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Make A New Plan, Stan: Starting A Restaurant

I thought I had a great idea for this post. I woke up with it, and it was one of …

By Dave Eagle

Image courtesy of Chelsea Ling (Flickr)
Image courtesy of Chelsea Ling (Flickr)

I thought I had a great idea for this post. I woke up with it, and it was one of those ideas that’s just so achingly clever that the whole damn thing was going to write itself.  It was going to be in the form of a recipe, with a list of ingredients—stuff like 1 Idea, Great; 6 Months, Cash Reserves—followed by detailed instructions on how to combine them all and in what order and you get the idea.  But then I started to wipe the sleep from my eyes and the coffee took hold, and I realized that if starting a restaurant were as easy following a recipe, everyone would do it.  At the very least, all the people who made that killer risotto that one time for a dinner party would do it.  But it’s not that easy, and this is why if you do a google search for opening your own restaurant you’ll see just as many sites telling you not to do it as there are sites with helpful tips.  There are tons of decisions that need to be made along the way, so much so that putting it all in a recipe form would either be reductive, or I’d have to reinvent the format of recipes as a series of conditional if->then statements.  So, back to the drawing board, minus the postmodern aesthetic. The main problem I’m confronting in creating a How To Start A Restaurant Guide stems from the complexity of the undertaking: every successful restaurant is unique in its own way, and so only the most basic template could be used to apply to as general an audience as possible.  Unfortunately, I get paid to write things more thoughtful than Step One: Get Some Stuff, Step 2: Do Some Things. Turning your dream restaurant into reality is going to be more complicated than that, much more than can be covered in any one blog post. But, I mean: I’ll try it.

Photo by Roland Tanglao (Flickr)
Photo by Roland Tanglao (Flickr)

So, we’re going to try something different here. Instead of me writing something nonspecific and unhelpful, I’m going to guide you in writing your own How-To Guide, tailored exactly towards your vision. If that sounds too cumbersome for you, understand that regardless of what I write, you’re going to have to create this How-To document, anyway, and you’ll call it your “Business Plan.” Think of it as the Bible of your business: it provides solid direction and a mechanism to get money from others.  Everyone knows you need one of these if you’re expecting to borrow money or attract partners.  Anyone who loans you money for a business venture without looking at your business plan is likely going to skip the late fees if you miss a payment and go right to breaking your knees.  If helping you to raise capital while preventing the unnecessary fracture of your bones isn’t enough motivation for you to write a thorough business plan, then surely the third benefit will convince you.  Namely, it is the How-To Guide for starting and running your restaurant.  It’s your business’s instruction manual, and before you RTFM you have to WTFM.  There are tons of decisions you’ll need to make, and many of them can be made ahead of time, added to the manual, and then referred to when needed. Here, then are the major things you need to consider when writing your How-To Guide:

1. Develop the concept of your restaurant.

This doesn’t mean something as simple as “burger joint” or “bar.” That’s the easy part.  The concept is every other little thing that goes into making your restaurant unique.  Think of it like the Dude’s rug: it really tied the room together. In the US—and 28 other countries—there’s a popular chain of restaurants called Hooters, which offers the usual assortment pub-grub served by amply endowed waitresses in tight fitting shirts.  Whatever you think of this concept, it’s worked for over 30 years and counting. The concept is what sells the place: men can get burgers, wings, and beer anywhere. But if they’d like to relax in a casual environment where their misogyny won’t be challenged, Hooters is the place to go. It’s the concept that sells the place, not the food. Even at the highest Michelin rated restaurants serving the world’s best food by talented chefs have concepts that help to create a cohesive experience. So put a lot of thought into this. Much of it is already carved out in the skeletons of your ideas, like the food you want to make, or whether it’s going to be quick-serve, casual dining, or formal setting. The concept drives everything: how you decorate, the equipment you’ll need, the days and hours you operate, the target customer. All of this information needs to be included in your business plan, and should be justified by the central concept. Every success starts with an idea, so make it a good one.

2. Design Your Menu.

Not really this kind of design, but you have to admit this is kind of perfect.Photo courtesy of H is for Home
Not really this kind of design, but you have to admit this is kind of perfect.
Photo courtesy of H is for Home

Different than your overall concept, your menu gets down to the specifics of the delicious things you’ll be wanting to cram down your eager patrons’ gullets. But this exercise isn’t just about seeing listing a bunch of tasty things people might want to buy. You’re going to need to include your menu in the business plan, and this gives you and potential investors an opportunity to see how feasible it is to be able to make everything you want in a single kitchen. Once you’ve got all the dishes listed out, make a list of ingredients that each one requires.  Is there a lot over overlap from plate to plate? That’s good! If 10 menu items all require red pepper, that simplifies ordering and large orders can mean a lower per unit price.  All 10 dishes become a little more profitable when one ingredient they share gets cheaper.  On the flipside, if you find yourself with wildly disparate ingredients from dish to dish, it adds complexity and cost to your inventory management.  Also, it points towards a menu that’s not particularly cohesive.  Variety may be the spice of life, but saffron is the spice that costs a ton and maybe you don’t need paella on your menu. For the moment, you don’t need to worry about pricing your menu—you’re just evaluating its appeal.

