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How do you write a proper restaurant business plan?
Do I even need one before I start my restaurant?
These are two very common questions I get in my email.
One mistake I see budding food entrepreneurs make is not having a business plan. It is an integral activity and document for your business.
In this post, I’m going to share a workbook with you that will help you create your restaurant business plan, which will help you have more clarity on your business.
To get things started, we need to understand why is writing a business plan super important and essential for your success.
Why Have A Business Plan
1.) To Help You Raise Funds
The number one reason why you should have a business plan is to help your chances to raise funds.
If you’re looking to get funding, investors need to have the confidence in giving you the money in the first place.
This means having confidence in YOU to use the money effectively, build a successful business with it, and provide them a return.
Having a document that clearly shows your abilities, experience, understanding of the market, and the appropriate milestones is how investors, banks, and the government would be willing to fork over their money to you.
2.) To Attract Business Partners
A lot of people are looking for business partners.
Specifically, partners who are talented, hustle as much as you do, and someone to share the workload.
But it’s very difficult to translate your grand vision unless you’re a very organized person. This ends up getting interest from people who may imagine the business in a smaller or larger scale manner.
By having a business plan, you can communicate your vision and the business opportunity in full. It would then attract the right partners who have a higher chance of being aligned with what you’re looking for.
3.) Clarity For You
So many people get into business without writing a business plan and what does that do?
It blindsides them later. It exposes them to what they don’t know at often the worst times.
You would end up hitting all these pitfalls, which can be avoided if only you planned for it, if only you read this post and did the work.
Although there will always be issues that you can’t account for, your initial research will help provide a good foundation in clearing up major issues.
It will also pave the way for you to look back on when you’re 6 months in, 1 year in, or 5 years in. With so many moving parts in a business, it’s easy to get lost and even lose your way.
Looking back at your business plan can help keep you grounded and continue to set forth on the vision you initially set out.
We talked about why we need a business plan and why it’s essential for your success. Now we’re going to be talking about how you’re going to write that business plan so then now you can raise your funds, you can find the right partners, and have clarity for your business.
Let’s dive right in.
Side note: Everything that I’m sharing is just basic elements that are essential for your business plan. They are not the only type of things that you want to consider. The terminology might be different depending on where you are, which country you’re in, which is the reason why only use this as a reference and tailor it specifically to your area and your needs.
Restaurant Business Plan Workbook
Essential Business Plan Elements
1.) Restaurant Concept
The first element that you should definitely consider is your concept.
What restaurant concept are you trying to bring to the world?
What concept are you trying to offer your customers?
Last time, we talked about the four different types of restaurant concepts for your business.
In the business plan, you should be able to identify:
- the type of business and the type of concept that you’re trying to bring to the world,
- what problem it solves in the marketplace,
- why you are the one that is going to solve this problem,
- why you are uniquely capable of solving this problem,
- why your customers should be buying from you.
This concept is super important and it should be only a page long. It should cut right to the chase because you only have two or three minutes to capture your investor’s or partner’s attention.
If your concept is like a 10 page long essay, they’re not going to read it. It’s going to be boring.
You need to identify where you see an opportunity, why you are suitable, and how are you going to be able to fulfill and close that gap.
If I were to rewrite the business plan for 720 Sweets, our ice cream shop, we would identify this as a fast-paced food concept. A concept that requires minimal investment because we don’t need structural changes. We don’t need to install a hooded fan, which is something that a full-scale restaurant would need.
Our shop is only 500 square feet, a small little place that requires minimal investment for it to be up and running. That itself may be suitable for one investor, might not be suitable for another investor because of the potential revenue that they can bring.
What problem am I trying to solve?
With 720 Sweets, we are located in an area that does not have a lot of novel places to hang out for younger adults, which is the reason why we created our shop in this particular area. Then that way, we can fulfill that gap.
Why is it that we have the ability to solve this problem?
It is because of my background from being able to travel across Asia, seeing different recipes and seeing different presentations. I’m able to bring these ideas back to Vancouver and offer it to university kids who find this stuff very intriguing and find it very appealing for them to consume.
