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

Let's delve into the various costs associated with establishing a restaurant in Toronto.

Converting your restaurant idea from a dream into reality is a big challenge, but it can also be incredibly rewarding. Like any major life decision, after "How do I launch a restaurant?" comes "What are the financial commitments needed to make it happen?"

Numerous upfront costs and multiple variables make this a complicated issue to solve. Nonetheless, in this article, we will explore all the startup expenses you need to prepare for and budget accordingly.

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

Depending on your rental costs, choices of furniture, and how you choose to renovate your space, the total starting capital needed for a restaurant can range between $175,000 and in excess of $750,000.

Restaurant Opening Cost by Square Foot

For the premises alone, as per collaboratemeetings.com, you can expect costs to be in the range of $200-$500 per square foot, but this can vary significantly based on the location and whether you lease or purchase. For restaurants utilising hundreds or even thousands of square feet, this expense can start to add up.

If you’re considering leasing, according to thestorefront.com, restaurants face monthly rental costs ranging from $3,500 to $10,000 in Toronto.

If you're in the market to buy a 1,500-square-foot restaurant that is closing down, complete with all its furniture, fixtures, and equipment, your costs might land on the lower end of our $175,000 to $750,000 estimate. On the flip side, starting a restaurant in Toronto from scratch can lead to higher expenses, with construction costs and the price of equipment, furniture, and decorations all contributing.

It's important to remember that these figures are approximate costs for opening a restaurant – numerous factors can influence these estimates, and they can vary from one establishment to another.  Your Toronto restaurant’s business plan is crucial in this context, so ensure it is a solid foundation to build on.

What Restaurant Startup Costs You Can Expect

Launching a restaurant in Toronto calls for a variety of elements to work together — there's no one-size-fits-all answer. This means that getting a detailed understanding of how your money will be spent can get you closer to a more accurate estimate of the final cost.

After all, failing to plan well is, in essence, planning to fail. So, in the beginning, you and your team should dedicate sufficient time to plan your strategy — this includes getting a clear picture of the funding needed for every aspect of your restaurant.

Restaurants usually have narrow profit margins and involve many intricate parts, so starting with a poorly designed space can lead to financial setbacks due to higher labour expenses and reduced customer traffic. An uninviting space might prevent guests from spending more time by doing things like indulging in dessert. Plus, substandard construction and selecting inappropriate equipment could double your future costs.

Here are some of the key expenses and costs you should anticipate when starting a restaurant.

Restaurant Startup Costs Breakdown

Use this checklist to help you as you start budgeting for your new and exciting endeavour.

1. Utilities

Even though your restaurant might not be operational during the build-out phase, it's crucial to ensure essential services such as gas, water, and electricity are ready and working. These expenses can add up quickly: According to Direct Energy, Canadian restaurants spend 3-5% of their total expenses on energy.

Energy consumption in restaurants can be broken down by area: 

• Food Preparation: Approximately 35%.
• HVAC: Heating and cooling use up to 28%.
• Sanitation: Sanitation and water usage is responsible for around 18%.
• Lighting: Lighting takes up to 13%.
• Refrigeration: Keeping your produce chilled uses up to 6%.

Price Range: Plan to allocate 3-5% of your gross operational costs to utilities; bear in mind that larger venues might find themselves at the higher end of this spectrum.

2. Location

Selecting the ideal location for your restaurant is one of the most important decisions you can make. Thinking of a food truck? Aim for high foot traffic right on service time in downtown Toronto. Dreaming of a high-concept, hip restaurant? Consider Kensington Market. Typically, opting for a popular or busy spot with high foot traffic is recommended rather than relying solely on marketing to draw in patrons.

Depending on your concept, several options might be available to you:

• Building a new facility from the ground up and allocating budget towards fresh construction.
• Initiating operations within an existing building and taking over a currently functioning restaurant.
• Converting an existing commercial space into a dining environment.

Each option has its own set of pros and cons and will have a big impact on your startup costs — there are no absolute right or wrong decisions here — but, with in-depth research, you can find the option that best fits your business.

3. Interior Finishes and Equipment

At this stage, numerous smaller costs start to add up. Unsurprisingly, your business will need various kitchen utensils and cooking equipment. Also, you’ll need furniture and decor to reflect your brand's identity to your customers. Also, don’t forget essential items like signage, and lighting, along with audio and communication systems.

It can be surprisingly easy to exceed your financial plan here, so careful budget oversight is essential to keep your costs within budget. The main factors influencing the fluctuation in costs here are the kitchen appliances and furnishings, which are largely determined by the size of your kitchen and seating area.

Price Range: According to Ownr, the expected average cost is about $50,000 for furniture and $43,000 for kitchen equipment.

4. Pre-Opening Expenses

Everything should be set up, operational and ready by the time you open the doors at your restaurant's grand opening.

Here is where investing in a comprehensive training program to ensure your staff are knowledgeable and efficient starts to pay off. Plus, remember that you should maintain a well-stocked inventory in your kitchen and freezer to cover the early days following the launch. This includes an assortment of food, utensils, drinks, glassware, water pitchers, and any additional necessities for providing a memorable experience to your visitors.

Price Average: $18,750 on kitchenware and $12,500 on opening inventory. 

