How to write a restaurant business plan and avoid risks

Editorial headshot of Jen Matteis
If you are opening your own restaurant your success may be dependent on a well thought out business plan and adequate protection from associated risks.
A restaurant from the exterior.

If you're new to the world of entrepreneurship, the idea of creating a business plan for a restaurant can be daunting. It requires research and strategic effort, but ultimately a business plan for your restaurant can not only get you approved for financing and serve as a road map to your success. The more thorough and detailed the plan, the better your chances of turning your dream of owning a successful food service business into a reality.

While a business plan is an important step in opening your restaurant, it's equally important to make sure you protect your business with the right restaurant insurance policies. Otherwise, all your hard work could literally go up in smoke if a fire breaks out and you don't have the necessary insurance coverage.

In this guide, we'll go over seven key sections to include in a small restaurant’s business plan. We'll also cover which insurance policies you might need before you're ready to open your doors and serve the first customer.

Section I: Executive summary

The executive summary should provide an overview and serve as an introduction, concisely summarizing your restaurant business plan's main components for the reader. Although it goes first, you may want to write it last so you don't miss any important points you cover in the plan.

Make sure your executive summary includes your:
  • Confidentiality statement (to protect your ideas and compiled research)
  • Identity
  • Concept and reasons why it will work
  • Projected costs
  • Anticipated return on investment (ROI)

Remember, this is your first opportunity to make an impression on the reader – someone who may have the final say on whether or not the plan deserves financing. Hit the key talking points to entice your audience to keep reading, but don't go into too much detail. That comes later.

Section II: Company description

Next, it's time to break down the logistics of the business operations. That includes components such as:

Mission statement

Describe the goals of your food service business, including your overall vision for the company.

Legal structure

Indicate what the business structure will be: sole proprietorship, limited liability company (LLC), partnership, or S corporation. For a sole proprietorship or partnership, consider disclosing your rationale for choosing that structure, since it means you could be held personally liable for business losses.

Address of your leased or purchased commercial site

If you don't have a specific address yet, list the area or city where your restaurant will be. Your choice of location is integral to the success of your food business – and your lender will be sure to pay attention to this detail. You'll also need to note whether you plan to lease or purchase the property, and explain why.

Startup capital needs

Offer a quick estimate of how much capital is needed to open your doors and how you plan to obtain it.

Business concept

This is one of the most critical parts of your plan, since it gives you the ability to truly sell the reader on your vision. Write this section as if you were a critic writing a rave review of your restaurant. Some of the points to touch on include:

  • Service style (e.g., fine dining, bistro, casual, or quick service / fast food)
  • Restaurant size and seating capacity
  • Operating hours and meal periods
  • Any interesting decor, design elements, and furnishings
  • The "feel" of the restaurant (atmosphere and ambiance)
  • General menu theme
  • Unique selling points (e.g., signature dishes or cocktails, entertainment, or unique service style)
  • Additional services (catering options or delivery)

Sample menu

This will be another strong selling point. Take time to make the sample menu look attractive, and pay special attention to your food descriptions – you want the reader's mouth to be watering after reading them.

Building design

If you have a floor plan or artist's rendering of your restaurant, include it.

Overall, this section should give the reader a clear idea of what the restaurant will look like, how it will operate, and what the experience will be like for customers.

Section III: Management and organization overview

No matter how innovative your concept is, the success of your restaurant will be determined by how your team executes your plan. Show prospective investors and lenders your team's business savvy, experience, and ability to manage operations. Be sure to include:

Key employees' and principals' resumes

Include a resume-styled summary for each of your key owners and managers. List each person and write a brief summary of their role in your company, including any experience they have in management. The goal here is to show how your experienced team will help your business succeed.

Management agreements

This section should include brief descriptions of:

  • Compensation and incentives for all employees and key personnel
  • The board of directors, if applicable
  • Third-party involvement, such as outside consultants
  • Management to be added
  • Management structure and style (i.e., who reports to whom)
  • Ownership and stock options

Investors and lenders will feel more confident giving you money if they can see that you and your management team have a proven track record of success.

Section IV: Industry analysis

In this section, you want to demonstrate that you have done your research and found that there is a demand in the market for your restaurant concept. Your industry analysis should include:

An industry overview

There are countless resources you can use to illustrate the growth of the U.S. food service industry. For example, the National Restaurant Association offers in-depth research about industry projections, operational trends, and customer spending habits. Use these figures to paint an optimistic outlook for your food business.

Target market research

Use this section to describe the characteristics of your potential clientele (e.g., income, age, industry, education, household size, etc.). Include demographics, dining habits, and preferences to demonstrate your concept's appeal to this market. Also, detail if any relevant industries, such as tourism or a nearby university, will help drive traffic to your doors.

Location analysis

Your real estate broker might help you with this section, which should present demographic statistics and describe the local industry and economic outlook. Examine location traffic counts, traffic generators such as shopping centers, and proximity to residential and commercial areas. Location can make or break a business, so be sure to demonstrate your spot's ability to draw traffic to your doors.

