We are often asked by clients for the keys to writing a restaurant business plan that will successfully secure financing. While a business plan plays only a supporting role in a restaurateur’s quest for startup funding, the planning document must still clearly, concisely and compelling communicate the investment or lending opportunity.
To accomplish this goal, EVERY restaurant business plan MUST have an identified location. Whether or not you have a signed lease or purchase agreement on a space, your business plan must be written as if you have researched and selected the perfect location for your concept.
While we do work with some startup restaurant owners that have secured a facility, many more are waiting until they have raised money from a bank, an investor or both before they “choose” where to locate their restaurant. While this is certainly understandable, it is imperative that a location is selected even if it just for illustration purposes.
Let me give you an example. You are starting a quick service restaurant serving hamburgers, chicken sandwiches, and Philly cheese steaks. You have approached a leasing agent for a prime location in a downtown area, where you will be surrounded by tens of thousands of workers during the week who are looking for something quick and delicious for lunch, but come evenings and weekends the 1 and 3 mile area around the location becomes a ghost town.
You also have your eye on a power center in the suburbs where you will be surrounded by a few major big box retailers, as well as a movie theater and a number of restaurants. Due to the heavy residential nature of the area, your lunch business will not be great, but evenings and weekends you will be slammed as individuals, families and groups of friends look for a place to “grab a bite”.
Which location scenario you select will have a dramatic impact on almost every aspect of your business plan. While your core product offerings – burgers and sandwiches - will be consistent, nearly everything else may be slightly or greatly different.
For instance, how large a space and how many seats will you need to meet customer demand? What are the demographics of the individuals within a 1, 3 and 5 mile radius, as well as those of non-residents such as workers, tourists, students, etc.? How will your average ticket price (food and beverage) differ between a lunch-centric crowd and one where most customers visit you for dinner? How will you promote and market your restaurant to your target customer? What are your hours of operation? How will you staff your restaurant to ensure you have proper personnel at all times?
This is just some of the information in a restaurant business plan that will differ based upon your choice of a location.
So, what should you do if you don’t have a location selected yet? Do some basic research and pick something. Even if you end up not securing that particular spot, you will have written a business plan that demonstrates how you think and gives your reader a plausible scenario by which to judge you, your team, your concept, your potential, etc.
Once you have secured funding, or at least gotten much closer to the financing finish line, you will be able to reexamine your location options, select a final space, and then make any necessary changes in your plan to reflect this new reality. In fact, you may even be able to work with your lender or investor to help you due the final set of due diligence, review your lease or purchase agreement, secure a contractor to complete your TI work, etc.
So, don’t panic if you are starting a restaurant and have yet to find that perfect or final location. As business plan writers who work with restaurateurs on a regular basis, we know it would be great to have a signed lease agreement on your dream space. However, this is not always feasible so pick something that would make sense if it happened and then continue to make changes to your plan as the situation changes.