how to create a winning restaurant business plan.doc

7/27/2019 How to Create a Winning Restaurant Business Plan.doc

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How to Create a Winning Restaurant Business Plan

by Joe Erickson

A business plan is your roadmap for the future of the business. Not only does it provide

direction, it requires you to consider all the pitfalls and opportunities of your prospectiveenterprise, well before you open its doors. It is your script of how the business ought tobe.

ithout it you are unlikely to receive funding from anyone other than the most trustingor unsophisticated sources of financing. In short, many restaurateurs agree that having asound business plan was the single most important ingredient in making their newbusiness a reality.

!o why do so many restaurateurs forsake this critical step, without which manyentrepreneurs wouldn"t even open a lemonade stand# $or one, restaurateurs often want to

get the ball rolling quickly. %oo many operators put all their planning into simply gettingfinanced. %hey then want to open the doors as fast as possible to create cash flow.

&nfortunately, some operators don"t understand how crucial a well'planned opening is tothe success of their concept. (ard work, great food, and the will to succeed are notenough. )ou need proper training, established operational procedures, and a creativemarketing plan, before you open. %hese may be more important to a successful openingthan menu design or table and chair selection.

here to start# )ou can wade through thousands of articles, software programs andbooks that can be purchased on the Internet or in the business section of your local

bookstore*coffee bar. !ome of these guides are valuable, although you might have to diga little to find information created specifically for restaurateurs. %his article is not meantto be the first and last word on the business planning process+ however, it intends to giveyou an overview of the key, basic components of a strong business plan. e"ll tackle thebasics here e-cept for how to create financial proections, which is deserving of aseparate article in a future issue/.

So, Who's Going to Read It, Anyway?

0ost business plans address the same basic areas+ however, there are a variety of ways toorgani1e and format them. %he overriding goal is to structure your plan in a logical and

easily understood manner. 2onsider that it will be your roadmap for development, andprospective financiers '' be they institutional lenders or 3friends and family3 investors ''will want to review your business plan as part of their due diligence, before they opentheir checkbooks. 2onsider the ways that your business plan will be used before youbegin writing. %hese include the obvious4

Acquire investment capital.

Get a bank loan.


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Obtain lease space.

And the not so obvious4

Convince your prospective managers to believe in your concept.

Gain respect and confidence from prospective employees. Allow management to concentrate on execution rather than "plan as you go."

Create a blueprint for operating your restaurant.

If you want to achieve your obectives, keep your business plan simple, but make it easyfor the reader to find the answer to specific questions they may have. As with any goodreference, you will want to provide a table of contents that outlines the content in theplan./

First, Put Down Your Pen and Breathe

$or most business people, the most daunting aspect of creating a business plan is thewriting process. 0ost folks have a deadly fear of the blank sheet. %his is the part wheremany would'be operators and e-perienced restaurateurs struggle.

%heir e-pertise, in many cases, stems from their ability to conceptuali1e their dream of

owning a successful restaurant.hen it comes to documenting their dream, however, the enormity of the task can be

overwhelming. 32reating a business plan for the first time is too daunting of a proect formost newbies,3 says 5ave 6strander, who is known as 3%he 7i11a 5octor.3 3Even we"6ld 8ri11lies" often shudder at the task. It takes big hunks of time and lots of research tocreate a great one. Anything less than great has a big chance of being turned down.3

%hat"s a lot of pressure. 9ela-. )ou might not be (emingway, but once you have adopteda structure for your business plan, 3fleshing out3 the content will flow more easily thanyou anticipated. Address the following points below, and you"ll find that the skeleton ofthe plan will take shape.

0ind you, there is no shame in hiring assistance from a consultant, for whom writing abusiness plan is routine. Not only is the consultant producing a much needed document,but he or she is helping to plan the operational strategy and opening process as well.2onsider this icing on the cake.

9egardless of who drafts the final version of your business plan, have another set of eyes'' preferably someone who understands the process '' rigorously proof the final version.

. . . 2reating a businessplan for the first time is toodaunting of a proect for mostnewbies.

