In this article we go through, step-by-step, all the different sections you need in the business plan of your restaurant. Use this template to create a complete, clear and solid business plan that get you funded. Let’s dive in!
1. Restaurant Executive Summary
The executive summary of a business plan gives a sneak peek of the information about your business plan to lenders and/or investors.
If the information you provide here is not concise, informative, and scannable, potential lenders and investors will lose interest.
Though the executive summary is the first and the most important section, it should normally be the last section you write because it will have the summary of different sections included in the entire plan.
Why do you need a business plan for a restaurant?
The purpose of a business plan is to secure funding through one of the following channels:
- Obtain bank financing or secure a loan from other lenders (such as a SBA loan)
- Obtain private investments from investment funds, angel investors, etc.
- Obtain a public or a private grant
How to write your restaurant’s executive summary?
Provide a precise and high-level summary of every section that you have included in your business plan. The information and the data you include in this segment should grab the attention of potential investors and lenders immediately.
Also make sure that the executive summary doesn’t exceed 2 pages in total: it’s supposed to be a summary for investors and lenders who don’t have time to scroll through 40-50 pages, so keep it short and brief.
The executive summary usually consists of 5 major sub-sections:
- Business overview: start by introducing your restaurant and the products and services that you intend offer. Mention the type of restaurant you intend to open (such as fine dining, casual dining, fast casual, ghost restaurant, café, pub, etc.), the menu and prices. Also add here the total number of customers your restaurant can host at once, its location, and some details on the surface and the design layout
- Market analysis: summarise the market where you will operate and provide a brief about the target audience, market size, competitors, etc. No need to provide granular data here, save it for the Market Overview section later on (or the appendix)
- People: introduce your restaurant’s management and employee structure. Provide a brief (no more than a couple of sentences each) of the knowledge and experience of the team. Also, speak about your hiring plans.
- Financial plan: how much profit and revenue do you expect in the next 5 years? When will you reach the break-even point and start making profits? You can include here a chart depicting your key financials statements
- Funding ask: what loan/investment/grant are you seeking? How much do you need? How long will this last?
2. Restaurant Business Overview
This is the section where you will provide details about your restaurant and the chosen business model. You must address some important questions that lenders and/or investors generally ask.
Here is a quick list of some of those questions you must address:
- What is the rationale behind you opening this type of restaurant today?
- What’s the restaurant’s location and why did you select that location?
- Why did you select the type of restaurant you want to open?
- What will be the products and services you will offer?
- What will be your pricing strategy and why?
- What will be your opening days / hours?
- How many customers can you serve at once (capacity)?
- What is the surface of your restaurant? How is the restaurant designed (incl. dining rooms and kitchen area)?
- What will be the legal structure of your company?
a) History of the Project
Any business must have two components:
- Passion & experience of the business owner
- Rationale behind starting this type of business today
Passion & experience
You may or may not have prior experience. If you have experience, speak about it and how it will help you to run your business. For instance, you may have been a restaurant manager in a popular restaurant for 6 years, and now you want to start your own restaurant and use your knowledge to run it more efficiently.
However, if you don’t already have experience, that’s fine. You must demonstrate your passion and some industry knowledge (you may have conducted thorough research).
What is your restaurant’s mission?
For example, there may not be any fine dining restaurant in your area where wealthy residents or tourists can enjoy an upscale meal experience in a sophisticated and elegant environment.
But that’s not all: your market must be suitable for your business to thrive.
For instance, if you are planning to open a fine dining restaurant in a low-income area, it is probably not going to attract many customers. Similarly, if the population of the target market has a high percentage of people preferring takeaway/delivery food options because of their busy lifestyle, a fine dining restaurant may not be a good idea.
b) Business Model
This sub-section of the Business Overview will explain your business model. Describe the following points briefly:
- Will you buy an existing restaurant and do some remodeling, or will you start a new restaurant and design it from scratch?
- Will you buy a franchise or do you plan to open an independent restaurant instead?
- The type of restaurant you want to open and why
What are the different types of restaurants?
There are multiple types of restaurants. Some of them that you may consider include, but are not limited to:
- Fine Dining: They provide upscale meal experience with several courses. The atmosphere is sophisticated and classy. They can be franchises or individually owned. Of course, they are quite expensive.
- Casual Dining: This type of restaurants serve customers at their tables and the food prices are moderate. The atmosphere is not very sophisticated. Though the décor is often unique, it can be based on the type of food a restaurant serves.
- Fast Casual: These restaurants will make your food available quickly, but the food is healthier than fast food. Also, food is cheaper than casual dining. They have a counter service (you must collect food from the counter) and the décor is more contemporary.
