Tuesday, August 2, 2011

A RESTAURANT BUSINESS PLAN IN A RECESSION

If you want to open a restaurant, financing can present a problem in today’s economy.  Banks aren’t taking a lot of financial risks at the moment, and for better or worse, restaurants have a high failure rate.  So the question becomes, how do you get financing for a restaurant in a recession.  A solid business plan will steer you in the right direction.

A restaurant business plan outlines your entire restaurant concept, from who your target audience is to how much you estimate for restaurant costs and how much you estimate for restaurant costs and profits.  A well thought out restaurant business plan will also help you identify possible problems, such as a poor location or lack of customer base. 

Opening a new restaurant in today’s financial climate is still possible, but it requires careful research and consideration, beforehand.  If you show the bank or potential investors your idea has been researched, you will be one step closer to opening day.

Most business plans have the same general parts, but some sections of you plan should be geared specifically to the restaurant industry.  Here is a break down of all the necessary parts of a restaurant business plan.

  1. Executive Summary - Start out with an overview of your entire business plan.  Think of it as your introduction.  Make it interesting, to keep your readers attention.  Here are some tips for writing an executive summary geared toward a restaurant. 

    1. You want to give the reader (a potential investor) the basics of your business idea.  What is the style of your new restaurant, the name, the location?
    2. Explain why you are well suited for this restaurant venture.  Do you have previous cooking experience in restaurants?  If not, do you have any experience in the restaurant business?  If the answer is “no,” then you need to sell them on the idea that despite your lack of experience, you are still the perfect person for this new restaurant business.

  1. Market Analysis -  This part of restaurant business plan is sometimes referred to as a marketing strategy.  There are 3 parts to a market analysis:

    1. Industry - Who are you going to be serving?  Is your restaurant going to cater to the older folks at lunch time?  Single professionals at dinner?  Families with young children?  Explain your customer base and why they are going to flock to your new restaurant, not your competitors’.
    2. Competition - Who is your competition?  Many people opening a new restaurant assume everyone will prefer their new establishment to the existing competition.  Don’t undermine the other restaurants.  They already have a loyal customer base, and luring customers from that base is not always easy.  Find out as much as you can about your competition, including their menu, hours and prices.  Then explain in a paragraph or two how you will compete with the already established businesses.

    1. Business Operation - Sometimes referred to as Products and Services.  This is where you tell investors about your hours and how many employees you plan to hire.  Here is where you explain the benefits of your establishment for customers, such as its convenient downtown location, or its close proximity to the local interstate exit.  This is also a good place to mention any close ties you have to local restaurant vendors, such as food supply companies or local farms that will give you a competitive edge.

    1. Management & Ownership - Who is going to run the ship?  Are you going to be the general manager, bookkeeper, head cook and bartender?  If so, how are you going to do it all?  Many new restaurant owners either hire a general dining room manager or a kitchen manager (but usually not both).  Explain who is going to do what, including any potential employees whom you feel will be a great benefit to your new restaurant.

    1. Funding - Now the tricky part of a restaurant business plan.  How much is this stellar business plan going to cost?  Here you want to list the projected growth of your new restaurant.  You should include a profit and loss statement that projects how much you are going to spend vs. how much you are going to make.  This is a good time to once again point out all the great aspects of your new restaurant.  Other items you should include in your funding report include:
·         Break even analysis
·         Balance sheet
·         Industry data
·         Possible risk (show that you acknowledge them, and outline how you plan to deal with them)

For more details on writing a small business plan, check out Critical Steps to Writing a Business Plan by About.com expert Darrell Zahorsky.