Many people dream of opening up a restaurant, but here’s a few things you should know prior to setting up your kitchen. First, it’s a very challenging business. Profit margins, after all expenses, are normally under five percent and the failure rate is alarmingly high.

The cost of setting up an average restaurant, like a diner, is around $400 per square foot. That could include tables, chairs, carpets, kitchen equipment and paint for the walls, but not the property costs.

Other costs would be various permits (occupancy, sanitation, fire safety and liquor) and insurance policies for liability, workman’s compensation, and fire. Then there are the various construction costs. Labor will typically be 25% of your expenses.

Since bankers don’t like to lend into an industry with such a high failure rate, normal funding sources are family and friends as well as high-interest credit cards. Overlooked by most, unfortunately, is reliance upon, and assistance from, a good local trade exchange when opening up a new eatery.

Under-capitalization is one reason restaurants go under. But location is very important, too. However, experts say the monthly rent bill for a healthy restaurant is ideally no more than its sales on one busy day.

BarterNews offers an exceptional, in-depth 16-page report, “Why and How Savvy Restauranteurs Trade,” see “Top Resources at bottom of right-hand column.

See “Site Sponsors” at the top of the page for restaurants who barter in your area.

This entry was posted on Sunday, July 29th, 2007 at 2:46 pm and is filed under Marketing, Purchasing & Financing, Top Resources. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.