Following the announcement that NTUC Foodfare will be acquiring the Kopitiam chain of food courts and hawker centres, there have been plenty of discussion about how high costs have been crippling hawkers and would-be hawkers.
Whether you’re an experienced restaurant owner dreaming of Michelin stars or an aspiring café owner looking to open your own café, financing your F&B business can be extremely challenging in Singapore. Thus, here are some of the costs you need to be aware about.
How much does it cost to start a restaurant business in Singapore?
A restaurant business can be expected to incur the following expenses:
The location of a restaurant will determine the traffic and footfall to the restaurant. Being located in the busy Central Business District may be more desirable than being located in the heartlands due to the amount of traffic expected in the CBD. However, rentals in the CBD can cost upwards of $12 per square feet per month as compared to $4 per square feet in the heartlands.
2. Furnishing & Renovation
Restauranteurs may need to renovate newly rented spaces in order to maximize the seating spaces while ensuring that there is enough room for the crew to work. In addition, if the location does not have pre-existing furnishings, you would need to finance the purchase of furniture and fixtures.
Depending on the cuisine and food that you are serving, specialized equipment may be required. A simple case, for example, if you serve waffles in your café, you would need a waffle machine. Commercial kitchen equipment can cost anywhere between S$5,000 over S$50,000.
Staffing costs for restaurant businesses may be lower to other industries, however, there remains a need for training. Also, as the employer, you will need to contribute up to an additional 17 percent of your employee’s pay to CPF.
5. Licensing & Franchise
If you are a serial entrepreneur looking to buy a franchise, you would be liable for franchising fees as well as licensing fees, which may cost thousands of dollars.
6. Raw Ingredients & Inventory
Unless you have existing connections to suppliers or buy in huge bulk amounts, it is unlikely that you will be able to minimize your costs.
7. Business Expansion
In order to ensure that your business is competitive, there is a need to always expand into new markets and with expansion comes the need for funds.
New challenges ahead for the industry
In Singapore Budget 2018, the Singapore government announced an increase in GST from 7% to 9% from 2021 to 2025. Therefore, it is paramount that restaurant owners should prepare for the increase in GST by ensuring that their business model is adjusted to ensure that the hike will not hurt their profitability. Measures may include business expansion and the hiring of more staff. Although these may seem like large expenditures, they might be a necessity in order to ensure the business is viable in the future.
Financing your restaurant business through loans
In general, the perceived risk of F&B industries may be considered higher compared to other industries by banks & financial institutions due to demand uncertainty of F&B industries. Typically, banks require a two to three-year track record with a positive cash flow for a loan to be approved.
At Funding Societies, we understand the challenges of running a restaurant business – as put forward by one of our restaurant entrepreneur & SME owner, Mr. Raj from the Homely Raj chain of restaurants, obtaining a loan is not easy due to past bad credit records.
Funding Societies offers financing options to SMEs that might not meet traditional bank’s requirements. As the largest P2P financing company in South East Asia, it offers competitive SME business loans, which are great short-term financing options. In addition, it offers one of the largest available P2P invoice financing loan (up to S$1,000,000) and it is one of the fastest financing options for SMEs (with the disbursement of funds as quick as 1 day)