Opening of a restaurant : How to draw up a business plan?

Updated on November 30, 2022

The financial part of your business plan defines your cash flow needs for the realization of your project. It is at the heart of the search for financing and allows investors or the bank to judge the soundness of your project.

In addition to your cash flow needs, your business plan establishes your financial forecasts including your start-up capital, your estimated turnover, your profits and your results. It also allows you to define your sales and marketing strategy as well as your legal status.

The key ratios of your business plan

There is a whole series of ratios in the restaurant industry that allow you to build your business plan. We have given you an order of magnitude for each one. Obviously each project is different and these ratios are not absolute rules. They will help you to situate yourself in relation to the market standards.

• Purchase of raw materials/CA (also called food cost in the restaurant industry): 30% maximum
• The prime cost, which takes into account personnel costs, raw material costs and packaging costs, should not exceed 60% of the turnover. You must ensure your profitability in view of the substantial initial investment.
• Rent/turnover: 9 to 10% maximum
• Personnel costs/sales: 30% maximum These are very important for a restaurant and many people want to start small with very few staff. This can be dangerous if, for example, you target a lunchtime clientele in a hurry who need to be served quickly.
• Percentage of salary costs in the price of a meal: Gross salaries + charges / turnover before tax (Recommended rate: between 35 and 45%)
• Casting (loss, breakage, theft)/AC: 2% maximum
• Gross margin / Sales: 70
• Promotional budget / sales: 4% at launch, 1 to 2% thereafter
• Net profit/Sales: 10

Determining the price of food and drinks

To set prices, several elements must be taken into account.

The prices set by the market and therefore by your competitors will of course be studied, but this is not enough. The prices you indicate on your menu must also depend on the image you want to give to your restaurant and the margin you want to make.

Once you have taken all these elements into account, you can use the multiplier method to set your prices. This method consists of applying a multiplier to the cost of the material, so in the calculation we only take into account the price of the raw material, we do not take into account the personnel costs or other additional costs.

There are several rules to respect:

• The lower the material cost, the lower the multiplier
• The higher the multiplier, the higher the workload to perform the service
• The coefficient that you apply must allow you to obtain a gross margin that is able to cover all the expenses of your restaurant and to obtain a satisfactory result

To establish the price of the wines on your menu, Les Grappes advises you :

To establish the price of the wines on your menu is to apply a multiplier to the purchase price of the wine.

This multiplication coefficient must take into account the purchase price of the wine of course, but also external factors such as the price of the rent of your establishment, your personnel costs etc. This is why, for example, the coefficients applied are generally higher in Paris than in the regions.

At Les Grappes, our experts include VAT in the coefficient. Once applied, you get a price including VAT.

It is advisable to apply a slight degressive on the coefficients.

For example :

• A bottle bought for 4€ HT, we can apply a coefficient 5 → Calculation : 4€ HT x 5 = 20€ TTC à la carte
• A bottle bought for 8€ HT, we can apply a coefficient 4 → Calculation : 8€ HT x 4 = 32€ TTC à la carte
• A bottle bought for 14€ HT, we can apply a coefficient 3.5 → Calculation : 14€ HT x 3.5 = 49€ TTC à la carte

Calculation of the margins

The margin on solids is calculated as follows: (Sales before tax - Purchase cost of the food consumed) / Sales before tax.

The margin on liquids is calculated as follows: (Sales before tax - Cost of purchasing the drinks consumed) / Sales before tax

Generally, the margin on solids is around 72% and that on liquids 85%.

Your financial forecast

First of all, it is necessary to foresee the amount of all the expenses related to the purchase of the goods necessary for the elaboration of your meals. You will also need to budget for beverage purchases. The amount of these expenses must be in accordance with the margin that you plan to make afterwards.

In the forecast you should also take into account the rent for the commercial lease and the deposit paid at the beginning (which should be entered as an investment).

Then, in terms of overheads, we generally find :

• Energy expenses
• Maintenance of equipment
• Maintenance products
• Small kitchen equipment
• Professional insurance
• Equipment rentals
• Fees of the accountant
• Advertising expenses
• Bank charges
• Telecommunication costs
• Loan repayment (if a loan has been taken out)

It is important to separate tangible investments (premises, equipment, kitchen, stocks, maintenance products, computer equipment) and intangible investments (lease, salaries, communication).

Figures to know :

• A "safety cushion" of at least 15% will allow you to deal with unforeseen events. - The rent or occupancy cost should not exceed 10% of your projected turnover.
• Keep in mind that the bank may refuse financing. They consider that the risks linked to the opening of a restaurant are high (one restaurant out of two closes before its third year of operation).
• In general, you must bring at least 30% of the financial contribution to be able to borrow money.

Build a good business case to convince your investors. The more persuasive and determined you are, the more investors will believe in your project and therefore trust you. Do not hesitate to constantly rework your business plan until it is perfect.

To learn more about the different options for financing your restaurant, see our dedicated article.

Need to be accompanied?

Les Grappes is an online platform for the sale of wines from winemakers, for professionals. We accompany cafés, hotels, restaurants, wine cellars in their choice of wines, but also in the realization of customized wine lists! According to your project, your tastes and your budget, we help you to choose the best wines, among more than 800 wine growers, in short circuit.Register for free to have our team contact you! For more information, go to our website.