If you’re serious about opening a restaurant, you’ll have to draft up a formal and accurate business plan to pitch to banks, investors, and even potential employees.
I won’t lie—writing a formal business plan isn’t exactly a breeze. It takes a lot of time, effort, dedication, knowledge, and passion to get it right. But if starting a restaurant is your goal, a business plan is one of the first steps toward reaching it.
There’s scientific evidence that businesses that plan even grow faster. But, you probably only need a formal business plan if you’re seeking investment funding from an angel investor or a loan from a bank. If you don’t need either of those, putting together a strategic Lean Plan that you can update often and that takes less time to write and maintain is probably a better use of your time.
The reality is that 26 percent of restaurants fail within one year, and 60 percent fail within three. If you want to beat the odds, you need to be prepared for running your restaurant long before the doors open. You can set a clear vision for your restaurant’s path to success with a business plan.
Unfortunately, you can easily make a lot of mistakes when writing up your first business plan. To help you avoid those errors, take a look at some of the most common, and how you can avoid making them yourself.
Mistake #1: Putting in minimal effort
A restaurant business plan is not the midterm essay you wrote in college for that class you didn’t care about. This document actually matters. As such, you can’t push it off until the last minute, half-ass it, and expect good results.
Serious investors will recognize a poorly-constructed business plan when they see one. They’ve earned their money because they know which kinds of businesses (and business leaders) turn a profit and which ones do not. If they look at your business plan (or listen to your investor pitch) and can tell you didn’t put much effort into it, they’ll laugh you right out the door—as they should.
Your restaurant business plan is the key to opening your doors. If you know you want to run a restaurant, prove it. Do the work.
Find your information. Research your competition. Crunch your numbers and put together a realistic sales forecast for your restaurant. Do everything it takes to flesh out a fully-detailed business plan.
Show your effort and it will pay off. Breeze through it and your restaurant may never have its opening day.
Mistake #2: Being too dull and dry
The people reading your business plan don’t have all day. It’s best to get right to the point and make it an interesting read. Remember—more words don’t always make it better!
Throw in some visuals to make your business plan clear and exciting. Some ideas are:
- Headshots of your restaurant’s leadership team
- Your restaurant’s logo
- Photos of your concept or design
- Drafts of your menu
- Maps to show your location compared to competitors
- Any existing or planned marketing collateral
- Charts and graphs to explain your numbers in a visual way
If you hand in another dry business plan, potential investors will do everything they can to finish reading it before their next meeting or lunch break. That means they’ll probably skip over important details, especially if they’re hidden in overly-complex writing.
It’s crucial to deliver all the details to investors upfront and in an intriguing way. Remember, it’s a human being reading that business plan. Be clear, concise, and get to the point, and they’ll be thankful.
Mistake #3: Not making your competitive advantage clear
What makes your restaurant special in the company of one million other restaurant locations nationwide?
More importantly, what makes you stand out from the other restaurants in your state, town, or street? Answer: your competitive advantage. If you don’t have one of these, there is absolutely no reason for diners to go to your restaurant over a competitor’s.
On top of building and explaining your competitive advantage, your restaurant’s business plan should have an entire section completely devoted to competitive analysis. This analysis should include how you plan to differentiate yourself from other restaurants, whether it be through menu items, concept, price, location, atmosphere, or management tactics.
Whatever your competitive advantage may be, make sure it is justified, fleshed out, and very difficult to argue against. This will take some time to get right, but your competitive advantage is what will sustain your restaurant longer than others.
Mistake #4: Glossing over the executive summary
Your executive summary acts as the foundation for your entire business plan, and your business plan is the foundation of your restaurant.
So, why would you not take the time to craft an amazing executive summary? Use this opportunity to reel your readers in, show them you are passionate and knowledgeable about the industry, and that you mean business.
Your executive summary should contain your mission, the key facts of your business, your competitive advantage, and the main takeaways readers can expect to see fleshed out when they read your entire business plan.
If you fail to hook someone with an executive summary, or if yours is simply there as a formality, you’ve wasted a huge opportunity to interest investors.
In the immortal words of Eminem: “You only get one shot.” Well said, Slim. Well said.
Mistake #5: Underestimating the value of marketing
In the marketing section of your restaurant business plan, don’t just mention a budget and that you “plan on using social media.”
Marketing is how you make your competitive advantage clear to potential and existing customers.
Consider answering all of the following questions in your marketing section:
- Will you be offering a customer loyalty program?
- How do you plan on getting involved with a charity or sponsoring community events?
- Will you be working with a PR company or a local news outlet?
- Do you intend to advertise through Google AdWords, social media, or some other paid digital marketing platform? What about print ads?
- Do you have/plan to have a restaurant website?
- Will you keep a customer database through your restaurant POS to micro-target your customers and keep track of guest behavior and buyer patterns?
- Will you use a WiFi marketing tool to boost customer loyalty?
Remember, restaurant marketing is not just about bringing customers in—it’s about bringing them back. Have a plan to leverage your competitive advantage with your target market with modern, creative marketing tools and strategies, and investors will be impressed.
Mistake #6: Guesstimating sales and costs
Nothing drives investors crazier than seeing numbers that don’t make sense. If you simply write that you will do $1 million in sales for your first year, readers will want to know why.
Investors will want to know your financial forecast, your profit margins, your labor expenses, your fixed and variable costs, and so on. Without a clear layout of expected cash flow, investors won’t be thrilled to throw cash your way.
Take as much time as needed to project your sales and expenses as accurately as you can. These numbers can be based on industry standards, historical documents, or numbers from another restaurant you operate. It’s not necessary to be a financial expert—but it wouldn’t be the worst idea to consult one if it means procuring funds for your business.
Crafting the perfect restaurant business plan
While these mistakes can be simple slip-ups in your first business plan, it’s important to avoid them to the best of your ability. This document can put you in business, but when it isn’t given the attention, dedication, or resources it deserves, it might postpone your grand opening indefinitely. Put ample time, effort, and resources into developing your restaurant business plan and you will soon reap the rewards.
Remember, this business plan is not just for banks and investors; it’s also for you. Writing a business plan is a great way to make the vision for your new restaurant clear and define your path to success. There will always be bumps along the way, but writing a solid, well-researched restaurant business plan will help you make sure you’re moving in the right direction.
If you’re looking for examples of business plans for restaurants, Bplans offers a library of free samples you can download. And to make it easier to get started writing your plan, download our free business plan template.