Opening a restaurant is a big undertaking full of risk. More than half of restaurants fail within the first year and more than 80 percent fail within five years. Poor planning is the root cause of most restaurant failures, but a solid business plan can help you navigate the difficulties that lead to failure and help set your restaurant up for success.
A business plan is a detailed map that identifies your goals and explains how you intend to reach those goals. If you are looking to get a loan, you are going to need a solid plan to show the lender how you intend to make and spend money, proving that you will be a good investment for them. Your business plan will serve as a guide to the future. The restaurant industry is full of moving parts, so having a business plan that serves as a guide to the future of your restaurant is crucial to get the whole staff on the same page.
Here are four key sections you should include in your business plan:
1. The Summary
The opening of your business plan should break down your Unique Sales Position (USP), which describes your niche in the market. The executive summary explains the business idea and provides a snapshot of your mission and how you serve your customers. You are opening up a restaurant for a reason, so begin by writing down the why. List what makes your business unique. Be sure to hit on business objectives, a mission statement, your guiding principles and keys to success in this section. Keep in mind, the executive summary can serve as a resource to revisit in the future.
2. The Basics
A great business plan anticipates critical questions and provides answers to those questions. Think through every question that could be asked, such as:
What are your hours?
How many days a week are you open?
Will you provide take-out?
What about catering?
How do you differ from the competition?
What kind of technology will you use?
Be sure you fully address the who, what, when, where and how. Research the demographics where your restaurant is located to help predict marketing strategies, foot traffic patterns and check averages. All of this information will be important to not only your lender, but the current and future leaders in your organization.
3. The People
Employees are the foundation of any business. They hold the potential to make it a success or failure. This is especially true in the service industry where customers are directly connected to your staff. The way your staff treats customers will dictate the reputation of your business. Walkthrough the different team members you’ll have working in your restaurant, from the general manager to the finance team to the cashiers, and highlight their attributes and experiences.
Provide a personnel plan to break down your front-of-house and kitchen staff. In this section, you want to provide details on your management team, discuss outside support and detail your hiring criteria and growth plans. As you develop this section, remember people don’t invest in a business, they invest in a person. You have an opportunity to showcase your attention to detail and knowledge of who you need to hire.
4. The Finances
This is the interesting piece of the puzzle where you really dig into who your patrons will be. Half the fun of a restaurant is never knowing who will walk in the door, but a big part of success comes from knowing your target audience. You need to know their daily traffic patterns, spending habits and dietary restrictions. Anticipate customer preferences and how your business will fit into the community. Look at food costs, labor projections and daily operational expenses like your technology spend. This section can get heavy with text and numbers, so break it up with graphics and charts to display key facts and figures.
The financial forecast is the meat of the plan. Everything else is all conceptual until you start putting in numbers and data. You need to provide a detailed look at profit and loss forecasts that examine assets, liabilities and total net worth week to week, month to month, and for up to five years. The more extensive your forecast, the more financial success may be benchmarked. Even if you don’t need outside financing, it is helpful to compile a financial forecast to steer your business and keep everyone on the same page. While it’s important to be detailed here, remember that at the end of the day, you are simply making an educated guess for your initial business plan.
If you are looking to open a new restaurant, a business plan is essential to your success. You need to get a blueprint on paper now, so you will be set up for success in the future. Be sure you showcase the why behind the restaurant, the details of how you will accomplish your purpose, the people who will make it happen and the numbers. Your business plan can serve as a roadmap to success and keep the whole team on track.