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How to Write a Restaurant Business Plan (with examples)

Date: September 4th 2018        Author: Joshua Phillips

Life goes better with a plan, and so does business.

There’s a lot more to a business than a good idea. A business plan tells the world how you’re going to turn your restaurant idea into reality.

Whether you’re opening your first restaurant or your fiftieth, your business plan is the most important document you’ll have. You need to think about all aspects of your business. What do you need for the business? Who will your customers be? How many customers will you have? What are your costs and profit margins? And how much money will you make?

It doesn’t need to be long. In fact, if you’re pitching to potential investors, you should keep it short and sweet. But it definitely needs to be thought through completely.

No two business plans are alike, because every business is going to be different, but every business plan needs to have these five things:

1. An Executive Summary

This is the elevator pitch for your business. It’s what people will read first and should tell them the basics and give headline figures and milestones.

2. Opportunity

What problem does your business solve? Who is your market?

3. Execution

How are you going to set up and sell your product? What will your costs be, and how will you make a profit?

4. People

Who is in your team already? Why are they well-suited for their role? And who will you need to hire?

5. Financial plan

This section contains detailed projections for the first months and years of your business’s life.

The executive summary:
your restaurant in a nutshell

The executive summary is the first section of any business plan. It lays out what your business idea is, how it’s going to do it and how much money it’s going to make.

An executive summary is a high-level sketch of the rest of your plan. It’s your business distilled to the very basics.

And it’s the last thing you should write: you shouldn’t write it until you’re absolutely certain that the facts and figures that feed it are correct, and you know what the highlights of your plan are.

The more work you’ve done on the rest of your plan, the easier it’ll be to craft a compelling executive summary.

idea-01

Sometimes, investors or executives will only ask to see your executive summary, so it’s vital that it communicates as much information as possible, whilst still being clear and concise. A good executive summary should only be one or two pages, so make sure they count.

There’s a few key ingredients to a winning executive summary:

The elevator pitch

This is your big idea, your business in a nutshell. The elevator pitch is a one-paragraph overview of your business — short and sweet.

Start by sketching out the problem your future customers have, and the solution your business offers.

You should also mention any work that you’ve already done towards the project — anyone you’ve secured a deal or an agreement with, or any funding you’ve got.

But how does this work for a restaurant I hear you say.

Let’s say, for example, that you live in a charming market town in Suffolk, UK. It’s on the tourist trail, and has a high number of stay-at-home mums and freelancers, but no restaurant that makes the most of local produce. You’ve partnered up with a local farmer who’ve offered you 15% off a year’s supply of produce, if they can act as an exclusive supplier.

Your elevator pitch might go something like this:

Town X sees 350,000 tourists per year, and has a population of 8,000, a high proportion of whom are affluent and time-rich stay-at-home parents with young families. However, it does not have a high-quality restaurant serving produce from the local farms. I want to open a modern restaurant on Town X’s high street that caters to both tourists and locals, serving locally-sourced decadent brunches, light lunches and evening meals. I’ve already secured a deal with Y Farm, in Town Y, to act as exclusive suppliers for much of the produce for the first year at 15% off.

That pitch clocks in at 99 words precisely, and it goes through the problem that the town has, your solution, and what you’ve already done.

After this, there are a few things you should talk about. Take just headline points from your longer business plan and discuss them in a paragraph or two. Use bullet points if you like.

Problem

The problem section sketches out what hole your business is going to fill. What do other businesses do well, and what don’t they do? And how do you distinguish yourself from them?

So, to go back to Town X in Suffolk, if there’s already a Thai restaurant on the high street, this is the place to mention it. But be sure to mention how you’re going to differ from it.

An obvious place to start might be that you’re planning to focus on local produce far more, but you also want to drill down into the Thai joint’s appeal: what has it done to create inroads into the local population, for example?

Solution

jigsaw

This is the part where you come in. What’s your solution to this problem? How will you create a restaurant that’s meaningfully different to the competition, and which acts as a space for locals without alienating the valuable tourist trade? You also need to quantify this. Who are your target markets and who you are selling to — your target audience.

Team

team

Who are you, and who do you work with? What roles do your team play — and why is everyone best-placed to do what they’re doing. Who do you need to work with? That means new hires as well as any partnerships you think you’ll make — so, suppliers, marketers, and all that jazz.


