Restaurant Business Plan: 12 Key Elements You Need to Succeed
Last update: 31 October 2023 at 02:51 pm
Are you planning to open a restaurant but aren’t sure where to start? Write a restaurant business plan!
This is because, no matter how many hours of effort you add into researching the industry or conceptualizing the idea, without an adequate business plan in place, your restaurant is bound to fail.
After all, who would know better than you – managing restaurant operations is as challenging as rustling up lip-smacking food.
Even research conducted by Professor Dr HG Parsa states that 59% of hospitality facilities fail within the first three years of being launched due to improper business planning. The highest level of failure happens in the first year at 26%, followed by 19% and 14% in the following two years.
By creating relevant business plans, you can enable your restaurant to be on the right side of the statistic.
The importance of a restaurant business plan
Many new restaurant entrepreneurs tend to skip creating business plans because of how challenging and time-consuming it can be. But, your toil in creating one can prove beneficial. Here is how –
A business plan acts as a guide
Your restaurant business plan will act as a map that navigates you towards the success of your restaurant. For instance, it allows you to identify how your business is unique from the rest of your competitors.
A typical business plan comprises vital information such as market analysis, financial analysis, design, and so on. Thereby, it can also be used to unveil any problems before you even start your restaurant.
Remember, when things go south, or you end up facing problems while running the restaurant, you can use your plan to help find appropriate solutions.
A well-crafted restaurant business plan not only outlines the overall vision and strategy but also includes the establishment of clear and relevant Key Performance Indicators (KPIs). Setting KPIs within the business plan ensures that the restaurant’s objectives are specific, measurable, and achievable, providing a roadmap for tracking progress, making informed decisions, and ultimately achieving the defined goals. KPIs for restaurants encompass metrics such as customer retention rates, average check size, table turnover, and inventory turnover, which are essential for assessing and optimizing the business’s performance
Proves crucial for your investors
Besides helping you navigate each stage of launching and running the business, a well-designed business plan can help entice new potential investors.
After all, no one in his/her right mind would want to invest in a business that does not have a detailed business plan – showcasing the many merits of the investment.
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How to create a restaurant business plan
Your restaurant business plan should begin with an executive summary that offers an introduction to not only your business plan but also a summary of the entire business idea.
The notion behind an executive summary is to entice the reader (investor, to be precise) into your business plan.
Here is a list of prevailing elements that should be a part of your executive summary –
- Proposed concept
- Mission statement
- Potential cost’s brief information
- Expected ROIs
The executive summary is one of the key elements in attracting investors to fund your project. Instead of reading the entire business plan, your investors can just comb through the summary to find relevant details about your business.
This is the part where you fully introduce your restaurant business.
It is best to start with the name of your restaurant, its location, contact details, and other relevant information. Also, don’t forget to include the owner’s details and the experience.
The second part of the company description outlines the legal standing and the restaurant’s short and long-term goals. You can include a brief market research that displays your understanding of the restaurant news and trends and states why your restaurant might succeed in this market.
The market analysis section of your restaurant business plan comprises three parts, including –
· Industry analysis – This is where you understand your target market, the demographics you wish to cater your services to, etc. Industry analysis helps you to explain your target audience to potential investors and even summarize why you believe the target market might choose your restaurant.
· Competitor analysis – No matter how unique you think your restaurant will be, there are bound to be similar competitors in the market. With competition analysis, you can determine your competitors and their existing customers in the area you wish to serve. Note down everything from their menu to price, working hours, restaurant design, and so on. This way, you will have an idea of how to actually make the restaurant unique and explain the same to investors.
· Marketing analysis – Your investors will want to know how you plan to market your restaurant. Marketing analysis will help you determine which channels – whether traditional or digital; you can rely on to reach a potential customer base. What offers do you wish to offer? How your marketing campaigns will differ? Ensure to list everything.
Without a relevant menu, you cannot let potential customers know what delicious food your restaurant will offer them.
At this point, you probably won’t have a final list, but try creating a mock-up just for the sake of the restaurant business plan template.
Also, don’t forget to make this sample menu graphically appealing. By that, we mean to add a logo and choose a design for the menu that you actually envision. Seek a graphic design agency in creating one that looks professional and in sync with your restaurant’s theme.
The key element of this sample menu design should be the pricing. Ensure that your prices reflect the cost analysis you must have done for your investors, thereby giving the investors better insight into the restaurant’s price point.
Under the company section of the restaurant business plan, make sure that you include information about the general manager, waiting staff, chefs, bus boys, etc., you wish to employ. Perhaps a brief overview and description of everyone in the management team.
Even though the investors won’t expect you to have an entire team selected, they will expect at least a couple of people onboard. Highlight the combined work experience of your chosen staff on the business plan, thereby letting the investors know what you are bringing to the table.
Your diner’s location should be directly proportional to your target market. Even though you have a specific location in your mind, having a few to choose from won’t hurt anyone.
Besides offering a brief description of each of these locations to the investors, try including as much information as possible detailing why it would be perfect for launching a successful restaurant. From typical diner demographics to square footage, mention everything in the location analysis.
This is exactly where you will want to show off your great idea, creativity, and thoughts to the investors.
