How to Write a Restaurant Business Plan

A good restaurant business plan is vital to opening a new restaurant
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Many people dream of opening a restaurant and see 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 shop after just a few years.

One reason for the high failure rate in this industry is that restaurant owners fail to treat their restaurant operation as a business from the very beginning. They have no plan to deal with problems and unexpected expenses and don't understand the scope of the cost 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 accomplish two things:

  • Showing the bank you have a clear plan for getting your restaurant up and running.
  • Developing a contingency plan to handle problems.

What a Plan Can Do for You

In structure, a restaurant business plan needs to be like most business plans, but the details need to address the specifics of your vision for a restaurant and how it fills a void in your local market.

Using the same general components of a standard business plan, see how you can gear it specifically to the restaurant industry and how you fit into that industry:

1. Executive Summary. This overview needs to introduce your entire business plan with a couple of key broad strokes: What niche will you fill in the local dining market, and what role will you play?

  • Make it clear to the reader (a potential investor) what kind of restaurant you will be. From fast casual to sports bars to fine dining to ethnic cuisine and many more options, 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.
  • Also make it clear to the reader what your role will be. Restaurants are multilayered businesses, and one person trying to build a menu, cook the food, and run the business operation will be overwhelmed. If you're an experienced chef with a plan for a fine dining restaurant, then make it clear to readers that your primary role will be in the kitchen and that you're hiring experienced professionals to handle other key roles.

2. Company Description. This is a business analysis, and it is where you get into more detail. Sticking with the fine-dining example, what about your market research tells you that you'll be bringing something unique to the market. What sets your idea apart from other fine-dining options in the area? Will the population base support another fine-dining establishment? What kind of ingredients will you be using, and how will that impact your pricing? How will your pricing compare to competitors?

3. Market Analysis. 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 component:

  • Industry. Who are you going to 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 touched on it in your company description, but this is where you really 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 dig deeper in this section. Loyal customers at established area restaurants aren't likely to change their dining habits unless your menu or 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 food and the menu, someone with experience promoting and marketing restaurants needs to be in charge and have a plan. Let investors know you've brought someone on board for that purpose, that they are experts on the local food scene, and explain their marketing plan.

4. Business Operation. Sometimes referred to as Products and Services. 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 close 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. This is where you would explain to investors that you've hired a consultant who specializes in negotiating the purchasing of liquor licenses to handle that aspect of your business.

5. Management and Ownership. Who is going to helm the ship? Again, following the example of the owner focusing on duties as the executive chef, who else will be part of the management team? How will the hierarchy be structured? For example, will there be a single general manager who reports to you with other managers—dining room, bar, business, etc.—reporting to her? Or, will everyone report to you equally? The structure you choose is less important than actually choosing a structure that works for you and making it clear to investors that you do have a plan and understand how it will function effectively.

Outside Help

Many people opening a restaurant are not always experienced business professionals, so it often is a good idea to seek out a business partner with requisite experience or to hire a consulting firm that specializes in helping new restaurants get their operations off the ground and running. At minimum, it often is a good idea to hire a professional to assist with designing a business plan.