Running a restaurant in Australia is often seen as a passion-driven venture — combining creativity, hospitality, and entrepreneurship. But behind every busy dining room and beautifully plated dish lies a complex financial structure that many first-time operators underestimate.

The reality is simple: restaurants are expensive to open, expensive to operate, and often run on thin margins.

If you’re considering entering the hospitality industry — or simply want to understand the economics behind your favourite local café — here’s a detailed breakdown of what it really costs to run a restaurant in Australia.

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1. The Initial Investment: Opening the Doors

The startup cost of a restaurant varies significantly depending on size, concept, and location.

Typical startup cost ranges in Australia:

• Small takeaway shop: $80,000 – $200,000
• Mid-sized café or casual restaurant: $250,000 – $600,000
• Large or premium venue: $600,000 – $1 million+

These costs generally include lease deposits, fit-outs, equipment, licensing, and initial working capital.

Lease and Bond

Commercial leases often require:

• 3–6 months’ bond
• Advance rent payment
• Legal and negotiation fees

In prime metropolitan areas like Melbourne or Sydney, rents can exceed $1,500–$5,000 per square metre annually. Even in regional locations, annual rent can range from $30,000 to over $100,000 depending on the site.

Lease terms are one of the most critical financial decisions an operator will make, as rent is a fixed cost regardless of revenue performance.

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2. Fit-Out Costs: The Biggest Upfront Expense

The fit-out is typically the largest single expense when opening a restaurant.

This includes:

• Commercial kitchen installation
• Ventilation and exhaust systems
• Plumbing and grease traps
• Electrical upgrades
• Flooring and compliance works
• Furniture and décor
• Signage

In Australia, commercial fit-outs commonly cost between $2,000 and $4,000 per square metre. A 120 sqm venue could easily require $250,000–$400,000 before opening day.

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3. Equipment and Technology

Restaurants rely on commercial-grade equipment that complies with Australian health and safety standards.

Common costs include:

• Commercial ovens: $8,000–$20,000
• Cool rooms: $10,000–$25,000
• Commercial dishwasher: $5,000–$15,000
• Refrigeration units: $5,000–$20,000
• POS system: $2,000–$8,000

Even when purchasing some second-hand equipment, total kitchen setup costs often exceed $100,000.

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4. Licensing, Compliance, and Insurance

Operating legally requires strict compliance.

Key requirements include:

• Food business registration with local council
• Food Safety Supervisor certification
• Liquor licence (if serving alcohol)

Liquor licences vary by state but can cost anywhere from $3,000 to $20,000+, depending on the licence type and capacity.

Insurance is mandatory and typically includes:

• Public liability
• Product liability
• Workers compensation
• Property insurance

Annual insurance costs often range between $5,000 and $15,000.

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5. Staffing: The Largest Ongoing Expense

Labour is usually the biggest recurring cost in Australian restaurants.

Under Australia’s Fair Work system, wages are regulated by awards and include penalty rates for weekends and public holidays. Casual staff also receive loading, further increasing payroll costs.

Typical wage ranges:

• Casual kitchen staff: $25–$35 per hour
• Casual waitstaff: $24–$32 per hour
• Full-time qualified chef: $65,000–$85,000 annually
• Public holiday rates: Often double time or more

Restaurants generally aim to keep labour between 30% and 40% of revenue. However, rising national wages are adding increasing pressure.

According to the Australian Bureau of Statistics (ABS), average weekly earnings in Australia have continued to rise year-on-year, reinforcing structural upward pressure on wage costs across industries — including hospitality.

As overall wages increase nationwide, restaurants must compete for staff in a tight labour market while maintaining compliance with award rates. Unlike other costs that can sometimes be negotiated, wages are largely regulated and non-negotiable.

For example:

If a restaurant generates $50,000 per week in revenue, labour costs may reach $15,000–$20,000 per week.

Managing rosters, improving efficiency, and optimising productivity are critical to protecting margins.

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6. Food and Beverage Costs

Food cost — often referred to as Cost of Goods Sold (COGS) — typically ranges between 25% and 35% of revenue.

If weekly revenue is $50,000:

• Food costs may range between $12,500 and $17,500.

Recent inflationary pressures have increased the cost of meat, dairy, fresh produce, and imported goods. Supply chain disruptions and seasonal variability also impact pricing.

Menu engineering, portion control, supplier negotiation, and waste management are essential to maintain profitability.

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7. Utilities and Operating Costs

Restaurants are energy-intensive businesses.

Electricity and Gas

Commercial kitchens consume significant electricity and gas. Monthly utility bills can range from $2,000 to $8,000 depending on venue size.

Water

High usage from dishwashing and food preparation increases water bills.

Waste Removal

Grease trap cleaning and food waste removal add recurring costs.

Cleaning Services

Professional cleaning may cost $1,000–$3,000 per month.

These operating costs are ongoing and often rise with inflation.

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8. Delivery Platforms and Commission Fees

In today’s market, many restaurants rely on food delivery platforms to expand reach. However, these platforms typically charge commissions between 20% and 35% per order.

For example:

If a $30 meal is sold with a 30% commission, the restaurant receives $21 before deducting food and labour costs.

While delivery increases exposure, it significantly reduces margins. Many operators increase menu prices on delivery apps to offset commissions, but this can impact competitiveness.

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9. Marketing and Customer Acquisition

Restaurants must consistently invest in marketing to maintain customer flow.

Common expenses include:

• Google Ads
• Social media advertising
• Website development
• Branding and photography
• Promotions

A modest marketing budget may range from $1,000 to $5,000 per month.

Without marketing, even well-located venues can experience declining foot traffic.

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10. Profit Margins: The Reality

Despite high turnover figures, restaurant net profit margins are generally slim.

Typical net margins:

3%–10% (if well managed)

For example:

• Annual revenue: $2 million
• Net margin: 5%
• Net profit: $100,000

That figure is before tax and assumes disciplined cost control.

Given rising wage pressures, increasing rent, and delivery commissions, profitability requires strong operational management and financial oversight.

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Final Thoughts

Running a restaurant in Australia is rewarding but financially demanding.

Between startup investment, rent, compliance, staffing, food costs, utilities, marketing, and delivery commissions, expenses accumulate quickly. Labour costs, in particular, continue to rise in line with national wage growth trends.

Understanding these structural pressures also helps explain two common industry questions: why so many Australian cafés and restaurants fail — even when they appear busy — and why food prices across the country continue to rise. If you’d like to explore those topics further, read our related articles:

• Why So Many Australian Cafes and Restaurants Fail (Even When They’re Busy)
• Why Food Is So Expensive in Australia (And Where the Money Actually Goes)

Together, these insights provide a clearer picture of the financial realities behind Australia’s hospitality industry.