This article is a step-by-step guide on how to write a restaurant business plan. We will cover the essential elements of a successful restaurant business plan. Foodservice industry in Canada has created 1.3 million jobs across the country making it the 4th largest private-sector employer in Canada. Restaurant business models could either be franchise or non-franchise. Some of the popular restaurant franchises in Canada include Tim Hortons, Country Style and Second Cup. Non-franchise restaurants in Canada are usually privately owned and offer traditional restaurant services such as dine-in. Both franchise and non-franchise restaurants can adopt any of the 4 types of service delivery mechanisms used in the industry. The 4 types of service delivery for restaurants include Fast Food/Quick Service, Fast Casual, Fine Dining and Casual Dining.
A restaurant business plan lays out the road map for the development and growth of your new or existing restaurant business that you have acquired. In simple terms, it is a written document that is used to describe the goals you have set out to achieve for the restaurant and the steps to be taken to translate those goals into reality. It requires proper planning regardless of the many assurances you have received from friends about how it will be a success or the endless hours you have spent in thinking of the concept. Failure to develop a restaurant business plan is setting the business up for failure. Being in the restaurant industry is as tough as any other business as it has its fair share of highs and lows. However, it holds promise to be the most rewarding business, particularly for those who are excessively passionate about food and hospitality.
“A restaurant business plan is a concise, clear way of conveying to potential investors the work you have already done and of convincing them of your restaurant idea’s viability and profitability”
- Roger Fields, Author of Restaurant Success by the Numbers
Why is a Business Plan Crucial for Restaurants?
One of the many reasons that restaurants go out of business after the first few years of operation is because they had no clear plan from the start. Unforeseen problems and operational expenses will always surface during the course of running the restaurant. The absence of a clear plan to refer to when establishing a restaurant increases the chances of not succeeding in the industry.
A business plan for your establishment is the first thing investors and banks will need to look at to obtain capital for your business. It is used to show proof of the viability of your business concept. Without the start-up capital, it will be difficult to keep the doors to your restaurant open for the foreseeable future, if at all you manage to start operations unless you are funding it from your savings. Even with personal funds, you will need a business plan to help you manage expenses.
“The point of a business plan is to show that you have done your homework. You have to show any potential investor that you have an actual plan, you know what you are talking about, it looks professional, and you are not screwing around”
- Charles Bililies, Owner of Souvla
Elements of a Good Restaurant Business Plan
A restaurant business plan can be likened to a recipe for bringing your concept to reality. You will need ingredients that will go into making it effective in running your business i.e. components of the business plan. All the elements of the business plan are meant to complement each other in supporting your business as a singular unit. Although it is often used internally, it is essential for you to properly write the business plan. It should be structured in a manner that is understandable, logical, and practical to enhance business sustainability in the long run.
Writing a good restaurant business plan is often viewed as a difficult process that takes a lot of work and investment to come up with one that is captivating to the reader. Not to worry, we have outlined everything you need to draw up a successful restaurant business plan.
Cover Page
This element is often overlooked when preparing a business plan regardless of the industry your business is in. Here, you put your logo at the front and center of the cover page in order to make a proper first impression. The business logo is important as it gives investors the first impression of the concept of your restaurant and the ability to be marketed. It also doubles up as a basic test of how professional the business is and the vision you have for the concept.
You don’t have a logo? Try and come up with one and include it on the cover page even if it is not complete to your liking. Other details you could add include the date the business plan was completed, your name, and all relevant business contact information as well as links to your social media handles. This will help in providing more background information about your restaurant for potential investors to perform their due-diligence.
Executive Summary
In formulating a restaurant business plan, it should always begin with an executive summary. It is usually placed immediately after the table of contents. The summary is often a one-page overview of the whole business plan that briefly outlines the rest of the plan components that follow. This section should always be written last after the rest of the sections have been completed.
Information in this section include:
- Plan objectives and project description – your restaurant’s mission and strategic goals as well as the business details that you intend to ‘sell’ to potential investors
- History of the business – business identity, concept, general company information e.g. founding date, place of incorporation, and restaurant category i.e. franchise/non-franchise
- Products and services offered – what your restaurant will serve and how it will offer its services
- Project financing – how you intend to finance the business i.e. own funds, borrowed funds, grants
- Risk assessment and contingency plan – steps to take to ensure the business survives in the foreseeable future
It is important for you to use this section to highlight the above information to get the reader’s interest. Do not put too many words and instead only discuss the key areas about your restaurant. Not many readers of the business plan go past this section. Investors mostly look at the executive summary therefore you need to make it convincing enough to make them read the rest of your business plan.
Business and Industry Overview
This is where you go deeper into describing your restaurant in detail. It should clearly show different aspects of your establishment which potential investors will be interested to know. There are high chances that potential investors have seen lots of restaurant business plans therefore you need to put your best foot forward and seize the chance to get readers to be hyped by your restaurant business plan so that it stands out from the rest.