2.) Sample Menu
Your sample menu should consist of items that you propose to serve your customers.
Why is it that you’re offering this specific item? What need does it fulfill?
What’s its cost? How much are you planning to retail it for?
You’re going to build this whole menu out so you can understand what type of offering that you’re serving your customer and what needs you’re fulfilling.
By you doing that, you have a very clear idea of whether this menu is going to work or not, because with this menu you can go out there and survey people that are around the block. Survey whether this would fit their profile, whether this is something they need and this is something that they want.
Then you can include the cost of the item and how much you plan on retailing it for. That way, you can see what margins you can hit.
Without proposing a menu, we wouldn’t know the numbers. We wouldn’t know whether our customers want it.
Those are two very dangerous elements to be playing with.
For 720 Sweets, we went out to survey people around the neighbourhood three months before we opened.
We asked them:
- what kind of flavours they’re looking for,
- how much they’re willing to spend and
- seeing how much other dessert shops in the area are charging
Not only did we get a clear understanding of what people in the area wanted (in terms of flavours and pricing), it helped us see if there is actual interest in what we were trying to create.
3.) Your Team
What is the background of your management team?
What kind of resources you have that may give you the upper hand?
What are some of your backgrounds and relevant experience?
All of this helps in giving confidence to your investors. It lets them see how you are aware of your advantages, disadvantages and unique skillsets to make the business a success.
It lets them know the business is in good hands.
For example, my partner, Tim, runs one of the biggest wholesalers for bubble tea supplies in Western Canada. When we put his name down and show his background, it instantly adds credibility to the parties we are raising funds from. If we were raising funds from angel investors or venture capitalists, it becomes a really big selling point when we have a supplier who is part of our partner team.
You want people to know that you have the background, the ability, and the resources that other people don’t have.
If you don’t have much experience, that’s okay. You need to try your best to write down what makes you different. What gives you a competitive edge?
You’re trying to wow them.
Because the more they get wowed, the more money you’ll raise, the higher the chances that you’ll get approved for your loan and attract the right team and the right talent.
When drafting my business plan, I want to be able to showcase and flex in front of them and show them that I know what I’m doing. This means the businesses I’ve worked on for the last 10 years and even the awards I’ve won.
As I mentioned, I also put my partner, Tim, which adds a lot of credibility to our investors and partners that we’re speaking to. This itself acts as a really great positioning piece for your business.
The whole point of creating a business plan is to be able to show your vision with the people you’re raising funds from and the people that you want to join your team.
The more that you’re able to do that, the more they can see your vision, and the more money they’re going to give you or join your team.
That’s why your design is super important. You need to be meticulous with your ability to transfer what you have and what you see to these different types of people.
If you have the ability and the resources to hire a drafting firm or interior design firm, they’re going to be able to generate all these designs for you.
They’re going to talk to you about your vision, type of material you want to use, the kind of feeling you want to transpire, and what kind of experience you want to give your customers.
They’re going to be able to create designs to showcase how it’s going to look like and to bring your vision into reality.
But not a lot of people have the budget to hire an internal designer.
Online marketplaces like Upwork or Fiverr may be decent places then if your budget is tight. Use them to employ different types of talent to be able to do this for you.
However, you’ll need to keep a closer eye on things because the quality of work isn’t as high on there.
For 720 Sweets, it was the number one thing we relied on when we were building out franchises. Having beautiful designs to show our potential franchisees and investors of what their shop could look like was crucial.
We were able to secure different resources and rounds of fundings partly because of the amazing designs.
5.) Target Market
The fifth element for your business plan is the target market.
You need to be able to identify who is it specifically you’re trying to serve.
Why is it that they want to shop from your place?
What problem are you trying to solve?
Are you trying to serve that 30-year-old that’s hustling in their job and they’re just trying to get something quick to go, and to eat, and something healthy?
Well, if you’re offering something that is going to take 40 minutes to make, that is unhealthy, that’s difficult to eat on the go, then that doesn’t meet the criteria.