- Ghost Kitchens: ghost kitchens (or “dark kitchen”) restaurants do not have a storefront, a dining room, signage, or décor. They operate using food delivery partners and take orders through online ordering or phone ordering.
- Fast Food: Think of Taco Bell, KFC, Burger King, etc. The food is relatively cheap and is served quickly. Food ingredients are usually preheated or precooked, and food delivery happens over the counter or via a drive-through window.
- Buffet Style: These restaurants are similar to the Family Style restaurants but with a fundamental difference. People get to select from a selection of food that are made available against a fixed price. However, customers need to serve themselves and they are allowed to return to the buffet for as many times as they want.
c) Products & Services
Of course, the products you will offer in your restaurant will depend on the type of restaurant you are opening. A Buffet Style restaurant, for example, usually prefer specialty cuisines like Indian, pizza, home cooking, Chinese, etc. Similarly, if you are opting for a Diner, you will most likely offer fried foods (fish & chicken), breakfast items, burgers, etc. at a low cost.
It is a good idea to give a list of food and drinks that you want to sell. Depending on the scale of your operations, you may have too many menu items. It is not possible to list every item on your menu, but make sure that you are listing the most important ones. If you specialize in one or a few specific dishes, mention that, too.
d) Pricing Strategy
In this sub-section, you must explain the pricing strategy of your restaurant. If you have multiple competitors (in the same niche) in the vicinity, you cannot have huge pricing variation, especially for the similar food items. Pricing will, of course, depend on the type of restaurant you are opening, and the food items you are offering.
For example, if you are sourcing the raw materials only from organic farms that do not use fertilizers and pesticides, your menu items will have a higher price tag.
Similarly, you cannot expect to charge expensive Fine Dining-like prices if you are opening a Casual Dining restaurant instead.
Create a pricing table and ensure to provide an average price range for your products. You don’t need to provide exact pricing for each product. Use price ranges instead.
Offering a pricing table is important because your pricing strategy will allow investors to tie your pricing strategy with your financial projections.
e) Legal Structure
Finally, your business overview section should specify what type of business structure you want. Is this a corporation or a partnership (LLC)? Who are the investors? How much equity percentage do they own? Is there a Board of Directors? If so, whom? Do they have experience in the industry?
3. Restaurant Market Overview
A complete understanding of the market where you want to operate is important for the success of your business.
For example, if your intentions are to open a classy Fine Dining restaurant in a low-income area, you will not attract enough customers. Similarly, if you want to open a fast-food restaurant in a place where family dining is more popular, it will be a disaster.
Therefore, you must cover here 3 important areas:
- Market size & growth: how big is the restaurant industry in your area? What is its growth rate (or decline rate) and what are the factors contributing to its growth or decline?
- Competition overview: how many competitors are there? How do they compare vs. your business? How can you differentiate yourself from them?
- Customer analysis: who is your target audience? What type of restaurants do they prefer? How regularly do they visit restaurants for dining? What type of food do they prefer? How much do they spend at restaurants on average?
a) Restaurant Industry Status Quo
How big is the restaurant industry in the US?
According to Finance Online, there were over 1 million restaurants (all types combined) in the US in 2021. The industry recovered post a 60% drop in sales in April 2020 due to the pandemic, and recorded an annualised market size of over $1 trillion dollars in July 2022 ($1,033 billion)..!
How big is the restaurant industry in your area?
Once you provide the overall picture of the US, divert your attention to the area where you want to operate. It might not be possible to find region or area-specific studies, and hence, you must estimate the market size.
For example, if there are 1,000,000 restaurants in the country with total annual revenue of $1 trillion, the average annual revenue for each establishment is around $1 million.
Therefore, if the area where you want to open your restaurant has 30 restaurants, you can safely assume that the restaurant industry in your area is worth approximately $30 million.
How fast is the restaurant industry growing in the area?
You must show the expected growth rate of the restaurant industry in your area. This information may not be available via online research papers. However, assessing the growth rate will not be difficult as you can use metrics such as the number of competitors in your area.
For instance, if there were 25 restaurants in 2018 and 30 restaurants in 2022, the average annual growth rate would be 5%.
What are the current restaurant market trends in your area?
It is vital to understand the trends of the restaurant industry in your area. Understanding trends will allow you to devise marketing strategies.
Understanding trends won’t be easy. You must conduct research and talk with your target audience. Additionally, you must also study your competitors to understand their target audience, the products they sell, etc.
Some common questions you may ask the target audience include:
- What type of restaurants do they prefer?