-- Big Dave Ostrander


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hile this is not 0s. 2rabapple"s English composition class, typos and misspellingsreflect poorly on your attention to detail. Is this enough to cause a lender to deny fundingor a prospective partner to lose confidence in your diligence and ability to e-ecute acomple- proect# 0aybe not, but :

The Ee!uti"e Su##ary

Almost every business plan, regardless of business type, includes a one' to four'pageintroduction that gives the reader a summary of the business plan components to follow.%he e-ecutive summary should be written last, after you have completed the othercomponents of the plan.

%he summary should effectively convey your identity, your concept, why the conceptwill be successful, your plan to make it a reality, its cost, and the anticipated return oninvestment.

&se this opportunity to capture the reader"s interest, and as a sales tool for your businessplan. Avoid too many details in this section. 5etails will be addressed later. 5iscuss onlythe key aspects about your restaurant concept. 9emember, some readers never make itpast this part of the business plan. A well'written summary can convince the reader tothoroughly e-plore the rest of the plan.

!ome plan advisers suggest that a confidentiality statement precede the introduction.After all, much of the content you provide is confidential and cost you a lot of time, effortand e-pense to produce.

$o#%any Des!ri%tion

Legal structure.Establish early on the ownership structure and capitali1ation plan of theproposed restaurant. %his section should include a brief description of the legalorgani1ation. $or an independent business, this will typically be an !'corporation orlimited liability company ;;2/ rather than sole proprietorship or partnership/ sincethese 3entities3 allow for multiple ownership interests and can shield managing investorsfrom personal liability for claims against the business.

Site lease or purchase. If a definitive site has not been chosen, list the area or city therestaurant is to be located. 7erhaps there is no business in which location is more criticalthan a restaurant. Informed prospective investors will look at site selection very carefully.

Also, the financial, including ta- consequences of a lease versus purchase is critical inany new venture. A detailed e-planation of the rationale for selecting either is warrantedin the business plan. $or e-ample, a significant attraction of the deal might be theinvestment value of the real estate. %his section can be updated, if needed, once a site hasbeen selected.

Capitalization needs.8ive an overview showing the estimated capitali1ation needed toopen the restaurant and the planned sources for funding it.


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and don"t clutter it with minor issues. 5etailed proections and investment requirementswill be e-plained in the 3Investment Analysis and the $inancial 7roections3 sections ofyour business plan.

Business concept.As critical as this aspect is, writing your concept description is

typically the most fun. hat you want to do here is to paint a picture of what thee-perience will be from the guests" point of view. Just as a menu can whet one"s appetite,creating an image of your restaurant concept can peak a reader"s interest.

hile you might envision serious investors and bankers as dispassionate numbercrunchers concerned only with income proections and returns, in fact, they need to besold on why your business is a great idea. %hey need to be convinced that the conceptshould succeed in appealing to diners. 9emember, everyone understands what makes arestaurant enticing. If you can"t get them e-cited about your concept, don"t e-pect them toinvest.

riting a vivid concept description is a lot like telling a good friend about a fantastic newrestaurant you have visited. &se descriptive, enticing language to describe the followingfeatures of your concept4

ervice style! such as fine dining! casual upscale! fastcasual or quickserve.

i#e and seating capacity.

$%cor and furnishings.

Operating hours and meal periods.

Atmosphere! ambience.

&ighting and music.

General menu theme.

'oints of difference or unique selling points.

(elated products and services such as catering! delivery! and retail.

In addition to describing the food, be sure to mention interesting design elements, uniquefurnishings or other attractions. And let"s not forget the service. A good descriptivesummary of the service style, as well as the promptness, is necessary to properlycommunicate the conceptual image of the restaurant.

%he writing style you use should resemble that of a restaurant critic, albeit one who hasonly positive things to print about your restaurant. 5escriptive remarks about the overall

atmosphere you want to proect helps to solidify the conceptual picture you are trying tocreate. )our narrative should inform the reader of other key factors such as therestaurant"s price point, hours of operation and service style. Alcohol service, if provided,should also be pointed out.

=e sure to e-press any unique selling points or points of differentiation the restaurantmay have. 7oints of difference can include anything from food to d>cor to entertainment.


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%ypical distinctions are often made for signature dishes, ethnic cuisine new to the area,unique service styles or unusual d>cor.

