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Understanding Restaurant Renovation Costs and Budgeting for a Successful Project

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Justin GuinnAuthor

Renovating a restaurant is a strategic investment that can help your business thrive in a competitive industry. 

A restaurant renovation can enhance the ambiance, increase functionality, and improve overall operational performance. It can signal a significant rebrand of your business. Or it may be a requirement when taking over a new space.

Restaurant owners can consider a restaurant renovation at any point in time — though given the lofty investment of restaurant renovation costs, it’s important to be intentional and prescriptive about how any improvements will positively impact sales and profitability.

In this article, you’ll learn when to consider a restaurant renovation, the key factors impacting restaurant renovation costs, how to manage costs for a successful restaurant renovation, and how technology can help you ramp up your newly renovated restaurant operation.


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When should you consider renovating a restaurant?

Restaurant business owners may consider a renovation at any point during their journey. 

The most common motivations for restaurant renovations typically include taking over a brand new or existing restaurant space. You want the front- and back-of-house to work functionally and properly represent your brand, and renovations may be required to help new spaces check these boxes.

But there are plenty of restaurateurs that take on restaurant renovations of spaces they’ve been in for years. Perhaps they were saving up to afford the restaurant renovation costs. Or perhaps the space simply no longer functions as it needs to in today’s multi-channel restaurant world.

Here are some reasons that may make a restaurant renovation a priority.

  • Layout decreases operational efficiency: Remodeling your kitchen and dining area can create a more efficient workflow, allowing for faster and better service.

  • Customer experience negatively impacted: Renovating your restaurant can improve the aesthetic appeal and create a welcoming atmosphere, enhancing the overall dining experience for your customers.

  • Needs safety and accessibility improvements: A renovation can improve safety measures and comply with accessibility standards, ensuring a safe and inclusive environment for customers and staff.


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Factors affecting costs of renovating a restaurant

Restaurant renovation costs can vary based on several factors. Understanding these factors will help you estimate expenses accurately during the planning phase.

The size and scope of your restaurant renovation project is the largest factor impacting costs. A complete overhaul of the restaurant will be more expensive than a partial remodeling of select areas. Likewise, the technicality of the project will vary depending on whether you’re moving plumbing around, taking down walls, digging into the ground, etc.

Here are some key considerations that can impact your restaurant renovation costs.

  1. Materials and finishes: The choice of materials and finishes, such as flooring, lighting, countertops, and furnishings, will significantly impact the cost. High-quality materials and finishes will increase the cost, whereas budget-friendly options can help manage expenses.

  2. Plumbing and electrical updates: If your renovation involves plumbing and electrical updates, such as installing new fixtures or upgrading outdated systems, the cost will be higher.

  3. Labor and professional services: The cost of labor and professional services, such as architectural, design, and engineering services, will significantly impact the total cost.

Importance of budgeting for a successful restaurant renovation

Proper budgeting for your restaurant renovation project is crucial to ensure its success. 

Overhead costs are high enough for restaurant operations without the cost of restaurant renovations stretching the gap to breakeven. That’s why it’s critical to implement a sound renovation budget to help reduce financial strain. 

Without proper budgeting, renovation costs can accumulate quickly, leading to financial strain or even project shutdown. A realistic budget helps you manage expenses and ensures that you have enough financial resources to complete the project.

Irrespective of the scope and size of the project, budgeting ensures that you have a solid financial plan to execute your renovation without any financial strain. 

Here are some reasons why intensive budgeting for your restaurant renovations should be a priority:

  1. Encourages realistic planning: Budgeting forces you to prioritize your needs and wants and assess which improvements will yield the greatest return on investment. It encourages you to develop a realistic plan that fits your budget.

  2. Enhances project efficiency: A well-planned and budgeted project ensures that materials and labor are efficiently utilized, reducing project delays and unexpected expenses.

  3. Improves long-term financial planning: Proper budgeting allows you to identify sources of funds, such as loans, grants, or investors, and establish favorable payment schedules. It also helps you monitor expenses and ensure that you are within your financial plan.

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Tips for managing restaurant renovation costs and expenses

While managing restaurant renovation costs and expenses is crucial, there are ways to optimize spending without compromising on quality and functionality. Consider the following tips.

  1. Prioritize your needs and wants: Identify your areas of focus and prioritize those that yield the greatest return on investment. This will help you develop a realistic plan and stay within your budget.

  2. Solicit multiple quotes: Before hiring a contractor or supplier, obtain multiple quotes from reputable sources and compare costs and expertise. This will help you find the best value for your money while ensuring quality workmanship.

  3. Plan for contingencies: Unexpected expenses can arise during a renovation project. Plan for contingencies by setting aside 10-15% of your total budget for unforeseen expenses.

  4. Utilize recycled or refurbished materials: Consider utilizing recycled or refurbished materials where possible. This will help you reduce material costs and minimize waste.

  5. Factor in long-term energy savings: Renovating your restaurant with energy-efficient materials and appliances can help you save on utility bills in the long run. Consider the long-term savings when factoring in renovation costs.

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Achieving successful restaurant renovations

Renovating your restaurant can be an exciting and rewarding project, but it requires careful planning, budgeting, and execution. 

By understanding the significance of renovating a restaurant, estimating restaurant renovation costs accurately, developing a realistic budget, and managing expenses efficiently, you can achieve a successful renovation project that enhances customer experience, increases efficiency, and improves safety measures. 

Plan your renovation project carefully, execute the plan efficiently and watch your business thrive.


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Taking control of all restaurant costs

The greatest takeaway from this article is the importance of ongoing, consistent restaurant cost breakdowns — for restaurant renovation costs and beyond.

This cost analysis doesn’t exist in a vacuum. As a restaurant operator, you’ve bought the ticket. Now it’s time to take the ride. The first best action you can take is to assess your current costing process and the systems you can employ for conducting a cost breakdown — especially for more controllable variable costs like food and labor.

While something is better than nothing, and manual calculations are something, your ability to accurately, consistently break down costs at scale is dependent on proper technology.

At the end of the day, profitability is the name of this game — not sales or revenue. A laser-focus on profitability requires a laser-focus on your costs — and a laser-focus on costs requires actionable, pinpoint accurate restaurant cost breakdowns.

Combining Toast and xtraCHEF can help all types of restaurants access reports on daily sales, costs, and how they’re impacting profitability.

Toast Payroll and Team Management, as well as Scheduling, powered by Sling, work together to uncover valuable labor trends so you can make better decisions.

xtraCHEF by Toast empowers you to drill into line-item level detail for every ingredient on each of your supplier invoices.

Together, these tools can automate and simplify the process of creating restaurant cost breakdowns.

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DISCLAIMER: This information is provided for general informational purposes only, and publication does not constitute an endorsement. Toast does not warrant the accuracy or completeness of any information, text, graphics, links, or other items contained within this content. Toast does not guarantee you will achieve any specific results if you follow any advice herein. It may be advisable for you to consult with a professional such as a lawyer, accountant, or business advisor for advice specific to your situation.