How to Start a Restaurant 09 : Writing a Restaurant Business Plan

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How to Start a Restaurant 09 : Writing a Restaurant Business Plan

First of all you should feel pretty damn good about yourselves! You have decided to go after your dreams and you have accomplished so much all ready in the first two units of “How to Start a Restaurant” You are killing it! We have covered things like “where should you open your restaurant” and “creating your restaurants unique selling point.” With these lessons under your belt it is now time to discuss writing your very first Restaurant Business Plan. This restaurant business plan will serve as a guide for your new restaurant business.

If you are a fan of RestaurantMastering.com you may have already started to put together some of the things you are going to need to write your plan. As an aspiring restaurant owner your business plan is going to be one of the most important parts of your business. Specially if you are going to be looking for funding from a bank, investors, or partners. It serves as your road map and lets them know you have a plan for your restaurant. As the restaurant owner you are going to have to project 3 to 5 years into the future to write this business plan.

A good restaurant business plan will let you step back and look at your business objectively. You may see things that you didn’t see at first that will help you succeed in the future. The U.S. Small Business Administration has a great business plan tool along with other great resources if you are still early on in your entrepreneurial journey.

Why write a business plan?

If the thought of writing a business plan seems a bit overwhelming your not alone! When I went to start my first restaurant I remember feeling that way. I was thinking holy crap this is a lot, and I don’t know what I am doing. I was thinking just give me the money I won’t fail. A lot of new entrepreneurs skip the business plan until or unless they need a bank loan or are starting to approach investors

The first real business I tried to start was an indoor water park. The first thing the bank said to me when I went to apply for a loan was do you have a business plan? My answer to them was “No should I?” Yes I actually said that. I was young, roughly 25 years old at the time. I was working for an architectural firm and thought that might be enough. I was planning on doing the architectural drawings which I thought would count as my collateral to get the loan. I am surprised I wasn’t laughed out of the bank. Instead the loan officer pointed me to someone that could help me write a business plan. I just new that if the bank would of given me a chance I wouldn’t of failed. It ended up that never took off but I learned a lot.

As a restaurant owner your restaurant business plan is going to be more than just something you use to try and get funding. Your business plan is going to be something you can use to guide you through step by step. It will help you set goals for your business and you will have a laid out plan on how you are going to get there. Your business plan will help you hold yourself accountable by creating projected growth numbers.

I remember when I was writing my business plan for my restaurant I learned how much I was going to have to sell just to break even. It will give you a deeper understanding of your business as well. Be realistic with your numbers and your goals. Once I did my projections I decided against one loan type and went with another option that I new I was going to be able to afford. You will be able to see things like this once it is completed.

As a future restaurant owner it is exciting to see your idea start to come together on paper. You know your going to succeed rather than just thinking your going to succeed. By doing the projections for your new restaurant you are going to be able to find parts of your business you may not of realized before that are going to need a little more attention.

Ready, Set, Start Your Restaurants Business Plan

Everyone is going to write their business plan at a different pace but don’t expect to get it all written in one setting. It more than likely will take a few weeks to write a good thought out plan. The more thought and time you put into it the better your plan is going to be.

Every entrepreneur that is opening up a business should have a business plan. Below I brake the it down into different sections. Each section has a brief description of what you should include and a list of questions to help you write that section.

1. Executive Summary

The executive summary is the very first thing that someone is going to read but it is the last thing that should be written. It is what summarizes your entire plan. This is a very important part of your plan. This needs to keep your readers attention so they want to stay and read what your idea is all about and how you plan on going from point A to point B.

Below is some questions that if you answer should help you write this section remember to write it after you have written everything else.

The first paragraph should cover things like :

  • Name of Business
  • Location
  • The service or product you are going to sell
  • The purpose of your plan.

