How to Write a Restaurant Business Plan
A solid business plans is the foundation of your restaurant’s success.
- August 20, 2019
- Starting Your Business
- 11 min read
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You could fill a small galaxy with the number of restaurants that have failed because the owners didn’t have a good plan in place. If your dream is to open a restaurant, you can avoid a similar fate by creating a restaurant business plan that serves as your road map to success.
A thorough and well-researched business plan has a number of important benefits. First, you’ll typically need one if you require financing to get your restaurant up and running. Second, a business plan provides a valuable guide of practical steps you can take before opening. And third, if you ever feel as if your restaurant has gone off-plan, you can always refer to your business plan to recalibrate and figure out your next step.
A restaurant business plan is similar to any other business plan, at least in terms of the actual business plan format. With few variations, you’ll want to include the same sections and much of the same information, whether you plan to open an upscale steakhouse, a small diner, a catering business, a cafe, a bakery, a takeout joint or a food truck.
It’s critical your plan covers plenty of territory — it should include everything from the concept and business structure to the restaurant’s sample menu, marketing strategy and operational plan.
The U.S. Small Business Administration (SBA) notes that a good business plan “guides you through each stage of starting and managing your business.”
Any business plan should include industry-specific information that shows you have a thorough knowledge of what it takes to be competitive and profitable.
In the restaurant business, that means not only having expertise in preparing the types of food that will attract customers. It also means knowing how best to reach and serve those customers, price menu items, manage staff, control costs and operate at a profit.
Because the restaurant industry is so diverse, you’ll want to customize your business plan to your restaurant’s individual needs. But just about all restaurant business plans should include the following sections on detail:
- Executive Summary
- Company Overview
- Industry Analysis
- Competitor Analysis
- Marketing Plan
- Business Operation
- Funding Request
- Financial Analysis
The specifics of each section will differ based on factors like the type of restaurant, its size, its staffing needs and location. For example, a French bistro in a pricey urban area will need a different market analysis than a catering business operated from home in the suburbs.
As a general rule, each section should contain detailed information that lets potential lenders and investors know you’ve done your homework on what it takes to succeed in the restaurant industry and makes them feel confident in their prospective investment plans.
Prior to writing your business plan and approaching lenders for money, do as much legwork as possible ahead of time. This will give you a big head start when it comes time to put your plan into action.
Because restaurants have two distinct missions — making money on the business side and preparing food on the creative side — the work you do ahead of time can be divided up into those two categories.
Here are some things all prospective restauranteurs should take care of on the business side before opening a restaurant:
- Make It Official: Register your business as either a sole proprietorship with a DBA, a Limited Liability Company (LLC) or a corporation. This will require picking a name for your business, which isn’t necessarily the same name as your restaurant. For example, your business name might be “Jones Restaurant Group Inc.” while your restaurant name will be something catchier. Make sure your business and restaurant names aren’t already trademarked.
- Get Licensed: Obtain business licenses and permits. Most restaurants need a general business license, liquor license (for those that serve alcohol), food service license, Employee Identification Number (EIN), food handler’s permit and sign permit, according to Food Newsfeed.
- Get Coverage: Research restaurant insurance. Insurance is a key part of opening a restaurant because of the potential for kitchen fires, food poisoning, work injuries and liability tied to customers who are served alcohol and later get into accidents. The types of insurance you should familiarize yourself with are general liability insurance, commercial property insurance, worker’s compensation insurance and liquor liability insurance.
- Get Regulated: Research federal, state and local food service regulations governing food preparation, safety and inspections as well as product labeling.
- Create Agreements: Create shareholders’ and partnership agreements if you plan to operate as a corporation.
Here are some things all prospective restauranteurs should take care of on the creative side before opening a restaurant:
- Define Your Vision: Choose a restaurant concept and brand that includes the type of restaurant (full-service, fast-casual, cafe, etc.), as well as the food it will specialize in, its ambiance, service style and the target market.
- Set the Menu: Develop a menu of basic food items you intend to serve at each meal. Deciding what will be on your menu is important for obvious reasons, as well as in determining equipment and staffing needs. Plus, determining the menu is closely aligned with figuring out the type of clientele you want to attract and how you’ll market to them.