Financial Summary

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The financial summary you’ve already written needs to be pretty detailed. It’ll contain forecasts of your business month-by-month as well as a projected balance sheet, but this isn’t the time or place for most of that. Instead, you need to use headline figures here: your milestones for the five years, big purchases like property and equipment, as well as any loans you might need to take out and funding you need to secure

That’s the executive summary polished off. Now, onto the main body of your business plan.

Opportunity


Every self-respecting business solves a problem, even if that problem is as simple as “This town doesn’t have a decent restaurant.”

The opportunity section of your business plan is the part where you talk about this — the problem you want to solve, and how you’re going to solve it. Your town doesn’t have a decent restaurant, so you’re going to set one up. But it’s no good just talking about this in the general. Save the broad brushstrokes for your executive summary. Now’s the time to get detailed:

Why are demographics important for a business plan?

You should put people at the heart of any opportunity analysis that you write. Now’s the time to talk demographics — who’s in the area, and who’s going to buy your food. What is your target market?

demographics-min

One way of thinking about your market is in terms of the acronyms, TAM, SAM, and SOM. These nest inside of each other like Russian dolls. But what are they?

TAM: Target Addressable Market

This is the whole market for your product — so, everyone who goes to restaurants. Obviously, this is an unrealistic target: you’ll never be able to sell to every consumer in the world, and you probably wouldn’t want to. You obviously need to pare down this a little bit, which is where SAM and SOM come in.

SAM: Serviceable Available Market

This is the market for your product that you can physically reach. So, to go back to our earlier example, it would be the restaurant-going population of Town X in Suffolk, plus the restaurant-going portion of the town’s 350,000 tourists. You can grab pre-existing stats if they’re out there, but if you’ve got data available from surveys or market research you’ve done yourself, that’s likely to be more accurate, so it’s best to use that here.

SOM: Serviceable Obtainable Market

You can’t really cater to your entire SAM — your SOM is the portion of that market you can reasonably expect to capture. Make sure to be realistic when you’re working out your SOM: you’re not doing yourself any favours by going too high, as you’ll make investors think you’re cocky, and, more importantly, your SOM is the basis for your finance projections, so it’s vital you set a target you think you can hit.

Buyer Personas

Your business’s buyer persona is the person you’re hoping to target with your business. Buyer personas inform everything from how you market your business to how you decorate it, as well as what items you have on your menu and your prices. They’re pretty important.

personas-min

Let’s go back to the restaurant in Town X again. That one might have two buyer personas: one for residents, and the other for tourists. Most businesses will have a set of buyer personas — it’s rare that a business will work for one type of customer and one only.

Here’s a few examples:

A example of a tourist’s customer persona:

This is the market for your product that you can physically reach. So, to go back to our earlier example, it would be the restaurant-going population of Town X in Suffolk, plus the restaurant-going portion of the town’s 350,000 tourists. You can grab pre-existing stats if they’re out there, but if you’ve got data available from surveys or market research you’ve done yourself, that’s likely to be more accurate, so it’s best to use that here.

  • 45-60
  • Can either be male or female
  • Live in London but drive out for weekend getaways
  • Staying in a hotel close to Town X
  • Works in solid professional jobs that pays well
  • Looking to eat locally-sourced food
tourist-min
An example of a local’s customer persona:
  • 18-35
  • Comes in on weekdays
  • Lives less than a five-minute walk away from Town X
  • Staying in a hotel close to Town X
  • Wants to support local farmers and suppliers


The restaurant in Town X might want to create other customer personas for their local trade: for instance, retired people and families with young kids in tow are likely to be looking for different things in your restaurant. It might help to use templates when you’re mapping out customer personas: they’ll make it more likely that you hit all the right spots.

Get to grips with the competition

As well as putting as much detail about your customers and your target markets, you also need to take a good look at the other players in your niche. You’re unlikely to be the only business doing what you do — even if you think you’ll do it better.

When talking about the competition, you need to be up-front not just about who they are, what they do, and how they do it, but why they’re doing what they do. You need to evaluate them as a business prospect, listing their strengths and weaknesses.

You also need to be clued up about your indirect competition. These are other businesses that provide what you’re doing, but aren’t necessarily the same type of business.

So, the restaurant in Suffolk might face direct competition from the Thai place in town. It’s been there for 30 years, and it’s loved for its Pad Thais and green curries, but it doesn’t do much to support other local businesses.

Equally, it faces indirect competition from nearby takeaways and shops selling convenient ready meals. You might be offering something different, but habit is a powerful thing, and you need to work out how you’ll break it.

You can’t just set up and hope customers fall into your lap: you need to give them a reason to shift from the competition, both direct and indirect.