The second paragraph you will want to cover things like :

  • Experience in the industry,
  • Experience of a few of your main managers you are planning on hiring
  • Why you are planning on becoming a restaurant owner
  • What kind of food are you planning on specializing in
  • Where your restaurant fits in with the rest of the community and restaurants around your community.
  • Goals and growth if you are planning on expanding to become a franchise put that in there. Let them know you are serious about becoming a restaurant owner.
  • How you are different than the rest of your competition in your community. Unique selling point
  • If you are trying to obtain funding with your plan be sure to put financials in your summary. You will want to put how much cash you have to invest and how much you are looking to barrow. You will also want to cover the cost of your restaurant and your profit expectations. You will want to be persuasive so they want to invest in your business, and so they want to keep reading.

How long should your executive summary be?

If you search online you are going to find that there are a lot of difference of opinions from the experts on this.

Best length for an executive summary - keep it to a page. You cover a lot of information in your plan so they will see the specifics later. Don’t explain every little aspect of your business in the summary.

2. Company Description

A company description is exactly what is sounds like it is a description of your company. This section comes right after your executive summary. This is going to be the shortest section in your plan but it is by far the least important.

This section is where you get to introduce yourself and present the where, when, why and who. Think about the most important characteristics about yourself that is going to make your restaurant a success. Think about what you want the reader who has never met you before to walk away with. This is where you can introduce your team that you are planning on bringing on board. Explain who you are as the founder, how you being apart of this restaurant is going to make it different than any other restaurant that serves what you serve, what is the unique selling point of your restaurant, and why you want to become a restaurant owner.

If you have worked on an “elevator pitch” this is where you can work it into your plan keep it simple and sweet. Listed below are some ideas on what you can include in the next few paragraphs.

  • Company Overview
  • Company History
  • Ownership and Legal Structure
  • Founding date
  • Location and any interesting facts about the area
  • Mission Statement
  • How do you fit in with the community and the rest of the business
  • Type of restaurant
  • Are you only going to cater events
  • What kind of experience do you bring with you.
  • What makes you the advantage over other restaurants
  • Is there a need for your restaurant

Some of the information we covered in the first few lessons of “How to Start a Restaurant” will help you in this section. Next weeks lesson on Setting Realistic Goals for your Restaurant will help with this part of your plan as well.

3. Market Analysis

The market analysis is one of the most important parts of any business plan. Every new startup should have a business plan even if they don’t need any funding from a bank. It gives you a clear idea business.

If you are going to be approaching banks, or investors they are going to want to see a market analysis so they can see if the restaurant is going to be successful in the area you are proposing you open.

The very first 2 lessons 1 Where Should you Open your Restaurant and 1a Feasability Study podcast transcript booth will help you write this section of your business plan. I also did a interview on my podcast with a real nice lady from the small business development center in Michigan on this topic as well. Check out all three of those resources before writing this section.

By doing a good market analysis you are going to get to know your potential customers needs and wants, your competitions vulnerabilities, and be able to establish competitive pricing. This section will help you create projections based on numbers rather than just guessing. Don’t forget to list any regulations you will need to follow in this section as well. You will be identifying your target market and be looking at local trends in the restaurant industry.

Here a few questions that should help you write this part of your plan.

  • Why did you get into the industry
  • What types of restaurants are within a 1, 3 and 5 mile radius
  • Your chances of success
  • Identify potential customers
  • Competitors vulnerabilities
  • Establish competitive pricing
  • Your Growth Projections
  • How big is the restaurant industry
  • What kind of growth has the restaurant industry seen in the last 5 years
  • Who’s your restaurant going to serve?
  • Who’s in your target market?
  • How often does your target market order or go out for dinner?
  • What are their characteristics?
  • Where is your target market?
  • What percentage of the market can you realistically expect to take.
  • What type of advertising do your local competitors use, look at their strengths and weaknesses?
  • Are their any secondary competitors you’ll be up against (example : if you are a pizza shop are there party stores selling pizzas, bars, are there other restaurants such as a wings and things?)
  • Local ordinances such as but not limited to sign regulations, parking regulations, is live music aloud, and outdoor seating regulations
  • Will you give discounts to anyone if so how much and when?
  • How are you going to determine the price of your food? Looking at others in your industry is a start but the best way to do it is by doing food cost analysis of your menu. If you use a big company like Sysco as you food distributor they will do this for you for free.
  • Don’t forget to include obstacles that lay in your way and how you plan on over coming them.   

