How Much Does It Cost to Open a Restaurant in London? [Restaurant Startup Costs]

Ryan Gromfin

Ryan GromfinAuthor

Let's look at the costs needed to start a restaurant in London. 

Turning your restaurant dream into a reality is a big step and can be very exciting.

Usually, after asking "How do I start a restaurant?" what comes next is "How much will it cost?" 

There are many costs to think about, and lots of things vary from business to business, so it's not a simple question. But in this guide, we'll go through all the costs you need to plan and save for. 

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How much does it cost to open a restaurant in London?

How Much Does It Cost to Open a Restaurant in London [Average Cost 2023]

Based on your lease, choice of furniture, and the way you set up your space, the overall expenses for starting a restaurant can be anywhere from £150,000 to more than £1 million.

Restaurant Opening Cost by Square Foot

Just for the space, in London, the cost is about £47 for each square foot, as noted by Counting Up, but can be far higher for premium spaces and locations. This price can change a lot based on the area and whether you decide to rent or buy. For restaurants using hundreds or even thousands of square feet, this expense can grow and get large fast.

For those considering renting, the average cost for restaurants in the UK is usually between £2,000 and £5,000 monthly, with London at the higher end of that range.

If you plan to buy a 1,500-square-foot restaurant that's closing, with all its furniture and equipment included, prices might start at the lower end of our £150,000 to £1 million range. However, creating a new restaurant from scratch can be significantly more expensive, potentially reaching £2-3 million for premium venues, especially when adding high end building costs, equipment, and decoration.

Bear in mind, these are approximate figures for starting a restaurant, so actual costs can vary widely. It's better to use a formula or a tailored calculator for opening restaurants to estimate your costs accurately, based on your own situation and restaurant idea.

Also, your restaurant's business plan is crucial, so ensure it is comprehensive and well-prepared. 

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What Restaurant Startup Costs You Can Expect

Opening a restaurant in London comes with many variables — there's no single answer to how much it will cost. But understanding where you're likely to spend money can give you a clearer idea of your total expenses.

And remember, not planning well is a sure way to fail. At the beginning, you and your team need to take time to plan everything — this includes figuring out how to cover all costs associated with opening your restaurant.

Restaurants typically operate on tight budgets and have many components to manage, so starting with an inefficient layout can lead to spending more on extra staff and lost revenue from less-than-happy customers. An uncomfortable or awkward space might make customers less likely to stay for dessert. And poor construction and choosing the wrong equipment can end up costing double in the long term.

Below are some major costs and expenses you should expect when starting a restaurant.

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Restaurant Startup Costs Breakdown

Refer to this checklist of restaurant startup expenses to help you start planning and budgeting for your new venture.

1. Utilities

Even though your restaurant won't be fully up and running during the setup phase, you'll still need to have utilities like gas, water, and electricity working. The costs for these can accumulate fast: typically, London restaurants and bars spend between £1,000 and £1,500 each month on utilities.

Price Range: Annually, you're looking at costs between £12,000 and £18,000 on average depending on your venue's size. If your restaurant is a larger one, prepare for higher utility expenses.

2. Location

One of the most important decisions you’ll have to make when opening your restaurant will be its location. If you’re thinking high end, Soho might be the right fit, or if your style is more lowkey and hip, think Hackney or Shoreditch. Generally speaking, it's smart to spend the money on a location that has good foot traffic, rather than relying solely on marketing to entice guests into your London restaurant.

Depending on your concept, you might also be in a position to consider a few different options:

  • Building from the ground up and investing in new construction.
  • Opening in an existing building and purchasing an operating restaurant.
  • Converting an existing commercial space into a restaurant space.

Each of these options has its pros and cons and this will affect your upfront costs — there are no right or wrong answers here — but with solid research, you can make an informed decision on which option is best for you.

3. Interior Finishes and Equipment

This where all the smaller costs can begin to accumulate. It's clear you'll need both kitchen tools and major appliances. Additionally, your restaurant requires furniture and decorations to reflect your brand to your diners. Plus, there's the need for backend items like signs, lighting, a sound system, and a phone setup.

It's so easy to overspend in this area, so it's crucial to plan carefully to keep your startup costs in check. The main pieces of this puzzle that will influence costs will be the kitchen equipment and furniture, which vary based on your kitchen's and dining area's sizes.

Price Range: The amount you should anticipate spending on equipment and furnishings typically falls between £35,000 and £100,000.

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4. Pre-Opening Expenses

Everything should be set, prepared and ready to function from the moment you open the doors to your new London restaurant.

Quality training is essential to make sure your team is prepared and efficient, so invest in a program. Additionally, it's important to have enough stock in your storage and freezer areas to cover the initial opening. This includes items like food, dishes, beverages, glasses, water jugs, and any other supplies necessary to deliver an outstanding experience for your guests.

Price Range: Expect to spend between £25,000 and £40,000 on food and utensils, and around £2,100 monthly for each staff member.