Execution

Now you’ve detailed your business’s market and its niche, you need to talk about how you’re planning to run your business. This is where you talk about operations — how you’re going to turn a profit. This section will inevitably cover some of the same ground as your finances section, but it shouldn’t replicate it entirely.

Whereas your finance section talks figures — how much you’re making on each plate of food, or what you’re spending on keeping the place sparkling clean — your execution section talks about how you’re going to do it.

Your opportunity section discussed where your new business will sit in the market, but your execution section will discuss how to make the most of that niche. Remember those buyer personas? This is where you talk about how you plan on catering to them.

There are a few elements to this:

Your marketing plan

Chances are, you’ve been thinking about your marketing plan. You’ve probably got the draft of a marketing plan somewhere in your hard drive (and if not, why not?).

If you have, then great — you can take headline figures from the plan and discuss how they relate to your plan. If not, then there are a few things that you’ll need to bear in mind.

You might make great food from brilliant local produce, but that’s all moot if you don’t have customers to come and eat. Your marketing plan will set out how you’re going to bring in customers and keep the tills ringing.

advertising


A marketing plan starts from the same place as your business plan more generally: from the problem your business solves, and who it solves it for — your target market and your buyer personas. Your marketing plan will set out how you’re going to bring in customers and sell to these people.

You also need to list your goals — these are likely to share some common ground with your key financial milestones, but there may be some divergence. For instance, it’s more than likely you’re going to track how many customers you have and how much they’re spending — something that will be key to your financial projections — but your marketing plan might specify run twelve events in your first year, which you can use to sell more food but also build up brand awareness.

marketing-2

Your marketing plan covers physical as well as digital marketing, so it’s important that you set out how you’re going to make your presence known on the internet: but just how are you going to build a social presence?

Getting social

For instance, you might choose to invest in Facebook marketing. In this case, you want to set out who you’re going to target, as well as what your goals are when you’re doing this — are you aiming to “convert,” or drive online viewers into your shop, or are you aiming to drive “engagement,” to get people to comment on or share your posts? You also need to set your budget for social media advertising. Your decisions here will shape not only your strategy in a broad sense, but how you go about making each individual advert.

Let’s go back to the restaurant in Town X: they want their Facebook adverts to drive traffic into their restaurant. They might want to create two Facebook ads initially, one targeting all people who live within five miles of Town X and the surrounding villages and are interested in eating out, and the other aimed at their London-based tourist persona.

customer
You can use Facebook’s ad creator to target people with laser-precision, so they might create an advert that targets people from the ages of 40 to 65 and living in or around London, who have an income of over £40,000 and are frequent travelers with interests in staycations, weekend getaways, and holiday cottages, as well as in Suffolk and in Town X.

This may sound ludicrously specific, but according to Facebook’s Ad Manager, the advert has an estimated potential total reach of 1.9 million people. If the advert runs for a month, and has a total budget of £250, it is likely to be seen by between 3,500 and 11,000 people per day.

It’s one thing getting an advert to appear in people’s news feeds, but getting readers to pay attention is another thing entirely. The manager of the restaurant wants to make sure that the advert gets people’s attention, so she might decide to spend money on consulting a social media advertising expert and enlisting their help in creating an advert that catches people’s attention and can tempt visiting tourists. This spend should be factored into the total spend for Facebook ads — so if the specialist’s help costs £500, and each of the two adverts has a budget of £250, then the total spend on Facebook advertising would be £1,000.

When you’re writing the marketing portion of your business plan, it’s important not just to consider target and audience size, but how engaged an audience will be — while the advert for Londoners will be seen by far more people than the locals’ advert, the locals who see it will be far more engaged, and hence far more likely to pop in, so it’s worth spending time and money on that advert despite its lower reach. Sometimes, size doesn’t matter all that much, it’s more about the targeting the right audience.

Anything else?

Social media is probably the easiest marketing to get started with, but you should also consider any traditional or physical marketing, like ads in the local paper, which will need to be created, placed, and paid for, as well as how your website and social media presence impact on your marketing.

research

If you’ve got any strategic partnerships planned, then now is the time to mention them. For instance, lots of small, independent farmers and produce suppliers will offer cross-promotion, where you advertise each other in store and on your respective websites and social media accounts.

Setting up a website is pretty easy — there is a whole host of tools that allow you to create a beautiful website without a line of code — but it will incur running costs, and will need to be updated, and you need to write about this in your plan.

