From greasy spoon diners to Michelin Star restaurants, food service has captured the hearts and imaginations of countless culinary entrepreneurs.
In the United States, 90% are small restaurants with fewer than 50 employees, according to the National Restaurant Association. And 70% operate in just one location.
If you’re passionate about food and dream of opening a restaurant, you have plenty of company. But cooking skills alone won’t cut it. You need a plan.
In this article, we’ll walk you through writing a small restaurant business plan, from conducting market research to developing promotional strategies and creating a financial forecast.
Need more guidance? Download our free small restaurant business plan template.
Why write a small restaurant business plan?
Starting a restaurant from scratch isn’t cheap.
Startup costs range from $175,000 to $750,000 and include hefty upfront expenses like:
- Building lease
- Kitchen equipment
- Ingredient sourcing
The financials section of a business plan gives you space to compile these costs into an expense budget and compare them to your revenue projections. These will be invaluable in helping you determine if your restaurant concept is financially viable.
What’s your biggest business challenge right now?
And if you need a bank loan or investor to help fund your restaurant, they’ll want to see a plan that includes financial projections (more on that later).
The business plan is not only where you lay out your plan, vision, and goals for the restaurant–it pushes you to thoroughly research and understand your market, competitors, and customers to make informed decisions.
It guides you through the intricacies of opening and running a small restaurant and helps you keep your finances in order.
How to write a business plan for a restaurant
1. Create a company overview
A good place to start is to think about the big picture.
What do you want your restaurant to be? Are you envisioning upscale dining in a candlelit, intimate setting? Or maybe you’re going for comfort food in a family-friendly atmosphere?
Capture the essence of your restaurant with a brief, attention-grabbing overview. Think of the start of your overview section as an elevator pitch.
You’re introducing your concept and vision to highlight what will make your business unique.
Just keep it succinct.
You’ll need to include other important information about your business here, such as the legal structure of your business and the qualifications of you and your management team.
If you’re writing a business for an existing restaurant, you should also cover its history – when the restaurant was founded, who was involved, and milestones it has reached.
2. Understand your target market
Conducting a thorough market analysis is key to the success of your small restaurant. In an industry as competitive as the restaurant business, you’ll need to have your finger on the pulse of your dining market if you hope to create a unique offering.
Defining your target market is essential when starting your restaurant, helping answer questions like:
- Is there demand in the local market for your food?
- Who are your primary competitors?
- Is there building space for lease near where your target customers live or work?
- What types of partnerships with food distributors (wholesalers, farmers, butchers, etc.) will be needed to ensure a steady flow of fresh ingredients?
The first step is to identify who your diners will be.
It’s unrealistic to try to appeal to every single customer. So, ask yourself who you envision walking through your doors. Are they:
- Adults aged 40 and over, with lots of disposable income and exotic culinary tastes.
- Children, young adults, and families looking for quick, convenient food that doesn’t stretch their budgets.
Of course, these aren’t the only two customer demographics for a restaurant. But you should get the sense that these customer segments have very different preferences.
Read more: Target market example
Understanding your target market involves more than just demographics. Consider their:
- Spending habits
- Daily routines
If you plan to operate in a busy city center, your target market might include working professionals seeking quick lunch options or upscale dining options after work. But if you’re opening in a less visible area near residential neighborhoods, you may be more likely to target families.
3. Analyze your competition
With a target customer in mind, you need to understand who you’ll be competing with for their dining budget.
Analyzing your competitors is about understanding their strengths, weaknesses, and strategies.
Start by identifying direct competitors (other small restaurants) and indirect competitors (like fast-food chains or food trucks). Observe how they attract customers, the ambiance they create, and the variety and pricing of their menus.
Get a feel for their operational strategies:
- How much staffing do they have?
- How fast (or slow) is their service?
- What kinds of supplier relationships do they seem to have?
And their marketing tactics:
- How do they engage with customers?
- What deals or promotions do they offer?
- What kind of reviews are they getting online?
Finally, think about their long-term position:
- Have they expanded or downsized recently?
- Have they changed their operating hours?
- Have they changed their menu?
As you observe these competitors and their customers, ask yourself what they are doing right and where they are coming up short.
This knowledge will help you identify gaps in the market and opportunities to offer a unique experience.
4. Create a detailed operations plan
With so many moving pieces to manage as a restaurant owner, writing an operations plan is just as important as creating a market analysis.
The operations section of your business plan details how your restaurant will function daily.
It should briefly touch on every aspect of running the business–from staffing needs to how often you will need to buy new ingredients, kitchen equipment, or dining utensils.
Your operations plan will reflect the unique needs of your business, but a typical restaurant operations plan might include:
- Staffing and training: Lay out a staffing plan, with the roles and responsibilities of each team member. Include strategies for hiring, training, and employee retention.
- Equipment and technology: Outline your dining, kitchen, and technology needs, from tables and chairs to ovens and point-of-sale systems.
