How to Create a Restaurant Business Plan
What is a Restaurant Business Plan?
Every entrepreneur knows how critical it is to write business strategies to ensure a successful restaurant. With the many challenges the restaurant industry faces, a restaurant business plan can provide a competitive edge.
Potential investors will request any business plans before they even consider participating. Furthermore, owners who take the time and energy to write restaurant business strategies demonstrate how dedicated they are to the cause. Everyone can easily reference the document as situations arise in those first few months of the new business.
A restaurant business plan is a clear and precise method to convey the business model, mission statement and industry analysis to stakeholders. Investors want all of this information to know whether the venture is worth their time and money.
It also shows what the owner has already accomplished and whether it aligns with the original restaurant concept. While any entrepreneur can have a good business idea, not everyone can carry it out. A complete operations plan ensures the general manager has what it takes to deliver value to both customers and investors.
The better the business plan, the more it will show investors that the owner has what It takes to build a top restaurant. It will encourage investors to provide the capital required to cover startup costs and reach a target market.
Breakdown of Startup Costs in Restaurant Business Plan
It helps to first understand how much it costs to start a food restaurant in the United States. A restaurant owner needs to cover both expenses and restaurant costs. Expenses are regular, recurring fees such as rent, real estate mortgages, labor cost, and advertising costs.
On the other hand, restaurant costs include any startup expenses such as equipment, barstools, utensils, or other furniture items. Within the startup expense category are several subcategories. These include -
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1. Restaurant Startup Costs Real Estate or Commercial Space
Owners can either lease or purchase a piece of real estate to run the restaurant business. If the owner rents the space, he/she should commit to staying there for at least a few years. It's best to have six months of capital on hand to secure the space.
If the owner buys a commercial space, it's going to be much more expensive. A typical down payment is 15-20% of the total mortgage. Because it takes longer to break even in the restaurant industry, it's riskier to buy than to rent.
2. Startup Costs in Restaurant Business Plan Furnishing
The owner will most likely need to refurbish and renovate the space to align with a marketing strategy. This can cost anywhere from $5,000 on the lower end to $50,000 or higher. It's best to spend as little money as possible that first year.
Owners should focus on the dining room, bar area, kitchen, and seating. They can worry about the new espresso machine later. Smart owners also purchase a space that is already furnished for food service usage. This will save money on kitchen expenses, which can run up to $250,000.
3. Startup Costs in Restaurant Business Plan Technology
It is easy to get overwhelmed by the wide variety of technology available. Smart restaurant owners should start with the POS system, employee scheduling software, reservation tools, and a loyalty program for customers. Hardware should include receipt printers, cash drawers, payment terminals, and iPads for any display systems in the kitchen.
Benefits of Restaurant Technology:
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4. Startup Costs in Restaurant Business Plan Licenses and Permits
A good business plan template includes a budget for licenses and permits. The costs for these vary depending on the state and size and scope of the restaurant. The primary licenses and permits include -
- Food Service - License Each local health department manages the food service license. The cost is anywhere from $100-$1000.
- Liquor License - If the restaurant serves alcohol, the owner needs a liquor license. It costs between $12,000 and $400,000 and takes up to six months for approval.
- Handler's Permit - The handler's permit ensures the restaurant knows how to store and handle food properly. This is between $100 and $500.
- Other - Other potential permits and licenses include a business license, health permit, resale permit, valet parking permit, or dumpster placement permit. Owners should review local laws and regulations to ensure they acquire the correct ones.
5. Startup Costs in Restaurant Business Plan - Admin Fees
Owners need to create a business entity and submit payment to the state the enterprise resides in. an attorney can ensure that all taxes and fees are paid properly. Some owners decide it's better to file for corporation status to gain special protection. This can cost anywhere from $100 to $200 in filing payments, along with any additional tax fees.
6. Startup Costs in Restaurant Business Plan Marketing Fees
Owners should include any necessary marketing or advertising fees within a financial plan. These expenses include a small business website, logo design, and social media marketing fees. Smaller restaurants cannot always afford the extravagant marketing expenses that large chains take on.
Thankfully, digital strategies are usually very affordable and reach many in the target market. This will improve cash flow and provide a chance to pay off startup costs without going broke.
The Importance of a Restaurant Business Plan
Every full-service new restaurant must write a business plan so investors take the owner seriously. An effective business plan includes a company description, market analysis, financial analysis, executive summary, and other key elements that describe the original business model.
The plan serves as a guide to managing everything from restaurant marketing to customer service, to even menu design. What is the business structure? Is it fine dining, fast casual, or a sports bar with food? An effective plan will answer all of these questions and more.
Investors will only be interested in the idea that is unique, profitable, and well-researched. Because the restaurant industry is already highly saturated, this can be a difficult task. If the business plan includes evidence for why the concept will succeed, it's more likely to go over well with stakeholders.
The restaurant business plan also ensures the owner will focus on what is required. There are so many moving parts within restaurant operations. Licenses, fees, compliance concerns, real estate costs. If an owner doesn't have a plan to guide him/her, the process is much harder to navigate.
A good business plan also demonstrates how the restaurant plans to handle risk and competition. This will help persuade investors that the owner has what it takes to mitigate challenges and surpass those first few difficult months.