)ou should also inform the reader of the si1e of the restaurant and its seating capacity.0ake sure to mention the presence of a bar or banquet room, e-plaining the seating

capacity, d>cor and any significant factors about them. $inally, be sure to enlighten thereader of additional services the restaurant may offer such as catering, delivery or retailmerchandise.

Sample menu.Include a sample menu in your plan. A well'written and attractivelydesigned menu can help to sell your concept. hether your concept is a fine dining tableservice or a quick'service fast'food restaurant, the menu is your No. ? selling tool.

2ustomer perception, though influenced by several factors, is largely formed based on theappeal of the menu, whether it is a printed menu or a menu board. If you are opening aquick'service concept, consider the inclusion of your menu board design. And remember,it is not the number of items you have on your menu, but the design, variety and appealthat makes an eye'catching menu.

Building design and layouts.Architectural drawings, floor plans, and artist renderingscan also help you create a visual image of your concept. Include visual components of theconcept if available.

&anage#ent Tea# "er"iew

%he success of any business relies on sound management. 5on"t believe it# %alk to anyventure capitalist. A good story is ust a good story. %hey want to know who is going toe-ecute and drive the plan. A lot of great business concepts have been turned down byinvestors, both 3friends and family3 and institutional lenders, because the prospectivemanagers did not seem to possess the e-perience, skill, education, and*or discipline tomake the business work.


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%he restaurant business is no e-ception. 2ontrolling cost, managing employees andservicing customers requires e-perience and talent. %his section of the restaurant businessplan is intended to convey the background and e-perience of the managing partners orowners as well as key management personnel that will operate the business. )ou shouldinclude a r>sum>'styled summary for each of the management or owner*management

persons.

Rsums.%he summary should begin with the name of the person and a brief descriptionof the role or position they will have in the management of the business. 7rovide asummary of his or her e-perience or qualifications. )ou might choose to insert actualr>sum>s in this section or list them in the Appendices section of the business plan.

Management agreements.0anagement agreements, though not mandatory, may beused to lay out the e-pectations of the manager, the incentive plans, if any, and atermination strategy. )ou should disclose if there are to be any management agreementsin place between the company and owners, hired employees, or third parties. Include a

copy of the management agreement, if available, either here or in the Appendices sectionof the plan. It is also acceptable to state that while a management agreement will be inplace, none has been drafted as of yet. )ou should consult with your attorney beforecarrying out a management agreement, since they are binding on the organi1ation, andare a frequent source of litigation. $urthermore, you might not want to enter into anemployment contract with certain managers, and instead, keep the relationship 3at will.3$or more information, see 35on"t ;eave 0ad, Just ;eave@4 $iring ;egal 7itfalls, and(ow to Avoid %hem,3 9!8 Archives./

Business En"iron#ent Ana(ysis

0any restaurant entrepreneurs share an e-ceptional attribute that enables them tovisuali1e a restaurant concept they fervently believe will have popular appeal to thedining public. After all, passionate belief in their concept is the driving force that can turna dream into reality. (owever, passion must be balanced with reality when it comes tocreating a sound business plan. In'depth market research is needed to substantiate thatconceptual assumptions are in line with market conditions.

%here are four basic factors to consider in your market analysis. $irst, you need to beaware of current industry trends and customer spending habits. Ne-t, identify your targetmarket, the market niche to which your concept appeals. %hird, compare the customerbase for the chosen location with the target market you are appealing to. $inally, identifythe local competition that may contend for the same customer base.

ndustry o!er!iew.Although there has been a dramatic shift in dining habits over thelast BC or so years, the change has been gradual, reflecting a constant evolution of theindustry. In the &nited !tates, the National 9estaurant Association N9A/,www.restaurant.org,has been the premier source for identifying changing trends inconsumer habits. Each year the N9A publishes, among other things, its annual39estaurant Industry $orecast.3 %he forecast provides a glimpse of the industry through
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anticipated sales, customer spending habits, dining traits, operational trends and industryworkforce trends.

%he &.!. =ureau of the 2ensus, the 5epartment of ;abor, and %he ;ibrary of 2ongressare also good sources when analy1ing population growth, ethnicity mi-, labor and

economic conditions+ however, organi1ations such as the N9A and restaurant'basedpublications provide more relevant information about our particular industry. 8iven theproected growth of the restaurant industry, this aspect of your plan paints an optimisticfuture of your chances for success in a very competitive business.

