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Creating A Restaurant Business Plan: The Definitive Guide

Thursday, June 28, 2018
Table of Contents

So you think you can open a restaurant?

You have an idea, a possible venue, a great menu and some possible investors. How do you put it all together?

No investor is going to blindly shake hands on “a great idea” alone. You will need to create a restaurant business plan to communicate your ideas in a cohesive, digestible format. With this restaurant business plan, you can attract (and close) investments in your future restaurant.

Aside from using it as a tool to land initial investments, a great restaurant business plan will establish the groundwork for the first few years of a restaurant. Your restaurant business plan will include all the financials needed to open the restaurant, to manage the restaurant successfully, to see a profit in the restaurant, and to continue on a path of success.

Here, we laid out the ingredients for a clear, effective, and formal business plan that is sure to get any investor on board with a great idea.

The Executive Summary

The Executive Summary

The executive summary will be the introductory portion of your restaurant business plan. This is where you will provide potential investors with the 35,000 foot view. Treat your executive summary as the basis for a restaurant business proposal.

In many cases, unfortunately, this is the only section an investor will really read. Make it count!

The ideal executive summary will be only one or two pages and will reflect the overall mission statement of the restaurant.  Use this space to your advantage with clear language, thoughtful goals and a unified vision.

  • Introduce the type of restaurant you are opening, ie. a full-service Mediterranean restaurant
  • Introduce what sets your restaurant apart from the competition, ie. featuring an Grecian island theme ambience, caring service and nightly Mediterranean-influenced live music
  • Introduce the chef and the basics of the menu
  • Introduce the restaurant’s location. It is in a bustling downtown area? Is it in a prime beachside location?  
  • Introduce the opportunity or a target market in the area

Funding Requirements

Another crucial part of the executive summary is laying out the fundamental financials. In short, here is where you tell your prospective investors how much funding you need and why.

For example, you may use this section to introduce the overall amount of capital your restaurant needs to open and begin operating. From there, breakdown the restaurant startup costs into specific sections.

If you need $300,000 to open, break it down further by allocating these funds into specific parts of the restaurant. Maybe you need $50,000 specifically to renovate and improve the space.

Additionally, disclose any fundraising you have done prior to creating the restaurant business plan. If you have contributed a lump sum of your own money, taken a loan from an institution or entered into agreements with other investors, communicate that here.

Keys to Success

Use this section to lay out exactly why you think your restaurant has the elements of success. What sets it apart? What are going to be the cornerstones of your success? Use these 2-3 sentences to impress your investor.

In addition, if you have done any financial forecasting, include it here in a simple graph. Numbers speak. If you can show your investors the numbers you are aiming to hit in the first one to five years, those numbers will speak loudly.

A simple graph for your executive summary can include:

  • Gross Revenue
  • Cost of Goods Sold
  • Employee Expenses
  • Operating Expenses
  • EBITDA (Earning Before Interest, Taxes, Depreciation and Amortization)

The Restaurant Business Plan

The Restaurant

Now that you have completed your executive summary, you can really dive into the vision: your restaurant business plan.

In this section, you will bring your restaurant to life for your investors. Section by section, you can illustrate what makes your restaurant stand apart, how the experience will be for your patrons and what special “extras” you will offer to your guests.

The Restaurant Experience & Vision

When a guest enters your restaurant, how does she feel? Is your restaurant dark and moody with lush red velvet and French music playing in the background? Does your restaurant have sunny outdoor seating with an unparalleled view of the ocean and playful, colorful decor?

As a restaurant owner, you have likely been overcome with a desire and passion to open your own place. Use this section to draw your investor in to see what is so special.

Consider also how you want your guests to feel. If you are offering healthy, fresh fare, you might want your guests to leave feeling light, happy and ready for a day outside. Are your servers knowledgeable sommeliers? Do you want your guests to settle in for a long evening of fine dining or are you a fast casual restaurant?

Close your eyes and take the time to envision your restaurant. Paint the picture of your mission statement by showing and telling your investor about it.

