Opening A Restaurant
Information to consider when drafting a Business Plan for a new restaurant opening:
Sources of Information
The following publications provide excellent information about the industry:
- Nation’s Restaurant News
Lebhar-Friedman Publication - The Restaurant Planning Guide
Upstart Publishing Company - Restaurant Management
Prentiss Hall - The Restaurant
John Wiley & Sons.
Site Selection Criteria
Representative points to be considered:
- Demographics
- Competition
- Activity generators
- Demand for concept
- Zoning Ordinances & Variance
- Signage, Visibility and Accessibility
The Restaurant Facility
Representative points to be considered:
- Availability of licenses and permits
- Condition of the space & past history
- Cost of renovations
- Utilities – gas, water, electric, etc.
- Workable Layout and Design
- Rent, lease terms & R.E. Taxes
Buying a Restaurant
Documents to be requested:
- Copy of the Lease
- Tax Returns for 3 years
- Financial Statements for 3 years
- Complete Equipment List
- Latest Health Inspector’s Report
Valuing an Existing Restaurant
These factors determine the value:
- The potential for sales growth
- The potential for cash flow growth
- The condition of LHImp & FFEq.
- The length of the lease – 10 year minimum
- Base rent as a percent of sales
The Professional Team
Select professionals with experience:
- Attorney
- Accountant
- Contractor
Lease Negotiations
A partial checklist of salient points:
- Have lease reviewed by an attorney
- Length of the lease – 10 years +
- Base rent at Industry Average
- Scope of Landlord/Tenant Improvements
- Right of Assignment
- Condition of space at delivery
- Options to extend
- Extent of Personal Guarantee
Unit Level Economics
Representative operating expenses:
- Sales: 100%
- Cost of Goods: 32%
- Payroll Cost: 32%
- Other Expenses: 20%
- Rent: 6%
- Cash Flow: 10%
Restaurant Concepts
The concept needs to be well defined:
- Fine Dining: Ruth’s Chris, Capital Grill
- Casual Dining: Applebees, Chili’s
- Family Dining: Friendly’s, Denny’s
- Fast Food: McDonalds, Wendy’s
- Quick Casual: Panera, Baja Fresh
- Bars, Pubs: Bennigan’s, Houlihan’s
- Coffee: Dunkin Donuts, Starbucks
- Other: Ice cream, Deli, Pizza, etc
Target Food and Beverage Costs
Percentage will vary based on concept:
- Food: 29% – 32%
- Beer: 22% – 25%
- Wine: 29% – 32%
- Liquor: 22% – 25%
Business Plan Outline
Samples available on the Internet:
- Executive Summary
- Company/Concept Description
- Industry Analysis
- Products and Services
- Target Market
- The Competition
- Market/Sales Strategies
- Operations
- Management & Organization
- Long Term Development/Exit Strategy
- Financial Data & Projections