Why It Costs More Money to Open a Restaurant Today

When Zachary Engel moved from New Orleans to Chicago to open his first restaurant, he knew it would be a seven-figure proposition. Engel, who was named the nation’s top emerging chef by the James Beard Foundation in 2017, raised $1.2 million to open Galit, a Middle Eastern restaurant with a focus on seasonal, local ingredients that began serving diners in 2019.

The gamble paid off. Today, Galit holds a Michelin star, was a 2025 James Beard Award finalist for Outstanding Restaurant, and has returned its investors’ money.

Following the restaurant’s success, Engel and his co-owner, Galit’s director of operations Andrés Clavero, jumped at the opportunity to lease a building next to them in Lincoln Park. Not only was the new space bigger than Galit, its cumulative price tag turned out to be, too. 

Cafe YaYa, an all-day restaurant that opened this March, cost $3 million to get off the ground. This amounted to roughly $1 million over Engel and Clavero’s original budget. 

This increase in opening and operating costs doesn’t come from one single source but rather a series of changes. The restaurateurs estimate that the prices of kitchen equipment have risen around 50% in the past five years. The cost of gas and electricity has also spiked. “Utilities are [intense],” Engel told Food & Wine, but he has few options in summer or winter. “A restaurant isn’t like your house. You can’t keep it colder (in the winter) and tell people to put on a sweater.” 

Restaurateurs around the country can sympathize. Since the pandemic, everything from rent to licensing fees, ingredients, and labor have become more expensive. “The cost of building a new restaurant is much higher than [it was] pre-pandemic,” says R.J. Hottovy, head of analytical research for Placer.ai, a platform that tracks consumer behavior and food traffic in physical locations.

He approximates that with increased prices for building materials, a scarcity of capable contractors, licensing fees, and utility expenses, the cost of opening a new restaurant is 15 to 20% higher than it was in 2019. 

According to a survey conducted by RestaurantOwner.com, the median cost of opening a restaurant in 2018 could range from $175,500 to $750,500. In 2025, point-of-sale-platform Toast estimates that the average cost could be anywhere from $95,000 to over $2 million. 

As hopeful new restaurants face the potential of a notably higher opening price tag, some are adopting innovative approaches and spurning traditional choices to keep going and cut costs.

Make a mobile kitchen

Jordan Balduf worked in a series of restaurants around Ann Arbor, Michigan, before he launched a Buffalo, New York-themed pop-up in 2020, dubbed Side Biscuit. Inspired by his hometown, the pop-up specialized in chicken wings tossed in flavorful sauces and, as its name implies, flaky biscuits.

Balduf’s wings were an instant hit, and the chef’s pop-up fans and social media following eventually led him to open a small brick-and-mortar location in Ann Arbor. Through the years, lines out the door and high-profile endorsements from University of Michigan athletes convinced him he could grow the business further. 

This summer, Balduf is launching his second Ann Arbor venture, West Side Biscuit. Its menu will be anchored by his popular wings but will also venture into new territory with loaded fries, tots, and rotating specials. 

Rather than open another permanent location, however, Balduf is going mobile. He bought a 400-square-foot food trailer with a licensed commissary kitchen that’s bigger than his 270-square-foot restaurant. Unlike a food truck, it must be hitched to a van to move, so it will primarily be stationary on Ann Arbor’s west side.

Although West Side Biscuit will largely remain in one place, its flexibility allows Balduf to explore more revenue opportunities like tailgates for University of Michigan football games and other catering assignments around the Detroit area. 

While West Side Biscuit is on wheels, it was not cheaper than Balduf’s original restaurant. The chef spent $70,000 to open his first establishment, which came with some equipment already included. The food trailer cost the same amount, and Balduf had to install a tail hitch for his van. But considering that the two cost the same price, the mobile location is larger, and it opens up new revenue streams, it’s a fair tradeoff.

“We’re sort of going backwards,” he told Food & Wine. “Usually, it’s pop-up to food truck, then to brick and mortar. But our brick and mortar is so small that the trailer gives us more space.” 

Private dining may be more sustainable

In New Orleans, chef Jason Goodenough became known for the upscale cuisine he served at Carrollton Market. His menu was reminiscent of bistros in New York City, where he’d previously worked with chef Daniel Boulud. COVID-19 restrictions in 2020 sadly forced Goodenough to halt indoor dining, and he closed the restaurant in 2021, saying the pandemic had “crushed his spirit.”

Now, the chef is leveraging his decades of restaurant experience by shifting to private dining. In 2023, he launched the Goodenough Supper Club, a regular series of multi-course dinners served in locations like elegant townhouses and art galleries. 

