Why Writing A Business Plan Is Very Important
Your business plan will be the road map from which your new restaurant develops. No matter how much thought you’ve put into your concept or how many trusted colleagues have assured you of its greatness, you absolutely must write a business plan. It will prove the viability of your concept to potential investors and provide them with a clear and engaging answer to the question: “Why does the world need this restaurant?
First, ask yourself questions to ensure that your restaurant actually is financially sustainable and truly does offer unique value in the market you’re hoping to enter. Creating a business plan will guide you through the process and help you find inconsistencies and potential roadblocks, allowing you to make adjustments before you’ve presented your idea to prospective investors and partners. Here’s how to show that you’ve thought through every aspect of the business.
Crunch the Numbers
A restaurant, first and foremost, is a business. Guests will only get to experience your creation if you’re able to build it in a financially sustainable way. This requires research,brutal honesty, and in almost every case, outside help to figure out.
With a few rare exceptions, you’ll need to engage an accountant to help you put together the financial projections that any potential investors will expect to see. Even if you have a background in finance, soliciting a third-party, emotionally-detached opinion from a CPA who has experience with restaurant clients will ensure you’ve covered all your bases.
Charles retained an accountant while assembling Souvla’s business plan, despite having three years of relevant financial experience at Mina Group, a national restaurant group with more than 20 concepts under his belt. He says, “It’s very helpful when you can turn around to the investors and say, ‘We have retained the services of this firm, they have verified all of these figures, and they’ll be handling our accounting moving forward.
Mike Harden, Co-Founder and Senior Partner at venture capital firm ARTIS Ventures, has invested in successful restaurants like Tacolicious in San Francisco and is presented with countless restaurant business plans every year. When someone is on the other side of his desk hoping for investment, he wants to know:
You must be able to demonstrate clearly that in the market you’re hoping to enter, you’ll be able to produce enough revenue — based on your projected number of guests per day and your average check — to cover your expenses, and have money left over.
Paint the Picture
The writing that comes before and after those financial charts and numbers is equally important. Mike notes, “The average person who invests in an independent restaurant is someone that wants to go there. They want to get paid back and make money, but they also look at it as an investment in a community, an investment in the people around them, and a way to have fun.
With that in mind, your business plan needs to be engaging and give the reader a clear picture of what you, your brand, and your restaurant are all about. Roberta Economidis, Partner in the law firm of Georgopoulos & Economidis, LLP, has been representing restaurants in the Bay Area for more than a decade, which means she’s laid eyes on hundreds of business plans.
She says, “A business plan, in my mind, is the first date. What I do as a lawyer is the prenup. You need that romance factor to get people bought in with solid numbers that can back it all up.
When the reader can so clearly feel, taste, hear, and visualize the experience you’re promising that they’re
craving it just after seeing it on paper, you know you’ve got a solid business plan.
This is the first, but far from the last time you’ll hear me recommend that you be very honest with yourself about what you don’t know. If writing isn’t your cup of tea, hire a consultant who is experienced in creating restaurant business plans. Many potential investors will ask to see your business plan before taking an in-person meeting with you, so it’s crucial that this document captures their interest quickly and represents your concept accurately.
Establish Your Brand
When it comes to establishing a brand, clarity and consistency are always best — and your business plan is your first chance to get off on the right foot. Brett Traussi, the Chief Operating Officer of Daniel Boulud’s Dinex Group based in New York City, is a leader in creating new concepts for the company and, as a valued mentor, also reads business plans for concepts all over the world from former employees.
Try to describe your concept completely in one short sentence. If you can’t do it, you’re likely attempting too much at once (remember that your first restaurant doesn’t have to be your last!).
Add visual elements to your business plan to help readers better understand the experience you hope to create. Design a preliminary logo, choose a unique but easily readable font, and create a mood board within the document that shows snippets of defining design elements, finishes, and relevant food, wine and cocktail imagery. By the time potential investors are finished reading, they should have the same picture of your concept in their mind as you do. Everything you include should tie back to what you do, who you are, and why you’re doing it to help build strength and clarity into your brand.
