How to Write a Restaurant Business Plan
If you’ve decided to open a restaurant, then you’ll likely already know that it’s a risky business. The harsh reality is that a majority of new restaurateurs close within the first year, and 80% of fold within five years of opening.
Not only are restaurants notoriously difficult to run, but they often require a large amount of capital to get off the ground. With the amount of equipment that’s required and the renovations often needed, you will most likely need to spend a good amount of cash before you can even open your doors.
The leap into restaurant ownership will be filled with many challenges. Problems surrounding investors, financing, landlords, council requirements and many more will abound along the journey. Although it’s unlikely that everything will go to plan, having a well-researched and strategic business plan will go a long way towards minimising risk while increasing the chances of achieving financial success.
What is a business plan?
A business plan provides specific, organised information about your business. It helps to provide your business with a clear direction and is something that’s often a prerequisite for attracting funding. It defines what your business is, and outlines your objectives. In other words, it should serve as a “resume” for your business.
Why is writing a restaurant business plan important?
Most people believe that business plans are developed simply for securing external funding, either in the form of a loan or an investment. However, business plans are important largely because they ensure that you have a clearly thought-through roadmap for commercial success.
While writing a business plan may be ultimately intended for banks and investors so they can understand your vision, and see a plan for how the money will be spent, you can also use your plan to figure out startup costs, how long it will take to pay back lenders, and answer the ultimate question: Why does the world need your restaurant concept?
A business plan should always be a work in progress. Even successful restaurants and cafes should maintain a current business plan.
What to include in a restaurant business plan
While business plans generally follow a fairly standard format, restaurant business plans need to cover specific topics that other plans don’t. Your business plan should include things like competitor research, information on your target market, menu sample, a marketing plan outline, and a solid financial and budgeting projection.
As tedious as this step may seem, the better prepared your plan, the better prepared your business will be.
A strong business plan should include most of the components below:
- Cover Page with Branding
- Executive Summary
- Business Concept
- Sample menu
- Market Analysis
- Target Market
- Company & Management
- Design
- Location
- Marketing strategy
- Outside Help
- Financials
A business plan won’t be limited to just these fundamental sections, as concepts and investor needs vary, but consider this a great starting point when looking to develop a restaurant business plan.
Cover page with branding
Your cover page should include a logo (even if it is finalised) and be dated.
Executive summary
Your business plan should begin with an executive summary. This not only acts as the introduction to your business plan, but it also provides a summary of the entire idea. If you’re putting together the plan with the aim of seeking finance, this needs to draw the investors’ attention and make them want to keep reading.
Summarise your vision, a description of the target market, highlight your management team and hired industry experience, and provide an overview of financials.
Common elements of an executive summary include:
- Mission Statement
- Proposed Concept
- Execution
- Potential Costs
- Breakdown of the potential return on investments
Business vision & concept
This is your chance to describe your restaurant concept. From the food you will be serving, to the overall design aesthetic, use this section to define what makes your restaurant concept unique. You’ll need to define your mission statement: are you a Quick Service Restaurant or fine dining establishment? What meal times will you cover? Will your venue be table service or counter service?
Sample menu
Your menu is the most important element in launching a restaurant. Nothing can portray your restaurant's vision, concept and price point quite like the menu.
Even though you won’t have a final version, implementing a sample of a potential menu mockup with prices and formatting is your chance to give investors a clear understanding of your target market and price point.
Market analysis
Think about this section as answering “the why” to any potential questions about your business.
You can divide your market analysis into three parts:
- Industry Analysis
- Competition analysis
- Marketing Analysis
Target market
The target market section of your business plan answers the question ‘who are your customers?’. It’s key to remember that you can’t please everyone, so instead focus on a specific demographic and build from there.
Working out a target market will include a full analysis on the demographic including information like age, income and what they do for a living. Once you have described them in detail, reinforce why your concept will appeal to them.
Company & management
Most restaurants are partnerships, and your plan will need to explain how your business is structured and who owns what portions of the business.
With the ownership and legal side covered, you will need to touch on the proposed restaurant management team. While you won’t be expected to have an entire team selected, you should have at least a couple of key roles on board.
A potential investor will foremost want to partner with an experienced owner and management team, so dedicate this section of the plan to emphasising your industry experience and what you - and your team - can deliver.
Design
It is always a good idea to include some visuals. Paint the scene and create a mood board with images similar to your design highlighting the vibe and feel of your restaurant.
Location
The location you have chosen definitely needs to be in line with the market analysis and your target market. While you may not have a precise location set, you should at least have a few to choose from. It’s important to provide as much information as possible to reassure potential investors that you’ve done your homework and selected a winning location for your restaurant.
Marketing strategy & PR
Competition is high in the hospitality industry. The PR and marketing section of your plan should offer detail on precisely how you will market your restaurant, both prior to, and after, your opening. Explain the kind of marketing and advertising you plan on investing in and how you will manage your PR.
Outline if you plan on using a PR/marketing company and explain how you came to that decision. Or, if you’re going to do it yourself, explain your plans and how you’ll have time to manage PR while also getting a restaurant up and running.
Outside help
Opening a restaurant is hard work, and you’re likely going to need plenty of outside support. In this section, identify third-party business and tools you plan to use to get your restaurant up and running. This can include everything from accountants and designers to suppliers and software like restaurant EPOS systems. Software is an important part of the day to day running of your business so make sure you explain the importance of each and how they will benefit your restaurant.
Financials
Finally, your restaurant business plan will need a financial plan. Arguably one of the most important sections of the document if you intend on gaining outside investments or loans.
Due to its importance, it may be beneficial to hire a professional to help accurately calculate the financial forecasts required.
Investors will want to see a sales forecast, income statement, cash flow statement and a balance sheet. An accountant will be able to help get your financial estimates in order and give you a realistic idea of what operating the restaurant will really involve.
Before creating realistic financial projections, an accountant will want to know approximations on how many seats you plan on having, the average spend size, and how many covers you plan on having each day. Being conservative with these figures is key to working out if your concept will be financially feasible.
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