By: Paul Morgan, Restaurant Consultant
I had someone call me last week looking for help in opening a restaurant. The first thing I told them was to “hurry up and slow down”. The first step if you are going to open a restaurant is to draw up a plan – a business plan. It starts and ends with a plan; because it is the plan that lays out the roadmap to take you from where you are to where to go.
The modern business plan is no longer one of those “dig your eyes out with a spoon” documents that weighs 20 lbs and has 400 pages. Instead, the modern business plan has five components and is built around the financial forecast.
The components of the modern business plan are as follows:
- Concept – What you are planning on doing and how you are trying to do it. An idea is not a concept. A concept is something that is so clear in your mind that you can close your eyes and see yourself working in your restaurant a year from now. You can see everything from how big the menu is to what color is on the walls and from who you customers are to how loud the music is.
- Financial Forecast – Essentially “proves” your concept. Once you have clearly defined your concept. It is the financial forecast that tells you whether what you THINK is a good idea, IS actually a good idea. You can’t just pick numbers out of the air for your forecast; instead you have to build your numbers from the ground up.
- How many people are coming in day over day and month over month?
- What are they spending at lunch, at dinner, late night?
- What is the resultant revenue?
- What is your cost of goods sold?
- How much are you projecting for labor costs?
- What other expenses do you have?
- What is your bottom line?
In reality, you have to build your first year’s P&L before you have even rented a space.
- Start-up Costs – How much it is “really” going to cost to open your restaurant? You have to do the work and pin down all your pre-opening costs. I am talking about things like:
- Utility deposits
- 1st and last month’s rent
- Capital improvements
- Marketing and Advertising
- Professional Fees
- And so it goes
You have to identify every dollar you need; because you either have to raise that money on your own or get it from a lender and you want to have enough. And don’t forget working capital. You need a cushion to ensure you can survive the first while as you settle in.
- Marketing Strategy – To reach your revenue projections you need to have an active marketing program. The more revenue you want to generate, the more marketing dollars you have to spend. Utilizing social media allows you to get “loud” in a hurry; but also takes time. Don’t forget to look after your own back yard first and foremost. Local area marketing is key.
- Strategic Partners – You have to identify the key players on your team going forward. This includes your lawyer, your accountant, your business advisor, your manager, your chef….. Having a strong team makes your job easier.
By completing these steps, you will have a business plan that is real. It will have none of the fluff called for from one of those business plan templates downloaded for free from the internet. Find a business advisor to help you. Getting some help will save you from making one of those $10,000 mistakes impulsive business owners make. By doing your plan properly, you can sit back and see whether you should proceed. Isn’t it better to find out BEFORE you spend your money, IF you should spend your money. I think so.
So plan to succeed. Do all the work you can before taking the plunge. Restaurants don’t fail; owners do and don’t forget it.