"arget mar#et. 2areful evaluation should be used to determine the preferred targetmarket that your concept best appeals to and how that relates to the overall restaurantmarket with respect to diner demographics, preferences, and habits.

&se this section to describe the ideal targeted/ customer profile for the concept. 2onsiderthe demographic characteristics for your ideal customer such as head of household age,

income, household si1e, ethnicity, single or multifamily housing.

Identify the preferred market si1e of residential and business population and theirpro-imity. Establish desirable traffic count thresholds or a preference for a specificindustry such as tourism. 5etermine the importance of traffic generators for your conceptsuch as malls, theaters and universities.

Location analysis. !ome business plans, probably most, are created before a site hasbeen selected. %herefore, the location analysis may be limited to the general area or cityfor the proposed concept.

As suggested earlier, site selection is often considered the most crucial aspect of thebusiness planning cycle. %he location analysis should describe market conditions thate-ist in the location or general area/ you have selected. Information gathered anddisplayed here should include demographic statistics, description of local industry andeconomic outlook, location traffic counts, traffic generators, residential and businesspopulation and pro-imity.

)ou should also draw comparisons between market conditions for the selected location,and the targeted market characteristics of the concept. ;ist the surroundingneighborhoods, points of interest, and area businesses.

5emographic and other information about a specific market can be found through varioussources, including eb sites. 2ontact the local chamber of commerce, the &.!. censusbureau, the departments of labor &.!. and state/, and the comptroller"s and clerk"s officeof your county.

6ften the most useful information though will come from your real estate broker. %heyhave access to demographic information that is more specific to the immediate areasurrounding the location. %hey can provide you with reports for one', three' and five'mile


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radiuses. 9eal estate brokers oftentimes subscribe to services that speciali1e in collectingand analy1ing data that is not publicly available.

Competiti!e analysis.9esearching the local competition, in terms of pro-imity andsimilarities to your concept, is an important factor when estimating your market share.

%he competitive analysis should show the e-tent of market saturation, the type of otherrestaurants in the area, and restaurants deemed to be in direct competition with yourconcept. ;ist the unique aspects of your concept that give you a competitive advantageover each.

&ar)eting Strategy

A comprehensive business plan includes a sound marketing plan. 6wner, investors andbankers want to know you have a proactive plan to grow your business. )ou can"t rely oninstant popularity and simple word'of'mouth marketing ust because some restaurants,but not many, open their doors to instant success.

&se this section to paint a picture of your restaurant"s marketing strategy before and afteryou open the doors. 5istinguish your plans for the grand opening marketing fromongoing marketing.

8ive an introductory summary of the marketing philosophy that will guide yourmarketing program. %his introduction should convince the reader that a well'thought'out,workable plan is in place. &se a descriptive, enthusiastic approach to verbali1e the plan.

6ver the years, restaurateurs have found creative methods to market their concept. e"vecovered many of them in this maga1ine, and will continue to discuss them in future

issues. !ome of the methods you may want to consider are4

Build a customer data$ase.%he cornerstone of direct marketing efforts such as loyaltyprograms is to build a customer database. 6perators have used imaginative tactics togather names such as business card drops or promotions that entice guests to sign up.

%re&uent diner programs. 6therwise known as loyalty programs, automated frequentdiner programs are now available with many 76! point'of'sale/ systems. %here are alsoa variety of services available that help you track and reward repeat customers.

'(mail campaign.E'mail as a marketing tool has been a growing phenomenon for a few

years now. &nfortunately, spammers have infiltrated this market to the disdain of all.Nevertheless, e'mail can be an essential part of your direct marketing plan. It"sine-pensive and promotions can be created quickly without the time and cost associatedto produce mailers. 7romotions can include monthly newsletters, specials,announcements, etc. $or more information, see 3)ou"ve 8ot 0ail,3 9!8 Archives./

)irect(mail campaigns.5irect mail remains a highly effective tool to reach newcustomers. It can also be very effective when used in conunction with a well'maintained
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customer database. !imple practices, such as mailing birthday and anniversary cards toe-isting customers, help to build customer loyalty.

