Inspiration to start a restaurant struck, but now it’s time to get serious about the mechanics of running a restaurant. You want to show potential investors you have a vision: you need a business plan.
To help you get started, we’ve outlined what you should include in a business plan. We’ve also added some tips from Tim Felkner, a serial entrepreneur and restaurant consultant in San Francisco. His insights will help you determine the ingredients necessary to build a plan that will win people over and set you up for success.
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An executive summary is the overview of your restaurant business plan. “It should be a clear, concise preview of what’s to come, with the flexibility to grow and change,” Tim says.
Your executive summary should include the objectives of your restaurant and a mission statement. You’ll also want to include what it is that will make your restaurant successful and set it apart from competitors.
For example, you might highlight talented staff that can provide good customer service. You’ll also want a comforting environment so your patrons enjoy being there and want to come back. Writing these down will help you live them later on.
To get started, write out your company’s description to convey the vision and direction of your restaurant. Start with a restaurant concept, which will inform the type of food you serve, your target market, and restaurant decor. Some of the fastest growing concepts in the market are family-style restaurants, food trucks, and pop-ups.
A market analysis should include analyses of your industry, competition, and geography:
An industry analysis is a qualitative and quantitative assessment of the market. Conducting this research will show you local industry dynamics and help you discover upcoming restaurant trends.
Provide a competitive analysis of your market and location. You’ll want to include who has the biggest market share, how close your competitors’ restaurants are to yours, and what advantages you’ll have over the competition.
Include an analysis on your restaurant’s location or potential locations. “Different locations, even within the same neighborhood, are going to perform differently due to other businesses in the area, the people that live in the area, public transportation, and parking. And all of that tends to matter, and tendsto be probably a bit influential, in whether your business is going to be successful or not,” says Tim.
Talk about how you can combat those geographic difficulties as well. For example, if the area doesn’t get a lot of foot traffic, think about how you can draw people to your space and keep them returning. Having this information thought out will help instill confidence in you from investors.
Using all of this information, you can round out this section with a SWOT analysis.
A SWOT analysis includes strengths (competitive advantages), weaknesses (shortcomings or lack of expertise), opportunities your restaurant can capitalize on, and threats in the industry of tough competition. Include this so you can identify, and then focus on, your strengthens as you launch your restaurant and prepare to minimize weaknesses.
Determine what sets you apart from other restaurants and expand on that. Include an analysis of insights, trends, and what part of the industry you’ll be fitting into. For example, is your restaurant family style or a food truck? Maybe it’s something brand new to your area — or something the industry hasn’t seen before.
But in a SWOT analysis, “you should be really honest about where a business may lack in terms of the team or its competitive advantage,” says Tim.
“I think if a business plan is overly optimistic and says, ‘Oh, we’re going to beat our competition in every category,’ that’s probably not realistic. You’re probably going to be able to beat your competition in some categories and not others.”
Menus and sourcing
Everyone — including investors — wants to know what they’ll be eating at your restaurant, so be thorough when writing out a sample menu for your business plan.
In the menu, you’ll want to include menu items, product descriptions, and all ingredients needed to make your food and drinks. Food descriptions factor into customer-purchasing decisions at a restaurant and can be a marketing tactic for business. Think of it as “feeding the imagination,” with descriptions that help the customer visualize how how the meal will look and taste.
If you can test the menu ahead of time and provide that information in the business plan, all the better.
“Doing a little bit of testing and making sure that your recipes are on and that people are in the market for what you’re wanting to provide can save you a lot of money and headache, and maybe help your business survive in the long run,” says Tim.
Include where you’ll be doing your product sourcing and what vendors and suppliers will be used to source materials. Determine if your restaurant will only source local or organic products — this choice could be another marketing tool to draw in customers who care about where their food is from.
And don’t forget about restaurant safety. Research the permits and laws needed in your local area to ensure you’ll adhere to regulations. There are various federal agencies, state departments, and local policies to be familiar with. The FDA and your state public health department are good places to start.
In the marketing strategy portion of your restaurant business plan, you’ll want to write out your positioning statement, a concise description of your target market and a compelling picture of how you want that market to perceive your brand.
