- To create a successful business plan for a new restaurant, you first need to know what your concept will be, then study and learn from existing concepts that are thriving.
- Your business plan should start with an Executive Summary that boils down the plan to its essence so bankers and investors can understand it.
By Tom Wilscam
The process of opening a restaurant from start to finish can be, and should be, an arduous one. It requires a tremendous amount of research and determination, and it can easily get overwhelming. Often clients ask, “What should I be doing?” It’s the right question, but not easily answered. Why? There is a whole array of things that must be done simultaneously in opening any business, but especially one as complex as a restaurant.
So, where do you start? The best place to start is with a plan, of course.There’s a saying: “If you don’t know where you’re going, you are unlikely to get anywhere worthwhile.” So you begin with a business plan, a proven foundation of success and the road map to your dream becoming reality.
Let’s outline two important steps necessary to create a successful business plan:
1. You must have an idea of the type of restaurant you want. That means coming up with a well-thought-out concept, visualizing it with graphics, and describing in writing. Your entire business plan will evolve from this: how to bring that dream restaurant to life, how to give it its unique personality, and what makes it different from other restaurants.
2. Study successful restaurants in order to formulate a model that fits what you have in mind. You don’t have to copy them, just determine why you think they are successful. Is it their food? Is it their friendly service or atmosphere? Most likely it will be all of the above, fitting together to form a total concept: great food, prompt and attentive service, and a comfortable, if not unique, atmosphere.
I like to use the example of a three-legged milking stool to drive this point home. If one leg is weak, then the whole stool is weak and collapses, hopefully not with you on it.
When I suggest learning by observing other successful restaurants, keep this thought in mind: Your restaurant idea must be uniquely yours. Combine the best parts of other successful restaurants into your own creative version of what you want. Perhaps it’s the personal service and unique food presentation that you have enjoyed at one restaurant plus the decor theme at another. Blend all the elements that you feel make those restaurants successful into your own total concept of food, atmosphere and service, and you will have created your own original concept!
First, make an outline of what your business plan will include. Remember, be specific! Writing a business plan forces you to think through where you are going and how you plan to get there, and it is a tried-and-true road map to success. By organizing your thinking, you are more able to translate your thoughts to paper (or a computer screen) and watch a rigorous plan of action begin to take form.
Components of Your Restaurant Business Plan
The Executive Summary: Your Executive Summary should be brief and two-fold, containing:
1. A well-thought-out, condensed version of the business plan, a blueprint for developing your restaurant concept.
2. The executive summary provides a banker, or potential investor, insights into your thinking and an implied promise for profits. Condensed and to the point, the executive summary gives your potential investors the essence of the business plan without having to digest the entire document, and it creates an immediate interest to read further.
The Company Structure: Describe the legal business entity that you have selected to conduct your business. Your accountant and lawyer will advise you based on your personal circumstances.
Restaurant Service Categories: How will you deliver service to your customers? Are you thinking of table service, with a wait and bus staff, or the limited staff of fast-food or fast-casual service systems? Your service concept will determine the qualifications required of the employees you will hire and the pay scale appropriate to each.
Service Philosophy: What attitude and personality should your service staff display? How will they interact with your customers? From behind a counter, in a fast-food setting, or up close and personal, taking and bringing orders directly to the table with a smile? Good service, plus the pleasant attitude of your wait staff, goes a long way in bringing your customers back.
Menu: Write out your menu. Be specific, with a detailed description of each menu item and projected pricing. Explain why you have selected the menu items and how they relate to your service system. Making a Caesar salad table-side does not work in a fast-food restaurant. The menu and your service system are the foundation of your restaurant.
Customer Profile: In this section, you will describe your target customers, clarifying who your target market and potential customers are: their age, sex, income, occupation, marital status, etc. Present as clear a profile of your targeted customer as possible, with a sharp eye to demographics. Write out what you think it is, and then support your supposition with facts to back up how you perceive the demographics.
Competition: What are the other restaurants in the immediate area of your location? How does your concept for food, service, decor and atmosphere differ from them? Which types of restaurants are doing the best business?
Marketing Strategy: Outline your marketing strategy, point by point. Show how it meshes with your concept. A profile of your target market is essential, especially the specific market within a one- to three-mile radius of your restaurant location. By adopting a hands-on, personalized approach in your marketing efforts, you will avoid the unnecessary expenses of a mass media campaign.
Location, Location, Location: Explain why you chose the location of your restaurant and why you feel it is best-suited to attract customers. Highlight the important demographics of your location and why the menu, theme and decor closely match the profile of your target market.
Ownership: List the owners/partners of your company and the percentages each will receive. Define what role they will play in the company and include their resumes. A bank will undoubtedly want to see the financial statements of each along with their last two years’ tax returns.
Management: State in detail what your management strategy will be. Will the principal owner, or owners, function as general manager, or will you hire an experienced GM? Either way works, as long as you, the owner, are focused on doing the right things and making sure that your manager is doing things right, that is, those things that make a restaurant profitable. State the key positions of your management team.
Operational Systems: Define your operational systems, the navigational instruments and rudder of your great ship. They set the course, steering the ship on a straight and smooth course. How will you ensure training, consistent ongoing operations and effective controls? This should be summarized in your Business Plan.
Financial Requirements: Show your financial requirements in four primary areas:
1. Construction build-out cost per square foot
2. FF&E (Furniture, Fixtures and Equipment), including the decor package, pictures/paintings, etc.
3. Professional fees: legal, accounting, architectural, licenses, permits and miscellaneous fees
4. Working capital: You’ll need enough for opening inventories, pre-opening expenses such as training, and staying power while the business revs up.
5. Interior floor plan and elevation renderings: In this section of your business plan, you will need to provide a floor plan and elevation rendering of your restaurant.
6. Sales, profit and loss projections: This section should show, in spreadsheet format, your sales projections, which are critical to establishing a budget. The sum of rent, food costs and labor costs subtracted from sales will determine the majority of your bottom line.
If you will scrutinize and research each of these steps and follow this business plan outline, you will learn the information needed to give you the best chance for success.
Tom Wilscam has operated and helped others start restaurants for more than five decades. Besides individual restaurants, Wilscam helped launch the Einstein Bagel Company, Juan’s Mexicali and other restaurants that have become franchises through the application of standardized procedures. This article originally appeared on PMQ.com in March 2012.