Rental - How much can you afford to stretch?

Posted by fshsfhsfh on Tuesday, July 12, 2011

As a restaurant business how much rental can you really afford to pay?

Unfortunately the answer is easy, but accepting it, especially for those who are currently hunting for a space for their restaurant business, will be difficult.

For most restaurant businesses to be profitable and sustainable, the rental will need to be less than 15% of the estimated revenues. So if you are planning a budget restaurant that can generate revenues of about Rs.15,000 per day, the maximum rental you can afford is Rs. 67,500. Do remember that you need to pay service tax of 10.3% on the rental amount - so you realistically can afford a place that charges a rental of 60K.

If you are planning a fine-dining/expensive restaurant that can generate about 30K-40K revenues every day, you can afford a rental of about Rs. 1.5 lakhs per month. Do remember that for generating 30-40K revenues you would probably need a restaurant with about 100 seats, which means you are looking at a 3500-4000 sft space in a prime location - not easy to find at a rental of 1.5 lakhs.

In most cities in India, this really means that starting and running a viable restaurant business is going to be tough, till the real estate rentals become affordable and reasonable again.

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