Business Plan

A restaurant start up requires careful thought in many areas and food may be the least of your concerns. From conceptual assessment to facilities design to marketing and food menu and beverage list development, to start up a restaurant properly, a collaboration of ideas, multiple team disciplines, diversity of knowledge, management expertise and a passion for development and operational excellence is required.

Entrepreneurs who fail to consider these factors and the interactions between them could experience slow growth, no growth or worse. Having DCS Associates as your guide / “partner” in your restaurant startup will help you to avoid the many pitfalls to developing a growing and soon to be profitable business.

Your business plan is essential, especially if you are seeking any kind of financing. By creating a strong restaurant business plan, you do two things:

  • You show your independent investors, possibly a bank or the SBA, that you have a concise plan for getting your restaurant up and running successfully. You unequivocally prove that you know what you are doing; that you have the foundation for success
  • You discipline yourself and your team to concentrate on the numerous yet fundamental components of restauranting. You learn and also learn what you don’t know. You define your market and the competition in the local market.

If you are new to the food/restaurant industry, a business plan is imperative.  Multiple Issues you had not considered previously often arise, such as licensing, health codes and tax laws.  Just because you’re a “foodie” doesn’t mean you have the right stuff to be a successful restaurateur. If you are a restaurant veteran, developing a business plan can help you shake the rust off, get you reinvigorated and create the platform for growth or a new or reconcepted business. You need to do the exercise no matter how good you’ve been.

Following is a break down of all the generic components of a restaurant financial business plan and the accompanying investor narrative to “support” the financial plan and sell the “sizzle”, to create excitement surrounding the numbers. Your business plan will obviously be tailor made to you:

Financial Business Plan:

These are the elements of a complete Financial Business Plan. If these “Exhibits” are not incorporated into your plan, you are not prepared to raise money and spend it to develop and operate a business at a high quality of service, food & beverage and design and do so profitably. It doesn’t make any difference whether you’re a fine dining enterprise, a casual themed restaurant or a pizza joint. The equation is simple, no plan, no execution, no success. It’s not hip shooting…

Here are the rudiments. Each represents an individual category but they are tightly linked and yield a cohesive financial plan, a proforma and ultimately a foundation for a development and operating budget. Performance against that budget must be measured, action steps decided and implemented and success achieved. If not, you’ll be going home and staying home…

If you don’t know how to do it, a consultant is your best friend.

The pieces:

  • Company Information
  • Project Sources and Uses
  • Equipment & Furniture
  • Capital Investment
  • Opening Balance Sheet
  • Sales Projections
  • Hourly Labor Assumptions
  • Expense Assumptions
  • Year One P&L: Monthly Detail
  • Year One P&L: Monthly Summary
  • Year One: Low – Mid – High Performance
  • End of Year One Balance Sheet
  • Five Year P&L and Investor Returns
  • Break Even Worksheet
  • Break Even P&L Summary

It would be a long (perhaps too long to read with attention and interest) if DCS Associates were to elaborate, line by line on the above outline. Rather than write a “book” on the above, a new or experienced but business expanding restaurateur should expect and demand that a restaurant / hospitality consultant prove his or her worth by explaining how a good Business Plan is prepared, show examples and delineate its benefits. That’s something that should have no fee associated and designed to demonstrate know-how and build confidence that you are choosing the right consultant. You don’t go to a “quack” doctor…

Accompanying Investor Narrative:

1) Executive Summary—this provides the reader / investor a clear, concise, well-written overview and summary of your entire business. It is where you create the “sizzle” and enthusiasm; generate the excitement for your business. Theoretically, though not directly, the narrative supports the Financial Plan and translates the numbers (the quantitative) into the creative (the qualitative).

This is also where you will document why you and your team are well-suited for this restaurant venture, your experience in the restaurant business, and why you and the team you’ve assembled are perfect for this new or refurbished venture.  It is where you present the bios (abbreviated resumes) of the key team members who will lead your operation.

The Summary will provide all of that, an overview of the entire project, highlighting in a sentence or two, each of the following sections.

2.) Concept Statement—this minimally articulates / partially repeats some information in the Executive Summary but elaborates and adds more detail. You must, if you’re thought things through critically and are  good enough at it, be able to express the concept definitively in two or three sentences, no more than one brief paragraph.