- At what time of the day do they prefer to visit a restaurant (breakfast, lunch, dinner)?
- How frequently do they visit restaurants?
- What type of foods do they usually order?
You can ask as many questions as you need to understand the evolving trends.
b) Competition Overview
Studying your competitors’ business models is vital. You need to understand what makes them successful or why they fail. A clear understanding of their food offerings, marketing strategies, etc., will allow you to provide a better service.
If your competitors are offering nearly the same products & services, then what is their market share and how do they market their products & services to attract new customers?
It is always a good idea to do some research (if necessary, physically visit your competitors without revealing your business intentions) and create a comparative table summarizing their product & service offerings, marketing strategies, target audience, etc.
Here is a sample table that you can use:
|Competitor #1||Competitor #2||Competitor #3|
|Business model (and restaurant type)||Franchise (Fine Dining)||Individually owned (Family Restaurant)||Individually owned (Casual Dining)|
Social media outreach
Local business listing
Local business listing
Social media outreach & ads
Local business listing
|Google Rating||4.8 (521+)||4.1 (466+)||4.3 (1,027+)|
|Pricing range (menu)||$75-120||$30-45||$45-60|
|Restaurant size (dining area)||2,800 sq. ft.||1,700 sq. ft.||2,200 sq. ft.|
|Staff (peak time)||20||12||15|
The table you will create will depend on what information you need and want to include based on your proposed business model.
Restaurant SWOT Analysis
Try to provide a SWOT analysis. It must be crisp and highly focused. SWOT stands for Strength, Weakness, Opportunities, and Threats.
Here is a sample that you can use as a reference:
- Strength: 8 years of senior manager experience in a reputed Michelin Star Fine Dining restaurant operated & owned by a renowned chef and a master’s degree in Hospitality management, experienced senior chef with 22 years of experience
- Weakness: Startup cost, zero reputation
- Opportunities: An affluent neighborhood with a rising demand for fine dining establishments, only one fine dining restaurant in the 3-mile radius
- Threats: Increasing cost of raw materials because of geo-political turmoil restricting international trade routes
A clear understanding of your strengths and weakness along with opportunities and threats in the real market can help you to design your marketing strategy. It also helps potential investors to assess the risk and reward profile of your business.
c) Customer Analysis
This is the sub-section where you will provide a detailed analysis of your target audience.
Some important points that you must include in your customer analysis include:
- Age and gender distribution (you can get local demographic data from census.gov)
- Per capita expenditure on dining
- Frequency of restaurant visits
- Average monthly income and disposable income
- Average bill size per visit
- Average yearly or monthly spending on food at restaurants
- Type of restaurants preferred
- The expected price range for food
- Inclination towards loyalty programs & free perks
- Things they dislike about existing restaurants and what they expect to be improved
You can add as many data points as required to validate your business decision. The idea here is to display your deep understanding of the target audience and their needs, preferences, and expectations. This knowledge can help you to tailor your products & services to attract new customers and increase sales.
4. Sales & Marketing Strategy
This is the segment where you outline your customer acquisition strategy. Try to answer the following questions:
- What is your USP?
- What are the different marketing strategies you will use?
- How do you intend to track the success of your marketing strategy?
- What is your CAC or customer acquisition cost?
- What is your marketing budget?
- What introductory promos and offers do you intend to provide for attracting new customers?
Let’s expand a bit on a few questions below:
What marketing channels do restaurants use?
A few marketing channels that restaurants typically use are:
- Word-of-mouth, recommendations,
- Local listing & reviews (e.g. Google reviews)
- Online booking platforms (e.g. TheFork, Opentable, etc.)
- Influencer marketing
- Print media, etc.
It is not necessary to use all channels. You can start by focusing on a few of them and include other marketing strategies later instead.
What is your unique selling proposition?
In other words, how do you differentiate yourself vs. competitors? This is very important as you might need to win customers from competitors.
A few examples of USPs can be:
- Organic raw materials: we source organic farm fresh raw materials from local farmers
- Authentic Indian food: prepared by a Michelin Star chef from India
- Family run restaurant: run by a family, helping families connect over delicious food
- Price: affordable food & menu for the quality vs. competitors
- Location: the restaurant is located in a busy street, thereby attracting many customers who can easily glance over the menu
- Uniqueness: you may be the only tapas-style restaurant around, in an area where people are fond of this type of restaurant
5. Management & People
You must address 2 things here:
- The management team and their experience / track record
- The organizational structure: different team members and who reports to whom?
Small businesses often fail because of managerial weaknesses. Thus, having a strong management team is vital. Highlight the experience and education of senior managers that you intend to hire to oversee your restaurant business.