In this section, you will want to describe the restaurant concept you have for the business. There are 3 things that have to be mentioned here. First, you have to explain the type of service level you are offering. Is it fine dining, fast-casual, fast food, or casual dining? Thereafter you should describe the cuisine you will have on offer. Is it fast food? Breakfast meals? Brunch? Lastly, describe the types of food and drinks, if any, that you will have on sale.
For restaurant start-ups, it will be important for you to demonstrate your industry knowledge and the specific niche that you would like to focus on. To do this, you describe the nature of the foodservice industry. Provide a description of the industry players, the nature of the industry, industry trends, and various demographic, economic, social, and cultural factors that will make your restaurant a success in the industry. Additionally, describe the government regulations that govern your industry and ensure that your business will comply with them fully.
Market Analysis
The market analysis section covers two parts i.e. Target market/niche analysis and competitive analysis. The target market/niche analysis essentially explains the desired customers you would like to appeal to and have them go to your restaurant. Use demographic characteristics such as age, gender, and places of residence of your customers to describe your target/niche market.
Competitive analysis, on the other hand, helps to identify your would-be competitors in the industry who are other restaurant brands within the area where you are located. Competitors are categorized into two, direct and indirect competitors. Direct competitors are those who provide a product and/or service that is similar to yours. Indirect competitors provide a product and/or service that can be used as a substitute to yours in satisfying the same customer needs that your product and/or service caters for. A common misconception among restaurant owners is that everyone will automatically go to your restaurant. There are certain things that make people go or not to go to a restaurant. Therefore, you will need to outline your competitors’ strengths and weaknesses to find out what makes people go to your competitors and what competitors are doing that discourages people from going back to their restaurants. This is important as it enables you to research your competitors and take down everything they do and use that information to explain to your investors why your restaurant will be unique from the others.
Marketing Strategy
A well-written restaurant business plan should include a thorough marketing plan. It describes how you are going to get your target market to visit your restaurant and have them as repeat customers. You should use this section to give a picture of the restaurant’s marketing strategy before you begin operations. Potential investors will want to know how exactly you are going to advertise and promote your restaurant and get it noticed.
In this section, you will need to point out the specific tactics that you intend to use to market your restaurant. In addition to the tactics to be used, describe the channels you will use to advertise the business. A mix of traditional and online/digital marketing channels is effective in getting word about your restaurant out there. Other sections you should include in the marketing strategy are the pricing policy and selling methods you intend to employ as part of attracting and retaining customers in your business.
One important aspect you should include in this section is the customer relations strategy. Customer service has been used as a marketing tactic in enabling customer preferences towards businesses regardless of the industry it is in. Ensuring customer satisfaction should be a key priority for your restaurant as it is a make-or-break moment for the whole business. Outline activities that you will carry out to ensure that customers are happy and enjoy the best of what your restaurant has to offer.
Risks and Significant Opportunities
Businesses identify risks and significant opportunities in their internal and external environment by assessing their strengths, weaknesses, opportunities, and threats. To do this, you need to include a SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis in your restaurant business plan as it helps in identifying internal and external factors that would affect the restaurant in the long run. In order to navigate your business through these factors, you can leverage your strengths to maximize your opportunities and minimize your weaknesses. Moreover, business opportunities identified can be used to overcome the threats facing the restaurant thereby ensuring its survival for a long time.
Location and Assets
One of the biggest challenges faced by to-be restaurant owners is finding the ideal location for their business. Most business plans are drawn way before a site location has been selected thereby limiting analysis of the proposed location to a general area i.e. city or urban center. In such cases, a rule of thumb is to focus on the general area or city you are planning on opening the restaurant and explain why you chose that specific area as the place you put up your business premises.
When choosing the business location, you should ensure that it is in line with your target market. Your analysis should describe the current market conditions that are present in the proposed location selected. Make comparisons between existing market conditions and characteristics of your target market by listing down surrounding neighborhoods, interest points, and businesses in the area. Investors tend to look at this section very carefully to ensure that the proposed location has a market that is clearly connected to the restaurant’s chosen customer profile. Again, just like the target/niche market analysis under market analysis, you should use demographic statistics in presenting the information gathered to describe the attractiveness of the location and justify why your restaurant should be located there. Ensure you include things such as local economic growth, major citywide events and infrastructure projects in the area. You should also include information on the location premises such as the size of the premises (square feet), floor plan, and design.
Assets refer to the equipment, furniture & fixtures and technology, and any other physical aspect of the business that is necessary for operating your business in order to achieve the restaurant’s set goals and objectives. Assets for a restaurant business mostly comprise equipment, furniture & fixtures, and technology. Some of the equipment needed is usually in the kitchen department and includes ovens, grills, coolers, and freezers among others. Examples of furniture and fixtures in restaurants are shelves, cashier counter, tables, and chairs, etc. Technological equipment comprises telecommunication devices such as phones, printers, and fax machines. All assets combined should be sufficient to meet immediate, short-term and long-term operational needs.
