Deconstruct Your Restaurant Business Plan to Avoid First-Year Failure

By Doug Radkey, Foodable Industry Expert

It’s no secret. The failure rate among restaurant startups is significantly higher than many other industries. The question is: How can you position yourself to increase your chances for long-term success? The answer starts with having a sound business plan.

The old adage “Failing to plan is planning to fail” has never been more true. Many people think that a business plan is only used to obtain funding, and that couldn’t be further from the truth. A business plan, when properly written, will also guide you through the start-up stages and prepare you for the challenges you’re about to face.

Would you build a house without a blueprint? Let’s hope your answer was an emphatic no. Then why build a restaurant without a business plan? A restaurant is a business and needs to be thought of as that, first and foremost. However, there are components of a restaurant-focused business plan that is different than that of a traditional “small business” business plan. Let’s have a look!

Executive Summary

Write this section last. Be creative with your writing and tell a story that will leave future readers intrigued. Outline the overall concept, food and beverage focal points, key market statistics, and financial objectives.

Business Objectives

Describe what will define your restaurant or bar. List three to five first-year goals and list three to five long-term goals. What action will be done to reach these goals? Use the SMART acronym when describing each of your goals (Specific, Measurable, Attainable, Relevant, Timely) to hold yourself accountable.

Competitive Landscape

Describe your top five competitors plus what advantages and disadvantages you will have in terms of marketing, food and beverage, service, and other areas of concern. From there, outline three to four keys to success that will make your restaurant competitive and successful long-term.

SWOT Analysis

A SWOT (Strengths, Weaknesses, Opportunities, Threats) evaluation is a popular tool to specify the objective of the restaurant venture while identifying the internal and external factors that are favorable and unfavorable to achieving your specific objectives. Try to list four to five for each section at minimum. Consider using the SWOT evaluation against each competitor, as well. It is also a  great exercise to use on yourself as an owner — what are your strengths and weaknesses?

Operational Analysis

Outline your location specifics and/or needs. To name a few, this would include total square feet, kitchen size, front-of-house size, total occupancy, washroom facilities, square feet per customer, summary of leasing requirements, and customer parking. You also want to describe hours of operation, training programs, certificates needed, and permits required for start-up and day-to-day.

Personnel Profile

Describe the ownership team while including their qualifications and background. Outline the management team, their roles, and their salaries. Outline the remainder of the team, both FOH and BOH, to determine hiring requirements such skill-set needs and wages over the next three years. With this data, you can estimate the necessary working hours per week and your future labor costs.

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Menu Development

You may not have your entire menu formulated at this point, but you should have the concept and key items completed. Outline your menu, describing core items in detail, while describing potential suppliers, cost objectives, supplier deliveries, quality control, pricing strategy, and average revenue per customer. You also want to outline specific equipment needs, costs, and equipment specs needed to execute your first menu.

Industry Trends

Look at industry trends for your region, service style, and overall concept. Discuss flavors, technology, growth patterns, and more. Combine as much detail as possible, and as always, outline your sources of information.

Market Summary

Arguably, this is one of the most important sections of the business plan. Define your market segments, overall demographics, hyper-local analysis (5-10 mile radius), market growth patterns, market spending habits, and much more. Use graphs and charts to describe your collected data.

Brand Development

How do you want your customers to remember you and your brand by? List out colors, fonts, atmosphere, customer experiences, and the development of stories you want to see come to life at your restaurant.  

Marketing Plan

Using the previous data and knowing your target customer(s), describe how you will generate awareness, maintain and increase your average revenue per customer over time, and generate repeat business. How will you position your restaurant or bar within the market? What external tactics will you use for promotions? What internal tactics will you use for promotions? Describe your perception of value. Outline your marketing goals and proposed budget for start-up and ongoing campaigns.

Sales Plan

Working alongside your marketing strategies, what sales objectives and tactics will you use? Will you have a gift card program? Will you have day-break menus? What programs will you use to develop your business? Will you use online ordering? What will you do to combat typical slow periods within the industry?

Business Development

Starting a restaurant is a monumental undertaking and it can be intimidating to do it alone. In this section, set up a timetable of milestones for completing tasks and their proposed completion dates, as well as who should be responsible for these goals. These can include any growth goals, such as franchising in the future or potential exit strategies.

Financial Highlights

Now the “fun” begins. Outline all of your start-up costs in detail, complete your opening balance sheet, and define your financial management strategies. Describe the investor/lender strategy plus return on investment.

Financial Analysis

In this section, describe your key performance indicators, financial goals, and financial assumptions. Complete your breakeven analysis, sensitivity analysis, RevPASH (Revenue Per Available Seat Hour) analysis, and three-year financial projections. Complete these month-by-month in the first year and quarter-by-quarter in years two and three with a three-year financial summary (year-by-year).

Remember, your business plan should be revised as you move along — this is why many call it a “living document.” This minimum 30-40-page document should be reviewed monthly, adjusted accordingly, and measured against results.