In the non-surprise department, a new study by Restaurant Furniture reveals that California and New York are the states where it is most expensive to open a restaurant.
The study analyzed the various amounts that an entrepreneur would need to spend in one year to run a restaurant in each state, from the rent of a commercial space to licenses such as food service and liquor permits, to discover which state would be the costliest. The data were turned into scores from 1 to 10, where the highest scores would mean better results. The lower the total score, the more expensive it would be to open and maintain a restaurant in the area.
California takes first place due to a combination of factors such as annual rent per square foot, which is the third highest of the top 10 at $45.74; its food service permit, which amounts to $809; and state sales and corporate taxes. If you consider that commercial units in California can be between 400 to 5,000-plus square feet, rent can cost between $20,000 to more than $200,000. The state’s total score was 28.04.
New York comes in second by a whisker with a total score of 28.39. The state’s yearly rent per square foot is the highest in the top 10 at $69.60, while it records the second most expensive liquor license at $4,352. Its other relevant figures include a $280 annual food service permit, a 5% state sales tax, a 7% state corporate tax rate and a minimum wage of $14.20 an hour, which was second only to California’s.
Colorado is third with factors such as rent per square foot ($25.95 per year), state sale and corporate tax rates (8% and 5%, respectively) and the cost of an annual food service permit ($385) and liquor license ($750).
Further down the list, Illinois is fourth, while Arizona closes the top five. Yearly rent per square foot is similar in both states at $28.42 and $24.70, respectively, while other factors such as the annual liquor license differ significantly, as Illinois’ fee is $750, while in Arizona, the cost is $2,000.
Arizona is followed by Alaska, New Jersey, New Mexico, Hawaii and Washington.
Nick Warren, head of e-commerce at Restaurant Furniture said of the findings:
“Opening and maintaining a restaurant can be a significant financial undertaking due to the cost of living, diverse regulatory environments and varying market demands across states. California and New York, being two of the most populous and economically active states, often have higher real estate costs, labor expenses and regulatory requirements, making it expensive to establish and sustain a restaurant business. The competition is fierce in metropolitan areas like Los Angeles, San Francisco, New York City and others, and operating costs can be notably high.
“Generally, the states listed in this top 10 present a mix of high living costs, competitive markets and unique challenges contributing to the overall expense of establishing and maintaining a restaurant business. Prospective restaurant owners should carefully consider these factors and conduct thorough market research before venturing into the culinary landscape of these states.”