3. Identify (and then research!) a Location.

It’s just like Henry David Thoreau said, “Location! Location! Location!” It’s the feature so nice you say it thrice.  Again, your concept should greatly inform where you set up shop. Is it easy to get to? Does it serve a demographic that matches your target audience? Commercial real estate is also poses unique problems for buyers: if this location is so great, why’d the previous business fail? Or perhaps you want to get into a new shopping center; this is risky because the demand for such a destination has yet to be demonstrated. A good place to check on the viability of any location can often be traffic studies. It’s not enough to know there are a lot of hippies in the town where you want to set up a quinoa smoothie stand.  Towns with good zoning laws will regularly conduct traffic studies of commercial districts to help plan infrastructure upgrades.  But these reports contain a wealth of data about how many vehicles drive through on any given day, when peak hours are, comparisons of both directions of traffic.  Pedestrian traffic is also measured, with estimates on foot traffic along certain stretches of road.  The more data like this you include in your business plan, the better.  Not only does it make investors more comfortable, but you might want to refer to this information once you’re open to better plan promotions around peak customer times.

4. Research your Startup and Operating Costs.

When you’ve identified a few possible locations, project out your startup costs.  Things like the mortgage or rent down payment, construction/design of the interior, permit fees, equipment purchases, upfront utility and insurance payments, tables, chairs, linens, point-of-sale hardware and software, and a million other things you haven’t thought of yet need to be factored in. The same thought and care needs to be put into monthly operating expenses. Mortgage/rent, utilities, insurance, food purchases, payroll, POS subscription or support fees, and tons of other things that will detract from the flow of this sentence will determine this number. Payroll is an important number to get right, because a general rule of thumb is to have at least six months worth of payroll in cash reserves at all times.  This both ensures you’ll operate at peak efficiency if revenue isn’t matching expectations, but the cash also covers unforeseen expenses, like if any equipment breaks down.  Your monthly operating expenses will also determine how you price your menu and whether it will be able to support your vision.  You should use these numbers to show the revenue potential of the restaurant at various levels of capacity. If you can break even with, say, only 25% of your seats occupied, then you’ve done something very right. If you need to price your burgers at $30 each to make the numbers work, it’s time to rethink some things.

5. Design a Marketing Plan.

Image courtesy of mkhmarketing (Flickr)
Image courtesy of

Sure, your food might induce feelings of euphoria in those who eat it, but no one will know that if you don’t tell them.  And make no mistake: YOU have to tell them. Word of mouth, while the best and cheapest form of advertising, is not the sort of thing you can or should ever rely on. People don’t leave a restaurant after a good meal and then start spreading the gospel of your food.  If the meal and experience was spectacular, then they might offer their opinions to friends the next day without being asked: Hey, I had the best meal last night! But that doesn’t last long. You’ve got to have a legit marketing plan, one that identifies who your target audience is and how you’re going to reach them.  But it doesn’t end there; you also need to identify how you’re going to keep them coming back.  Put some thought into possible loyalty programs to reward repeat customers. Develop more details about your social media plan than just saying We’ll have a Facebook page and an Instagram account.  It’s also a good idea in this section of your business plan to identify who your chief competitors will be and what steps you’ll take to stand apart from them.  

6. Define Your Systems of Operation.

The business plan should describe in detail how you intend run the place as a practical matter. Systems ought to be in place defining how a typical order is handled (how the information gets from customer to kitchen, then returns to the customer as a meal); how inventory is managed and procured; how payroll is issued. Identify what tools you’ll use to handle all this—a POS for inventory and ordering, a consultant for accounting tasks, etc.

When you’ve collated all this information into a document, you’ll find yourself with the best How-To Guide of them all. I should say that a formal business plan has a lot more than what I’m talking about here—the kinds of things that are boilerplate regardless of business—but the six items mentioned above will become a handy map once you start working towards an opening; keep in mind that you can always reroute and adapt the plan as reality requires, but having a reference guide to go back to helps keep you on the right track. Plus,the more time you put into making a thorough plan, though, means less time having to adapt to unanticipated situations. It also means being better prepared for when that becomes unavoidable. It’s hard out there for the hospitable, but gratifying when you get it right.