4. Organization and Management

This section usually comes right after the market analysis. Not all business plans are the same though it is okay to be different. This is the section where you will let the reader know how your business is organized and describe you and your crews qualifications and education. This lets them know who will be responsible for what task. If this is a partnership you will want to include things about how it is going to work. Make sure to include the hierarchy of your business and how profits are going to be split. Even if you and your partner have already discussed this it shows that you haven’t left any part of your business to chance. It is always good to have things like this written down as well so you and your partner are on the same page. Include things like what should happen if you and your partner are to split up.

Here are some questions that if you answer them may help you write this section.

  • Name
  • Business organization couple examples LLC or S Corp
  • Partnership or Sole proprietorship
  • Have you or any one involved ever owned their own business before?
  • If it is a partnership who holds a majority of the business?
  • How are profits distributed?
  • Who gets what days off if it is a partnership this could be important trust me
  • Who is expected to do what?
  • Past employment of you and everyone else involved
  • Skills you and your team have that will benefit the business.
  • Awards
  • Duties of you and all the key players in your kitchen
  • Having a Resume of you are your partner and managers will help you with this section. It isn’t a bad idea to include them in this section
  • What happens if you and your business partner spilt up?           

5. Services and Products

In this section you are going to describe your items on your menu and how they differ from the competition. It is not necessary to list your recipes but what items you plan on having on your menu is a good idea. You want to keep them interested in your product so think of all the unique characteristics of your business.

I have a story when I was recently looking back at my research I was doing before opening up my first pizzeria I had written down I wanted a wide variety of pizzas. I wrote, this way I will have a pizza for everyone. If they don’t like my sauce well maybe they will like a pizza that has basil pesto sauce on it instead. One pizza I had written down that I wanted was a BBQ shrimp pizza and it is on the menu. Not the most popular pizza but non-the-less it does get ordered on occasion.

Here are some questions that will help you write this section.

  • Where do you get your ingredients?
  • What makes your product different from the competition?
  • Are you going to offer delivery?
  • Do you offer catering? If so do you have any catering orders already lined up?
  • Are you going to be mobile?
  • How much your product is going to cost.?
  • Why are people going to come to your restaurant?
  • Any copyrighted recipes you may own should be mentioned.
  • Anything you have trademarked should be mentioned.
  • What are your thoughts of expanding to possibly a food truck in the future or opening up more restaurants.

6. Marketing and Sales

The marketing and sales section is next you’ll find that this section is important if you want to be a successful restaurant owner. Lots of restaurants have amazing food, amazing customer service, and a fantastic unique selling point. As a new restaurant you want to have a plan of how you plan on marketing your restaurant. You are going to need a solid marketing plan. You will get a marketing plan template if you purchase my Restaurant Growth Kit. It is the same marketing plan I use. Sign up for my newsletter and you will get 6 solid marketing tips.

As a restaurant owner you should think of marketing as people getting to know, like and trust you and your food enough to purchase. Soon they will become a raving fan of your restaurant. It all starts with the minute they walk through your front door.

See also Creating a Creating Fans of your Restaurant.

In this section you will want to focus on how you plan on getting your customers through your front door. At first everyone will want to try your food once the word is out there is a new restaurant in town. Getting the word out is the hard part. You’ll want to break this section into 2 areas one will be the marketing section and than the sales section.

Below are some questions you can ask yourself to try and get this section written. Hang in there your getting closer to having this thing all written.