- Find a Spot: Scout locations that fit best with your restaurant concept, menu, clientele and budget, and that also give you the best chance of being competitive against other restaurants in the area. Take note of the location’s access to roads, transit, parking and nearby neighborhoods.
- Build a Team: Analyze staffing needs to ensure you have the right mix and number of people to properly execute your menu and service. If you plan on opening a food truck with just yourself preparing and serving the food, this isn’t as important. But if you have an upscale concept with an emphasis on complex dishes and premium service, then you’ll need to make a list of all the types of workers you’ll need to pull it off. This might require the services of a management team, executive chef, sous chef, prep cooks, bartenders, servers, food runners, bussers and dishwashers.
When you’re ready to move forward with your restaurant business plan, cafe business plan or bakery business plan, put together a template like the one below to ensure it’s structured correctly.
Start with a basic business plan outline and then customize it to your needs. Following are key sections to include:
The executive summary serves as an introduction to your company and its plans for the future. This is where you provide a snapshot of your concept and mission, as well as your performance and growth plans.
Because you want to grab the reader’s attention right upfront, it’s important to use catchy and concise language here and get to the point quickly. Ideally, the executive summary will be no more than one or two pages. Let the reader know right away that you’re an expert on how to open a restaurant and have laid out a clear path to success.
Related: The Best States to Start a Business
In this section, write about the background of your business, your restaurant experience, and your ownership and management structure. Use this section to provide more detail on your mission, concept and brand. Also, provide specifics on the restaurant itself, including its culinary focus, service style, layout, design, location and desired customer experience.
The industry analysis is a critical part of the restaurant business plan because it’s where you get to impress potential lenders and investors with your market knowledge. They’ll want to know that you have a firm grip on industry trends, market demand, consumer spending, labor availability and what works well in your area food-wise.
Be sure to gather plenty of data to back up your points. Good sources include local and state restaurant associations, chambers of commerce and commerce departments.
Your industry analysis should include the following:
- Market Description and Outlook: Provide data on the size of the restaurant industry in your city in terms of dollars spent and the number of eateries. Track how that figure has grown or declined in recent years, and which types of restaurants have performed the best. Include information on which parts of town have seen the most growth/decline in restaurant spending. Also, provide data on how the restaurant industry is projected to grow and evolve over the next five to 10 years based on population and economic trends.
- Target Market: Here’s where you’ll provide more detail on the types of customers you want to attract, the size of the customer base and where they tend to be the most concentrated. Add detail about the locations you’ve scouted and how those locations fit with your target market in terms of nearby businesses and residential areas. For example, if you want to open a restaurant that specializes in authentic Indian food, investors will want to know how many people of Indian ancestry live or work nearby because these people might make up the core of your customer base. You should also include information on if your restaurant will service take-out or delivery orders, and if so, which apps you’ll utilize and what percentage of your business you expect to be delivery versus dine-in.
- Regulatory Environment: The restaurant industry is heavily regulated on the federal, state and local levels in terms of how food is labeled, sourced, stored, handled and prepared. There are also numerous regulations governing cleanliness, workplace safety, labor and alcohol sales. Describe the regulations you’ll need to operate under and how you plan to comply with them.
In the competitor analysis section of the restaurant business plan, you’ll provide an extension of the industry analysis, only with a focus on the local restaurant landscape and how you intend to win market share. Again, you’ll want to demonstrate a deep knowledge of the market by providing data on the number of competitors, their names and locations, their concepts, their clientele and their strengths and weaknesses.
Be mindful of who your real competitors are. If you plan on opening a small sandwich shop with affordable prices, your competition won’t be upscale steak or seafood houses. Instead, focus on other eateries in the area that offer similar menu items at similar prices. Explain how you plan to stand out from the competition in terms of menu options, food quality, service, opening hours and price.
The marketing plan describes your strategy to spread the word about your restaurant and reach potential customers. Provide details on how you plan to promote the business before opening and then build a loyal customer base once it’s up and running. Be specific in terms of how you intend to use advertising, social media, public relations, loyalty programs and promotions to market your restaurant to potential customers.