5. Marketing

This part depends entirely on the type of restaurant you are opening. For franchises, your advertising might already be covered. But, opening a new restaurant in a competitive area could mean spending more on advertising and promotions to get noticed.

If your new restaurant is a high-end establishment in central London, you might engage with a PR firm for exposure, or you might get contacted by media for a feature story about your eatery.

Starting with social media is an effective way to engage customers initially, and as your customer base grows, expanding into email marketing can reap rewards. The costs for marketing and PR will vary based on your specific restaurant concept, the level of competition, and other factors you as the owner will be aware of.

Price Range: Typically, 3 to 6% of your total sales.

6. Capital and Contingency

Even if your restaurant is an instant smash hit, it's important to understand that it will still take a while for everything to operate smoothly. You should expect a slow increase in sales and understand that it might take time for customers to start coming in regularly. That’s why it is smart to have some capital and a backup fund ready to support your London restaurant through at least the first six months, a time that may bring unpredictable or reduced sales.

Price Range: Allocate 10-20% of your initial startup expenses for emergency situations.

7. Exterior Finishes

Focusing on your restaurant's appearance shouldn't be limited to just the interior. If you can influence the outside look of your building, investing in outdoor aesthetics like design, lighting, and landscaping could make your space really stand out. Also, if there's an outdoor eating area, be sure to take advantage of this feature in the warmer months.

And, even if you don't have the ability to alter the building's exterior, having clear signage is a key way to announce to passersby that you are open for business.

Price Range: Expect to spend between £100 and £100,000, and remember there might be extra costs for planning permissions.

8. Organisational and Development Costs

This is generally the least enjoyable part about starting a restaurant, but it's crucial. You must apply for and pay for your restaurant's licences and permits, put down deposits for insurance, and also make initial payments for utilities like gas, electricity, and water.

This process can be as time-consuming as it is costly, so it's important to familiarise yourself with the necessary licences and permits needed to open your London restaurant.

Price Average: Expect to pay between £100 and £1,905 for licences, and between £750 and £1,500 annually for insurance.

9. Professional Services

First-timers to the industry should totally consider seeking wider, professional support. Hiring a restaurant consultant and getting advice from experts such as architects, lawyers, and designers could be a smart investment for a successful launch of your London restaurant.

Price Range: You could spend between £0 and £55,000, depending on whether you decide to hire professionals.

10. Technology

Your tech is crucial for your restaurant's efficient operation. Every restaurant requires a point-of-sale (POS) system, and based on your specific theme, you might need additional tools and technologies to help everything run seamlessly.

For example, full-service restaurants may benefit from a handheld POS system for quicker table turnover, while fast-service spots might need a kitchen display system and performance metrics to gain valuable business insights. You can learn more about each here. 

Price Range: Get a quote.

11. Food Cost

Since this is the core of your product offering, it's crucial to make sure you have all the necessary items for a successful launch. Lacking sufficient food supplies, particularly at the start, can leave a bad taste in your customer’s mouths. On top of that, having a fully stocked inventory ensures that your kitchen staff have everything required for smooth service. Like all aspects of the restaurant game, the average monthly cost of food will differ based on your London restaurant's cuisine type and menu selections.

Price Average: Generally, restaurants allocate 25% to 35% of their total food and beverage sales to stock their inventory.

Bonus Cost: Franchise Fees

It almost goes without saying, this expense won't affect you if your restaurant isn't a franchise. However, if it is, prepare to pay a considerable amount. Below is a list of average startup costs for well-known restaurant franchises*:

  • McDonald’s: Between £350k and £1.85m
  • Pret a Manger: Approximately £500,000 
  • Costa Coffee: £250,000 to £800,000
  • Five Guys: Approximately £300,000
  • Domino’s: Approximately £350,000 
  • Subway: Between £85,000 and £220,000

*Data collected in November of 2023 and subject to change. 

Assembling Your Restaurant Startup Dream Team

It’s a common tale that restaurants often struggle and may fail due to inadequate funding. Lack of sufficient capital can make the tough restaurant business even more challenging. To steer clear of these common issues, it's important to collaborate with experts throughout the entire process.

Here is a list of trades and professionals that you should consult as you plan to open your restaurant:

  • Real estate agents
  • Solicitor 
  • Accountants
  • General construction contractors
  • Marketing firms
  • Architects

Getting support from experts like these will help make sure you're on the right track. Whenever possible, try to find professionals who specialise in working with restaurants.

Open a Restaurant without Closing Your Bank Account

Before deciding to launch a restaurant in London, figure out your available capital and how you plan to distribute it across different areas. For instance, you may choose to invest more in remodelling than in marketing.

Plan your budget carefully and aim for accuracy. Although your actual expenses may be significantly higher or lower than anticipated, beginning with a realistic and thoughtfully prepared budget will increase your chances of success.

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