Second generation versus bare shell
Second generation space already has a hood, a grease interceptor, gas service, and often a walk-in. Taking that space can cut a project in half and shorten permitting by months.
A bare shell means installing infrastructure that is invisible to the customer and consumes a large share of the budget before a single finish is chosen.
Where the money goes
Typical allocation on a 300,000 project in second generation space:
- /Construction and leasehold improvements: 40 to 50 percent
- /Kitchen equipment: 20 to 30 percent
- /Hood, ventilation, and mechanical upgrades: 10 to 15 percent
- /Furniture, fixtures, and signage: 8 to 12 percent
- /Permits, architecture, and engineering: 5 to 8 percent
The costs operators forget
Pre opening payroll for training weeks, opening inventory, deposits for utilities and POS, and 2 to 3 months of rent during construction all land before the first ticket. Budget them as part of the project, not as an afterthought.
Permit delays are the most common cause of overruns because rent keeps accruing while nothing is being built.
How to finance it
Separate construction from equipment. Construction financing runs 36 to 84 months against the project, while equipment carries its own longer term at lower cost against the asset.
Ask for a draw schedule tied to milestones so interest is not accruing on capital sitting unused.
Calculator
Buildout budget and capital needed
Most buildout budgets miss by ignoring what accrues while nothing is being built. This splits the project cost across the standard allocation, then adds contingency, rent during construction, and opening capital to get the number you actually have to fund.
Second generation space runs lower. A bare shell runs far higher once infrastructure is installed.
Training payroll, opening inventory, deposits, and the first slow weeks.
Where the project cost lands
The arithmetic
Project cost = square feet x cost per square foot. Contingency = project cost x contingency percent. Rent during construction = monthly rent x build months. Total capital needed = project cost + contingency + rent during construction + opening capital.
Sources
- 1Buildout allocation model: construction 45 percent, equipment 25, mechanical 12, FF&E 10, soft costs 8Foody Finance modeled assumption (modeled assumption, not a published figure). Our own allocation for a second generation restaurant project, published in the buildout cost guide. It is a planning assumption, not a published statistic, and every project moves the mix.
- 2Occupancy costs commonly run above 5 percent of salesNational Restaurant Association. Restaurant Operations Report, occupancy cost as a share of sales for full service operations.
- 3Average hourly earnings, food services and drinking places: $21.95U.S. Bureau of Labor Statistics. Current Employment Statistics series CEU7072200003, all employees, average hourly earnings.
Estimates, not offers: Amounts, terms, and funding times are estimates based on programs commonly available in food service. Actual terms vary by program, lender underwriting, time in business, revenue, and credit profile. Nothing here is an offer of credit or a guarantee of approval.