3.) Location—this section defines the location and why how the concept will succeed at this location. It will provide commentary on the demographics and possibly psychographics of the market. This will tie into the Marketing section as location and marketing in all its incarnations are intricately linked.  A good question to consider is how does the location of the restaurant fit into the community? In analyzing the site, several factors should be considered:

The competitive environment

  • Number of restaurants and concepts already serving the proposed market area
  • Activity level of the restaurants (slow, somewhat busy, very busy)
  • Positive factors common among the busiest restaurants
  • Apparent problems with the slow restaurants
  • Ways a new restaurant could gain a competitive advantage
  • Potential future developments in the area which could change the environment (shopping malls, highway bypass, and so on)
  • Potential effect new, mixed-use real estate developments could have on the business environment.

Characteristics and sources of potential customers

What is the target market in terms of demographics and psychographics?

  • Is the restaurant a  “destination” (can potential customers be drawn from outside the market area) or will it be dependent on the in-close neighborhood population
  • Does the potential customer population fall short or exceed the number of restaurant seats in the market area?
  • Can potential customers be drawn from other restaurants in the market area?

4.) Design Concept: Exterior and Interior-this is where you describe the planned interior and exterior atmosphere. The atmosphere or ambiance, along with the menu and service style should fit the type of restaurant (fast food, casual, upscale casual or upscale) determined by the concept.   Internal and external signage, furniture fixtures and equipment and artwork; all contribute to the design concept.<

Consider the following factors (any or all can be integrated into a single concept in various dining and bar areas, private dining rooms, an outdoor patio area, by day part, etc.):

  • Formal or informal
  • Soft lighting or bright
  • Quiet or loud
  • Cozy or open
  • Romantic or social
  • Singles, couples or family
  • Leisurely or busy
  • Comfortable or functional

5.) Food and Beverage Concept: What is the food offering and the compatible beverage offerings, spirits, bottled wine, wine by the glass, bottled water, specialty drinks?

6.) Service Concept: All service, except Fast Food has identical steps of service. The steps are simply modified, abbreviated, eliminated to be compatible and enhance the concept’s guest experience.

7.) Target Market- See above and think who’s your target?  What kind of people will eat at your restaurant?  What do they do for livings?  What do they wear?  It’s best that you find out.  Will you cater to the older folks at lunch time? Single professionals at dinner? Families with young children?  Explain your customer base and why they are going to flock to your new restaurant, not your competitors.

8.) Competition- See above and think who is your competition? Many people opening a new restaurant assume everyone will prefer their new establishment to the existing competition. Don’t underestimate the other restaurants. They already have a loyal customer base, and luring customers from that base is not easy. Find out as much as you can about your competition, including their menu, hours and prices; beyond those basics, what specifically entices customers to populate that restaurant vs. another, including yours. Then explain in a paragraph or two how you will compete with the already established businesses.

9.) Marketing Strategy – What methods do you plan to use to promote your restaurant? How are you going to target your core audience? Perhaps you will offer kids eat free night, or free lunch delivery to local offices, hospitals, other businesses. What is going to set you apart from your competition? Give specifics, after examining the marketing climate with your consultant, on how you plan to advertise (newspaper, radio, TV commercials, etc.…).  This is where you calculate how to reach the market you’ve defined; you’ve conducted a feasibility study. Successful restaurants usually rely on “word of mouth” spread by providing good food and high-quality service, supported by effective advertising and community involvement. Really successful restaurants do not neglect Branding, Positioning,  a complete Marketing Plan which includes Sales & Business Development; Advertising / PR / Promotion; Logo Development and Graphic Design; Social Media Marketing, Web Site Design, Search Engine Optimization; E-mail and Mobile Marketing and a Loyalty Program.  Repeat business is especially important and tantamount to success whether in a small or larger city, whether a “destination” or neighborhood hangout, with or without tourists.

Depending on the target market, some population characteristics are definitely more relevant than others. For example, family style restaurants might be concerned with the number of households, the average income per household, and the average household size. Upscale restaurants might be more concerned with income levels because the price point and disposable income are important considerations.

10.) Summary and Conclusion- This is much like the Executive Summary but shorted (with less detail) and basically moves from Executive Summary through the components itemized above and wraps the written Business Plan up both in Financial and in narrative formats