An overview of the competition

To succeed in the food service business, you have to know your competition. Key points to include here are the types of other restaurants in the area, and which ones are targeting your ideal customer. Explain why your concept has the advantage and what factors will lead your target market to choose your restaurant over a competitor.

The industry analysis should leave the reader confident that you have done the research and found that demand exists in the market for a restaurant like yours.

Section V: Marketing plan

Your chefs may be capable of serving up world-class cuisine, but that won't keep you in business long if potential customers don't know you exist. Investors and lenders will want to know how you plan to draw customers to your establishment and keep them coming back for more.

This section should describe how you plan to market your food service business, which could include:

  • Print, radio, or TV advertising
  • Email marketing
  • Direct mail
  • Social media campaigns
  • Frequent diner programs
  • Community involvement and charity events
  • Holiday specials or events

Provide as many specifics as you can to show that you have given your marketing strategy quite a bit of thought. If marketing isn't your strong suit, consider hiring an advertising firm or marketing consultant to help.

Section VI: Operations overview

Now it's time to dive in and explain how your establishment will run on a day-to-day basis. Be sure to describe your operational processes, dedicating a brief section to each of the following points:

  • Staffing
  • Training
  • Daily operations and production
  • Customer service
  • Suppliers
  • Daily cash control
  • Weekly prime cost report (i.e., the gross profit margin after the cost of goods sold and labor costs have been deducted from sales revenue)
  • Purchasing records and accounts payable
  • Accounting system / service
  • Payroll processing (i.e., how and when the payroll checks will be processed)

Management controls, such as:

  • POS system to track sales
  • Time and attendance tracking
  • Scheduling
  • Operations checklists
  • Ordering procedures
  • Inventory control
  • Cash control procedures
  • Security measures
  • Safety policies
  • Liability reviews

Administrative controls, such as:

  • Accounting
  • Payroll processing
  • Daily and weekly reports
  • Profit and loss (P&L) reporting
  • Bank reconciliations

It will be time-consuming, but going through all these details now should help reduce the amount of work you need to do in the final weeks leading up to your restaurant opening for business.

Section VII: Financial projections

This section gives you the chance to show that you are capable of planning for your business's future. Make sure you provide realistic projections and accurate information, since misinformation may hurt your chances of securing loans or funding.

Some potential items to include are:
  • Personal financial statements for the business's owners
  • Projected funding and uses of cash
  • Capital budget
  • Sales projections
  • Hourly labor cost projections
  • Assumptions to the financial projections
  • Annual operating projections
  • Five-year operating and investment projections
  • Profit and loss balance sheets and projections

It can be hard to project expense and income when you are starting from zero, but do your best. You may want to hire an accountant to help with this phase of your plan.

Final tips for creating your restaurant business plan

Now that you have a basic outline of what your food service business plan should include, let's review some general advice to help guide your writing:

Proofread, proofread, proofread

Spelling mistakes and grammatical errors look unprofessional and can hurt your ability to secure financing.

Organize your plan in a logical manner

Remember, you want a prospective investor or lender to read your plan in its entirety, so be sure to organize your ideas and research in a way that is easy to grasp.

Develop your ideas, but keep it concise

If your plan is too short, it may seem underdeveloped. On the other hand, a plan that is too long may lose the reader's interest.

Above all else, make sure your plan is well-written. Again, you want to grab your reader's attention and incite action. When you use descriptive and clear language, you have a better chance of engaging your audience and selling them on your ideas.

Protect your new restaurant with small business insurance

Getting approved for financing will get you one step closer to opening your food service business. However, if you don't invest in restaurant insurance, a fire or customer injury could wipe out everything you've worked so hard to build.

Here are a few of the policies you are likely to need as a restaurant owner:

General liability insurance

This can pay for lawsuits and damages related to third-party injuries and property damage. Most commercial landlords will require you to have this coverage in order to sign a lease.

Business owner's policy

Combining general liability coverage with commercial property insurance, often at a lower rate, a BOP is a popular choice with restaurant owners. The property component will protect your building if you own it, as well as your valuable kitchen equipment, dining area furnishings, and more.

Workers' compensation insurance

Required in almost every state, workers' comp can pay for employee medical bills and lost wages caused by workplace injuries.

Liquor liability insurance

This policy can cover the cost of lawsuits related to damage or injury caused by a customer who became intoxicated at your establishment.

There are several other policies for food and beverage businesses that might benefit your new restaurant. If you aren't sure which ones are right for you, your insurance agent should be able to help you secure the protection your new restaurant needs.

Compare quotes from trusted carriers with Insureon

Complete Insureon’s easy online application today to compare insurance quotes from top-rated U.S. carriers. Once you find the right policy for your food service business, you can begin coverage in less than 24 hours.

Jen Matteis, Content and Production Editor

Jen is an expert on small business insurance, a talented writer, and meticulous editor. She’s written and edited hundreds of articles to help inform small business owners about their insurance options. Prior to joining Insureon in 2018, Jen served as a senior copywriter at a digital marketing agency, and as a writer and editor for newspapers on both coasts. In her spare time, she writes fiction.

Get business insurance quotes from trusted carriers
What kind of work do you do?