- Supply chain management: Explain your ingredient sourcing and inventory management strategies and your plan to build relationships with suppliers.
- Customer service policies: Describe how you manage customer service needs and feedback to ensure a positive dining experience.
- Health and safety protocols: Detail procedures for maintaining kitchen hygiene practices and food handling standards to ensure food safety and compliance with health regulations.
Without an operations plan, you’ll lack a documented strategy for managing your kitchen workflow, maintaining customer satisfaction, or even basic tasks like inventory or staffing.
And if you’re writing a business plan to get a bank loan or investment, they’ll want to see that you have a plan for successfully managing the restaurant.
5. Market your restaurant
Your small restaurant may serve the most mouthwatering dishes in town, but no one will discover it without effective promotional strategies.
You need to develop a comprehensive marketing plan to showcase your culinary delights and entice customers through your doors.
Consider both traditional and digital marketing channels to reach your target audience. Traditional methods may include:
- Hosting special events
- Participating in local food festivals
- Partnering with complementary businesses in your community
Digital strategies may include:
- Creating an engaging website
- Building a strong presence on social media platforms
- Utilizing online review platforms to build credibility and foster positive word-of-mouth.
When developing your promotional strategies, consider the following tips:
Be smart about your online presence
Build a visually appealing and user-friendly website that showcases your restaurant’s ambiance, menu, and story.
Leverage social media platforms to engage with your audience, share enticing food photos, and run targeted advertising campaigns.
Encourage repeat business by implementing a loyalty program that rewards customers for their patronage. Offer incentives such as discounts to certain customer segments, like seniors, veterans, or students.
Engage with the local community
Participate in community events, sponsor local sports teams or charity initiatives, and establish partnerships with neighboring businesses.
Becoming an active community member will build brand awareness and loyalty.
6. Financials and pricing
According to data from the National Restaurant Association, about 60% of restaurants fail in their first year, and 80% close within five years.
You need to understand your startup and ongoing operating expenses to run a successful small restaurant.
Start by estimating your startup costs, including:
- Site acquisition (down payment if owning the space, initial payment if leasing)
- Building improvements
- Equipment purchases
- Licenses and permits
- Initial inventory
- Menu creation
Then, account for ongoing operating expenses, such as:
- Employee wages
- Mortgage or rent payments
- Ingredient costs
Pricing your menu items strategically is essential to ensuring profitability. Analyze ingredient costs, consider portion sizes, and compare prices in your local market to determine competitive yet profitable pricing.
Conduct a break-even analysis to determine the number of customers you need to serve to cover costs and start generating profits. Regularly review your financials and adjust your pricing as needed to maintain a healthy bottom line.
Consider these financial aspects when developing your small restaurant business plan:
Determine how you will allocate your budget across different areas of your restaurant, such as kitchen equipment, interior design, marketing, and staff training.
Prioritize investments that will have a direct impact on customer experience and operational efficiency.
Identify multiple revenue streams for your restaurant. This may include revenue from food sales, catering services, private events, or partnerships with local businesses.
Diversifying your revenue sources can help stabilize your cash flow.
Develop strategies to control costs without compromising quality. Efficient inventory management, negotiation with suppliers, and staff training on waste reduction can contribute to cost savings.
Create a sales forecast based on your market research, pricing strategy, and seating capacity. Consider seasonal fluctuations and special events that may impact your restaurant’s performance.
Other information to include in your small restaurant business plan
As a restaurant owner, a few components of your business plan are unique to your industry.
None of these fit neatly into any one section of a business plan. We suggest addressing them in additional sections or within the appendix.
Restaurant location and layout
Include information about your restaurant’s location.
Some of this information will be included in your market analysis, but once you’ve secured a location, you should go deeper and analyze factors like:
- Rent and utilities
- Foot traffic
- Parking availability
- Nearby businesses
Explaining the layout of your restaurant – especially your kitchen – is also important. Consider adding photos or diagrams of each room to your plan.
Diagrams can be especially helpful. You can add in-depth details for seating arrangements in the dining room or how staff should move efficiently throughout the kitchen.
What do many people do before deciding whether to eat at a restaurant?
They look at the menu.
You can gain or lose customers on the strength of your menu. It affects numerous business areas, from marketing to pricing and operations.
For instance, if you’re running a family-friendly restaurant but your prices are too high, people will see that on your menu and may decide to eat somewhere cheaper.
On the other hand, if you’re running a fine dining restaurant, but your menu fails to describe your dishes in an appealing way, diners may go somewhere they perceive as having higher quality meals.
That makes the business plan a great place to create menu concepts.
You can experiment with different offerings, price points, and menu designs until you’re confident about sharing them with customers.
And since business plans are continuously updated as your business changes—you can see how your menu has changed over time and what’s been most successful.
Download your free small restaurant business plan template
If you’re ready to start a restaurant, you can download our free small restaurant business plan template from our library of over 550 sample business plans.
Get started today, and discover why businesses that plan grow 30% faster than those that don’t.
More restaurant business plan examples: