Restaurant

Business Plan

Create a business plan that serves as a map for your restaurant's growth. Stay on track and you'll navigate success.

If you are setting off on a long expedition, you’d better have a map. In the same way, if you are opening a restaurant, you’d better have a realistic, comprehensive business plan. You can’t afford to make many wrong turns when opening a restaurant, as you may never get back on track. Without a plan, people won’t follow you, much less contribute money to your restaurant expedition. So although restaurant ideas may start on a napkin, the first written sign that a restaurant can become a reality is a business plan.

In most cases, 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 the key to a restaurant’s start, growth and expansion. This makes 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 his or her business’s position in the marketplace. Even established restaurants can gain something from having a business plan as the owner/managers nearly always find valuable 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, creating a business plan can turn vague ideas into something concrete with realistic strategies, goals and financial projections.

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. The planning process gives you a chance to become more clear-sighted 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

It’s tempting to write your business plan like a big sales pitch. That kind of business plan will go nowhere. Instead, a business plan should be a methodical and clear explanation of your business based on concrete information about how your restaurant will function and succeed. You will surely get an opportunity to dazzle lenders and investors with your “vision” when you talk with them, but do not get carried away in the written plan. A glowing sales pitch in the business plan makes a lender or investor question your decision-making skills if you sound overly enthusiastic, delusional or grandiose rather than merely confident.

Mistake 2: Not Getting 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 each person says. This is a good way to practice taking constructive criticism that will help you throughout the funding process.

Mistake 3: Not Being Analytical

A business plan can help decision-making by breaking the many elements of starting a restaurant into smaller, more manageable pieces. In smaller pieces, a financier can see how parts of the business interrelate and how the business may develop. If a business plan is not analytical, you cannot expect to influence people’s opinions.

Before writing, one step to ensure that your business plan is analytical enough is to do a SWOT analysis, a widely accepted tool for business strategy. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Strengths and Weaknesses refer to the internal characteristics of the business venture, whether positive or negative. Opportunities and Threats, meanwhile, are the exterior forces that may either provide chances for growth or problems.

A SWOT analysis challenges a restaurateur to look at the business situation in new ways to understand the what influences might affect his or her business. It is a good exercise to do before embarking on a business plan as much of it can be incorporated into the plan.

Characteristics of a Good Business Plan

There are many sample business plans out there for restaurants. Instead, let’s cover the major points and how you will address them in your business plan.

Clear Organization

Let us first review the sectioning and organization. Business plans should have a clear structure. It keeps everything to the point and on topic. It also helps whomever you are sharing the business plan with to 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, se sections. You cannot write this like a high 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 some thought and professionalism into your plan.

Clear, Fact-Based Writing

From the beginning description of your restaurant, a business plan should be fact-based and written like a journalist. It should be dispassionate.

“***** will be a new, fine dining sit-down Korean restaurant in the Detroit area. We will serve traditional Korean food at premium prices to professionals and local residents. We will 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 are also key issues throughout your business plan. That means do not leave out important facts that are not flattering because you hope 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, he or she will reject your proposal, and you will have lost a prospect.

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 late until the middle of the night, even when the business is turning a substantial profit. It is the drive to do better continuously that gives your restaurant the best chance for success..

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 where you will not compromise. It will be the last thing you sacrifice as a restaurant owner because your mission explains why you want to run a restaurant. It is good to have your mission statement on paper because it can motivate you and your staff to value and believe in the work, even in harder times. This demonstrates to financiers and investors 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 to show that you are in control. For example, you may include important details that someone reading a business plan might not have considered. You might mention promotions that 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.

You will discover that most business plan structures are similar, but not exactly alike. The exact order matters less than leaving something crucial out of the plan.. 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

Cover Letter

A cover letter is a business letter addressed to a particular financier. It should introduce yourself, be professional and to the point.

Executive Summary

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, ambiance, site, corporate structure, staff size/structure, basic financial figures, management/ownership history and the amount of money you need and how that money will be used to get a return.

Company Description

The company description is the first breakdown of information. You might have subsections about brand, mission/concept, visuals of the floor plan and menus, hours, key promotions and bios of key players (owner, manager, famous chef).

Industry Analysis

Industry analysis is a macroeconomic (big picture) look at investing in the restaurant industry. Talk about the common issues that all restaurants face when trying to be profitable (like high food prices).

The Target Market

The target market is an analysis of your expected customers. You explain which demographic groups would likely visit your restaurant. You have to think about their attributes (like affluence and transportation) and what about your restaurant should appeal to them.

Business plans find the essential qualities of a business so that someone unbiased can evaluate whether the concept will be successful. Restaurants, in particular, have to show a carefully considered and realistic way to reach success, bringing together all the different variables. If you put a lot of effort into your plan, you will be rewarded with a greater understanding of your business and a better chance at outside funding.

Marketing Plan and Sales Strategy

Your marketing strategy should be explained, from building a website to advertising and public relations. You may want to introduce particularly powerful promotions that will bring new customers in the door.

Operations, Management and Organization

On the average day, your restaurant should work like a machine but with people. Explaining how staff members work together shows financiers that you know how to run a restaurant, including training, scheduling, staffing, hiring and quality control.

Goals and Long-Term Development

You want to reveal how you define achievable success over the next few years. That means what kind of financial position you are 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.

The Competition

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 your restaurant stand out and can flourish, despite your competitors.

Financial Data and 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 too rosy a picture. Financiers want to know that you can pay off a loan or recoup an investment.