Utility costs for stores w/ dining rooms?

[ammonation]

Hey guys. My current store in NYC is in an indoor-mall. I have a 500 sqft store, 4 fryers, 2 Grills, icemakers, refridge/freezer ect. Last year I paid around 16,000 in gas/electric.

I am currently looking at a free-standing location that is 3300 sqft. The landlord said the previous tenant (also a restaurant) paid around 70k a year in gas/electric. There is a sit-down dining room and 2 lights in the parking lot.

Granted I would now be heating/cooling a dining area, and additional outdoor lighting this figure blew my mind away.

I am curious as to what some of you pay a year in utilities in locations of comparable size.

[pizzablogger]

My experiences are in talking with a few operators of wood fired pizzerias, so that is quite a different story being that the pizza oven is not gas or electric. In addition, all of the places I am familiar with offer only pizza, a few salads and a couple of desserts on their menus. So there is no need for fryers, large ranges, etc.

The spaces in question are all in the 2500 to 4000 sq ft size and none of them pay even half of what you were cited for their gas, electric and water. All are running between 20 and 30 tons of HVAC.

I know deck ovens, fryers, etc are going to require much more energy and gas than a wood fired pizza joint, but double the cost? That may very well be the case, but it seems pretty high. How much HVAC does the building have and how long ago was it installed? --k

[pizzablogger]

At 500sq feet it's safe to say the bulk of your current electric and gas costs are to run your kitchen equipment. $16,000 a year.

So, $16,000 for your current equipment and assuming ALL of the electric and gas costs of the WFO places I have familiarity with is for heating/cooling their spaces (which it's not, they have walk-ins, coolers, etc), you are looking at about $45,000 per year in electric and gas for a space in the 3000 to 4000 sq ft range, assuming you are using the same amount of kitchen equipment as you currently are.

Is the larger space you are looking at going to have more equipment in the kitchen (larger coolers, etc)?. Assume that the electric and gas costs you are currently paying primarily for equipment doubles to $32,000 per year due to the increase in equipment in the new space. And still assuming the WFO places are spending all of their gas and electric costs on HVAC (which they are not), you're looking at $62,000 a year in gas and electric (using the most expensive annual gas and electric costs of the WFO joints I am familiar with).

So the $70k figure seems a little high, even when using the somewhat aggressive assumptions used above. Again, in your part of North Carolina that may be the going rate.

[ammonation]

At 500sq feet it's safe to say the bulk of your current electric and gas costs are to run your kitchen equipment. $16,000 a year.

So, $16,000 for your current equipment and assuming ALL of the electric and gas costs of the WFO places I have familiarity with is for heating/cooling their spaces (which it's not, they have walk-ins, coolers, etc), you are looking at about $45,000 per year in electric and gas for a space in the 3000 to 4000 sq ft range, assuming you are using the same amount of kitchen equipment as you currently are.

Is the larger space you are looking at going to have more equipment in the kitchen (larger coolers, etc)?. Assume that the electric and gas costs you are currently paying primarily for equipment doubles to $32,000 per year due to the increase in equipment in the new space. And still assuming the WFO places are spending all of their gas and electric costs on HVAC (which they are not), you're looking at $62,000 a year in gas and electric (using the most expensive annual gas and electric costs of the WFO joints I am familiar with).

So the $70k figure seems a little high, even when using the somewhat aggressive assumptions used above. Again, in your part of North Carolina that may be the going rate.

I personally think you are on par with what I thought. I had made a slight error when looking back on my profit/loss, electric is included in my mall rent @ $1,200 a month. So my yearly profit/loss is around $24-25k.

The biggest difference in the two stores would be probably the addition of walk-in fridge/freezer, air conditioning/heating for dining room, and outside lighting. With the addition of the walk-in box comes the subtraction of say 2-3 stand up fridge/freezers tho.

Still, the quote of 66k for utilities blows my mind away. One of their expenses was 11k for water, that is car wash levels. 13k for trash.. My family runs various businesses and the going rate is usually 1200 per year in trash.

If all this rings true then whats the point of developing outside a super-mall? Sure the rent is cheaper, but judging by the utilities it all seems even in the end.

[pizzablogger]

Still, the quote of 66k for utilities blows my mind away. One of their expenses was 11k for water, that is car wash levels. 13k for trash.. My family runs various businesses and the going rate is usually 1200 per year in trash.

That seems very high. Waste disposal/trash should be more in the $4,000 to $7,000 range per annum for a restaurant. Water should be more in the $2,000 to $4,000 range for a pizza joint (and $4,000 is high). $11,000 is completely ridiculous.

If all this rings true then what’s the point of developing outside a super-mall? Sure the rent is cheaper, but judging by the utilities it all seems even in the end.

I’m sorry that I mentioned North Carolina earlier. I misread your initial post. What part of NYC are you in? Many neighborhoods likely have stock of spaces that are not freestanding buildings….I would imagine there are attached/connected row spaces in NYC where the lease would be more affordable than a free-standing commercial space with a parking lot, etc.

Utilities are only part of the equation. Many commercial buildings are leased out NNN (triple-net), which means you will likely be responsible for utilities, real estate taxes and maintenance/repairs on the space. With the seemingly high costs associated with your prospect space, I would make darn sure that you are only responsible for maintenance and repairs of equipment or structural issues within the interior walls of the space. Anything happening to an HVAC unit on the roof, to the roof itself, issues with the parking lot, etc should be paid for by the landlord or you don’t sign the lease. This is often SOP, but for a space with such high quoted figures for utilities and trash, it is doubly important.

Don’t fall in love with any one space. While some spaces may justify higher expenses due to a killer location, sometimes something in a not quite as good (but still good) location may be the better bet due to a lower expense hurdle to vault. --K

[ammonation]

That seems very high. Waste disposal/trash should be more in the $4,000 to $7,000 range per annum for a restaurant. Water should be more in the $2,000 to $4,000 range for a pizza joint (and $4,000 is high). $11,000 is completely ridiculous.

I’m sorry that I mentioned North Carolina earlier. I misread your initial post. What part of NYC are you in? Many neighborhoods likely have stock of spaces that are not freestanding buildings….I would imagine there are attached/connected row spaces in NYC where the lease would be more affordable than a free-standing commercial space with a parking lot, etc.

Utilities are only part of the equation. Many commercial buildings are leased out NNN (triple-net), which means you will likely be responsible for utilities, real estate taxes and maintenance/repairs on the space. With the seemingly high costs associated with your prospect space, I would make darn sure that you are only responsible for maintenance and repairs of equipment or structural issues within the interior walls of the space. Anything happening to an HVAC unit on the roof, to the roof itself, issues with the parking lot, etc should be paid for by the landlord or you don’t sign the lease. This is often SOP, but for a space with such high quoted figures for utilities and trash, it is doubly important.

Don’t fall in love with any one space. While some spaces may justify higher expenses due to a killer location, sometimes something in a not quite as good (but still good) location may be the better bet due to a lower expense hurdle to vault. --K

I spoke with another franchisee that has a free-standing drive thru in queens, and he indeed confirmed he pays 85k a year in utilities. Still blows my mind. Big difference is his drive-thru does around 1.5 million in revenue where as I was expecting 700-800k in revenue. He thinks I am under estimating my numbers.