To prepare and present his meals, he has access to a commercial kitchen and all the elegant crystal, china, and decor that he’d use to outfit a restaurant. But when compared with a traditional restaurant, private dining has more opportunities for reduced operational costs, like less labor needed or the ability to know exactly how many guests you’ll have well in advance.

Goodenough’s delicious meals have attracted clients like Sports Illustrated, which hired him to handle its Super Bowl party earlier this year, and wealthy visitors who want a customized meal just for them. But he’s not interested in being tied down to a regular routine in a restaurant again or the hazards that come with it. “Doing private catering gives me more flexibility,” Goodenough explained.

Restaurants also face higher labors costs

Initially, Galit’s menu was a relative bargain for a well-regarded restaurant, charging $65 for its prix fixe offering of four courses, allowing customers several options for each course. Once it won recognition from the Michelin Guide and bookings filled up faster, Engel began raising prices tens of dollars at a time. This year, its four-course menu costs $104.

While tariffs have affected restaurants selling products from Asia and Europe, Engel explained that the wine, spices, and other goods he imports from abroad have not risen in price much yet. 

However, beginning July 1, Chicago mandated an increase in tipped wages, such as those paid to restaurant servers, from $11.04 to $12.62 an hour, and increased other hourly wages by 40 cents to $16.60. Wages will continue rising through 2028 under the city’s “One Fair Wage” ordinance. The owners “keep nothing,” Engel said. “It all goes to wages.” 

To be clear, Engel isn’t lamenting the need to pay workers a living wage. Instead, he’s demonstrating how far labor costs cut into the already slim profit margins of a traditional restaurant model.

In New Orleans, tipped restaurant employees make $2.13 an hour, but because Goodenough works privately, he can offer his staff more. He pays a stipend of $250 for a five-hour shift, which translates to around $50 an hour. “I have the ability to price those rates into my business model,” he explained. 

Ingredient prices are volatile

Among the chefs, Balduf has seen the most turbulent prices for his main ingredient. When COVID-19 began, he paid $1.19 a pound for wholesale chicken wings. But as the pandemic swept through meat processing plants, that price spiked by more than 200%, to around $3.62 a pound. At that price, “You’re starting to get into steak territory,” the chef joked. 

The cost has since dropped to $1.62 a pound, but other ingredients have also gone up in price without coming back down. Pre-pandemic, Balduf paid $18 for a five-gallon drum of fryer oil. That later jumped to $45 and is around $38 today. He used to pay $14 for a gallon of Hellmann’s mayonnaise, but now, that costs about $26.

The chicken wing expert theorized that restaurant supply companies are “trying to make up for their losses,” especially since so many establishments went out of business as the pandemic took hold. Balduf makes a point to stay on the good side of his suppliers, who will give him a heads-up when prices seem poised to spike. 

He’s keeping an eye on ingredients like the gochugaru chili powder that he buys from South Korea, which faces 54% tariffs imposed by the U.S., although the countries continue negotiating. 

“My vendor is really good at saying, ‘Heads up, it’s going to go up.’” Balduf said. Likewise, when prices drop, he hears, “You might want to stock up.” 

What comes next?

All the restaurant owners say they have been urged by customers to expand their business, but considering the turbulent environment of tariffs, employment, and unpredictable costs, none of these entrepreneurs are ready to predict when they might grow more. 

“People have said, ‘We’d love you in Detroit,’ or ‘We’d love you to put one in East Lansing,’” near Michigan State University’s campus, Balduf said. “I’d love to put one back in my hometown, Buffalo. But the offers aren’t exactly rolling in the doors.”

Even if he wanted to grow, Placer.ai’s Hottovy emphasized that rising costs are delaying new ventures, and that, “Restaurants are taking multiple years to open.” He knows of at least one place north of Chicago that is in its third year of development and its fourth contractor. 

“The best defense is to have some flexibility in your lease before signing it,” Hottovy said. “Make sure you’re not on the hook before you open.” 

Goodenough fears that the deteriorating tourism climate in New Orleans, coupled with actual climate turmoil, is making it hard for existing restaurants to stay afloat on the hot and humid Louisiana coast. In the past few months, the legendary Brennan family closed Palace Cafe, a fixture on Canal Street for 34 years, while celebrated chef Michael Gulotta closed his two New Orleans restaurants, MoPho and Maypop. 

“I’m pretty well insulated,” Goodenough said. “For my peers, if I could wave a wand, it would be to have business in the summer.” 

According to Engel, “There’s no thought of expansion. We’re trying to have things that last.” Growing beyond his two current restaurants means “less time to spend in our community” and family. Instead, Engel said he’ll keep pursuing collaborations with other restaurants, developing special events, and making sure the new place is a success.