A marketing plan should start with a positioning statement which explains how you want customers to perceive your brand. To write a strong positioning statement, include the following:
- A description of how your restaurant is different from others
- How your brand is enjoyed by customers in ways that set you apart from your competitors
- A segment or category in which your company competes
- Compelling evidence and reasons why customers in your target market can have confidence in your differentiation claims
Target market definition
A customer analysis will help you define your target market and customer demographic. When defining your target market, it’s important to be specific to ensure you capture your intended market. This is a more affordable and effective way to reach potential customers and bring in business. You’ll want to check out your competition’s customers also.
Next, you’ll need a logo. A logo should portray your restaurant’s style, personality, and cuisine. Logos can make strong first impressions about what your restaurant’s vibe, cuisine, and interior is like. It can also help you stand out from your competitors and attract new customers.
Don’t forget to show your website mockups and what will be available to potential customers to access online — your brand identity should be evident. When a potential customer is at home and deciding between you and your competitor, your website could be the deciding factor in that choice. A website with photos of your site, links to social media, and your menu will help drive people to your actual restaurant.
Your brand should also translate to your restaurant’s interior design and layout. Studies show that a restaurant’s interior heavily plays into customer satisfaction. “A unique design will help you stand out from the competition and plays into how guests perceive your brand,” Tim says.
Test your brand
Discuss how you will test different marketing strategies and measure their success.
“A bit of test marketing is not done nearly enough and can be extremely valuable. Maybe you have good product, but does the marketing or the message fit?” says Tim. “Get a lot of feedback from many, many people instead of just one group who are your loyal followers. Try out as many things as possible and track what works and what doesn’t, since there is no one size fits all.”
Once you’ve concluded your initial testing, describe how your brand benefits customers in ways that set you apart from your competitors. Explain the segment or category in which your company competes. You’ll want to provide compelling evidence and reasons why customers in your target market can have confidence in your differentiation claims.
Marketing to drive traffic
You should also consider other events to drive traffic into your restaurant, such as:
- A soft opening
- A concept test in a pop-up event prior to opening
- Special discounts on certain nights of the week
- A prix fixe menu during your city’s restaurant week
- Chef pairings
- Takeout/delivery options
- An occasional evening to give back and donate a portion of your proceeds. For example, a promotion with other community organizations where all proceeds go to the local YMCA on the first Monday of the month.
Organization and management
List out the roles and responsibilities for your management team, front-of-house, and back-of-house positions. Front of house may include the hostess, server, bartender, or sommelier, while the back-of-house positions will comprise of a chef, sous chef, line cooks, and food runners.
Remember, both quality and quantity of employees will be a significant factor to your success. It’s important to hire the right type of person that believes in the restaurant’s mission, as well as the right amount of people to generate efficiency.
You’ll also want to include the business entity you’ll declare for your restaurant, whether it be an LLC, sole proprietor, etc. The business entity you elect will determine your tax return to file, so be sure to conduct thorough research and consult with a legal professional.
And don’t forget that technology plays a big role in operational efficiencies. Outline what technology you will use in your restaurant. Invest in a restaurant POS that is designed to place orders and tickets, take payments, split checks, track sales, and help your servers better manage tables.
Last but not least, how much is all of this going to cost? Your financial plan is made up of three main components: restaurant startup costs, funding options, and a break-even analysis.
First, write out the startup costs in your restaurant business plan. Startup costs are the total cost of the initial purchases you need to start your restaurant. For example, you only need to buy tables and chairs once, so this is a one-time large purchase. Other startup costs include technology to pay your staff and process customer payments and kitchen equipment (this is everything from pots and pans to ovens and refrigerators).
Consider your food cost percentage. Calculate this by taking what you paid for the ingredients and diving by what you will sell the dish for. That equals your food cost percentage.
Next, list out your funding options. Your options can range from self-funding, crowdsourcing, relying on friends and family, seeking small business loans, or having an investor.
Finally, create a break-even analysis. To break even means your sales or revenues equal your total expenses. What will it take to get there? Include your profit and loss model, cash flow projections and a balance sheet.
“Don’t be too aggressive financially. Success doesn’t happen overnight and, while you may be able to get there, it doesn’t happen for every business or even every location,” he says. “Be conservative and try to ensure that with average financials, or even slightly below average financials, you could pay the bills and make it for a little while.”
If you follow this restaurant business plan, you’ll be well on your way to impressing investors, being prepared, and starting the restaurant of your dreams.