It is the reason why you need to identify very specifically who is it that you’re trying to serve. By you doing that, you can profile their needs. You can profile what they like, how old they are, what kind of income they have, what is it that they’re trying to solve.
By you doing that, you can cater the whole experience to them and solve that one problem they are facing.
“Hey, Wilson, what if I only offer everything to this one customer that you’re talking to? Wouldn’t I be cutting out the rest of the people?”
The answer is no.
Just because you’re offering and catering your experience to this one demographic, that doesn’t cut out everyone else. People will still consume from you. People will still understand what you’re trying to offer.
You’re beating out the noise.
You don’t want to be vanilla in this trade. You want to be very, very specific. You want to solve that need.
By you doing that, you can now stand out from the crowd and that’s the reason why you need to identify your target demographics.
With 720 Sweets, it was important for us to identify our target demographic.
We’re serving Michelle.
Michelle is an 18-year-old that goes to university. She values the goodness of life. She loves social media, experiencing the world, and she has a purpose to what she wants to do in life.
Her disposable income is around $8,000 to $10,000 and she’s in her second year of university. She loves experiencing food with her friends and she loves innovative items, trendy items.
That’s our target demographic.
By doing that, we’re actually able to attract a bunch of Michelles to purchase from us.
We were able to gain a lot of traction because we were so specific with the experience that we were trying to deliver.
The next element of your business plan is the location. You have to identify the type of location that is the most suitable for your food concept.
Why is that the case?
There’s a big difference between a destination location versus a high traffic location. The difference is based on the foot traffic and the rent.
A lot of people make the mistake of instantly thinking about a spot with the most foot traffic.
Unfortunately, in the real world out there, budget is always a constraint, which is a reason why you need to identify the location that is best suited for your offering.
If you do choose a destination location, you need to consider how accessible it is for your target demographic. If you’re catering to high school students, you’ll want to make sure it is easy to get to by bus. Likewise if you’re targeting more luxurious crowd, you’ll want to make sure there is ample parking spots and even valet.
Other characteristics you need to be wary of:
- How much crime is happening around that area? Would it scare off our potential customers?
- What’s the visibility of the shop like? Is there a giant tree blocking the front?
- Is there a sense of community in the area?
The more specific that you can identify the nuances of a location, the easier it is to fully understand whether that location is a good fit or not for the concept that you’re trying to bring to the world.
Because if it’s confusing, then most likely you’re not going to get the funding or stellar partner you’re hoping for.
That’s the reason why with 720 Sweets, we purposely chose a destination location, which is a 15 minutes away bus ride from the nearby university. It was an accessible spot for our target audience.
The shop is only 500 square feet, which makes the rent super affordable.
When you scan the area, there are a lot of food establishments but very few dessert shops. This presented a good opportunity to fill that void.
7.) SWOT Analysis
I know a lot of people talk about SWOT analysis, and it may seem like a cliche, but it is super important for us to not be blindsided.
What is a SWOT analysis?
SWOT analysis stands for strength, weakness, opportunity, and threats.
What advantage does your company have over other people?
Do you have a partner that is supplying ingredients to you? This ensures that your cost of goods sold (COGS) are always at cost and way lower than what other people have to pay.
Or have you been studying the vegan industry for the last 10 years and you have this crazy recipe that no one has?
These are the strengths that you have over your competitors. You need to identify that.
What disadvantages do you have compared to your competitors?
For example, you could be offering a vegan recipe to the world. However, is vegan super popular in your marketplace?
It might not be the mainstream item that people are ordering. That really limits your type of people that are attracted to your business. It limits your potential for revenue because your offering is also limited to a certain amount of customer demographic.
Just because it is a weakness doesn’t mean you shouldn’t take that away from your plan.
Your investors and your partners should know that you are living in the real world, that you understand what your weaknesses are.
Just because you have disadvantages doesn’t mean that you’re bound to fail. It just means that it’s something to be aware of.
What is an opportunity in the food market nowadays?
Imagine you’re looking to start a new plant-based restaurant at a neighbourhood where this type of cuisine is still quite new. The opportunity lies in showing people that consumption of plant-based items is on the rise and is beneficial for various reason. You become the forefront of a trend that’s picking up like crazy.
