The Most Expensive States to Open a Restaurant in the US

  • California comes in first place with the least convenient combination of factors, making it the most expensive state to open a restaurant.
  • New York is second, with the second-highest annual liquor licence cost of the top ten.
  • Colorado takes the third spot, while Illinois and Arizona are fourth and fifth, respectively.

A new study by Restaurant Furniture reveals that California is the state where it is most expensive to open a restaurant.

The study analyzed for each state the various costs that an entrepreneur would need to spend in one year to run a restaurant, from the rent of a commercial space to licences such as a Food Service Permit and a Liquor License, to discover in which state it would be the most expensive. The data were turned into scores from 1 to 10, where the highest scores would mean better results. Therefore, the lower the total score over 100, the more expensive it would be to open and maintain a restaurant in the area.

California takes first place due to a combination of factors such as annual rent per sq. foot, which is the third highest of the top 10 at $45.74, the food service permit, which amounts to $809 and State Sales Taxes and Corporate Taxes. If we consider that commercial units in California can be between 400 to 5,000+ sq. ft, monthly rent can cost between $20,000 to over $200,000: this alone proves just how expensive it can be to open a restaurant in the state.

In second place comes New York by a whisker. Yearly rent per square foot in the state is the highest in the top 10 at $69.6, while it records the second most expensive Liquor Licence at a whopping $4,352.

Colorado comes third with factors such as rent per sq. foot ($25.95 per year), State Sale Taxes, and Corporate Taxes rates (8% and 5%, respectively), and the cost of permits and licences such as the annual Food Service Permit ($385) and the annual Liquor Licence ($750).

Further down on the list, Illinois is fourth while Arizona closes the top five. Yearly rent per square foot is similar in both states at $28.42 and $24.70 respectively, while other factors such as the Annual Liquor Licence differ greatly, as Illinois’ fee is $750, while in Arizona the cost is of $2,000.

  Top 10 states where it’s most expensive to open a restaurant
Rank State Annual Food Service Permit cost ($) Annua Liquor License cost ($) State Sales Tax rate State Corporate Tax rate Minimum wage ($) Rent per sq foot per year ($) Score/100
1 California 809 N/A 3% 9% 15.50 45.74 28.04
2 New York 280 4,352 5% 7% 14.20 69.60 28.39
3 Colorado 385 500 8% 5% 13.65 25.95 40.02
4 Illinois 450 750 5% 10% 13 28.42 40.15
5 Arizona 585 2,000 6% 7% 13.85 24.70 40.44
6 Alaska 400 600 8% 9% 10.85 23.28 41.88
7 New Jersey 100 1,375 3% 9% 14.13 25.75 45.14
8 New Mexico N/A 5,525 4% 8% 12 21.59 46.66
9 Hawaii 300 300 1% 6 12 66.72 50.05
10 Washington 632 1,600 4% 0 15.74 25.32 52.23

Nick Warren, Head of Ecommerce at Restaurant Furniture commented on the findings:

“Opening and maintaining a restaurant can be a significant financial undertaking due to the cost of living, diverse regulatory environments, and varying market demands across states. California and New York, being two of the most populous and economically active states, often have higher real estate costs, labor expenses, and regulatory requirements, making it expensive to establish and sustain a restaurant business. In metropolitan areas like Los Angeles, San Francisco, New York City, and others, the competition is fierce, and operating costs can be notably high.

Generally, the states listed in this top 10 present a mix of high living costs, competitive markets, and unique challenges that contribute to the overall expense of establishing and maintaining a restaurant business. Prospective restaurant owners should carefully consider these factors and conduct thorough market research before venturing into the culinary landscape of these states.”