Why is a restaurant business plan so important?

Because it creates a clear and concise road map of the vision and path to financial success. The restaurant business plan clearly defines your brand, culture, standards, unique characteristics of your restaurant and how you plan to create an emotional connection with your internal and external guests. Moreover, it states why you will be successful given the demographics, competition within the market and location.

The cornerstone of a restaurant business plan is the development of the business pro forma — without one, the concept and business becomes a moving target. Moreover, as an owner you are reacting to financial matters as opposed to planning for them. This is not how you want to run your new business.

Many callers who are planning a new restaurant do not always see the value in developing a restaurant business plan. They believe they have the whole concept and financial model buttoned up in their head, so why waste the time or money? Our response to this is “his is one of the biggest and most fatal mistakes that can be made.

How to Write a Successful Restaurant Business Plan

When we write a restaurant business plan it always it takes the following into account:

• Cover Letter
• Executive Summary
• Company Description
• Industry Analysis
• Menu and Restaurant Operations
• The Target Market
• The Competition
• Marketing Plan & Sales Strategy
• Operations
• Management & Organization
• Long-Term Development & Exit Plan
• Financial Data & Projections
• Appendices

Company Description

Example: Eat at Joes, Inc., a California based company, will operate Eat Here, a single unit, medium-size restaurant serving healthy, contemporary style food. The restaurant will be located at 1234 Broadway Street in Cerritos, California.

Mission Statement
A brief concise statement of why this entity is being formed. It becomes the road map for the development of the concept, as well as maintaining poignant direction in the future.

Development & Status
Includes: type of organization established (Sole Proprietor, LLC, Corporation, etc.), Principles involved with the organization, Business information (number of stock shares, who owns them, equity information, loans and capital available, etc.
Future Plans
What is the future plan for the business: 1st year, 2nd year, etc

Industry Analysis

Although the restaurant industry is very competitive, the lifestyle changes created by modern living continue to fuel its steady growth. More and more people have less time, resources, and ability to cook for themselves. Trends are very important and Eat Here is well positioned for the current interest in lighter, healthier foods at moderate to low prices.

The Restaurant Industry Today
Current conditions of the industry: sales, profits, guest tendencies, etc.
Future Trends & Strategic Opportunities
Information, statistics and “quotable” documentation that describes future trends regarding industry growth and potential.

Menu and Restaurant Operations

Example: Eat Here Restaurant will be offering a menu of food and beverages with a distinctive image. There will be three ways to purchase these products; table service at the restaurant, take-out from the restaurant, and delivery to home or office.

The Menu
Example: The Eat Here menu is moderate sized, and moderate-low priced offering a collection of ethnic and American items with a common theme — healthy (low-fat, low cholesterol, natural ingredients), flavorful, and familiar.

Production
Provide a brief description of the means by which food will be prepared and served � all prepared from scratch? Or all purchased, or somewhere in the middle. What type of talent will be needed to execute to the desired production methodology.

Service
Describe all service styles available:

Future Opportunities
Are there other revenue opportunities that could exist going forward, e.g. catering, adding an additional day part

The Target Market

Example: The market for Eat Here’s products covers a large area of diverse and densely populated groups. Although it will be located in a downtown urban setting, it is an area where people travel to eat out and one that is also frequented by tourists. It is also an area known for and catering to the demographic group we are targeting.

Market Location & Customers
Where is the location, what are the demographics, what sort of businesses are located in the immediate area, what is the daytime/nighttime population within a 3-4 mile radius.

Define the customer base: surrounding population, why people are in the trade area , local, college students, tourists, local business, etc.

Describe the type of customer your brand will attract within the above population profiles: students, foodies, tourists, etc.

Market Trends & The Future
What are the current and future trends, happenings and insights relative to your trade area: population growth, business growth, an expansion of government and/or college facilities, etc.

The Competition

Competitor Profile
How many, and what types of restaurants are in your immediate trade area. What are there profiles (independents, chains, etc.).

Competitive Strategy
How are you going to differentiate yourself from the competition? Design and guest experience.

Marketing Plan & Sales Strategy

Market Penetration

Example: Entry into the market should not be a problem. The store has high visibility with heavy foot traffic all day long. The local residents and students always support new restaurants and the tourists do not have fixed preferences. In addition, $10,000 has been budgeted for a pre-opening advertising and public relations campaign.
Marketing Strategy

How are you going to build awareness, buzz and interest in your restaurant vs. the competition? Outline a brief marketing calendar that described how the plan will be implemented.

Operations

Facilities & Offices
Describe the facility, e.g. ground up, existing building (what is the condition), where are the offices located, etc.

