How to create a restaurant business plan
We’ll help you cook up a restaurant business plan in no time with this easy to follow recipe
According to a 2017 Harvard Business Review study, entrepreneurs who write ‘formal business plans’ are 16% more likely to succeed. But why is this?
Well, if you’ve never made coq au vin before and you just decide to wing it, it might go well – but more than likely, you’ll make a pig’s ear of it.
Following a business plan is like following a tried-and-tested recipe. It allows you to understand exactly what you’ll need, and what it is you want to achieve, before you embark on your venture.
The very process of writing a business plan forces you to finetune your idea, address any weaknesses in your proposition, and foresee any possible challenges.
And if you’re not the most financially astute, it’s also an opportunity to dig down into the numbers and make sure they’re sound before committing cash to launching your restaurant.
How to draw up a business plan for a restaurant: key elements
For the purposes of this article, we’re going to use a fictional establishment – let’s call it The Goodfare Restaurant – to show you exactly how a restaurant business plan should work in practice.
You can find a more comprehensive breakdown of what to include in a generic business plan here.
*Any resemblance to a real restaurant is entirely coincidental!
This is a brief snapshot of the key information the reader needs to know about The Goodfare Restaurant.
- The restaurant – The Goodfare Restaurant is a 100-seat family eatery in North London, serving moderately-priced comfort food classics
- Your mission statement – The Goodfare Restaurant exists to bring hearty, reasonably-priced grub to the masses
- Objective(s) – to be the most popular moderately-priced eatery in North London
- Values – the customer is almost always right
This section should go into detail about the management team, the legal structure of the business, and operations.
- Founders/management team – Founders Stelmo and Philip Blimp are brothers with a combined 25 years’ experience working in some of the UK’s most successful restaurants
- Ownership structure – The Goodfare Restaurant will be 100% owned by the Blimp brothers (unless equity is given away as part of an investment deal)
- Legal and insurance – The restaurant will abide by all UK health and safety laws, as well as food hygiene legislation etc.
- Startup costs – We estimate initial startup costs for The Goodfare Restaurant will total £150,000, self-funded by the Blimps
- Property – The 2,000 square foot property has space for 100 covers. It comes fitted with a functioning kitchen and bathrooms, but will require some minor renovation
- Location – The restaurant is located on the high street in an area of high footfall
- Opening hours – Monday to Friday – 11am to 11pm
- Responsibilities – Stelmo will be responsible for stock management and finances, while Philip will be in charge of managing staff and payroll
- Suppliers – Thanks to their years of experience in the industry, the Blimps have excellent relationships with a number of quality local suppliers
This section is where you prove the viability of your proposition with thorough market research.
- The industry – over the last two years, London’s restaurant industry has seen the highest level of closures in decades, as well as very high staff turnover. Chains and high end establishments have been hit particularly hard, with consumers hankering for more authentic independents like The Goodfare Restaurant
- The target market – The local population of around 260,000 people is comprised of young professionals and families, with a median annual income of £40,000
- Competitors – There are three direct competitors within a five-mile radius, including:
|Size||200 covers||120 covers||70 covers|
|Product / Service offered||Standard fare||Overpriced swill||Hearty grub|
|Price of comparable product / service||Menu prices range from £6-£17||Menu prices range from £12-£25||Menu prices range from £5-£12|
|Strengths||Familiar chain restaurant||Great location||Very affordable prices|
|Weaknesses||High staff turnover||Overpriced||Poor location|
|Threats posed by competitor||Much better name recognition than Goodfare||None||Attracts a similar crowd to The Goodfare Restaurant|
|Opportunities presented by competitor||Consumer shift towards independent restaurant||Goodfare offers better food at a more reasonable price point||Goodfare is in a much better location|
The Goodfare Restaurant will position itself as the number one mid-range family restaurant in North London.
We will incorporate traditional and digital marketing elements in our strategy. Primarily, we will:
- Develop relationships with local businesses by offering lunchtime deals
- Implement a loyalty scheme
- Encourage repeat visits through our email database
The below is a rough breakdown of the expected costs of starting and running The Goodfare Restaurant, and the revenue generated assuming an average table turnover rate (i.e. the number of daily sittings at each table) of 2.5.
A good rule of thumb is that you want to be turning over your tables every 45 to 90 minutes during busy periods.
Here are some other restaurant metrics you could track.
