How to Get Funding for a Restaurant
Opening a restaurant is a lifelong dream for many, but making a start without funding can be a real challenge. While the hospitality industry has gone through a significant rough patch in recent years, experts say that the restaurant business is firmly back on the rise. With sales forecasted to top $1 trillion for the first time in history, there’s never been a better time to start your own restaurant business.
Knowing how to get funding for a restaurant can be difficult, but there are plenty of ways to raise money if you know where to look. From government grants to organizing your own restaurant fundraiser—we’re sharing our top tips for financing your restaurant in this complete guide.
How much money do you need to start a restaurant?
It’s no secret that opening a restaurant is expensive, but many people still underestimate the total cost. One industry survey found that the average total cost of opening a restaurant is around $375,500, working out at just a little over $3,500 per seat.
Aside from opening costs, there are lots of other restaurant expenses to keep in mind. Utilities, rent, labor costs and kitchen equipment are just some of the overheads that restaurateurs have to account for. Moreover, you might want to consider working with a marketing firm to get exposure for your restaurant. While all these costs can sound overwhelming, getting funding for a restaurant is always possible. Once you determine how much total funding you’ll need, it’s time to start assessing your options.
What is the cheapest type of restaurant to open?
When working out how to finance a restaurant, it’s important to remember that costs vary widely depending on the type of establishment you’re planning to open. Smaller restaurants naturally incur lower costs when it comes to leasing, renovations and utilities, but expenses can still be high in other areas. Below is a breakdown of some of the most common restaurant types, along with some useful information relating to costs.
Small restaurants
While there are no set rules in relation to restaurant sizes, small restaurants are generally considered to seat 20-50 customers at a time and cover areas of 1,000 to 2,000 square feet. They tend to operate from a smaller menu and often specialize in a particular cuisine or concept.
As less space, equipment and staff members are required, opening a small restaurant allows you to make significant savings on operational costs. You can expect to spend a total of $50,000 to $500,000 when opening a small restaurant, with costs varying widely depending on your location, concept and potential renovations.
Virtual Restaurants
Often referred to as ghost kitchens, virtual restaurants are fully online establishments which do not use a physical dine-in space. A modern take on the traditional restaurant experience, virtual restaurants have become a popular feature of dining in the digital age and can save you a lot of money on start-up costs.
The biggest financial benefit of starting a virtual restaurant is not having to pay for a physical storefront. This completely eliminates the cost of furniture, décor, renovations and rent—allowing you to direct all of your restaurant funding towards online marketing, delivery platform fees and branded packaging. While total costs can always vary, starting a virtual restaurant typically requires an investment of up to $10,000.
Home Restaurants
Home restaurants—sometimes referred to as cottage kitchens, hidden kitchens or underground restaurants—are dining establishments which operate directly from the owner’s home. They offer perhaps the easiest way of getting funding for a restaurant, and give you freedom to run an establishment in exactly the way you’ve always dreamed of.
With fewer labor expenses, less equipment required and no rental costs to worry about whatsoever, opening a restaurant in your home gets rid of many traditional management costs. However, you may still need to spend money on ingredients, marketing, equipment and any permits or small business licenses required in your state. All things considered, opening a home restaurant shouldn’t cost more than $10,000.
How to start a restaurant with no money: 4 creative restaurant fundraiser ideas
Once you’ve decided on the type of establishment you would like to open, it’s time to start thinking about how to finance your restaurant business. While the costs involved can feel overwhelming for many, it’s important to remember that help is always available. From small business loans to sponsorship, crowdfunding and more—here are four creative ways to get funding for a restaurant, even if you’re starting out with nothing.
1. Research restaurant start-up loans
Small businesses in the United States can often make use of helpful loans from banking organizations and the government. While they won’t fund your business startup entirely, these loans can offer flexible repayment terms and help to cover a range of upfront costs.
The US Small Business Administration partners with lenders to provide loans funding programs worth $500 to $5.5 million. Lenders take on less risk when your loan is SBA-guaranteed, giving you a much better chance of getting funding for your restaurant.
The most common type of SBA loan for restaurant owners is the 7(a) loan. It covers the acquisition and renovation of buildings, the installation of machinery and equipment, the purchase of furniture and can even refinance any debt from previous businesses. You must meet SBA size requirements in order to get funding for your restaurant, as well as satisfying the rest of their eligibility criteria.
2. Find a restaurant investor in your community
Finding an investor can be a massive help in getting funding for your restaurant. Usually, restaurant investors get a portion of ownership in the business in return for the money and expertise they provide. Many people ask for donations from their family, friends and personal network, as this gives you a great chance of receiving funding without compounding interest rates.
