Restaurant Design and Construction Budgets
Usually one of the first questions we’re asked by those embarking on restaurant projects relates to budget. How much does it cost? Well, budgets can swing dramatically from project to project, but here are some rules of thumb. Generally, restaurants are built between $25 – $300 a square foot (some mega projects or ultra-high-end projects have gone for a few thousand a square foot), but this also depends on whether we are doing a renovation or new construction. The cost for “restaurant design” and planning is often around 5-10% of the construction budget (considering strictly the design phases of the project, not larger concept development issues involved in large-scale development projects). The type of restaurant you are building is certainly a factor – you’ll spend more per square foot for a fine dining restaurant than a fast-casual concept. Also, you should expect an entirely different financial model in approaching the creation of a new restaurant concept you plan to roll out nationwide versus a single one-off concept. The former requires much more planning and development. An average Red Lobster is believed to cost around $120 per square foot and an average Starbucks around $85 per square foot. However, these companies have spent millions and millions in design, branding, and purchasing planning/efficiencies, so a start-up shouldn’t expect to be anywhere near these ranges in creating a new concept from scratch. It is amazing how often someone thinks they will be the next Starbucks within a 10-year period and with a $500,000 investment. Starbucks has spent hundreds of millions of dollars to perfect what we see today in their latest restaurant prototype. It’s more than just wishful thinking to think it can be duplicated as a growth concept within the cost of what they can today build a single unit they’ve spent so much perfecting. Mega chains can afford seven-figure per year Executive Vice Presidents and teams of hundreds working on a new concept. It’s believed that well over $10M (“soft” costs) is spent developing just the prototype plans for some projects. So can a new prototype be created for less than $10m? Of course. By all means.
It’s less likely though that the next billion-dollar brand can be conceived within less than the cost of opening a single unit though. At a minimum, you can expect to spend a lot more in the years to come correcting the mistakes of the under-funded prototype. There’s a saying, “Measure twice and cut once”.