Restaurant location cost comparison

What you will enter

• Comparison period (months): How many months to compare, typically the initial term or the first three years.
• Contribution per additional order ($): What one extra order leaves after food, packaging and other variable costs. Take it from the break-even or delivery tools.
• Open days per month (days): A whole number from 1 to 31.
• Space A: monthly base rent ($): First-year base rent in the offer.
• Space A: monthly additional charges ($): CAM, tax and insurance pass-throughs and other recurring charges. Enter 0 only if the offer has none.
• Space A: annual base-rent increase (%): The escalation in the offer. Enter 0 for a flat rent.
• Space A: free base-rent months (months): Months of base-rent abatement at the start. Charges are assumed to continue.
• Space A: required fit-out ($): Your estimated cost of the work needed to open, net of any landlord work that is committed in writing.
• Space A: refundable deposit ($): Security deposit or similar cash held by the landlord.
• Space A: preopening delay months (months): Months between possession and opening at this space.
• Space A: other monthly delay costs ($): Costs per delay month not already counted in rent: salaries, insurance, storage, loan payments.
• Space B: monthly base rent ($): First-year base rent in the offer.
• Space B: monthly additional charges ($): CAM, tax and insurance pass-throughs and other recurring charges. Enter 0 only if the offer has none.
• Space B: annual base-rent increase (%): The escalation in the offer. Enter 0 for a flat rent.
• Space B: free base-rent months (months): Months of base-rent abatement at the start. Charges are assumed to continue.
• Space B: required fit-out ($): Your estimated cost of the work needed to open, net of any landlord work that is committed in writing.
• Space B: refundable deposit ($): Security deposit or similar cash held by the landlord.
• Space B: preopening delay months (months): Months between possession and opening at this space.
• Space B: other monthly delay costs ($): Costs per delay month not already counted in rent: salaries, insurance, storage, loan payments.

The formula

Occupancy over the period = Σ each month's base rent (zero during free months, increased by the annual percentage each 12 months) + monthly charges. Cash committed = occupancy + fit-out + deposit + delay months × other delay costs. Extra orders per day = (A's quoted monthly occupancy − B's) ÷ contribution per order ÷ open days, where quoted occupancy is the initial base rent in the offer plus monthly charges, before free months and before annual increases; month one with the concession applied is shown separately.

A worked example

Fictional example over 36 months: Space A rents for $7,000 with $70,000 of fit-out; Space B rents for $5,500 but needs $140,000 of work. Both have $500 of charges, 3% annual increases, two free months, a $10,000 deposit and two months of delay at $1,500. A commits about $346,636 in cash; B about $363,999. B's lower rent does not offset its higher fit-out within three years. Before concessions and increases, A's quoted occupancy ($7,000 + $500 = $7,500) is $1,500 a month above B's ($6,000), which needs about 4.81 extra orders per open day at $12 contribution (1,500 ÷ 12 ÷ 26); both spaces' two free months and the 3% increases are in the cash totals, not in that starting figure.

How to use the result

Keep the cash items separate

Rent, charges, fit-out, deposit and delay are different kinds of money with different dates. The tool totals them so you can compare, but the P&L and the cash calendar need them apart.

A cheaper total does not resolve a technical problem

Permitted use, exhaust route, gas and electrical capacity, grease interceptor, accessibility, sprinklers and who does the landlord's work decide whether a space can open at all. Get those answered by the right professionals before the arithmetic matters.

Turn the difference into orders

A $1,500 monthly difference is abstract. Dividing by contribution per order and open days gives the number of extra customers the dearer space has to produce every day, which you can compare with foot traffic and capacity. The tool uses the quoted starting cost, the initial base rent plus charges before free months and annual increases, so the two offers are compared like for like; the free months and the increases show up in the cash total over the period and in the month-one line.

Questions owners ask

Why is the deposit counted as a cost?

It is counted as cash tied up during the comparison, not as an expense. If the lease returns it later, that is outside the period. It still has to be raised at signing.

The landlord offers a build-out allowance. Where does it go?

Reduce the fit-out figure only by the amount committed in writing and confirm when it is paid; a reimbursement after opening still needs bridging cash. Track the date separately.

Should I discount future rent?

This tool does not; it compares nominal cash. For a longer horizon or a financing decision, ask your accountant to add present value and taxes.

Keep working on the decision

• Read: the lease negotiation checklist
• Read: what a second-generation space really saves
• Check either space's rent against its sales
• Lease review questions and construction scope templates
• New to percentages? Start with restaurant math from zero.
• Add this decision to your guided opening plan

Sources and scope

• U.S. Small Business Administration: Plan your business (market research, business plan, startup costs)
• SEC: beginners' guide to financial statements

Planning estimates based on your inputs. Check the assumptions against your actual quotes, recipes and operating records. Not legal, tax or accounting advice.