Marketing Section

  • Are you going to pass out free samples? This is a great idea a lot of franchises use this method.
  • Send out press releases letting them know you are opening.
  • Are you going to use Social Media?
  • Are you going to use Google Adwords?
  • Special Nights example kids eat free on Tuesdays, or 2 for Tuesdays.
  • How do you plan on getting customers to return?
  • How do you plan on turning your one time customers into raving fans that come back 2 to 3 times a week?
  • Make sure you put together a marketing budget. How much you plan on spending on marketing each month.
  • Follow your plan consistency is a big factor. Don’t just try one thing than another than another.
  • How are you going to compete with other restaurants and food trucks?

Sales Section

  • How many sales are you going to have to make to break even? I have a great worksheet that covers this in the Restaurant Startup Kit.
  • How many sales are you going to have to make to keep the lights on?
  • How many sales will you need per day?
  • How many sales will you need per week?
  • What are you basing your sales on?
  • What is the average ticket price you are going to be aiming for? My average ticket price I set out to get from the very beginning was 20 dollars. My average ticket price is starting to creep up towards 25 dollars now.

7. Funding

Making sure you have enough capital to get your dream up off the ground is essential. This section is where you are going to want to include how much funding you are going to be requesting from investors or banks. Some restaurant owners don’t want to borrow money so they boot strap everything. This is what I did. This is the reason a lot of restaurants fail they don’t have the funding they need to be successful. I was lucky. I had a lot of knowledge of the industry and I did all most all the remodeling myself.

If you are going to be looking for funding these questions below will help you write this section.

  • How much are you planning on investing?
  •  How much money are you looking to barrow? Are you willing to give up any percentage of your business? I don’t recommend this.
  • What kind of terms are you looking for?
  • Give them a break down of all the cost so they can see how you got to the final dollar amount. Don’t forget to include things like signs, kitchen equipment, and all the small wares.

8. Financial Projections

Financial projections have always been one of the hardest things for me. There is a lot of guess work that goes into these especially if you have never owned a restaurant before.

I went back and looked at some of my projections I made when I started and compared them to actual numbers I have now. My projections weren’t even close to what I thought they were going to be. Some things were way over and others were way under. Things like that are going to happen when you are starting out on your entrepreneurial journey.

As a new restaurant owner you need to just try to make the best guesses you can. Make sure you use reasonable sense when making these projections so people don’t think you don’t know what you are talking about. Don’t try to sway the numbers in your favor. Chances are the person reading your plan has been doing this a long time and probably knows better than you do at what kind of sales you are going to have your first few months open.

Below are some questions that will help you write this section.

  • How much do you anticipate your utilities being?
  • How much do you anticipate payroll being?
  • How much do you anticipate insurance being?

You may find this article interesting as well Research Restaurant Insurance

  • What are your projections for the first month, quarter and yearly sales?
  • Once you have done these projections what do you anticipate your sales being in the next 4 years. How did you come up with these numbers?
  • If you already have a business that is similar to the restaurant you are opening you may need to include those numbers as well so they see how you are coming up with your projections.

9.  Appendix

Not everyone uses the appendix section but this is a good place to include your most important documents so you can present them to investors easily. Below are some things that may be included in your appendix.

  • Things you have had trademarked. For instance I trademarked my tag line the first day we were open. I envisioned my restaurant expanding eventually and wanted to make sure this was covered.
  • Anything you may have copyrighted.
  • Any catering contracts that you have for the next year.
  • Any leasing documents which you shouldn’t of signed yet if you are still in this phase.

Wrap it up!

You did it! Pat yourself on the back. Do you know how many people want to own their own restaurant but never do? A lot of people skip this phase of the journey and hope for the best. You have just written out possibly your first business plan.

Go over your plan a few times before you turn it in. Make sure everything is spelled right.  Make sure if you used a template that you inserted your name in the correct area. You wouldn’t believe how many people forget that and turn it in and on the front page it says put your name here instead of having their restaurants name there.

If you have any questions about writing your plan or anything that has to do with the restaurant industry feel free to use the contact page and send me a quick email. I will get back to you and if I don’t know the answer I will do my best to find that answer for you.

            

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