days of training for employees will cost about $11K
- Your wine and liquor inventory will cost roughly $45K
- A public relations organization to help with marketing will charge about $26K the first year
- Your restaurant’s stereo system will run about $11K
Remember that each of these figures is a top-of-the-line estimate, because you’ll most likely be making your purchases in San Francisco or elsewhere in the Bay Area.
However, it’s important to remember that it’s almost prohibitive these days to open a new restaurant almost anywhere. This is because of the operating challenges and financial constraints that restaurant owners are faced with, especially in San Francisco.
Ultimately, you’ll need to be creative and persistent in order to make your dream of opening a restaurant in San Francisco a reality.
However, if you can persist through the struggles, always serving up great food with top-notch service, the people of San Francisco will take you and your restaurant into their hearts. And your own heart can finally be at home in that beautiful City by the Bay.