Depending on the type of business you plan to open, you might consider using a two-tiered approach with your marketing plan:
- Marketing Strategy: In this section of your restaurant business plan, you’ll describe how you intend to use traditional marketing methods to spread the word about your restaurant, such as newspaper or radio ads, social media, direct mail and email marketing. Provide details on your website (yes, you’ll want one) in terms of its design, layout, content and functionality as well as how you plan to feature menu items, market special promotions and take reservations or take-out orders. Also, provide details on alternative means of marketing, such as leveraging local restaurant reviewers and food bloggers or partnering with local delivery companies.
- Sales Strategy: Catering services often use direct sales to land clients, as do restaurants with separate rooms dedicated to private events. If that’s the case with your business, you’ll need to outline the type of sales operation you plan to set up. If you plan to use your own sales team, provide details on who’ll do the job, how they’ll be paid and what kind of sales quotas you’ll implement. Also, provide details on your strategy to find and call prospects. If your plan is to use a third party, identify the companies you might use and how much you’ll budget.
Outline the day-to-day operation of your restaurant in this section of your restaurant business plan. Provide details on all aspects of how you plan to conduct business, including;
- When the restaurant will be open to customers
- When you plan to make food, beverage and supply orders
- Which vendors you plan to use and approximate recurring costs
- When you’ll accept deliveries and how you’ll check them in
- How you’ll track sales and inventory
- Which point-of-sale system you plan to use
- What types of equipment, cookware and other tools the business will need
- When and how you’ll pay vendors
- When and how you’ll collect accounts receivable
- When and how you’ll review operations to make improvements as needed
This is also where you’ll provide details about staffing. For example, you might outline who you plan to hire first and why — then go into detail about the next stages of hiring. You can also include information on training methods you plan to use as well as specific duties and daily checklists for managers, kitchen staff, waitstaff and bar staff.
When it comes to a restaurant business plan, the financial analysis section is another critical part of a well-written business plan because it’s where you show lenders and investors how you plan to spend their money — and eventually repay it. It’s important that you provide as much detail as possible here, beginning with basic financial documents such as a balance sheet, projected profit & loss statement (often called a P&L) and cash flow statement. Include a break-even analysis that estimates how long it will take to break even on the investment.
In addition to these documents, go into greater detail on the following:
- Costs: Begin by detailing projected costs to get the restaurant up and running, including:
- Buying or leasing a space
- Purchasing equipment and supplies
- Paying for permits and licenses
- Hiring and training staff
- Purchasing food and beverages
- Paying for advertising/marketing
Next, provide projected costs to run the business during its first year of operation. For most restaurants, the biggest costs will be payroll and food, so it’s important to provide as much detail as possible on what these costs should be based on the amount of business you expect.
- Revenue: Here is where you’ll provide estimates on how much revenue you expect to generate each week and month based on your market analysis. Detail how much you expect to generate through:
- Food and beverage sales
- Alcohol sales
- Private events
- Ancillary items (e.g. hats, T-shirts, souvenir glasses)
Also, provide details on how you intend to price your food, how those prices compare with competitors and what kinds of margins you’ll need to operate on to turn a profit.
This section is where you’ll provide details on the financing requirements needed to open the restaurant and keep it operating at full strength until you’ve built up enough business that it can operate on its own. Provide specifics on the amount of money needed over the next few years and how it will be spent. Also, specify whether you will require debt or equity, for how long and at what terms.
With your restaurant business plan completed, the next step is to seek funding. One obvious step is to approach traditional lenders such as banks and S&L’s, but they might not be willing to work with new businesses. If you’re looking for a Small Business Administration loan you might be out of luck, too, unless you have three years of business tax return to show them.
As an alternative, consider contacting Seek Capital, which helps startups and new businesses get the funding they require to get their operations off the ground regarless of how new your business is. To get pre-qualified for a restaurant loan, or simply find out more about the choices available, contact Seek Capital today.
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- 10 Tips For Female Entrepreneurs From Women Who Founded Their Own Companies
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