That becomes an opportunity for what you’re trying to offer.
As I mentioned previously, there was a massive gap in the Vancouver dessert market. There were very few visually appealing and innovative items that appealed to young millennials. And the neighbourhood for our planned flagship store didn’t have a spot for people to just hang out at. That was our opportunity to fill that gap.
What are some of the threats to the survivability of your business?
If you’re in an industry that is on a downturn, the market itself becomes a threat. For instance, if you’re offering extremely sugary and fatty items, you’ll be hard-pressed in North America as people look to cut down on those types of food and be more health-conscious.
Aside from the actual market trends, other threats include:
- Competitors: Can a bigger and more established brand wipe your business out by just copying you?
- Talent: Will you go out of business if you can’t find specifically skilled staff?
- Price: Would your business be viable if the price of a core ingredient hikes up? (this is particularly dangerous for F&B businesses who rely on a single core item)
- Approvals: Is there a chance that something may not be approved? IE. building permit, food regulation, city regulation
- Weather: Will the weather affect the success of your business? IE. seasonality affects frozen dessert shops
- Customer perception: Is there a negative perception about the items you serve, your cuisine, or ingredients? Ie. fresh-pressed juice is considered expensive and may ward off people.
These are some of the items that you want to consider when you’re creating your SWOT analysis. The more thorough and the more descriptive they are, the better because it shows your investors that you are analytical and you don’t leave anything unturned.
In turn, shows that you’re much more sophisticated and it shows that you’re much more prepared to handle what is to come.
How do you plan on bringing your brand, your offering to the market?
Do you plan on partnering up with food delivery services?
Or do you plan on collaborating with different clubs and offering them discounts to bring in loads of people into your restaurant?
Whatever your marketing plan is, you need to identify this plan so your investors and partners know how you’re going to become successful.
Marketing is a very broad category and touches a lot of parts in a business. You want to consider your major marketing channels and how you’ll get people through the doors.
Are you going to be leaving brochures at office restaurants or office buildings all the time?
Or are you going to be planning on running Facebook ads?
What is your marketing plan?
What specific things are you going to be doing to bring your business to the next level?
For 720 Sweets, a big part of our marketing came down to collaboration.
We understood that our target demographic is looking for something new all the time. They want to be the first ones to show their friends and tell their friends the latest trends.
Collaboration with different companies allows them to tell their friends all the good stuff that’s happening. In turn, it allows our brand to be exposed to them over and over again.
Our latest collaboration with Nespresso and Vitasoy became such a big talking point with our customers. This is a great marketing channel specifically for us.
You need to understand and identify what type of marketing and strategies you plan on doing to bring your restaurant to the next level.
Last but not least, the financials.
Never ever leave this part out in your business plan. It’s something that shows your investors that you know what you’re talking about.
Just because you don’t know the financials, just because you don’t know how your performance is going to do, does not mean you shouldn’t budget. It does not mean you shouldn’t project.
The more different line items you can account for, the more you can actually project, and the more thorough you are, the better it is for you to be able to raise funds.
It becomes way easier it is for you to be able to justify things when you have the numbers.
How do you even come up with numbers to project when you even haven’t opened up your restaurant?
Sometimes we can become very optimistic. Sometimes we’re very pessimistic. Where will we be able to draw these numbers from?
By conducting surveys and doing your homework.
Now, what do I mean by that?
Doing Your Homework
Go to your neighbour’s restaurant and sit there with a clicker.
Every time someone walks in, you click and you count how many people are walking in.
Every time people order, see what they’re offering, see what they are ordering, and jot down how much that item is. Are they ordering a drink with it? Are they ordering dessert?
After you’ve done that multiple times, you can calculate an average of how much revenue that this place is generating on an hourly basis.
Go in morning, go at lunch, go during dinner, go during a weekday, go during a weekend. This will give you a clear idea of how they’re performing on a weekly basis.
From that, you can project that if and when you can perform as well as this restaurant, your numbers would look similar.
