RE: Business Plan Financials???? Help!!
Opening a restaurant is a huge exercise in being able to multi-task and to move ahead in the face of uncertainty and inexactitude.
Your motto will need to be “complete, careful and thorough”.
The amount of research, writing and figuring required is extensive to say the least.
Your business plan and particularly all financial figures are NOT just to get funding but to help you not go bankrupt as well.
Regarding your equipment ...
The very first thing you need to do is establish a preliminary/draft Kitchen Plan document based on the building you intend to inhabit. The equipment you inherit with your building (if any) will give you an initial list of equipment on-hand verses needed-to-purchase. The health department in many jurisdictions will require you to submit a spec sheet on each piece of equipment in advance - and they may be quite specific as to what they will or will not allow. *Importantly* just because a previous owner may have used a piece of equipment in your building or even in the jurisdiction, that does NOT mean the health dept. will necessarily approve *you* to use it.
Read my previous post at the following link ... about a third of the way down the page, it starts with the words “Yes, Health Department is an important thing” ...
The Building department may force you to spend on further building modifications ... keep this in mind as well.
The following additional post I made previously near the bottom of the page at the following link may also help ...
Regarding your Food Cost as stated in your financial statement ...
“Shoot from the hip” as little as possible. This will take multiple steps. The following are some of them.
Predicting Food Cost is based on a few different things.
First, you need to know the basic style of restaurant you want to open and the menu and pricing of very similar restaurants in the area.
Second, for a given period (say, monthly) you need to know your approximate expenses as close as you can possibly nail them down ... your rent, your taxes, your labor - both variable and fixed etc. etc ... essentially you need to do the expense portion of a formal Breakeven Analysis. A very, very preliminary estimate of food expenses will in fact be part of these numbers as well ... at this stage of the game estimating food expense is bound to be "more an art than a science" - do as best you can on that initial estimate.
Once you understand the expenses you expect to incur both fixed and variable, then you need to determine a few things ...
What your total (allowable) seating capacity will be ... this will have to do with your interior space as well as other things like bathroom capacity etc.
What your average customer check might look like ... i.e. the bill for a table of 2 people at a coney island will be quite different than a fine dining place.
Your anticipated volume of business (conservatively) ... considering traffic flow, location, local lunch attendees from offices, and a host of other things.
Volume of business depends in part on what turnover you can expect. That is: the number of times you can re-fill a table with new customers for different periods, days, shifts etc.
THEN, using your expenses, your seating capacity and volume, your average customer check, and a *conservative* estimate of your profit from all menu items (for a serving of broccoli; what you sell it for minus your cost), YOU WILL DETERMINE ...
1) whether your menu, as you have guessed it and at the prices you are intending to charge, has a chance of being profitable enough *to support your business* in view of your volume and seating constraints etc etc.
This is where you will get an initial idea of whether, for instance, a hot dog restaurant in a building with the most expensive commercial rent in town, is even in the ballpark to survive. It makes no sense to knock yourself out on other things until you have a reasonable expectation that your plans, as best you know them, are likely to pay the bills you will incur.
2) finally .... your stated FOOD COST in your Business Plan will be based on the proposed menu that you put through the above rigorous steps.
Of course, this means doing complete recipe sheets for all menu items with all ingredients and then calling restaurant suppliers/purveyors to get pricing.
You should understand that many of the above steps are based on the data used in Breakeven Analysis (which will also be part of your submitted business plan) ... the ability to do a proper breakeven analysis - NOT just a "breakeven number" - is the MOST important financial skill you can have in a restaurant.
It’s worth noting that banks are primarily interested in how they will be protected if you fail. Whereas equity partners are operating under the assumption that you will succeed. Both want complete and competent business plans. Banks are particularly interested in the numbers ... and they particularly want to see extremely well thought out and conservative numbers. And like I said above, you need to avoid “shooting from the hip” and “pulling numbers out of your hat” and instead, nail down the numbers as hard as you possibly can. If you need more info on what a Breakeven Analysis is about let me know and I'll try to post some points.