By Doug Radkey
One of the biggest mistakes an aspiring restaurateur makes is thinking a business plan is only needed if they require additional funding for their start-up. A business plan is much more than just paperwork to obtain funding from a bank or investor. It is the lifeline of your business and it is also a contingency plan for potential challenges.
When a concept development plan has been completed, it will assist in developing your business plan by preparing you for capital requirements, budget limitations, construction related options, space planning, lease requirements, and overall day-to-day operations including staffing, marketing, and menu production.
A business plan will also further prove the viability of your restaurant concept, by solidifying your feasibility study and concept development plan while providing not only you, but other third parties, clear answers to the industry’s most challenging questions; indicating you’ve done your homework and are prepared for the road ahead.
Your plan should be reviewed, adjusted, and measured against results throughout the start-up phase and ongoing operations. It is in fact a ‘living document’, meaning it shouldn’t be thrown in a drawer and never looked at again once you’re open for business (which many unfortunately do).
If you fail to prepare this document, your dream can quickly become a nightmare. Things can happen fast during the start-up phase in particular. Having a properly written and researched plan, will better position you to understand solutions to common problems such as property surprises, construction delays, hiring challenges, being strapped for cash, and finally, having little to no customers during the first one to two months of operations.
At minimum, your business plan should cover the following areas:
Executive Summary: It is best practice to write this section last, highlighting the most important details of the entire plan, for quick reference and to further entice banks/investors to keep reading.
Concept Summary: What is the drive behind the idea? Write out the core details of the concept; the vision, the mission, the value, and the culture. Why will this restaurant be needed in the market and how will it be sustainable long-term? Take the time to also list out detailed short-term and long-term objectives for the concept.
Menu Analysis: Once the concept is outlined, showcase the food and beverage highlights. What menu items will be featured, what are the core ingredients/flavours, what is the productivity cycle, what kitchen space is needed to produce a menu such as this and what main pieces of equipment will be needed. From there, determine approximate menu price points, a menu mix analysis, and anticipated revenue per customer in addition to plating, glassware, and take-out containers.
Market Analysis: If you’ve completed a feasibility study, this section will be much easier. It should include an ideal customer profile and market segmentation profiles plus a complete hyper-local demographic study including income levels, food dollars spent away from home, age brackets, dwelling counts, and much more. You also want to further explain the need and why this ideal customer profile will go to your restaurant, how often, and how much they will be willing to spend (all backed up with facts).
Competitive Analysis: Who are your direct and indirect competitors? What concepts are thriving in your area and which ones seem to be struggling? Analyze the top ten in the area on market share, perception of value, quality of menu, quality of service, local marketing, location advantages, and perceived financial background.
Location Analysis: Based on the market size, concept style, competition, and menu, what is an accurate property size and where should it be precisely located? What are the required design elements, size of parking, and overall square footage needs? What is the price per square foot for leasing in the area? Is this sustainable for your market, menu mix, and construction/renovation budget?
Industry Analysis: Break down the industry as a whole in your region. What challenges are restaurants facing? What are the growth patterns and average profit percentages? What are the food & beverage trends? What technology is available and how can it help your concept?
Operations Management: Outline potential hours of operation, staffing requirements, ownership qualities, management qualities, training programs, payroll management, food & beverage vendors, and emergency contacts. Develop a ‘mock schedule’ to determine required personnel, hours, and pay scale needed for your concept and size of location to back up your statements.
Start-Up Analysis: One of the most important sections for a start-up. Use this space to outline key milestones, timeframes, permits, and licensing. It should also highlight a full breakdown of start-up costs plus chosen designers, engineers, contractors, lawyers, equipment suppliers, accountants, and consultants, etc.
Business Development: Outline the marketing plan and overall sales strategies, the soft opening strategy, and launch day strategy. You also want to use this area to highlight exit strategies, contingency plans, risk management profiles, and future development plans for the concept (if any).
Financial Management: The final section should be used to outline the financial projections (month-by-month) for the first three years. It should also highlight break-even points, daily traffic analysis, key financial goals, key performance indicators, financial summaries (income and balance statements), and debt repayment plans.
Imagine opening a restaurant without all of this key information? The old adage remains today, if you fail to plan, then plan to fail!
About the author:
Doug Radkey is the principal owner of Key Restaurant Group, a global restaurant/bar start-up development agency based in Ontario, Canada. Being in the food and beverage industry for over 17 years has allowed him to become a leading voice in the development of feasibility studies, unique concepts, business plans, marketing plans, memorable menus, guest experiences, and financial management systems. Continue the conversation with Doug on Twitter @KeyRestaurants, on Facebook @DougRadkey, on Linkedin, or by visiting keyrestaurantgroup.com.