Many people dream of opening a restaurant, seeing it as an opportunity to turn a love for entertaining or cooking into a business. Unfortunately for many restaurateurs, the reality of running a restaurant is not what they expected. Long hours, low pay, and a lot of stress cause many entrepreneurs to close up shop after a few short years.
One reason for the high failure rate in this industry is that restaurant owners fail to treat their restaurant as a business from the very beginning. They have no plan to deal with problems and unexpected expenses, and they don't understand the true costs associated with opening a restaurant.
One way to prevent these types of problems is to develop a well-written business plan. By writing a restaurant business plan, you show investors or lenders you have a clear contingency plan for handling any problems that arise.
What a Plan Can Do for You
A restaurant business plan needs to be structured like most business plans, but the details need to address your specific vision for a restaurant and its place in your local market. Start with the same general components of a standard business plan, then gear it specifically to the restaurant industry and your plans of succeeding in that industry.
This overview needs to introduce your entire business plan with a couple of key broad strokes: What niche will your restaurant fill in the local dining market, and what role will you specifically play?
Make it clear to the reader (a potential investor) what kind of restaurant you will be. From fast-casual and sports bars to fine dining or ethnic cuisine, there are all kinds of restaurants. Let the investor know how you'll fit into the market, including the name of your restaurant and its location.
Be clear about your role in the business as well. Restaurants are multilayered operations. Menus must be built, food must be cooked, finances must be managed, customers must be served, and marketing efforts need to expand your clientele. One person trying to do all that would be overwhelmed, so include your partners in your executive summary. If you haven't found the perfect partners yet, explain the roles that you intend to eventually delegate to partners. If you're an experienced chef with a plan for a fine dining restaurant, for example, then make it clear to readers that your primary role will be in the kitchen and you'll hire experienced professionals to handle other key roles.
This business analysis offers a first look at all your key business details. Where will you be located? What's your mission? Who are your target customers? What kinds of dishes will make up your menu? What sets your restaurant apart from other options in the area? Will the population base support another establishment like yours?
You'll also want to include basic details like your company's legal name, business structure, ownership, and management team. Keep everything high-level here, and save the deep details for later in your plan.
This is often referred to as a marketing strategy, and there are three key components. Know how to address the specifics of your plan within each one.
- Industry: Who will you be serving? Is your restaurant going to cater to the older retired generation at lunchtime? Single professionals at dinner? Families with young children? Explain your customer base and why they are going to flock to your new restaurant instead of your competitors. You'll have touched on this in your executive summary and company description, but this is where you need to dig into the details of the local restaurant community and show how you fit.
- Competition: Who is your competition, and how will you distinguish yourself? Again, you'll have touched on this already, but use this section of your business plan to dig deeper into the details. Loyal customers at established restaurants aren't likely to change their dining habits unless your menu, atmosphere, or approach somehow sets itself apart from what everyone else is doing. Show your reader that you understand—in detail—what other restaurants are doing and how you're going to be different.
- Marketing: What methods do you plan to use to promote your restaurant? Perhaps more importantly, who will be handling this? Following the example of the owner focusing on the kitchen, someone with experience promoting and marketing restaurants should be in charge and have a plan. Let investors know you've brought a local food-scene expert on board for that purpose, and explain their marketing plan.
Also known as the products or services section, this is where you tell investors about your hours and how many employees you plan to hire. It's also where you explain the benefits of your establishment for customers, such as its convenient downtown location or its proximity to the local interstate exit.
This is also a good place to mention any close ties you have to local restaurant vendors, such as food supply companies or local farms, that will give you a competitive edge. For example, a liquor license is expensive and can be difficult to obtain in some markets. Here, you can explain to investors that you've hired a consultant who specializes in negotiating and purchasing liquor licenses to handle that aspect of your business.
Management and Ownership
Who is going to helm the ship? Who will cover the aspects of the business you can't? Beyond ownership, explain your management hierarchy, as well. For example, will managers for specific areas—dining room, bar, business, etc.—report to a general manager who then reports to you? Or, will everyone report to you equally? The structure you choose is less important than having one that works for you. You also want to ensure that the function of the structure is easy to explain to your investors or lenders.
Here, you want to list the projected growth of your new restaurant. You should include a general start-up budget, as well as a profit and loss statement that projects how much are you going to spend versus how much you are going to make.
Lenders and investors want to see that they are going to get a return on their investment, so give them a picture—and be realistic—of how that's going to happen. Put the work in to accurately project your labor and food costs, along with other operational costs, and compare those against the expected sales growth of your restaurant. A detailed financial plan will provide a road map for evaluating how your business is doing each year.
Many people opening a restaurant are not experienced business professionals, so it's a good idea to seek out a business partner with requisite experience. If you can't find a partner, consider hiring a consulting firm that specializes in helping new restaurants get their operations off the ground. At a minimum, enlisting a professional who knows how to write a business plan will ensure you've got a good chance of enduring those first tumultuous years.