Describe their duties, responsibilities, and roles. Also, highlight their previous experience and explain how they succeeded in their previous roles.
It is also important that you explain how their experiences and qualifications help you in implementing the restaurant you are proposing. If they have specialized training, achievement, and experience (such as a degree in hospitality management, 3 Michelin stars, experience in developing menus for 5-star hotels, etc.), add that information.
b) Organization Structure
Even if you haven’t already hired a restaurant manager, server, chef, head cook, busser, cashier, bartenders, and other relevant staff members, you must provide here a chart of the organizational structure defining the hierarchy of reporting.
6. Financial Plan
The financial plan is perhaps, with the executive summary, the most important section of any business plan for a restaurant.
Indeed, a solid financial plan tells lenders that your business is viable and can repay the loan you need from them. If you’re looking to raise equity from private investors, a solid financial plan will prove them your restaurant is an attractive investment.
There should be 2 sections to your financial plan section:
- The startup costs of your project (if you plan to start a new restaurant, renovate your restaurant, etc.)
- The 5-year financial projections
a) Startup Costs
Before we expand on 5-year financial projections in the following section, it’s always best practice to start with listing the startup costs of your restaurant. For a restaurant, startup costs are all the expenses you incur before you open your restaurant and start making sales. These expenses typically are:
- The leasing deposit for the space (if you rent) or to buy the real estate (if you buy)
- Renovations and improvements
- Equipment & appliances
- Furniture & tableware
Of course, the startup costs depend on a number of factors, like the size of your restaurant, its location, the facilities, the menu, etc.
On average, it costs $484,000 to $685,000 to open a casual restaurant with 150 seats (2,500 sq. ft.) in the US.
Note that these costs are for illustrative purposes and may not be fully relevant for your business. For more information on how much it costs to open and run a restaurant, read our article here.
|Lease security deposit or loan down payment||$17,000 (lease) – $100,000 (buy)|
|Building improvements & renovations||$300,000|
|Equipment & appliances||$50,000 – $150,000|
|Furniture & tableware||$80,000|
|Point-of-Sale system (POS)||$2,000 – $5,000|
|Accessibility (regulatory compliance)||$30,000|
|Legal fees & Licensing||$12,000 and $400,000|
|Total||$484,000 – $685,000|
b) Financial Projections
In addition to startup costs, you will now need to build a solid 5-year financial model for your restaurant.
Your financial projections should be built using a spreadsheet (e.g. Excel or Google Sheets) and presented in the form of tables and charts in the business plan of your restaurant.
As usual, keep it concise here and save details (for example detailed financial statements, financial metrics, key assumptions used for the projections) for the appendix instead.
Your financial projections should answer at least the following questions:
- How much revenue do you expect to generate over the next 5 years?
- When do you expect to break even?
- How much cash will you burn until you get there?
- What’s the impact of a change in pricing (say 15%) on your margins?
- What is your average customer acquisition cost?
You should include here your 3 financial statements (income statement, balance sheet and cash flow statement). This means you must forecast:
- The number of covers (customers or orders) over time ;
- Your expected revenue ;
- Operating costs to run the business ;
- Any other cash flow items (e.g. capex, debt repayment, etc.).
When projecting your revenue, make sure to sensitize pricing, cost of raw materials (food supplies) and your sales volume. Indeed, a small change in these assumptions may have a significant impact on your revenues and profits.
7. Use of Funds
This is the last section of the business plan of your restaurant. Now that we have explained what your restaurant’s business model and concept are, what is your menu, your marketing strategy, etc., this section must now answer the following questions:
- How much funding do you need?
- What financial instrument(s) do you need: is this equity or debt, or even a free-money public grant?
- How long will this funding last?
- Where else does the money come from? If you apply for a SBA loan for example, where does the other part of the investment come from (your own capital, private investors?)
If you raise debt:
- What percentage of the total funding the loan represents?
- What is the corresponding Debt Service Coverage Ratio?
If you raise equity
- What percentage ownership are you selling as part of this funding round?
- What is the corresponding valuation of your business?
Use of Funds
Any restaurant business plan should include a clear use of funds section. This is where you explain how the money will be spent.
Will you spend most of the loan / investment in paying your employees’ salaries? Or will it cover mostly the cost for the lease deposit and the renovation?
Those are very important questions you should be able to answer in the blink of an eye. Don’t worry, this should come straight from your financial projections. If you’ve built solid projections like in our restaurant financial model template, you won’t have any issues answering these questions.
For the use of funds, we also recommend using a pie chart like the one we have in our financial model template where we outline the main expenses categories as shown below.