Don’t worry if you don’t have a professional restaurant concept or mock-up rendered yet. You can create a mood board to convey your vision easily. Perhaps scan Pinterest to find pictures that match the aesthetics you are aiming for.
Also, ensure that you include kitchen equipment and restaurant software – things beyond the aesthetics – in the mood board or rendered mock-up of the diner.
This section heavily relates to the market analysis portion of the restaurant business plan. You need to go into detail about the micro and macro conditions of the area you wish to set up your restaurant.
For instance, if the economic conditions are making it difficult to open a restaurant, capture how you aim to counteract it and meet the dining habits of the people in that area.
Conduct a competitive analysis to determine all the direct competitors in the area. Then work on building strategies that will boost cash flow, repeat customers, and pro forma profit of your restaurant.
Marketing and publicity – online and offline strategies
With numerous restaurants opening on every street, investors nowadays wish to know how you will get the word of your restaurant out and about.
Your marketing and publicity section must go in-depth on how you plan to market your restaurant before and after it is open to the public.
Your restaurant’s advertising mix will be determined by your company objectives. Whether you’re just starting, want to rebrand, or want to establish yourself as the go-to spot for a specific sort of cuisine, a strong marketing campaign may help you achieve your goals. Restaurant advertising has always attempted to arouse the senses by emphasizing the […]
If you wish to open a restaurant that deals with delivery services or has no/limited seating, the internet will be your chief area to market the business.
You will need to outline both seed and ongoing budget for your marketing operations across your restaurant’s google ads, website, restaurant social media, loyalty programs, email marketing, and so on.
You will need to showcase that your website is completely worked out – in terms of operations and cost (you won’t be asked for a completed website). Demonstrate that your website will be made to match the durability and sophistication level that best suits your market size. Also, ensure to specify which online payment you wish to employ and the reason to do so.
Even if you wish to open a brick-and-mortar restaurant that relies on walk-ins to improve foot traffic, a website can help take online bookings, thereby boosting profits. Just ensure the website is based on the strategy that makes the right sense for your restaurant business.
Having a relevant traditional marketing strategy in place matters, too. In fact, the combination of both online and offline marketing can help gain a competitive advantage.
With offline marketing focus on restaurant branding, planning and budgeting for –
- Direct mail
- Billboard advertisements
- Partnership with influencers and bloggers
- Newspaper/TV/Magazine advertisement
- Restaurant public relations
While it isn’t necessary to be specific about any planned creative content, you can definitely keep forward any good idea that you have that suits your restaurant business seamlessly. Remember not to overdo it; after all, your restaurant business is more than just marketing.
The financial section is by far the most important part of your restaurant business plan. It is best if you seek a professional’s assistance for financial projections. For instance, a trained accountant can help you get the financial estimates in order, provide detailed cost analysis and offer a real insight into owning a restaurant business.
Ensure to have some necessary information ready to make things easy for your accountant. Perhaps scan your restaurant CRM to retrieve relevant details that your accountant might ask, such as –
- Seating details (number of seats in the restaurant)
- Average profits per table
- Number of guests you plan on seating everyday
Your accountant might also need a rough estimation of food costs for various menu items to determine the profit margin per dish. You can use free food cost calculator to determine this information.
The business structure needs to be both short and sweet. Demonstrate which business structure you have set up for your business and why did you specifically choose it.
It is best to work with an attorney to determine a relevant business structure for your restaurant. He/she will prove to be a great resource of valid information and knowledge. He/she can review the restaurant business plans for you and even provide experienced outside perspectives other than just legal insight into the matters.
At last, you will require to summarize your restaurant business plan. A SWOT chart can help do so effectively and easily.
SWOT stands for strengths, weaknesses, opportunities, and threats. Add 3 to 5 bullet points in each section for an added impact.
Tips for creating an effective SWOT analysis document –
· Strengths – List all the best parts of your proposed restaurant business. Include strengths you think are best to add to the list. However, ensure to include a few positive mentions of your location, cuisine, projected growth and venue.
· Weaknesses – You might think including weaknesses in your restaurant business plan template can backfire. Well, you are mistaken. There are times when it pays to be honest. Ensure to mention major problems you are or might face due to the planned set-up. Remember to present them positively and as a key area that can be developed down the line.
· Opportunities – Consider looking at the future of your business. Do you notice any advantages it can come across down the line? Will your business be able to fill any holes in the local markets? What trends can your business ride?
· Threats – This is the place to tackle any potential criticism of the business plan. Demonstrate that you gauged all the risks involved in the process. Mention the risks and briefly state how you wish to manage them properly.
Towards the conclusion, thank your reader for following your argument line until the end of the business plan. If you have a single huge point about your business – other than the unique selling points for your restaurant – that you wish to mention, this is where you need to.
Whatever the case, be sure to include a recap of your crucial benefits.
Focusing on the above-mentioned components will help you create an effective restaurant business plan that yields you many benefits as per your service style. However, ensure to invest in some professional graphic design when designing the final document. Why? Because it will give your document a necessary professional feel, especially if you intend to share the document with your investors.
Keep in mind showmanship is a part of great management in the restaurant industry. Why not begin with your restaurant’s business plan itself?