Hours of Operation
Daily hours, plus holidays when the restaurant will be closed.

Employee Training & Education
Example: Employees will be trained not only in their specific operational duties but in the philosophy and applications of our concept. They will receive extensive information from the chef and be kept informed of the latest information on healthy eating.

Systems & Controls
Example: A big emphasis is being placed on extensive research into the quality and integrity of our products. They will constantly be tested for our own high standards of freshness and purity. Food costs and inventory control will be handled by our computer system and checked daily by management.

Food Production
Example: Most food will be prepared on the premises. The kitchen will be designed for high standards of sanitary efficiency and cleaned daily. Food will be made mostly to order and stored in large coolers in the basement.

Delivery & Catering
Example: Food for delivery may be similar to take-out (prepared to order) or it may be prepared earlier and stocked. Catering will be treated as deliveries.

Management and Organization

Key Employees & Principals
Describe the credential and past experience of all principals and key players. Also describe their involvement with the new venture.

Compensation & Incentives
Example: Eat Here will offer competitive wages and salaries to all employees with benefit packages available to key personnel only.

Board of Directors
Who are they, what is their experience, and experience within the industry.
Consultants & Professional Support Resources
Will they be used? If so, who are they, and what are their credentials.

Management to be Added
Example: We are presently searching for a general manager and executive chef. These key employees will be well chosen and given incentives for performance and growth.

Management Structure & Style
Example: John Smith will be the president and chief operating officer. The general manager and chef will report to him. The assistant manager and ous-chef will report to their respective managers, and all other employees will be subordinate to them.

Ownership
Example: John Smith and the stockholders will retain ownership with the possibility of offering stock to key employees if deemed appropriate.
Long-Term Development & Exit Plan
Goals
Example: Eat Here is an restaurant concept that targets a new, growing market. We assume that the market will respond, and grow quickly in the next 5 years. Our goals are to create a reputation of quality, consistency and security (safety of food) that will make us the leader of a new style of dining.

Strategies
Example: Our marketing efforts will be concentrated on take-out and delivery, the areas of most promising growth. As the market changes, new products may be added to maintain sales.

Milestones
Example: After the restaurant opens, we will keep a close eye on sales and profit. If we are on target at the end of year 1, we will look to expand.

Risk Evaluation
Example: With any new venture, there is risk involved. The success of our project hinges on the strength and acceptance of a fairly new market. After year 1, we expect some copycat competition in the form of other independent units. Chain competition will be much later.

Exit Plan
Example: Ideally, Eat Here will expand to five units in the next 10 years. At that time, we will entertain the possibility of a buy-out by a larger restaurant concern or actively seek to sell to a new owner.

Financial Data

Financial Model

This is the process of building a mathematical model designed to represent the performance of the restaurant business with various scenarios of volume to determine returns on investment.

Example: Eat Here will be a hybrid of three highly successful fast-casual concepts that have relatively low labor costs due to the limited food preparation and throughput opportunities that will enable us to maximize productivity.

Capital Budget
Example: The capital budget is the amount of financial resources required for leasehold improvements, outside resources, furniture, fixture, equipment, marketing pre-opening/post opening and operating capital for a designated period of time.

Assumptions
The assumptions page of the financial model specifically defines what you believe/assume will be case on each line item of the capital budget.
Example: Eat Here is an existing restaurant and based on the planned remodel we will not require an architect or a contractor and believe building permits will be under $700.

Sales Projection
Revenue is calculated based on the number of projected guests served on a daily, monthly and annualized basis using the various day parts, items to be sold and all potential revenue streams of the restaurant. As part of the sales projections it is important to know the “per person average” and blended sales for the day.

Hourly Labor
Based on the proposed menu this is the projected amount of AM and PM labor hours required to execute the menu, wash the dishes, maintain cleanliness within the dining room and outside areas of the restaurant.

Pro-Forma
A pro forma is the financial statements are prepared in advance of opening the restaurant The pro forma models the anticipated results of the restaurants sales, with particular emphasis on the projected cash flows, net operating profit, taxes and earnings before interest, taxes deprecation and amortization also known as EBITDA. Within the pro-forma there should be the following four (4) planed financial scenarios: Best, worst, most likely and break even profit and loss statements.

Equipment Cost
This is a detailed listing of all required equipment costs (new or used) that is part of the capital budget.

Unit Level Economics
This is a summary of all revenue, “prime” operating expenses (food, beverage and labor costs) management, payroll taxes, controllable and non controllable expenses, occupancy costs, depreciation and net operating profit that will provide key sales to investment ratios.