Use those projections to project forecast how you’ll do in the first year, the next three years, and the next five years.
Remember, these are simply projections.
How impressed would the bank and investors be if you told them that you went to your competitor’s restaurant and you sat there for a week just to get these numbers?
They’re going to be so impressed because you’re willing to do your homework.
You can actually give them something more accurate to base off. They understand that these are not real numbers, but it shows them that you’re willing to prove how this business would become successful when you’ve put everything in place.
Determining Startup Costs
You need to identify what you’re purchasing.
You need to identify the equipment that you’re purchasing, your renovation costs, the design costs, the build-out costs. You need to identify everything in this plan.
That way, your investors would know how much money you need and why is it that you’re asking for 200K. They’ll also have a better understanding of how you plan on using this money.
Ask Peers For Help
If you’re confused about how to do projections, consider asking your accountant for templates and what are some costs to consider.
Also ask other entrepreneurs, how their numbers are looking like. This is how I was able to get a lot of insight to consider before engaging in business.
There you go.
These are the elements you would want to consider when building out your business plan for your restaurant.
It is super imperative for you to create this business plan.
It is so important, not just because you want to raise funds with it, not just because you want to find partners with it, but it is so important for you to have clarity in how you want to build your business.
Throughout this whole journey, it is so difficult and there are so many different moving parts.
If you don’t have anything to reference back to see what you envision and what you have planned out right from the beginning, you’re going to get lost throughout the way.
It’s going to be very tough for you to backtrack and you won’t know where you’re going if you don’t have a map, which is a reason why you need this business plan.
You’re going to have milestones. You’re going to have identified what you’re trying to create right from the get-go.
To have that clarity is going to be priceless for your own experience.
Restaurant Business Plan Workbook
Would you care if your staff stole a meal from you?
How about $5 from the pool tip? What if it was a hundred dollars?
Employee theft usually starts really small and escalates quickly.
So if you don’t pay attention and stop it right from the beginning, then it’s going to cost you a lot of money.
If you want to stop people from stealing from you, you need to know when and how they’re stealing from you.
Detecting Employee Theft
1.) Looking At Your P&L
The first step is to study your profit and loss statement (P&L).
It is important and essential for your success as a business owner. You’ve got to have proper bookkeeping practice and have it updated every month.
If you’re operating your business without understanding how you’re doing on a monthly basis, you’re basically working in the blind. You don’t know which levers to pull to have more profit at the end of the year.
A very simple number to keep an eye on is the food costs in relation to your revenue.
As a general rule of thumb, food cost should not account for more than 30%. If your restaurant makes $100,000, then $30,000 should be accounted for your food cost.
Food cost includes ingredients, to spoilage, to anything that is in direct relationship into how the food is produced.
If every month your food cost percentage is floating around 30%, and all of a sudden you hire a new manager and that food percentage increases to 40%, then you know something is wrong.
That doesn’t entirely mean that they’re stealing from you.
Maybe they’ve been comping a lot more to the customers to create a better customer experience, or they’re not managing food spoilage properly.
But this gives us the opportunity to dig deeper and investigate further what is going on.
This is the easiest way for you to detect anything that is going wrong.
2.) Look At Your Cash Register
If your P&Ls are not up to date, you could look at it is your cash register.
There are many patterns where you can observe from your staff’s cash register. Some people might be spot on, others might have a few dollars up, or a few dollars lower.
Keep an eye out on consistent patterns that are overage: that’s when they’re always $5 or $10 over when balancing their cash register.
It is a sign that something fishy is going on.
What most likely is happening: your staff is probably comping meals, voiding checks and then pocketing the cash. They may be tallying this in their head and throughout the night they lose count. They much rather be over than under.
Which is the reason why if there is consistent overage with your staff’s cash count and cash register, then something fishy is definitely going on.
Preventing Employee Theft
If you believe something fishy actually going on and that people are stealing from you, we’re going to be looking at ways to prevent this from happening.
1.) Have Each Order Require A Ticket
Make sure the kitchen does not produce any food or the bar does not give out any drinks until a ticket is issued. A ticket is needed before any products are made.
