How To

How to create a Restaurant Business Plan

Today we’re going to talk about restaurant business plans here at and how to maximize the chances of success for your restaurant business plan. Whether you’re an entrepreneur or a chef planning to put up a restaurant, you will know that every restaurant business starts off with a very clear vision of what the restaurant will be like.


You probably have a good idea of what the name of the restaurant will be, what type of food you’ll sell, how big the restaurant is, or even what the décor will be like. In short, you have a very good idea of what the restaurant will feel like when you walk in the door. You’ll also have a very good idea of where you like the restaurant to be located and you might have considered what the wine selection will be. All these questions are great because they start off your creative process and help you formulate your vision; but we have to turn that vision into a reality, that’s what we’re going to discuss today at


Right now, you probably have a collection of ideas you’re dreaming about in the hopes of starting your restaurant business. First things first, you need a business plan to formulate a business strategy that would attract the funding you need to get your business off the ground. This is how you turn your restaurant dream into a reality.


So how do we approach a restaurant business plan? For sure, it should be in the following sections:

Executive summary – is a one-page document which summarizes all the analysis in your business plan. This document should be no more than two pages. It should be short, concise and compelling because it’s all the investor and the financier are going to read. For that reason, we do this last after we’ve done the rest of the analysis.


Market and Customer Analysis – this is to ensure that we have a relevant market and that the business model will meet the needs of the customer. We also need to discover what the competitive landscape is so that we can find out if there are any weaknesses in their business model to help us compete more successfully within the market we have selected. Also, a marketing strategy will tell us how we’re going to bring a product to the market and how we’re going to promote it to our customer base.


Operational action plan – is essentially a blueprint to how you’re going to get your business off the ground.


Management Team – you have to discuss with your management team: that would be you and your team, and how you are qualified to lead the business to success.


Financial Plan – and finally, you need a financial plan to help you make the right financial decisions for that restaurant dream to become a reality.


For the Market and Customer Analysis, on this section of your business plan, you need to determine the overall market size in terms of dollars per annum and then identify your relevant market within that market, that would be the general geography of your trading.

We need to identify any current traits within your market in terms of what people want and establish what the dominant demographic is in your area in terms of what the customers are (example: age, gender, earnings and spending habits, and information on the average spend per person when dining out). This allows you to identify your target customer base which enables you to fine-tune your business model to maximize sales.


We have to move on to the competition. We need to know how many direct competitors there are, that’s because the competitors will be doing exactly what you are doing. We need to find out what their business models are and how they actually conduct their business and identify the strengths and weaknesses within that model so that we can modify and upgrade our own business model.


Anyhow, we need to establish how well we will do to compete in that market. We do this by identifying our unique selling proposition: So what makes your restaurant special? Also some analysis on how competitive the market is in terms of how they will react to a new entrant in the market, in terms of price or in changing their business model.


Once we identify the competition, we need to formulate a marketing strategy and that’s basically how you’re going to promote your restaurant. That could be through a unique logo and your location in terms of maximizing foot traffic; and how you can advertise the restaurant. With that, this can be done online, through radio, in the paper or through any other medium.


For operational strategy, if you’re just starting a new restaurant, this is a detailed action plan in terms of how you’re going to recruit staff, import stuff you need, obtain any licenses you need to acquire in terms of food and alcohol.


You need to figure out who’s going to be responsible for these activities and a detailed action plan to explain how they will be achieved, who will achieve them, and in what time frame. Bankers and investors see this is a requirement because it helps to mitigate risks in new start-up businesses.


Finally we have the financial plan. Your financial plan should have a start-up budget spreadsheet detailing all the expenses that you incurred and the cost of all assets that you need to acquire in order to get your restaurant off the ground. Now the hospitality sector is notorious for hidden costs so when you do your start-up budget, be you sure that you leave a sufficient contingency to cover any cost overruns during the start-up period.


We also have to have a forecast profit and loss balance sheet and cash flow to show the financial position of the restaurant over the first five years and also a detailed cash flow and working capital forecasts to detail exactly how much cash is going to be in the business and how it’s going to be appropriated as we trade. We need to look specifically at the average spent per cover or per table and do a scenario analysis on that to see how it will affect the sales and detail the credit terms with our suppliers which will directly affect the working capital position of the restaurant.

We also need to think in detail about stock levels that we will have and how we’re going to manage that, also the labor costs and how you effectively manage the fixed cost attached to the restaurant. We need to do a gross margin analysis on all food and all alcohol or drinks that we sell in the restaurant in order to effectively optimize our menu to make sure that we get the highest margin per sale.


It’s also important to do a break-even analysis in your financial plan to detail to any investor financing your venture exactly how many sales you have to make before you turn a profit. If you are seeking funding, you need to detail what the sources and uses will be of that funding source just so you can see exactly where you’re going to spend the money on. This is a very simple and brief financial plan. If you need any further help or assistance with your restaurant business plan, please visit us at