Startup costs – The Blimp brothers will provide the estimated £150,000 startup costs
Important assumptions – For the purposes of this business plan, we will assume the following:
- Average customer spend of £20
- Average 250 covers served per day
- Average meal cost of £3.50
- The restaurant will employ 25 people:
- 10 waiting and bar staff on average salary of £18,000*
- 10 kitchen staff on average annual salary of £24,000
- Two managers and one head chef on average annual salary of £30,000
- Two cleaners on average salary of £17,000
- Sales forecast – Based on assumed daily covers and average spend, we estimate an annual revenue of £1,825,000 in the first year
Staff salary cost: £544,000
Average variable meal cost: £319,375
Annual rent: £365,000
Other running and maintenance costs: £91,250**
Total annual expenses for year one = £1,319,625
- Startup costs = £1,469,625
Estimated year one profit of: £505,375
*Salaries based on data from Glassdoor
**The average restaurant budgets 1-3% of revenue for maintenance, according to restaurantequipmentrepair.org
This is a very basic (and perhaps generous) breakdown of the estimated revenue and running costs of a restaurant in London.
You may have to provide a more granular account of your monthly expenditure and revenue sources in order to convince investors that your financials are sound.
Milestones for a restaurant business plan
Milestones are clearly defined targets you hope to achieve within a given time. Not only are they a way to measure the progress of your restaurant, but they’re a good way to motivate your team towards a common goal.
You can set milestones in a table like the one below.
Think SMART. For each milestone, you should:
- Clearly define a completion target
- Set a realistic deadline
- Assign a responsible stakeholder
- Make sure it’s actually achievable!
|Full capacity day||10/08/20||Stelmo Blimp|
|Break even||14/12/20||Philip Blimp|
|Open second site||3/04/21||Lynton Snitch|
Restaurant financial plan: startup and ongoing costs
Your monthly costs and revenue can fluctuate wildly throughout the year at the mercy of seasonality, tightening purse strings, scarcity of supplies, and fierce competition.
The only certainty is that you can break your costs down into three types:
- One-off costs – licences and permits, property deposit, equipment, fixtures and fittings
- Fixed costs – rent or mortgage, salaries
- Variable costs – food supplies, hourly wages, utilities, maintenance and repairs
It’s easy to budget for those one-off and fixed costs, but make sure your financial planning is sufficiently flexible to account for the variables, as well as any other surprises.
You don’t want to be broadsided by some act of god (fire, flood etc.) or a sudden dip in customers, and not have the cashflow to ride it out.
Gross profit margins – pricing your food
Gross margin is the difference between cost of goods sold and revenue, divided by revenue.
Expressed as a percentage, it shows how effectively your restaurant is generating revenue for each pound spent.
Most restaurants aim for a gross profit margin of 65%. So, if it costs you £3.50 to produce a meal, you should sell the dish for £10.
It might look like a decent profit percentage, but a good portion of that 65% is going to be eaten up by your other ongoing expenses.
Securing funding with a restaurant business plan
So, how can this document help you to secure funding?
Investors are looking for unique ideas with high potential to deliver significant returns. They’re also looking for a talented management team with a clear and compelling vision for their business.
A comprehensive business plan should be proof that your business meets these key criteria. If done right, your plan says: “This is why you should invest in my business over any other.”
If you’ve already written your business plan, you could be eligible to win investment from the Start Up Series – a monthly equity seed funding competition that gives early and growth stage businesses the chance to receive up to £150,000 and £250,000 respectively in SEIS or EIS funding.
Veggie hot dog startup Not Dogs secured funding in December 2016, which it used to employ 12 new team members and revamp its Birmingham restaurant.
Writing a business plan for a restaurant: further support
There are countless restaurant-specific templates online that you could base your business plan on.
But there’s no perfect industry standard you have to meet.
Most importantly, your financials must be credible, your goals should be ambitious but achievable, and your plan needs to be comprehensible to someone who isn’t you.
Don’t get too obsessed with meeting targets and sticking rigidly to the original plan. Circumstances are bound to change, so you should allow yourself the freedom to alter your course and bounce back from setbacks with a new approach.
This is never more true than in the restaurant sector, where circumstances can change faster than you can say “ready, steady, cook”.
We have a whole suite of pages on every aspect of starting and running a restaurant, which you can find here:
- How to start a restaurant
- Restaurant marketing
- Restaurant website design
- Restaurant management software