Introduction to Menu

Use this section to showcase your restaurant menu to investors. Write a brief introduction describing the cuisine. Does it come from a certain geo? Do you adhere to a particular dietary restriction? Is it meant to evoke a specific time or place?

Include all of your menus in this section. If you intend on serving Lunch, Dinner and Brunch, include all of the menus, along with their ingredient and preparations.

Operation Details

Use this section for other details, such as hours, payments accepted, portion controls, management techniques, training programs and money management. Whew, that is a lot.

The operation details part of your restaurant business plan is incredibly important. The old saying “the devil is in the details” rings absolutely true for restaurant operations. Before you ever consider opening your doors, make sure you have these details ironed out.

Here are just a few “details” you might outline, and how you want to approach them, to your investors.

  • Hours of Operation
  • Days of Operation (Holidays, etc)
  • Inventory and Food Cost Controls
  • Recipe Controls
  • Cross Utilization of Inventory
  • Sanitation schedules
  • Food Handling
  • Management Systems
  • Software Used (Scheduling, Reservation Management, Point of Service, etc) 
  • Training and Staff Education
  • Money Management

Addressing these seemingly minute details may seem excessive when constructing a restaurant business plan. However, having these plans in place will demonstrate the sincere consideration you have put into making your restaurant dream a reality. Additionally, once funding is secured, it will set you up for success.

Market Analysis

Market Analysis

Your market analysis is incredibly important to the success of your restaurant-to-be. First of all, you want to make sure your restaurant is in a good location.

A number of things can make or break a restaurant, no matter how great the food, ambience and idea may be. Before ever considering a certain restaurant location, you want to make sure you have an active, ready-to-engage target market.

Target Market

What does your restaurant’s target market look like? Are they well-to-do business people who work across the street from your location? Are you opening in a foot traffic area with lots of young families? Assess your target market, find out where they live and find a great location from which to serve them.

Some characteristics you might want to consider in searching for a target market are:

  • Age
  • Dining habits
  • Style and tastes
  • Value beliefs
  • Affluence
  • Education
  • Marital status
  • Family
  • Religion (any corresponding dietary restrictions?)
  • Employment

Analysis of Neighborhood

The analysis of the neighborhood is also important and will feed directly into your target market. Consider using results from the latest Census to include in your restaurant business plan.

How many people live within walking distance? How many people live within an easy driving distance? Will most of your customers dine with you for brunch on the weekend? Is your location close to a cluster of businesses making it a busy lunch spot? Are there any major universities or large institutions nearby?

This is a great place to include visual elements in your restaurant business plan. Consider including maps of the area. A zoomed in map showing the surrounding area, whether a neighborhood or a city block, can illustrate the opportunity for foot traffic.

A bigger map showing surrounding freeways, parks, hotels and institutions can provide a glimpse into nearby opportunities, as well.

Analysis of Surrounding Businesses & Competition

There will likely be other restaurants, coffee shops and other venues around your new restaurant.

Make sure to communicate what restaurants are in the area. Obviously, you won't want to open a Mexican restaurant in an area with several successful ones in existence. However, if you are opening a Mediterranean restaurant in the middle of a neighborhood that is serving other cuisines, it might be a perfect fit for a highly trafficked area.

Major Venues and Institutions

As mentioned in the analysis of neighborhood section, a large institution could have a huge impact on your restaurant.

Make note of any large institutions and what they might bring to your restaurant. If a major university is nearby, they likely have a large stream of visitors on a daily basis. This will also add season highs for your restaurant come commencement ceremonies. If your restaurant is located by a major theater or auditorium, you might have a nightly influx of pre-show or post-show guests

Use this section as an area to highlight these neighbors that could be a huge benefit to your restaurant, which brings us to marketing…

Marketing Strategy

Marketing Strategy

Whether you are opening a 900th franchise of a popular restaurant or a brand new cafe, a marketing strategy is hugely important.

When I was in college at NYU, the area’s first Chipotle opened. As students, we all received a coupon for a free burrito, with no restrictions. In fact, some kinds found a stockpile of these coupons and used them to feed their entire student career.

