How Much Does It Really Cost to Open a Restaurant & Why You Should Register as a Corporation

How Much Does It Really Cost to Open a Restaurant & Why You Should Register as a Corporation

Opening a restaurant is an exciting venture, but it comes with its own set of challenges. From managing initial costs to choosing the right business structure, there’s a lot to think about before your dream restaurant can become a reality. In this guide, we’ll break down the major startup costs and explain why incorporating your restaurant could be a smarter decision for your long-term success.

What Are the Key Restaurant Startup Costs?

One of the most important steps is understanding restaurant startup costs and deciding whether to register your business as a corporation or sole proprietorship.

Before you open your restaurant doors, it’s essential to account for the major restaurant startup costs that will set you back financially. While every restaurant is different, there are common expenses most restaurant owners will face.

1. Rent & Utilities

Your restaurant’s rent will likely be one of your biggest expenses, typically taking up 5% to 10% of sales. If you’re in a high-demand area like downtown Toronto or Vancouver, this percentage can be higher. You should also factor in utility costs (electricity, heating, water, etc.), which can also take up about 5% to 10% of your sales, depending on location and restaurant type.

2. Food Costs

A healthy food cost ratio is between 25% and 40% of sales, depending on your restaurant concept. For example, if your restaurant makes $20,000 a week in sales, expect to spend $5,000 to $8,000 per week on ingredients and food. The type of menu you offer and how much prep work it requires will affect this ratio.

Money-saving tip: Negotiate with local suppliers and consider seasonal menus to reduce costs and minimize waste.

3. Labor Costs

Labor is another significant expense, making up between 25% and 35% of your sales. This includes wages for kitchen staff, waitstaff, and management. If you’re opening a full-service restaurant, expect to allocate a higher percentage to labor costs. A quick-service restaurant, on the other hand, will have lower labor costs.

4. Permits, Licenses & Insurance

Every restaurant needs the proper permits and licenses to operate legally, including health and safety inspections, liquor licenses, and more. These costs can vary by location and type of restaurant, so it’s important to budget ahead. Additionally, insurance (like liability and property insurance) is a must for protecting your business and assets, costing anywhere from $500 to $10,000 depending on your restaurant’s size and location. Using government tools to search for Licences and permits required for your restaurant business is easy via BizPaL.

Should You Register Your Restaurant as a Corporation?

When planning your restaurant startup costs, you also need to think about your business structure. Will you register as a sole proprietorship or a corporation?

SOLE PROPRIETORSHIP

This is the simplest option for new restaurant owners. It’s quick to set up, and you retain full control over the business. However, sole proprietors are personally liable for business debts, which puts your personal assets at risk.

Key points:

• Ownership: Owned by one person; no legal separation between owner and business.
• Liability: Owner has unlimited liability—personal assets are at risk for business debts.
• Taxation: Profits are taxed as personal income on the owner’s tax return.
• Control: Owner has full control over decisions.
• Continuity: Business ends with the owner’s death or decision to close.
• Ease of Setup: Simple and inexpensive to start.
• Funding: Limited ability to raise capital; mostly funded by owner’s savings or loans.
• Ongoing Requirements: Minimal filing requirements; just annual tax returns.
• Profit Distribution: Owner keeps all profits, taxed as personal income.
• Credibility: May appear less formal compared to corporations.
• Employee Benefits: No formal benefits unless the owner provides them.
• Exit Strategy: Difficult to sell or transfer ownership.
• Flexibility: High flexibility in operations and decision-making.

CORPORATION

A corporation is a distinct legal entity separate from its owners, providing limited liability protection. This means your personal assets are protected from any business debts or legal actions. Corporations are taxed separately, and profits are subject to corporate tax rates, often offering tax advantages like income splitting. One of the biggest benefits of incorporating your business is the ability to raise capital through share issuance, making it easier to attract investment and grow your business.

A corporate structure also enhances your business’s credibility with investors, customers, and suppliers. Additionally, corporations offer continuity, meaning your business can continue operating even if an owner leaves or passes away. While setting up and maintaining a corporation requires more paperwork, such as annual filings and corporate tax returns, it can provide long-term benefits, including potential tax savings and greater flexibility. To get started, you can easily register a corporation online and ensure your business is legally protected and positioned for growth.

Incorporating your restaurant offers key advantages:

• Limited Liability: As a corporation, your personal assets are protected.
• Better Funding Options: Banks and investors prefer lending to corporations, which makes it easier to secure funding.
• Tax Advantages: Corporations can benefit from lower tax rates and have more flexibility in managing income.
• Unlimited Growth potential: Able to bring shareholders and Outside investments to get funds to grow your Business.

If you plan to borrow money or grow your restaurant, registering as a corporation can be the better choice for long-term success.

Why You Should Register Your Restaurant Business Today

Now that you know the costs involved and the benefits of registering as a corporation, it’s time to get your restaurant business registered! Whether you’re in the planning stages or ready to launch, having your business legally registered is essential for protecting your personal assets and securing future funding.

Get started today and register your restaurant with our simple, affordable process. We make business registration in all Canadian provinces quick and hassle-free.

How We Can Help You Register Your Restaurant

At EZ Incorporate, we help restaurant owners like you get their businesses registered quickly and easily. Whether you’re registering as a corporation or sole proprietorship, our team is here to guide you through the process.

• Fast Registration: We handle all the paperwork, so you don’t have to.
• Corporation Setup: Get your restaurant legally incorporated and protect your personal assets.
• Affordable Pricing: Our service packages are designed to fit your budget.

Ready to take the next step? Register your restaurant now and start your business the right way

Opening Your Restaurant Starts Here

Starting a restaurant involves careful planning, including managing startup costs and choosing the right business structure. By understanding the key expenses and registering your restaurant as a corporation, you can set yourself up for success.

Get your restaurant business registered today and let’s turn your dream into a thriving business!

Disclaimer:
Please note that the costs associated with opening a restaurant can vary significantly depending on your location, business size, and type of operation. Costs for rent, utilities, food, labor, insurance, and licenses are subject to change based on the province or territory where you are operating, as well as the specific area within your city. Always budget accordingly and consult with local professionals for the most accurate cost estimates in your area.