If graphic design is out of your realm, this might be a good time to engage a branding expert. The idea of paying anyone else when you may not have even secured a single cent in funding probably sounds very unattractive, but it could mean the difference between getting 30 minutes of an investor’s time and getting passed over. Charles did as much as he could to sketch out his own logo before taking it to a graphic designer in order to minimize his costs. Looking through your contacts to see if you’ve got any talented.
Friends is another low-cost way of going about this.
What Your Business Plan Should Cover
The strongest business plans always include all or most of the components described below. Charles advises that first time restaurateurs read a bunch of different business plans for other restaurants and technology and retail companies to get a better sense of layout options, writing styles, and clarity of concept. Put the sections that you feel would be most compelling to someone who’s never met you first: the “Management Team” section if you’re coming from high-profile establishments, for example. The goal is for the reader to keep turning the page.
- Branded Cover
Include your logo (even if it’s not finalized), the date, and your name.
Describe your restaurant concept and get the reader excited about your idea. Go into detail about the food you’ll be serving, inspiration behind your concept, and an overview of service style. Define clearly what will be unique about your restaurant.
- Sample Menu
The menu is the most important touchpoint of any restaurant’s brand, so this should be more than just a simple list of items. Incorporate your logo and mock-up a formatted menu design (again, tap a designer for help if needed). Your sample menu should also include prices that are based on a detailed cost analysis. This will give investors a clear understanding of your targeted price point, providing the first building block to figuring out average checks. Establish Your Brand cont’d estimations needed to create financial projections, and show investors that you’ve done the homework needed to be confident that you’ll be able to sell these items at these prices and operate within your budget. (We’ll dive into the specifics of costing menu items in Chapter 10.)
This section is most relevant for fine-dining concepts, concepts that have a unique service style, or if you have particularly strong feelings about what role service will play in your restaurant. It can be a powerful way of conveying your approach to hospitality to investors by explaining the details of the guest’s service experience. Will your restaurant have counter service designed to get guests on their way as quickly as possible, or will it look more like a theater, with captains putting plates in front of guests simultaneously? If an extensive wine program is an integral part of what you’re doing, will you have a sommelier? If you
don’t feel that service is a noteworthy component of your operation, address it briefly in the concept section.
- Management Team
Write a brief overview of yourself and the team you have established so far. You want to demonstrate that the work experience you’ve acquired over the course of your career has provided you with the necessary skills to run a successful restaurant. Ideally, once you have described the strong suit of every member of your team, you’ll be presenting a full deck. Remember that most independent restaurant investors are in this for more than just money, so giving some indication of what you value and who you are outside of work may also be helpful.
Incorporate some visuals. Create a mood board that shows images related to the design and feeling of your restaurant. Planning on cooking in a wood-burning oven? Include that. Photos of materials and snippets of other restaurants that you love that are similar to the brand you’re building are also helpful.
- Target Market
Who is going to eat at your restaurant? What do they do for a living, how old are they, and what’s their average income? Once you’ve described them in detail, reiterate why your specific concept will be appealing to them.
There should be a natural and very clear connection between the information you present in the “Target Market” section and this one. You probably won’t have a specific site identified at this point in the process, but you should talk about viable neighborhoods. Don’t assume that potential investors will be familiar with the areas you’re discussing and who works or lives there — make the connections clear. You want readers to be confident that your restaurant’s “ideal” diner intersects with the neighborhood(s) you’re proposing as often as possible. If don’t have a site, this is a good place to discuss what you’re
looking for in terms of square footage, foot traffic, parking, freeway accessibility, and other important details that we’ll outline in Chapter 3.
- Market Overview
Address the micro and macro market conditions in your area. At a macro level, what are the local and regional economic conditions? If restaurants are doing poorly, explain why yours won’t; if restaurants are doing well, explain how you’ll be able to compete in an already booming restaurant climate. At a micro level, discuss who your direct competitors are. Talk about what restaurants share your target market and how you’ll differentiate yourself.
- Marketing & Publicity
The restaurant landscape is only getting more competitive. Discuss your pre- and post-opening marketing plan to show investors how you plan to gain traction leading up to opening day, as well as how you’ll keep the momentum going. If you’re going to retain a PR/marketing company, introduce them and explain why you’ve chosen them over other companies (including some of their best-known clients helps). If not, convey that you have a solid plan in place to generate attention on your own through social media, your website, and media connections.