There’s no reason to go into minute detail in your business plan’s marketing section — save this for a fuller marketing plan document — but any work you’ve done will show, and this part will be better for it. Much like your executive summary, it might be better to save this part until you’ve written a full marketing plan, and then take headline figures from that.

Operations

So, you know how you’re getting customers into your restaurant. Great.

What are you going to sell them?

And how are you going to make it?

This is what you’re talking about in the operations section of your business plan. It covers where you’re sourcing your ingredients from, what equipment you’ll need to serve customers, your distribution — even if you’re just selling instore — and the assumptions you’re making with this plan and any risks you might be exposed to while operating.

When writing this section, you need to be as detailed as you can: you need to set out precisely how you’re going to work and what you’ll do when things go wrong, as they inevitably will.

If you’ve already got suppliers then you need to give them and their details, and why you’ve chosen them, precisely what they’re contracted to deliver and how often deliveries are to be made, as many any guarantees they offer you — so if your fruit people send you a crate of rotten bananas, say, will they send out another batch ASAP, or will they simply give you a refund?

If you’ve not already got suppliers, then you need to go into as much detail as possible on your hunt for suppliers: who are you tossing up between, why you’re considering them, and what’s going to factor into your decision when you make it.

You need to give the same kind of detail for all of your equipment and service providers — as well as kit like your oven and your dishwashers, you need to talk about your gas and electricity, your water and your internet.

You also need to talk about risks built into your business. Part of this is what happens if something goes wrong, or if deliveries don’t come through. You might be able to do without in some cases, but if your bread delivery doesn’t make it or your dishwasher blows a gasket, you’ll be left high and dry without a plan. But you also need to talk about financial risk: you need to show, particularly if you’re presenting your plan to banks or investors, that you’re going to keep money squirreled away in case of emergency, or to tide you over during a lean period.

(Side note: if you're looking to set up a bar instead, we cover how to get investment for a bar in our page, how to set up a bar with no money.)

 

Team

A business is only as good as its people. That might sound like a slogan that should be printed below a photo of a waterfall or a rainbow on an inspirational poster, but it’s entirely true. It’s pretty unlikely that you’re doing all this on your own — and you definitely won’t be able to run your restaurant on your lonesome. There just aren’t enough hours in the day.

team2

This is why the team section of your business plan is crucial.

Rather than talking nuts and bolts, this is where you talk people. Who are you, and who are the people you’re doing this with? What roles will they all play in your nascent company, and why are they specifically the best people to do the job?

There’s no need to over-complicate this section: you just need photos, job roles and potted bios here. But that doesn’t mean you shouldn’t take the time to make sure this section is as well written as possible. This is your opportunity to really get your personality across and tell readers what drives you, your team, and your business.

You also need to talk about who you’ll need to hire, what skills you want them to bring to your team, and when you’ll be looking to hire them — as well as what you’re planning on paying them.

Financial Plan

This is far and away the most important part of your business plan, outside of the executive summary, so it’s vital that you spend time making sure your numbers add up.

More than anything, the financial plan tells your investors and potential business partners whether or not your business is a viable project.

Your financial plan needs to have detailed forecasts for the first twelve months, and then year-end forecasts for the next three to five years after that.

At the heart of these forecasts, whether they’re monthly or yearly, are sales forecasts: you need to give an accurate estimate of what you think you’ll sell. Of course, you can never entirely foresee this, but it’s important to try and give a figure that’s fair but achievable. Too low and you’ll look like you’re a poor business prospect; too high and at best you’ll look like you’re bragging, and at worst you’ll throw your other figures out and might run into trouble when you’ve got less money in the bank than you thought you’d have.

There are three key documents in a financial plan: a profit and loss forecast, a cash flow statement, and a balance sheet.

Profit and loss forecast

You also need to work out what you make per sale for the items you’re planning on making. To do this, you need to add the Cost Of Goods Sold (COGS) for each item, and subtract this figure from that item’s retail price.

COGS is a the cost of the materials that you use making an item, whether that’s a coffee or a car. It doesn’t include indirect costs like labour or electricity, though.

Let’s go back to the restaurant in Town X. They’re selling a flat white for £2.50. The shot of espresso in that flat white costs you 8p (based on the assumption that a kilo of beans costs £12, and they get 145 espressos out of a kilo bag) and the milk costs 6p. So the COGS for that flat white is 15p

If you take away the VAT from the ticket price of that flat white to get the gross profit for that cup of coffee — it works out at an even £2.00.

This means that the gross profit for each flat white the shop sells is £2.00 - £0.15 which is £1.85.

