The restaurant industry is one of the most cutthroat on the planet, yet it’s still a highly desirable field to get into. IBISWorld predicts that in 2023, the United States will have 158,642 restaurants open across the country.
If you want yours to be one of them, building a strong business plan is the key to success. Ahead, we’ll share some proven tips for writing a restaurant business plan.
Check it out!
Table of Contents
How to Write a Restaurant Business Plan to Get a Loan
Per restaurant resource Toast, opening a restaurant can cost between $95,000 and $2 million. Many people don’t have that kind of lavish capital just lying around, so they’ll rely on business loans to make their restaurant dreams come true.
Here is how to write your restaurant business plan if you want a loan.
Rent or Buy?
The first consideration is whether you’ll rent a building for your restaurant or purchase one.
Both have their advantages as well as disadvantages.
For example, renting is initially cheaper, but you have no say over how much rental costs can jump or fluctuate from year to year. Eventually, you could get pushed out of the building because you can no longer afford the rising rent.
Renting also typically prohibits you from permanently modifying the building, which can impede your décor options.
Owning a building gives you the peace of mind that it’s yours. You don’t have to stress about changing rent prices, and the cost of your mortgage should be stabler.
You’re also free to modify the building to your heart’s content since it’s yours! You can decorate your restaurant however you wish.
What you do have to worry about is the viability of the area. If other businesses begin shutting down left and right and your restaurant is the lone building standing, then what was once a bustling commerce hub can become a ghost town.
These kinds of factors–which are mainly unavoidable on your part–can skewer your business.
Determine Your Budget
Buying or renting a building is but one small part of restaurant ownership.
You also need to set aside cash for the following:
- Restaurant equipment
- Building décor
- Dining furniture
- Heating and cooling (if it’s not already provided)
- Lighting (if you want to change it)
- Utilities like air conditioning, heating, and electricity
- Point-of-sale software
- PA systems
- Marketing and advertising
- Legal and processing fees
- Business permits and licenses
- Restaurant insurance
- Employee salaries
Calculate your capital
Once you better understand your restaurant budget (do expect it to be high), it’s time to assess how much capital you have and what you can spend on your restaurant.
Restaurants have a high rate of failure, so you don’t want to funnel your life’s savings into the establishment. If your restaurant becomes another statistic, you could be bankrupt or darn near close.
That will make starting the next chapter of your life feel next to impossible, as you’ll be flat broke.
Look into your loan options
You know what kind of money you need to open your restaurant and how much you can afford to spend. Loans and investors will fill in the gap.
Here is an overview of your loan options.
- Brick-and-mortar bank loans: A brick-and-mortar bank loan can take upwards of 60 days for approval. You’re also required to issue collateral, including personal or business collateral. Interest can compound quickly too.
- Alternative loans: An alternative loan from a lender outside a bank is a secondary option. Although not the most popular choice, you’re usually offered more flexible repayment options.
- SBA loans: If yours is a restaurant in the US, you may be eligible for a Small Business Administration loan through the U.S. Small Business Administration. You might wait up to three months to receive your funds, which will be either fixed assets or working capital.
- Business lines of credit: A business line of credit works like a credit card in that you’re issued a spending limit. You could boost your credit if you stay within the limit and pay back what you take out on time.
- Crowdfunding: You can also use a crowdfunding service such as GoFundMe to raise money to open your restaurant. You get to keep nearly all the funds you acquire (the crowdfunding site does get a cut), but you’ll have to go above and beyond to differentiate your campaign from the millions of others on the website. If you don’t, no one will donate.
Apply for a loan
Once you’ve chosen a loan option that gels with the timeframe you need the funds and your ability to repay them, it’s time to apply for a loan and hope for the best.
How to Write an Effective Business Plan for Your Restaurant
Next, let’s go over the elements of a restaurant business plan so you can write one that shines, whether or not you need a loan.
The first is the executive summary, an overview of your business plan that includes every element of your restaurant. The summary is intended for investors and executives. Here are the parts of an executive summary.
- Mission statement: What does your restaurant strive to do? What is its purpose? The mission statement should only be several sentences–not paragraphs–long.
- Company management and history: Next, you can delve deep into the structure of your restaurant, including your location, when you were founded, who founded the establishment, who the owner is, and who the other major stakeholders are. You can also detail their management experience.
- Products or services: This part is easy, as your restaurant sells food and beverages to hungry customers. Don’t just outline what you sell but what kind of need it fulfills. Go deeper beyond a customer’s hunger when detailing the needs fulfilled.
- The market: What does the restaurant market look like at current? You must include a full market analysis in the next part of your summary. This section aims to prove that there’s a market for your restaurant.
- Competitive advantages: Next, you’ll detail your competitive advantages, including how you stand head and shoulders above your competitors and all your strengths.
- Financial projections: How much money do you think your restaurant will earn you in one year? What about three or five years? You want to project financial earnings at least that far out.
- Financial requirements: What kind of capital does your restaurant require to get off the ground? You must include this information if your restaurant is still in its first year.
Outside of your executive summary, you can go into more detail about your restaurant in the company overview section of your business plan.
This is where you want to lay out the full structure of your restaurant, including who occupies which roles. You should also include background on your restaurant, your target audience, and what your restaurant does.
An industry analysis delves deep into the hospitality field. You can produce the analysis locally, nationally, or even worldwide.
Your analysis should include this information.
- Industry summary: From industrywide revenue projections to economic changes, growth patterns, innovations, news, and trends, it should all go into your industry summary.
- Industry forecasting: Using your information, predict what the restaurant industry will look like five years, 10 years, and 20 years from now.
- Industry government regulations: Which emerging or current government regulations are sure to affect the restaurant industry? Include them in this section.
- Unique industry position: Now you can write a blurb about the spot that your restaurant uniquely occupies in the hospitality industry.
- Risks and limitations: What risks and negatives can derail or seriously impact the restaurant industry? You’ll include a section on these limitations in your industry analysis.
The last part of a successful restaurant business plan is a customer analysis. This analysis provides insights in the same vein as an industry analysis but with a focus exclusively on your audience.
Here’s what to include in your report.
- Buying criteria: What psychographics inspire your customers to make the decisions they do? Customer analyses focus on four criteria: prestige, convenience, quality, and pricing.
- Purchase patterns and process: If a customer has an existing purchase pattern, you can evaluate it now. Then you can answer questions like what inspires their decision-making, what kind of information goes into their choices, what their purchase timeline is, and who has authority in decision-making.
- Customer demographics: You should also include a section on the demographics of your restaurant customers, including age, location, gender, occupation, job title, income, marital status, and number of children.
The restaurant industry requires a business plan if you hope to succeed, as it’s an extremely competitive industry with lots of room for failure.
Whether you’re a fast-casual establishment, an organic restaurant, or a different type of establishment altogether, this article can serve as a guide to begin getting things done.
Good luck, and don’t forget to find the perfect restaurant CRM software.