- Specialists & Consultants
List any outside contractors you plan to retain, such as:
- General Contractor
- PR & Marketing
Briefly explain the services they’ll be providing for you, why you chose them, and any notable accomplishments.
- Business Structure
This section should be short and sweet. What type of business structure have you set up and why did you make that specific decision? As we’ll discuss in Chapter 2, you will need to work with an attorney to help you determine what business structure is best for you.
Let your accountant guide you through this portion of your business plan. It is crucial that whoever you retain to help you with your finances has a wealth of restaurant experience (not just one or two places), as they should be familiar with the specifics of restaurant finances and know what questions to ask you. Before creating realistic financial projections, your accountant will want to know approximately how many seats you’re planning on having, what your average check will be, and approximately how many covers per day you plan to do. Being conservative in these estimations is key as these three data points will be used as the basis for figuring out whether your concept is financially feasible.
Lou Guerrero, Principal at Kross, Baumgarten, Kniss & Guerrero, emphasizes that, “You’ll get a lot of accountants that tell you that they’ve done a couple of restaurants, but you have to choose someone that has a deep expertise in what you’re doing. There’s nothing to gain from going with someone that doesn’t have a very restaurant-centric practice.
A well-vetted accountant with restaurant experience will know exactly what you’ll need to have prepared to show investors. The key projections you can expect to work on are:
- Pro forma profit and loss statement for the first three to five years of operation
- Break even analysis
- Capital requirements budget
Additional Resources: For detailed reading on building the financial portion of your business plan, see Restaurant Success By the Numbers, by Roger Fields, CPA.
Building a Pitch Deck
A pitch deck is a consolidated, visually-driven version of your business plan, and it’s an extremely helpful tool for you and the person you’re presenting to. Why? Your business plan is going to be content heavy; lots of writing, not a lot of pictures, and too much information for any person to reasonably follow along with while you’re in a face-to-face meeting. A well-designed pitch deck is a visual aid to help you illustrate your key points and to help potential investors better understand your vision. Here are a few tips for creating an effective deck:
- It should be no more than 10-15 pages (printed) or slides (digital presentation).
- Use your business plan as your outline with roughly one slide representing a section (use more for important areas like describing your concept).
- Try not to put more than 10 words on each slide and make each one impactful.
- Use visuals to engage the person you’re speaking with. What images best represent what you hope to do?
- Keep the entire deck sharp, professional and on-brand.
- Bring a digital version and a hard copy to meetings so that technology failures don’t throw you off. Additional Tips from the Experts
- Share your business plan with people who are experts in areas that you’re not. Accept critical feedback from friends and colleagues that you trust; it’s hard to see the picture when you’re inside the frame.
- Drop the NDA. Charles says, “I was initially petrified that someone was going to take this idea and just run with it, but I quickly realized that I had much more to gain from making it as easy as possible for people to engage with my idea.
- Isolate your risk factors. “As a first-time restaurateur, you’re an unproven operator and that’s a risk factor,” says Mike Harden. “If you open an unproven concept in an up-and-coming location and it fails, you’ll never know why your idea didn’t work.
- Pick consultants who have a deep expertise in what you’re doing. Two of the most important people you’ll work with in the process of opening your restaurant will need to be identified at this stage: your attorney and your accountant. Do your homework to make sure they have depth of experience in the specific type of restaurant you’re opening, check their references, get price quotes, and ask other restaurateurs that you trust who they use for these services.
- Get consultants (like your attorney and accountant) involved as early as possible. Lou says, “A one-hour conversation today can save you a lot of heartache down the road if you’re able to address a whole host of issues that aren’t in your area of expertise.” Get a lot of input before you actually start spending time and money to open a restaurant that hasn’t been vetted.
- Make sure your business plan demonstrates both a passion for your concept and an understanding of
business and finance. You need to inspire potential investors to get involved, but you also must show that
your concept will be financially viable.
- Build a business plan that showcases your brand. This is the first representation of your brand, so make sure it’s something you’re proud of — a designer or talented friend can help.
Source by Opentable