5. Marketing

Marketing varies greatly based on your restaurant model. For instance, if you're initiating a franchise, your marketing needs may be met already. On the other hand, starting an independent restaurant in a competitive area might require significant marketing and advertising to stand out from the crowd.

For those launching a luxury dining spot in busy downtown Toronto, partnering with a public relations firm for visibility could be advantageous, or you might receive attention from the media for a feature about your new venture.

Kicking off with social media marketing is a solid and smart strategy — and as your customer base grows, getting into email marketing can really boost your business further. Like other elements of starting a restaurant, the costs tied to marketing and public relations depend on your specific business, market competitiveness, and other distinct factors unique to your situation.

Price Range: 3 - 6% of total sales.

6. Capital and Contingency

Even if your restaurant is an instant hit, there will still be a necessary period of adjustment before it runs seamlessly. Generally, it's important to expect a slow climb in sales and understand that converting occasional patrons into regulars takes time. Set aside a considerable sum of money as reserves to sustain your Toronto restaurant through the first six months, a time that might feature fluctuating or reduced sales at times.

Price Range: Set aside 10-20% of your total startup expenses for contingency purposes.

7. Exterior Finishes

Your restaurant's exterior should be as inviting as the interior. If you can influence the exterior aesthetics of your building, think about investing in its exterior design, including lighting and landscaping. Additionally, if your venue features al fresco dining, try to make the most of this feature during the warmer seasons.

Even if you don’t have the power to customise your building's facade, it's still so important to install signage outside to tell prospective customers that you are open and set to offer them an experience to remember.

Price Range: Anticipate expenditures ranging from $150 to $55,000, with possible additional costs for zoning permits.

8. Organisational and Development Costs

This part might be the least enjoyable aspect of starting a restaurant, but it is essential. You need to ensure that all necessary restaurant licenses and permits are acquired and fees paid, insurance premiums deposited, and have covered utility deposits for services such as gas, electricity, and water.

This task can be as exhaustive in time as it is in expenses, so start getting to know the essential licenses and permits needed to launch your restaurant in Toronto.

Price Average: Approximately $1,000 - $3,000 for yearly licensing and insurance, depending on your location.

9. Professional Services

Total newcomers to Toronto’s exciting restaurant scene should avoid getting started without extra help. Hiring a restaurant consultant and getting advice from professionals like architects, lawyers, and interior decorators is a wise investment for a successful start.

Price Range: The costs can range from $0 to $70,000, with the final amount depending on the level of professional services utilised.

10. Technology

When it comes to creating a smooth-running restaurant, your technological systems make all the difference. Every restaurant needs a point-of-sale (POS) system, and depending on your concept, extra features and technologies may be needed to enable your team to give guests the best experience.

Full-service restaurants might want a handheld POS system to turn tables faster, while fast-service restaurants might want a kitchen display system and performance metrics to gather helpful business insights. You can learn more about each here.

Price Range: Get a quote.

11. Food Cost

As this is the key part of your restaurant's offerings, you need to make sure you’re all set with the essential elements for a successful launch into Toronto’s foodie scene. A shortage of adequate supplies to prepare your menu offerings — especially in the opening weeks and months — might give your customers a less than favourable first taste. Keeping a complete inventory guarantees that your kitchen team has everything they need for continuous service. Plus, keep in mind that the average monthly cost for food will vary depending on your restaurant's cuisine type and menu choices.

Price Average: $12,500 is the typical food cost for restaurants opening in Toronto.

Bonus Cost: Franchise Fees

Clearly, this cost does not apply if your restaurant is independently owned, but for franchised establishments, be ready for a substantial initial financial outlay. Here is a list of common franchise fees for notable restaurant chains in Canada*:

• McDonald’s: Willing to invest $700,000 of non-borrowed funds
• Tim Horton’s: $25,000 - 50,000 franchise fee
• Mary Brown’s Chicken: $30,000 franchise fee
• Pizza Pizza: $150,000 franchise fee
• Subway: $15,000 franchise fee

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

Assembling Your Restaurant Startup Dream Team

It's commonly said that a significant cause of restaurant failures is underfunding. Insufficient capital can make an already challenging industry even more difficult to thrive in. To avoid these pitfalls, make sure you collaborate with experts throughout the whole process. Here is a list of experts and professionals you should consider involving when setting up your Toronto restaurant:

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

The support of these specialists will help ensure that your business operations are set up to succeed. Whenever possible, choose professionals with specific expertise in the restaurant industry.

Open a Restaurant without Closing Your Bank Account

Before diving in with a new restaurant venture in Toronto, evaluate your financial resources and plan how to allocate them among various areas. You might, for example, choose to devote more of your budget to renovations rather than to advertising efforts.

Plan your finances carefully and strive for accuracy in your budget planning. While your final costs may vary greatly from your earlier calculations, launching a restaurant in Toronto with a meticulous and well-considered budget will give you every chance of success!

Related Resources

• How to Write a Restaurant Business Plan
• How Much Does It Cost to Open a Restaurant? 
• What is the Average Restaurant Profit Margin in Canada?
• 15 Licences and Permits Needed to Open a Restaurant
• What is the Average Restaurant Revenue for a New Restaurant?
• How Much Does It Cost to Open a Restaurant in Vancouver?