Operation Plan
In this section, you should show how the restaurant will operate on a day-to-day basis from the start of operations. Here, you document the systems and controls that you will put in place. A comprehensive operation plan is a key ingredient to the success of the business as it acts as a guide for managers and employees to follow. Franchise restaurants usually have systemized operations that are documented in the franchisor’s operating manual which should be followed to the latter by management and employees alike. For non-franchise restaurants, acknowledging systems and controls that are to be put in place is the first step towards systemizing operations. Afterward, documentation of the systems and controls is done before the start of business operations once the business plan has been finalized.
The operation plan should include information on suppliers, inventory management, operation workflow i.e. restaurant order and delivery processes, distribution strategy i.e. intermediaries and networks as well as logistics i.e. packaging and shipping. Additional information in this area includes other business operations such as accounting and business support services which are often outsourced to 3rd party companies who have the required expertise to handle those operations.
It is also important to include an environmental compliance subsection in this area which explains how your business deals with waste and other environmental issues that are associated with your industry. You should note that banks often have strict requirements when lending to businesses which have an impact on the environment. Developing an environmental code of conduct will help show that your business will comply with relevant environmental legislation requirements applicable to the foodservice industry.
Management and Human Resources
Solid management and human resource plan are equally important as the marketing plan and financing plan. However, hiring employees in the foodservice industry is an uphill task as it is a challenge finding the right people to run your restaurant operations. You should be aware that a restaurant is a labor-intensive intensive business and that your operations team provides the much-needed support to the business and therefore should be treated with respect and be made to feel a part of the restaurant success resulting from their contribution which should never go unappreciated.
For restaurant start-ups, it is essential to set the qualifications you need for each business function which assists in the career development strategy and management succession planning. Briefly describe the job titles, responsibilities, and skills/qualifications for each function that will help establish criteria for recruitment and promotion. To sum it up, you should give a brief overview of the team you want to put together. You will also want to demonstrate the relevant work experience you have gained over the years in your career that has provided you will the necessary skillset to operate a successful restaurant.
Most importantly, this section should include information on the number of employees needed for the whole company operations, shareholding & management, and policies & procedures of the restaurant. Under policies & procedures, you should describe hours of operation on a weekly basis, vacation program for employees, training, and development for new and existing employees, remuneration & benefits due to employees, and Health & Safety guidelines and policies to be followed at the workplace for the well-being of employees as they carry out their duties.
Financial Plan
This is the final part of the restaurant business plan. It is the most important component for securing investors and loans from banking institutions. Investors could skip directly to this section right after the executive summary no matter how reasonable the rest of the business plan is. At the end of the day, the business narrows down to its ability to generate revenue.
When you ask investors and banks for money to fund your business venture, they will want to know exactly where their money is going and in what way it is being spent. A key aspect to keep in mind here is that it has to be realistic. Therefore, you will want to seek the services of a professional business plan writer with a financial background or an accountant with a wealth of experience in the industry and a strong background in restaurant finances. This will ensure that the financial information presented to investors and banks is highly accurate and informative.
First things first, you will have to provide some financial information to the person preparing your financial projections for the first 5 years of operation. This information entails the sources of funds that you intend to raise to finance the start-up phase of your restaurant business. Are your sources of funds personal savings or borrowed capital? How much do you intend to raise from your own pocket? How much money do you plan on borrowing? Once you provide that information, the professional hired will do the rest.
In preparing the financial plan, you should include information about your revenue model i.e. how you intend to generate income from your business, a financing plan that outlines the sources and amount of capital you intend to use in covering the start-up costs, and the financial projections for a 5 year period which are broken down according to months and years. Outputs of the financial plan include the income statement, balance sheet, and cash flow statement. Make sure to include tables, charts, and graphs to clearly illustrate the financial projections as well as sales forecasts (revenue), start-up costs i.e. expenses, gross profit, and net income.
Appendix
If you feel that there are other important components of the business plan that do not fit in other sections of the plan, then this is the section for that. The contents in this area are optional although it could be used to put additional information such as charts, plans, imagery, graphics, and all other materials that investors might find useful.
In particular, restaurants could use this section to add a sample menu for their foodservice business. Your menu is the core of the business plan. It forms one of the main representations of your restaurant brand. Apart from brand representation, it informs the kitchen and bar designs and adequate costing of your menu items based on a detailed cost analysis to show viability and profitability of concept from the investor’s point of view. In preparing your menu items, you should be guided by ingredient availability. Your sample menu should comprise of a simple item list with appropriate pricing. As for the design, do not go for those whose ingredients are difficult to source or require complex preparation techniques. The menu should be balanced between cold/hot and heavy/light dishes.
Other information that can be included in the appendix is floor plans, additional financial charts, and design mockups.
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