A lot of staff, take advantage of the ambiguity from the front of house to the back of house. And through this ambiguity, they’re able to take advantage and steal from you.
Make sure that your staff understands that there are systems in place. If there’s no ticket, nothing is being made.
This would save you thousands of dollars.
2.) Place Sole Responsibility
Make sure that whoever is touching the cash is responsible for that cash register only.
Because if there are multiple people touching the cash and the cash register, there’s ambiguity. They can blame it on other people. It becomes harder to isolate the cause.
So the best way to prevent this from happening is to make sure that each person is in charge of their own cash.
It also decreases the chance of people making dumb decisions.
3.) Random Spot Checks
If a staff is stealing from you, they are usually keeping a running tally throughout the night.
And then afterward, they’re going to pocket the cash.
So if in the middle of the shift, you do a random spot check with them, with their cash register, with their pockets and everything, it’s going to throw them completely off.
And they know for a fact that it’s much more riskier, and that you have these policies in place.
4.) Document All Discrepancies
You want to document every overage and underage and make the staff sign it.
This acts as a very good deterrent for your staff because it makes the whole process very legitimate.
It helps them understand that you are paying attention and that you do care about any discrepancies.
5.) Install Surveillance
A simple fix: install cameras in your restaurant.
Most businesses already have cameras situated around the exterior and interior to protect themselves from criminal acts conducted by strangers.
But this also acts as a great deterrent for internal staff as well.
6.) Audit Comps
Audit the comp and void function in your POS system.
Pull up a report every single night and actually do spot checks of how many items were being comped and how many items are being voided.
This is a common way people use to steal from you, when they comp items and then they pocket the cash. It is super easy for people to take advantage of.
Printing out these reports itself acts as a deterrence for people and your staff to know that you pay attention to these things.
7.) Zero Tolerance Policy
In the beginning of each employment, I get all my staff to sign this policy, mainly because it acts as a great deterrent and lets them understand the gravity of the situation.
If for whatever reason they do decide to steal from us, we will terminate them immediately and we will be pressing criminal charges.
They understand the gravity of the situation, and they will not dare to steal from you when you have these policies in place.
Not Theft, But Common Errors
1.) Servers Miscounting
A scenario that would also throw the numbers off is if your server is poor at counting and they’re always giving out either extra bills or they’re receiving extra bills.
2.) POS Is Complicated
If your POS system is really complicated, it could cause a lot of problems. For instance, when there’s a rush and your staff is trying to figure out how to balance the math on the spot, things could get messy.
They might be voiding different meals just to make sure that everything adds up. And at the end of the shift, they forget what was happening because they were in such a rush.
It could be when people are giving them, let’s say for example $50 and they don’t want the change back. And when the server just wants $10 instead of $10.52 cents in tips, they might just take the $10 and leave the $52 in the pot. And at the end of the day, and it doesn’t balance out.
This is due to pure laziness and just really poor practices. But at the end of the day, they might not be stealing from you.
What Does This All Mean?
If you are suspecting people from stealing from you, the first step is to have a meeting with the suspect and ask them to explain.
Let them come clean.
Never accuse them of stealing from you without any solid proof. Ask them to explain what happened and present your facts.
Don’t detain and restrain them if you have suspected them of stealing. It’s against the law to do that. You don’t want to defame them because they can press charges on you. Nor should you publicize they’re stealing from you. If you do not have sufficient proof, they can also press charges for slander.
At the end of the day, is it worth pursuing a lawsuit if they’re only stealing $50 or $100 from you?
Is it worth your time? Is it worth your effort?
Is it worth the team morale to go down because of one individual’s actions?
You rather want to have the preventive measures and policies in place.
As a professional company, your staff would not hate you for that, if all these are given to them upfront.
They will actually learn to appreciate and respect that, and you’re going to be able to build a great team.
So if you communicate with your team, they will be empathetic in your effort to stop theft and even be willing to be your eyes and ears – which is helpful when you are an unlucky victim of employee theft.