At the time, I thought Chipotle must be hemorrhaging money with these coupons. However, by gifting a couple thousand NYU kids a few burritos, they made lifelong customers out of us. Personally, I have bought dozens of burritos since my free one, which I may never have bought in the first place without the free coupon.

Positioning and Branding

By this point in your restaurant business plan, you have likely told the story of your brand, both visually and through text. Use this area to reiterate your brand, your mission statement, your values and what you hope to bring to the community at hand.

Marketing Strategy

The marketing strategy section is where you lay out your action-based plans. Beginning your timeline months before opening your location, you will want to have your marketing plans ready. These can include:

  • Advertising in local and regional newspapers and magazines
  • Creating a website and social media account that reflect the restaurant’s brand and mission statement
  • Public relations push to increase awareness prior to opening, including story coverage in local newspapers
  • Partnerships with nearby major institutions, venues, gyms and hotels
  • Strategies to attract new customers
  • Strategies to retain existing customers through loyalty programs
  • Strategies to create “evangelist” customers who will both return and spread the word
  • Search Engine Marketing and Facebook Advertisements targeting your specific geography and target market.

Be creative in your marketing strategy. In this virtual age, there are many ways you can spread the word. Utilizing social media in tandem with word of mouth will allow you to spread the word without necessarily breaking the bank.

It terms of timing your marketing strategy, sooner is better. The minute your permits, funding and groundbreaking are underway, also lay your marketing foundation. Tease some of your menu on Instagram. Allow your followers to see the progress of renovations. Having an engaged audience through the building process will translate into a record-breaking opening day.

Management Introduction

Management Introduction

Introduce your team in your restaurant business plan. If you are going to be heavily involved, as an owner, tell the investors more about yourself.

Let your story, your passion and your experience color your restaurant. Consider the unique point of view you bring and demonstrate this to the potential investors. If you have other specific team members attached to the project, introduce them here, as well.

Your Team

Take this section to showcase how you want to build your team. Having a clear idea of your team’s makeup demonstrates your deep understanding of what your restaurant needs and what it is going to cost to staff it.

Your team breakdown might look something like this:

  • General Manager
  • Two Assistant General Managers
  • Kitchen or BOH Manager
  • Two Lead Cooks
  • Two Line Managers
  • Servers
  • Prep Cooks
  • Bussers
  • Hosts
  • Bartenders
  • Barbacks

Consider adding how staffing might look for different meals, days of the week and times of the year. You can break down the cost of labor for a slow Monday lunch in February as opposed to a Saturday night dinner in June.

Financial Outlook

Financial Outlook

This last section will reiterate the numbers. Again, state the overall amount of capital needed to open and operate. From there, break down where the funds need to be allocated to align with the vision your business plan detailed.

This section will require the most figures and numbers, so do your research.

Funding Requirements & Capitalization Plan

This is where you will show how you turn your investors’ capital into a financial return a decided timeline. After breaking down the startup costs of a restaurant, show how you intend to make money.

Like we noted earlier, create an outline showing your financial forecasts. Create this by using these figures:

  • Gross Revenue
  • Cost of Goods Sold
  • Employee Expenses
  • Operating Expenses
  • EBITDA (Earning Before Interest, Taxes, Depreciation and Amortization)

Your EBITDA will show what your projected earnings are before taxation. Consider laying these out over the course of the first five years, with a steady increase on your bottom line earnings.

Additionally, break these numbers down according to meals. Your brunch revenue assumptions will differ from your lunch and dinner revenue assumptions. The more figure-based predictions you can provide in this section, the better.

In Conclusion

Your restaurant business plan will reflect you as a potential business owner. Often, it is your “make it or break it” document. Use it to your advantage.

There is no shortage of stories documenting restaurant failure due to missed details, overconfidence or plain neglect. Creating a comprehensive restaurant business plan will not only gain you capital. When done right, a great restaurant business plan will set you up for success, allow you to avoid common  pitfalls and give you something  to revisit when making future business decisions.

Good Luck!