How to Write a Restaurant Business Plan
Before the owner writes a plan, he/she needs to take several key steps and answer several questions. Points to consider include the amount of capital on hand, what restaurant type won't compete in a saturated market, and who the patrons may be.
All of these elements will impact the feasibility of the business idea. It's also good to research the demographics and consumer health trends to ensure the concept aligns with consumer needs. Other elements to consider before embarking on a business plan include -
1. Pick a Restaurant Concept
The business owner needs to define what the restaurant's theme or concept is. Is it a Chinese restaurant, or a fine-dining Italian restaurant? Or are there limited menu items and more drinks?
The owner should research trends to see what customers want. If unsure, it's hard to go wrong with a restaurant that offers a wide array of items that will still be popular in a few years. New business owners shouldn't go too trendy unless they are fully confident in the new concept, and investors are ready to back the idea.
Types of Restaurant Concepts:
2. Check Out Another Popular Small Business (Or Two)
Restaurant owners should always make sure to perform market research and competitive analysis before they embark on a business plan. Owners should check out both small and large restaurants that are popular in the local area. They can write down everything that works and doesn't work in these establishments, talk to the owners, and visit with patrons.
3. Pick a Good Location for the New Business
A specific location may seem like a great idea, but it's best to perform more research first. Many locations fail because of obscure reasons, such as lack of pedestrians or more shops on the next street over. Restaurant owners with limited capital may not be able to afford the hottest spot, but they can pick an acceptable location that will attract new patrons.
Key Elements of a Restaurant Business Plan
Good restaurant business plans use industry-appropriate templates. The owner can find examples online to get started. While the type of template can vary depending on the industry and type of requirements, the vast majority include the same elements. These include the following -
1. Restaurant Business Plan - Cover Page and Executive Summary
The cover page needs to include the restaurant name, logo, any fonts for the brand, and all contact data. An executive summary is the first section after the cover page. It summarizes the restaurant concept and vision, along with key aspects of the plan. This section should be catchy and easy to read. Other points to include in the EA are -
- How the owner plans to execute the plan
- Review of all potential operating and startup costs
- Anticipated profitability
- Restaurant's core values
2. Restaurant Business Plan Company Overview
This section reviews all of the basic information about the new business such as structure, location, and concept. Menu items, type of customer experience desired, and mood are also elements to include. The owner should also include any information about onboarding, training, hours of operation, and design.
3. Restaurant Business Plan Industry Analysis
The industry analysis section should describe the market conditions the restaurant will be a part of and the location. It includes potential industry growth, competitors, demographics, neighborhood hot spots, and other necessary information. Key subsections of the industry analysis section include -
- Target Market - Demographics, characteristics, and shopping preferences of a target market
- Location Analysis - City or area the restaurant will operate in, growth of the local economy, and any other information about the neighborhood
- Competitive Analysis - Big competitors, where they are, and how the restaurant plans to stand out
- Marketing Plan - Strategy to promote restaurants before and after the grand opening. This section should be as specific as possible
4. Restaurant Business Plan Operations Plan
This section should address how the restaurant plans to operate on a day-to-day basis. Critical elements to include are -
- Staffing - Who will work there and how many people are required for each role. Also include the hiring criteria
- Customer Service - Procedures Explains how the restaurant plans to offer a good customer experience
- Point of Sale System and Technologies - Any restaurant management systems the owner plans to use to handle transactions and collect data
- Vendors - How the restaurant plans to get its ingredients and what the process will do so
5. Restaurant Business Plan Financial Analysis
This is usually the last section of the business plan. Investors need to see a break-even analysis, how the owner plans to spend money and a comparison of anticipated vs. projected revenue. The primary elements to include in the financial analysis section are
- Investment Plan Capital - required and how the restaurant plans to spend that money
- Profit and Loss Statement - Educated guess of various costs and projected losses over the next year
- Break-Even Analysis Revenue required to break even once all other expenses are factored in
- Projected Cash Flow - Cash flow will depend on how frequently the owner plans to buy inventory, how much stuff there is, and the payroll schedule.
How to Present Your Restaurant Business Plan
Once the owner finishes the business plan, he/she needs to study it. All investors want to ensure that the owner is fully knowledgeable about each aspect of the organization. They also want to know that the owner has what it takes to fulfill the mission statement.
The restaurant owner should send the plan in an email to all contacts that may want to invest in the restaurant. It may take time and hard work to receive a response. Most investors want to discuss the business plan in person. They also may want to view a pitch presentation or receive a document to look over. PowerPoint is a great tool to create a high-quality presentation with unique visuals and charts.
Investors may ask unexpected questions. Owners should be prepared and well-versed in the plan so they can do so. If the owner is not sure, it's best, to be honest rather than lie. He/she should promise to find the answer and contact the investor as soon as possible.
Must Have's in Pitch Deck Presentation:
Key Takeaways of How to Create a Restaurant Business Plan
In conclusion, here is what to know about restaurant business plans -
- Restaurant startup costs include commercial space, renovations, technologies and equipment, licenses and permits, and marketing expenses.
- The owner should pick a unique restaurant concept, research the competition, and select a good location before writing a business plan.
- Key elements of a business plan include the cover page, executive summary, company overview, industry analysis, marketing plan, staffing needs, customer service procedures, vendors, and financial analysis.
- Owners should use a pitch deck presentation to present the plan to investors. They should be prepared for every question and answer honestly if they do not know the answer.