Restaurant Business Plan
Most often than not, restaurateurs write a restaurant business plan to obtain funding from banks or investors. It is a fundamental and indispensable element in acquiring more capital. And, as most owners realize, capital is often key to a restaurant’s growth and expansion, making business plans extraordinarily important. Under most circumstances, financiers will not put money into your business without a convincing business plan.
But it is a mistake to look at writing a business plan as a chore, even though it may be difficult. You are not only writing a business plan for your financiers, but also for yourself.
The benefits of a restaurant having a written business plan go far beyond financing. A good business plan allows even the most hands-on owner to obtain more intimate knowledge of their business’ position in the marketplace. Even established restaurants can gain something from having a business plan as the owner/managers nearly always make insights they might normally miss. For a new restaurant, it is an excellent way to evaluate your business in a systematic way and recognize and fix core flaws. Also, the creation of a business plan can turn vague ideas into something concrete with realistic strategies, goals and financial projections.
What Are Common Mistakes
Good business plans take time, and restaurant business plans are no exception. You need to research and think over your plans and strategies. It is a chance to be realistic and prepare for circumstances you hadn’t imagined before. So although writing a business plan may feel tortuous (even with assistance), it is also the opportunity to see your restaurant in a different light. By putting your ideas down, you start to understand what are pipe-dreams and what will probably bring revenue and growth.
First, it makes sense to discuss what a business plan is not. There are a few cardinal mistakes you should know beforehand that can cause a large waste of time and effort:
Mistake 1: Making it a Sales Pitch
Do not make your business plan a sales pitch. Instead, a business plan should be a methodical and clear explanation based on concrete information of how your restaurant will function and succeed. You will surely have the opportunity to dazzle lenders and investors with your “vision” when you talk with them but do not get carried away in the written plan. It makes a lender or investor question your decision making skills if you sound overly enthusiastic, delusional or grandiose rather than merely confident.
Mistake 2: Get Helpful Feedback
Even if you decide to write it by yourself, do not go it alone. Have people you trust re-read it and find out what they think. Some may be good at making the plan’s presentation more effective, while others might give you advice about the business aspects. Of course, you do not have to take their advice, only listen (good practice when you talk to investors and banks who are another good source of feedback). Even if you do not agree with them, attempt to learn one thing from what they say. This is a good way to practice taking constructive criticism that will help you throughout the funding process.
Characteristics of a Good Business Plan
There are many sample business plans out there for restaurants. Instead I want to cover the major points and how you will address them in your business plan.
Let me first mention the sectioning and organization. Business plans should have a clear structure. It keeps everything to the point and on topic. It also lets whoever you are sharing the business plan with find the information they are looking for quickly.
An organized business plan also demonstrates that you are organized and in control. So before you start, set up sections. You cannot write this like a school paper and just wing it. Also, if you provide good-looking visuals, such as photographs, tables or graphs, it seems as if you put in more time into your plan..
You will normally see most business plan structures are similar, but not exactly alike. The exact setup matters less than avoiding leaving something crucial out. Here is a rubric that covers most of the bases with a quick explanation of each. Be sure to take a look at a few sample restaurant business plans.
What a Business Plan Includes
A cover letter is a business letter addressed to a particular financier. It should introduce yourself, be professional and to the point.
An executive summary introduces the business to the reader in a few pages of text. It is like a quick tour of the restaurant. It covers in brief general aspects such as cuisine, size, prizes, ambiance, site, corporate structure, staff size/structure, basic financial figures, management/ownership history and —–the amount of money sought and how that money will be used to get a return.
The company description is the first breakdown of information. You might have subsections about brand, mission/concept, visuals of floorplan & menus, hours, key promotions and bios of key players (owner, manager, famous chef).
Industry analysis is a macroeconomic (big picture) look at investing in the restaurant industry. Talk about the common issues that all restaurants face towards profitability (like high food prices).
The Target Market
· The target market is an analysis of your expected customers. You find demographic groups that would likely visit your restaurant. You have to think about their attributes (like affluence, transportation) and also what about your restaurant appeals to them.
The competition is other restaurants in your area that are targeting the same customers or are providing a similar experience. You discuss how they are doing and what you do that will make it so you can flourish despite your competitors.
Marketing Plan & Sales Strategy
Your marketing strategy should be explained, from a website to advertising to public relations. You may want to introduce particularly powerful promotions that will bring new customers in the door.
Operations, Management & Organization
On the average day, your restaurant is somewhat like a machine made up of people. How they work together is part of displaying that you know how to run a restaurant, including training, scheduling, staffing, hiring and quality control.
Goals & Long Term Development
You want to reveal how you define achievable success over the next few years. That means what kind of financial position are you aiming for and what you will do when you reach it. Also, you should discuss if you plan on multiple locations or expanding your original site.
Financial Data & Projections
This is where you show your balance sheets, from your initial expenses to your operating costs and revenue. Take into consideration seasonal changes and do not present a too rosy picture. Financiers want to know you can pay off a loan or recoup an investment.
Clear, Fact-Based Writing
From the very beginning description of your restaurant, a business plan should be fact-based and written like a journalist. It should be dispassionate.
“***** is a 2 year old fine dining sit-down Korean restaurant in the Detroit area. We serve traditional Korean food at premium prices to professionals and local residents. We serve lunch and dinner 7 days a week and have 65 seats.”
Anything that can be explained in numerical terms should be. How many competitors do you have? What is the average household income in the area? Hiding from hard numbers weakens the business plan and makes financiers less likely to offer money.
Clarity and transparency is also key throughout a business plan. That means do not leave out important facts that are not flattering hoping that the bankers and investors will not ask. You cannot say how you will get around high start-up costs or unimpressive revenue if you do not mention them (but the financier recognizes these issues). If the financier thinks you are trying to pull a fast one on them, you have wasted your time.
Establish Belief in Your Business
Business plans can go a long way to earning someone’s trust, whether a financier or an important employee. You need to share your mission. This is the thing that motivates you to put up with the difficulties of the restaurant market.
Yes, all restaurant owners want financial success, but owners differ in their values. Values create the passion that keeps restaurant owners working up until the middle of the night even when the business is turning a substantial profit. It is the drive to always do better.
These values normally affect the core identity of the restaurant and can have a huge influence on the brand. Some elements that show up in many restaurants missions are authentic cuisine, underserved community, reasonable prices, original menus, healthy food, etc. It may be the food and it may be the community of customers, but you have to know your purpose.
Essentially, your mission is an area you will not compromise. It will be the last thing you sacrifice because restaurant owners are passionate about their missions. It is good to have these on paper as they can motivate your and your staff to value and believe in the work, even in harder times. This demonstrates to parties that could provide you financial assistance that you have a deep personal investment in the restaurant’s success.
The X Factor: Confidence
Even with a realistic look at your business, you should convey confidence that you will succeed. Of course, that is hard to do, but there are ways you can show that you are in control. For example, you may include important details that someone reading a business plan might not have thought of. You may exhibit promotions you are planning. You are not making any commitments, just giving a banker or investor a window into your future business.
The other aspect of confidence that you may think about is the ability to project the feeling that there is a demand to invest into your business. This is not something you actually say. Instead you suggest this with the structure and tone. As a general rule, people are less likely to reject something outright if they feel that others think they are offering something of value.
Business plans find the essential qualities of a business so that someone can evaluate if the concept will be successful. Restaurants, in particular, have to show a well-thought out and realistic way to reach success, bringing together all the different variables. If you put a lot of effort into one, you will be rewarded with a greater understanding of your business and a better chance at outside funding.