What's the Purpose of a Business Plan?
A business plan provides business owners, stakeholders, investors, and leaders with an organized plan for how you will make your vision for your new restaurant a reality, making sure that nothing is overlooked as you grow your business. When you're in the weeds with construction, licensing, staffing and other operational stressors, your business plan will act as a roadmap and help you stay focused. Going forward without one can make the messy world of restaurant opening much tougher to navigate.
Restaurant business plans are also crucial for securing potential investors. In most cases, opening a new restaurant requires attracting some outside capital from hospitality investors or people who want to be your silent partners. Before they invest in your dream, they need to buy into your vision. The business plan shows them that you’ve thought through every expense and every possible scenario: It provides them with a complete description of your plan – and why and how it will succeed.
Key Elements of a Restaurant Business Plan
The executive summary is the first section included in any business plan. It both introduces and summarizes your entire idea. This section should introduce the key elements of what will be discussed throughout the business plan. It should catch the reader's attention and entice them to explore the rest of the plan.
An executive summary includes things like a mission statement, proposed concept, how you will execute on the plan, overview of potential costs, and the anticipated return on investment. This is also a great place to discuss your business’s core values.
In this section, begin to explain the high-level elements of the proposed business. The company overview introduces information about the ownership structure, location, and business concept. Outline the vision for the customer's experience. Describe the brand. Identify the service style, design, layout, theme, and all the unique aspects of your restaurant.
Describe the existing conditions in the market sector that your restaurant will exist in, as well as in the specific location or area that you plan to open the restaurant.
This section should cover things like the growth of the local economy and industry, existing restaurants in the area, ongoing or upcoming infrastructure projects, nearby business and residential areas, and average foot and car traffic counts in the area.
1. Target Market
The restaurant industry is an extremely competitive landscape and finding your niche is crucial. What will make your restaurant stand out?
You should have a strong idea of who your restaurant will attract and who you hope will become your repeat customers. Describe the target market and how it compares to the restaurant industry as a whole in terms of diner demographics, characteristics, and behaviors.
2. Location Analysis
In most cases, aspiring restaurant owners don’t have a specific location selected before they create and pitch the business plan, so focus on the general area or city you plan to open the restaurant and why you chose that specific area.
Be sure to include things like growth of the local economy, major citywide events, and infrastructure projects nearby. Compare the existing market conditions to your intended target market. Potential restaurant investors will look at this section of the business plan carefully to make sure that the market in the proposed location aligns with the ideal customer profile.
3. Competitive Analysis
What other businesses are in the proposed area?
This section should explain the existing competitive landscape: Share the number of other restaurants in the area, paying particular attention to restaurants with similar concepts. Investors will want to understand what can make customers choose your restaurant over your competitors.
The marketing section explains your marketing strategy and how you plan to promote the restaurant both before and after opening.
Identify specific tactics you will rely on before and after the restaurant is operational. Perhaps you will rely more on public relations and advertising before the restaurant opens and then pivot to social media, loyalty programs, building a customer database, and four-wall restaurant marketing once the business is operational.
In this section, you should paint a picture of how the restaurant will operate day-to-day once it’s open. Include in this section:
Staffing: What positions will you need and how many people do you expect in each of the different roles? How will you set yourself apart as a great employer? What will the approximate pay be for each position? How do you plan to recruit staff and what are the hiring criteria for each role?
Customer service policies and procedures: How do you expect to provide an excellent and consistent guest experience? What are the specific service values, policies, and procedures you will put in place and how will they be enforced or encouraged?
Restaurant point of sale and other systems like payroll: How will you track sales and inventory, manage labor, control cash, process payroll, and accept various tender types?
The financial analysis is often one of the last parts of a business plan. Investors expect to see a breakdown of how you plan to spend their money in the first year, as well as a comparison of the anticipated costs and projected revenue. There are a few major elements you should be sure to include in this section.
1. Investment Plan
In this section, you explain the initial investment you’re hoping to receive and how you plan to spend the money in the first year. This will usually include kitchen equipment, furniture, payroll, legal fees, marketing, and some working capital.
2. Projected Profit and Loss (P&L) Statement
The business plan is created long before the restaurant actually opens, so creating this profit and loss statement will require you to make some educated guesses. You’ll have to estimate the various costs and sales numbers included in a P&L based on the size of the restaurant, your target market, and the existing market in the area you’ve selected. You can use this interactive P&L template and guide to learn more about profit and loss statements and to create one for your future restaurant.
3. Break-Even Analysis
This one is pretty straightforward. Investors will want to know how much revenue you will need to bring in each month in order to break even once all of the various overhead and operational costs are factored into the equation. There are always going to be some variable costs, so make a note of what you expect those to be in your analysis.
4. Expected Cash Flow
Your expected cash flow will depend on how often you expect to purchase inventory, the size of your staff and payroll, and the payroll schedule. Once your restaurant is operational, some months will be better than others. The cash flow analysis should help investors understand that, based on your expectations, your restaurant will be able to support itself even in the less fruitful months without requiring additional investments.
If all of this sounds a little overwhelming, don't worry – check out our free restaurant business plan template below.