Restaurant Business Plan: What Investors Actually Read

A restaurant business plan is read by someone with a short list of questions and very little time. How much do you want? What does it buy? Can these people run it? What happens if the first year is weaker than you hope? A plan that answers those quickly gets read. A plan that makes the reader dig for them gets filed.

Here you get an order of attack and a way of deciding what to cut, in place of a template. The aim is a document you could hand to a bank, a private investor or a partner, and be confident they will find what they need on the first two pages.

What does a restaurant business plan need to contain?

It needs a summary, the concept and guest, the market, the team, the operating model, the marketing approach, the funding request and the financial projections. Nothing about that list is unusual. What matters is how much space each part earns.

The US Small Business Administration (SBA) describes a traditional plan as detailed and comprehensive, the kind lenders and investors commonly request, with sections for the executive summary, company description, market analysis, organisation and management, product or service line, marketing and sales, funding request and financial projections. It also describes a lean plan: high level, fast to write and typically one page.

Write the lean version first. If you cannot fill one page with specifics, a longer document will only hide the gap.

Which sections do readers go to first?

Readers tend to turn first to the funding request, the financials and the team before the story. The evidence on how investors read is thin, so treat this as a working assumption. The SBA's own guidance points the same way. It says the aim of the financial section is to convince the reader that the business is stable and will be a financial success, and that investors want to feel confident they will see a return. Venture capital investors, it adds, review the management team, market, products, governance documents and financial statements.

So draft in this order:

1. The ask. How much, in what form (loan or equity), on what terms, and what it pays for.
2. The numbers. Opening costs, monthly sales forecast, break-even and cash flow.
3. The team. Who will run the kitchen and the floor, and what they have done before.
4. The concept. Who the guest is, and why they will choose you.
5. The rest. Market, marketing, operations, risks.

Then reorder the final document so the summary and the ask come first. The concept still matters, and the thinking behind it is covered in restaurant concept development. It simply earns fewer pages than founders expect.

How should you write the funding request?

State the amount, the form, the use of funds and the point at which the money runs out. A clear request tells the reader you know your own business.

The SBA says the funding request should explain how much you need over the next five years, whether it is debt or equity, the terms, and how the funds will be used. For a restaurant, a useful format is a short table:

Show percentages as well as totals. A reader who sees that most of the money goes on the building and almost none on the reserve will ask the right question without you. The line-by-line logic is in cost to open a restaurant. Set the contingency row from contractor quotes, with the largest allowance on the building.

How do you make the financials believable?

You make them believable by showing the assumptions behind them and testing them. Forecasts that look perfect are less trusted than forecasts that show where they bend.

Build four items:

• A base case, using cautious sales and realistic costs.
• A weaker case, with lower sales, a later opening or higher costs.
• A break-even point, in weekly sales and in covers per service.
• A cash view, month by month, showing the lowest point and how it is covered.

Sales should be built from seats, turns, average spend and trading days, not from a percentage of an industry total. If you say there are 40 seats, two turns on a weekend night and a given average spend, the reader can challenge each piece. That is a good thing, because each challenge shows the reader how well you know the piece.

A short worked example shows the kind of arithmetic a reader will repeat on the back of the page. This one is illustrative, in made-up currency units. Suppose fixed monthly costs are 30,000 and food and drink cost 30 per cent of sales, leaving a 70 per cent margin. Break-even sales are then about 42,900 a month (30,000 divided by 0.70). At an average spend of 30 per head, that is roughly 1,430 covers a month, or about 55 a day over 26 trading days. A reader can now ask a sharp question: does the room, at your hours, seat 55 paying guests on an ordinary Tuesday? If the answer is uncertain, the plan has found its real risk.

Then name the three assumptions the plan is most sensitive to. For most restaurants these are the average spend, the occupancy in the first six months and the building cost. Say what you will do if each one goes wrong.

A plan is persuasive when it shows the reader exactly where it might break.

What do investors want to know about the team?

They want to know who will actually run the place on a Friday night. A team section should show relevant experience, clear roles and a plan for what is missing.

Be specific. Write what each person has run, for how long and at what scale, rather than a list of job titles. If a gap exists, such as nobody has managed a large kitchen, say who you will hire and when. Naming a gap and a plan is more credible than hiding it.

Include advisers and suppliers only where they have a real role. A long list of names adds length without adding confidence.

How much market research is enough?

Enough to show demand and competition for your specific guest in your specific area. SBA recommends checking demand, market size, location, saturation and pricing, and mapping competitors by their strengths and weaknesses, including indirect ones.

For a restaurant, that means:

1. A map of the five to ten nearest competitors, with price points, hours and what each does well.
2. A description of the guest in one paragraph, with when and why they eat out.
3. Evidence of demand: foot traffic you counted, pre-orders, a waiting list or the results of a pop-up.

Direct evidence beats general statistics. A short pop-up that sold out says more than a paragraph on national spending.

What can you cut?

Cut anything that does not help the reader decide. Long mission statements, generic descriptions of the restaurant industry and photographs of dishes you have not yet cooked rarely help.

A useful test is to read each paragraph and ask what decision it supports. If the answer is none, shorten it or move it to an appendix. Keep the plan for the reader and keep a separate working model for yourself.

Key takeaways

• Write the one-page lean plan first. If it is vague, a longer plan will not fix it.
• Put the summary, the funding request and the financial case near the front.
• State the amount, the form, the use of funds and the reserve in plain terms.
• Show a base case and a weaker case, and name the three assumptions that matter most.
• Build sales from seats, turns and average spend so the reader can challenge each piece.
• Describe your team by what each person has run, and say how you will fill the gaps.