If you can’t receive funding from your immediate circle, try inquiring with other sources like angel investors and venture capital firms.
- Angel investors provide help when banks or private equity firms think your restaurant is too risky to invest in. Angel investors are individuals who are independently wealthy and typically have knowledge of the industry they’re looking to invest in.
- Venture capital firms usually invest in businesses that they think will have a good return on investment. Since venture capital firms often have more resources than individual investors, they’ll be able to support marketing strategies and other aspects of your restaurant business.
3. Start small before ramping your restaurant up
Financing a restaurant for the very first time can be daunting. Because of this, it may be worth getting your feet wet with a smaller business venture like a food truck or pop-up restaurant. This way, you can get a feel for what it’s like to run a restaurant while risking less and incurring lower initial costs. Many successful restaurant owners start out by operating a food truck or pop-up eatery, as these provide much of the hands-on experience you need while requiring far less start-up investment.
Check out our helpful tips on raising money for a food truck for a full guide to getting your mobile restaurant off the ground. You’ll be making significant savings on rent, utilities and staff, while getting the opportunity to gauge interest in your restaurant before establishing a brick-and-mortar location.
4. Start a restaurant fundraiser on GoFundMe
If you thought crowdfunding could only be used for medical emergencies, memorial services or disaster relief—think again. Crowdfunding can be used to raise money for restaurants, food trucks and just about any small business you can think of. Online crowdfunding platforms combine the power of social media and donor generosity to help people find financial support for a variety of worthwhile causes.
Modern crowdfunding websites like GoFundMe allow you to create your own restaurant fundraiser and start receiving donations instantly. There is no fee required to start or manage your fundraiser, and you don’t need to meet your fundraising goal in order to receive donations. All funds are transferred directly to you or your beneficiary’s verified bank account, and all transactions are completely secure.
Read our helpful guides to better understand how GoFundMe works, and to find answers to all of your fundraising questions.
Take inspiration from GoFundMe restaurant fundraisers
If you’re still in doubt about whether you can raise money on GoFundMe, these powerful examples of previous restaurant fundraisers might just be the inspiration you need. There are many reasons why you may end up needing to raise money for your restaurant business, and it can be comforting to know that many people have gone down similar paths before you.
Help Skoden Coffee Find A Permanent Home
When the management of Skoden Coffee in Phoenix, Arizona, began experiencing issues with their landlord, they knew that finding a new storefront wasn’t going to be easy. In search of a safer space where they could host gatherings and advocate for Indigenous rights, they decided to see if crowdfunding could help achieve their goal.
Setting an ambitious fundraising target of $20,000 to cover rent, utilities, moving costs and renovations—the Skoden team created a GoFundMe and began their journey towards finding a permanent home. Family, strangers and friends from their local community were quick to rally around the Skoden team, helping them to exceed their fundraising goal in just a few short months.
Help Rebuild the Village Bar Supper Club
Brayden Thumser’s grandparents, Kurt and Shelley, have owned and operated the Village Bar Supper Club in Kieler, Wisconsin for the past 23 years. Having become somewhat of an institution in their local community, Brayden knew that crowdfunding could prove beneficial when a tornado-like storm caused severe damage to their storefront.
With a fundraising goal of $5,000 to repair the roof and other damage throughout the property, Brayden created a GoFundMe page and set out on his crowdfunding journey.
Support Our Staff After Devastating Fire
The restaurant business comes with plenty of potential for accidents to happen and for unavoidable disasters to strike. For Fat Little Buddies—a popular sports bar in Olmsted Township, Ohio—the unimaginable happened when a kitchen fire broke out after closing time. Luckily, the fire remained confined to a secondary kitchen and damage to the property was limited.
However, Fat Little Buddies was still forced to close its doors, and it wasn’t long before the local community’s support came flooding in. Having surpassed their $10,000 fundraising target in a matter of days, Fat Little Buddies now has the means to keep its dedicated staff members comfortable until the restaurant is ready to reopen.
Start your restaurant fundraiser today
Don’t let the high costs of opening a restaurant discourage you from achieving your dream. With the help of small business loans, local investors and the generosity-fueled power of crowdfunding—you should now have a solid idea of how to get funding for a restaurant. For even more inspiration, check out our business fundraising ideas and fundraising tips for small businesses.
If you’ve got a passion and want to share it with the world, GoFundMe is here to support you through every step of your journey. Start a restaurant fundraiser today, and start sharing your love for food with friends, family and your local community.