From greasy spoon diners to Michelin Star restaurants, food service has captured the hearts and imaginations of countless culinary entrepreneurs.
In the United States, 90% of restaurant owners operate small restaurants with fewer than 50 employees. And 70% operate in just one location.
If you’re passionate about food and dream of opening a restaurant, you have plenty of company. But cooking skills alone won’t cut it. You need a plan.
In this article, we’ll walk you through writing a small restaurant business plan, from conducting market research to developing promotional strategies and creating a financial forecast.
Starting a restaurant from scratch isn’t cheap. Startup costs range from $175,000 to $750,000 and include hefty upfront expenses like:
The financials section of a business plan gives you space to compile these costs into an expense budget and compare them to your revenue projections. These will be invaluable in helping you determine if your restaurant concept is financially viable.
And if you need a bank loan or investor to help fund your restaurant, they’ll want to see a plan that includes financial projections (more on that later).
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The business plan is not only where you lay out your plan, vision, and goals for the restaurant – it pushes you to thoroughly research and understand your market, competitors, and customers to make informed decisions. It guides you through the intricacies of opening and running a small restaurant and helps you keep your finances in order.
Here are some tips for writing a small restaurant business plan that sets you up for success.
A good place to start is to think about the big picture. What do you want your restaurant to be? Are you envisioning upscale dining in a candlelit, intimate setting? Or maybe you’re going for comfort food in a family-friendly atmosphere?
Capture the essence of your restaurant with a brief, attention-grabbing overview. Think of the start of your overview section as an elevator pitch. You’re introducing your concept and vision to highlight what will make your business unique.
Just keep it succinct.
You’ll need to include other important information about your business here, such as the legal structure of your business and the qualifications of you and your management team.
If you’re writing a business for an existing restaurant, you should also cover its history – when the restaurant was founded, who was involved, and milestones it has reached.
Conducting a thorough market analysis is key to the success of your small restaurant. In an industry as competitive as the restaurant business, you’ll need to have your finger on the pulse of your dining market if you hope to create a unique offering.
Defining your target market is essential when starting your restaurant, helping answer questions like:
The first step is to identify who your diners will be.
It’s unrealistic to try to appeal to every single customer. So, ask yourself who you envision walking through your doors. Are they:
Of course, these aren’t the only two customer demographics for a restaurant. But you should get the sense that these customer segments have very different preferences.
Understanding your target market involves more than just demographics. Consider their:
If you plan to operate in a busy city center, your target market might include working professionals seeking quick lunch options or upscale dining options after work. But if you’re opening in a less visible area near residential neighborhoods, you may be more likely to target families.
With a target customer in mind, you need to understand who you’ll be competing with for their dining budget.
Analyzing your competitors is about understanding their strengths, weaknesses, and strategies.
Start by identifying direct competitors (other small restaurants) and indirect competitors (like fast-food chains or food trucks). Observe how they attract customers, the ambiance they create, and the variety and pricing of their menus.
Get a feel for their operational strategies:
Finally, think about their long-term position:
As you observe these competitors and their customers, ask yourself what they are doing right and where they are coming up short.
This knowledge will help you identify gaps in the market and opportunities to offer a unique experience.
With so many moving pieces to manage as a restaurant owner, writing an operations plan is just as important as creating a market analysis.
The operations section of your business plan details how your restaurant will function daily.
It should briefly touch on every aspect of running the business–from staffing needs to how often you will need to buy new ingredients, kitchen equipment, or dining utensils.
Your operations plan will reflect the unique needs of your business, but a typical restaurant operations plan might include:
Without an operations plan, you’ll lack a documented strategy for managing your kitchen workflow, maintaining customer satisfaction, or even basic tasks like inventory or staffing.
And if you’re writing a business plan to get a bank loan or investment, they’ll want to see that you have a plan for successfully managing the restaurant.
Your small restaurant may serve the most mouthwatering dishes in town, but no one will discover it without effective promotional strategies.
You need to develop a comprehensive marketing plan to showcase your culinary delights and entice customers through your doors.
Consider both traditional and digital marketing channels to reach your target audience. Traditional methods may include:
Digital strategies may include:
When developing your promotional strategies, consider the following tips:
Build a visually appealing and user-friendly website that showcases your restaurant’s ambiance, menu, and story.
Leverage social media platforms to engage with your audience, share enticing food photos, and run targeted advertising campaigns.
Encourage repeat business by implementing a loyalty program that rewards customers for their patronage. Offer incentives such as discounts to certain customer segments, like seniors, veterans, or students.
Participate in community events, sponsor local sports teams or charity initiatives, and establish partnerships with neighboring businesses.
Becoming an active community member will build brand awareness and loyalty.
According to data from the National Restaurant Association, about 60% of restaurants fail in their first year, and 80% close within five years.
You need to understand your startup and ongoing operating expenses to run a successful small restaurant.
Then, account for ongoing operating expenses, such as:
Pricing your menu items strategically is essential to ensuring profitability. Analyze ingredient costs, consider portion sizes, and compare prices in your local market to determine competitive yet profitable pricing.
Conduct a break-even analysis to determine the number of customers you need to serve to cover costs and start generating profits. Regularly review your financials and adjust your pricing as needed to maintain a healthy bottom line.
Consider these financial aspects when developing your small restaurant business plan:
Determine how you will allocate your budget across different areas of your restaurant, such as kitchen equipment, interior design, marketing, and staff training.
Prioritize investments that will have a direct impact on customer experience and operational efficiency.
Identify multiple revenue streams for your restaurant. This may include revenue from food sales, catering services, private events, or partnerships with local businesses.
Diversifying your revenue sources can help stabilize your cash flow.
Develop strategies to control costs without compromising quality. Efficient inventory management, negotiation with suppliers, and staff training on waste reduction can contribute to cost savings.
Create a sales forecast based on your market research, pricing strategy, and seating capacity. Consider seasonal fluctuations and special events that may impact your restaurant’s performance.
As a restaurant owner, a few components of your business plan are unique to your industry.
None of these fit neatly into any one section of a business plan. We suggest addressing them in additional sections or within the appendix.
Include information about your restaurant’s location.
Some of this information will be included in your market analysis, but once you’ve secured a location, you should go deeper and analyze factors like:
Explaining the layout of your restaurant – especially your kitchen – is also important. Consider adding photos or diagrams of each room to your plan.
Diagrams can be especially helpful. You can add in-depth details for seating arrangements in the dining room or how staff should move efficiently throughout the kitchen.
What do many people do before deciding whether to eat at a restaurant?
They look at the menu.
You can gain or lose customers on the strength of your menu. It affects numerous business areas, from marketing to pricing and operations.
For instance, if you’re running a family-friendly restaurant but your prices are too high, people will see that on your menu and may decide to eat somewhere cheaper.
On the other hand, if you’re running a fine dining restaurant, but your menu fails to describe your dishes in an appealing way, diners may go somewhere they perceive as having higher quality meals.
That makes the business plan a great place to create menu concepts.
You can experiment with different offerings, price points, and menu designs until you’re confident about sharing them with customers.
And since business plans are continuously updated as your business changes—you can see how your menu has changed over time and what’s been most successful.