Gross profit-1

But this is only gross profit. To figure out your net profit for each coffee cup, you need to subtract marginal costs — but for a restaurant, it’s easier to do this in aggregate.

You should do this analysis for every item you’re planning on selling — so, every menu item you’re planning on starting with.

And if you’re not sure what you’ve got on your menu yet then you should draw up a sample menu that reflects the sort of food you’ll be doing.

Once you’ve worked out your net profit per item, multiply that by the number of items you think you’ll sell to find your total net profit for that period, be it a day, a week, a month, or a year.

After this, you can subtract indirect and marginal costs over that period like heat and lighting, cleaning and staff wages, as well as depreciation, taxes and any one-off purchases like equipment or property, to get your total net profit for that period.

When doing this kind of forecasting, having a template to work from can be immensely helpful. Score.org, a US-based network that offers business mentoring, has two which are available to download for free — one for the sort of month-by-month forecast you need to make for the first year, and the second a year-by-year one.

Cash flow statement

The amount of money you make isn’t the same as your profit. Counterintuitive, right?

Increasing your profit does not necessarily mean you’ve got a higher cash-flow, and vice versa. As a hospitality business, you’ll be receiving small payments day-in, day-out, but when you spend money, you’re not going to be dealing with tiny sums — the figure we quoted above, that there’s 8p worth of espresso in a flat white, is entirely true but you’re not going to sit there counting out the pennies every time you sell a cup of coffee.

A cash flow statement takes this into account. If a profit and loss account is effectively a snapshot of your business at a certain point, a cash flow statement is a video of what happens in real-time.

payment-method

So, you might sell a thousand flat whites in a week, and make a gross profit of £1850 from those sales, but you don’t buy your coffee beans every week — you’ve got an account with a distributor and get billed for deliveries at the end of every month. This means that your cash flow for the first week of the month would look very different to your cash flow for the last week.

Cash flow statements take into account all outlays that you make during a given period — so, spending on ingredients, bills, staff wages and taxes, but not costs like depreciation. They’re important because they will highlight when you’re likely to have less cash to hand, so you’re able to plan accordingly.

One important difference between profit forecasts and cash flow projections is VAT (assuming you’ve got a turnover of £83,000 per year or more, or you sign up for VAT voluntarily). Whereas profit forecasts don’t take VAT into account, when working out cash flow, you need to forecast takings as inclusive of VAT — the total amount of cash a customer will hand over for a coffee or a slice of cake — and then work out how you’ll have to pay to HMRC at the end of the quarter.

As with profit and loss projections, having a template to work from can make things significantly easier: Startup Loans has created one for cash flow forecasts.

Balance sheet

A balance sheet takes the temperature of a business. Unlike a profit and loss account or a cash flow statement, which both tell you what money a business makes and spends, a balance sheet tells you what a business has.

This includes current assets which might include cash you’ve got at hand, inventory, and expenses like rent and insurance that you’ve pre-paid, as well as long-term assets like property and equipment.

All equipment loses value over time. This is called depreciation, and you need to take this into account when projecting your business’s holdings.

A balance sheet also includes current liabilities such as debts due to be paid within a year and portions of long-term debt that you need to pay within a year. As well as this, you need to include long-term liabilities such as your mortgage or leasing agreements.

Vertex42, an Excel specialist, has produced a balance sheet template but you’ll need to add additional columns for other years, as you need to produce forecasts for three to five years, as you do with your profit and loss and cash flow projections.

Appendices

You may find that you need to discuss things that don’t fall into any of the above sections, or attach documents that don’t have a home anywhere else. This is where an appendix, or appendices, might come in handy.

For example, if you’ve already secured a location, you may want to include plans and surveyors’ report on the building.

The take-home

While no two business plans are the same, there are three pieces of advice that will hold true, no matter what:

1. Keep it short

Ironically, this guide is probably longer than your business plan will be. Your business plan is an important document but it’s not the be-all and end-all; it’s just a summary of the essential points of your business.

2. Know your audience

The business plan you present to a bank should be different to one you present to private investors or to a potential business partner, which will be differ from one that you keep for internal use.

Different audiences will come at things from a different angle — a bank will be far more interested in your profit forecast than they will the ins and outs of commercial ovens, for instance, you can’t assume that everyone needs to know about your market.

3. Don’t be intimidated

It’s easy to be put off. Don’t.

Like most big tasks, writing a business plan is one of those things that is less difficult than it first seems. Break it down into discrete, manageable chunks, and just get started with them. You’ll be done before you know it.