Community*charity in!ol!ement.2ommunity involvement helps build name awarenessas well as loyalty. 5iners tend to frequent establishments that give back to the

community. !ponsoring charities has always been a great method to build support foryour restaurant and provide help to others. 2ontributions can be financial or the use ofyour resources such as your banquet hall for meetings or serving equipment for events.6ther community efforts include supporting the local sports teams, churches, and fund'raisers. $or more information, see 35oing ell by 5oing 8ood,3 9!8 Archives./

Building $usiness relationships.=uilding solid business relationships can lead to bigbucks for aggressive owners. )ou can build tourism traffic by establishing relationshipswith hotel concierges. A strategic relationship with a maor employer can help to drawlunch traffic from employees or from e-ecutive entertainment. 2atering revenue isenhanced when you know who books the catering. 5elivery to area businesses at lunch

helps the business guest and you.

+%our(walls+ mar#eting.In'house marketing is one of the most effective tools you haveto keep e-isting guests coming back. %hink of ways to promote your restaurant fromwithin such as table tents, menu inserts, displays or signage, suggestive sales tactics orfrequent diner promotions. $or more information, see 3!elling to a 2aptive Audience39!8 Archives./

Pu$lic relations ,PR-.Effective public relations takes creativity and work. )ou maychoose to handle this aspect of marketing yourself or hire a 79 firm. hichever methodyou choose, briefly describe how 79 will be handled. $or more information, see 3%he

Dalue of 79,3 9!8 Archives./

d!ertising.All restaurants advertise in one form or another. !imple signage with thename of your restaurant is advertising. hether or not you are a proponent of advertisingyour plan should be described here. !ome operators may choose to use this section toe-press a view against e-cessive advertising, choosing instead to bolster other marketingtechniques. Either way, investors or bankers will be interested in your viewpoint, if onlybecause advertising can be a huge e-pense. $or more information, see 3And %hey ill2ome4 7icking and 2hoosing 0edia Advertising for )our !uccess,3 9!8 Archives./

%erations P(an

%he operations section of the business plan should convey a general description of howthe restaurant will be operated on a day'to'day basis. 0ost chain restaurants havesystemati1ed their operations. %he system is then documented in an operating manual thatthe management team and employees must follow. %his way everyone is on the samepage.
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Although it is not always realistic to complete an operating manual before the businessplan is written, it is important to acknowledge the systems and controls you intend to putin place. 5ocumenting the systems and procedures can take place during the openingprocess.

%he operations section may be the most critical to the success of your restaurant+ not somuch from the investor"s and banker"s perspective, but as a comprehensive plan to sharewith management and employees.


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plans to hire a general manager or chef before making operational decisions. (owever, itis important that you acknowledge in your plan some of the basic controls such as4

'O system to track sales.

)ime and attendance tracking.

cheduling. Operations checklists.

Ordering procedures.

*nventory control.

Cash control procedure.

ecurity measures.

afety policies.

&iability reviews.

dministrati!e controls.Establishing systematic administrative procedures is equally

important as putting in place management controls. 6ne might view managementcontrols as tools for management whereas administrative controls are tools to measuremanagement"s performance.

Administrative tasks such as accounting and payroll processing are vital to the financialsuccess of restaurants. 0any owner'operators use a bookkeeper, accounting or payrollservice to handle some of the administrative tasks such as the preparation of daily andweekly reports, profit'and'loss 7;/ reporting, bank reconciliations or payrollprocessing.

Investment partners may want to know 3who is guarding the henhouse.3 %o address theirconcerns you might consider the incorporation of these financial controls4

)aily cash control.Adopt a system whereby sales and receipts recorded by the 76!system will be compared with actual cash and credit card deposits on a daily basis.Establish acceptable over*short amounts. 0onthly totals should be compared with actual7; statements for accuracy.

Wee#ly prime cost report.7repare a weekly report that shows the gross profit marginafter the cost of goods sold and labor cost has been deducted from the sales revenue. %heprime cost, depending on the type of restaurant, is e-pected to range on average from percent to F percent. 7roper control of the prime cost is the single most effectivemeasure of management"s ability to operate the restaurant. eekly monitoring allows forquick reaction to adverse cost ratios.

Purchasing records and account paya$les. Establish a system to process and recordinvoices and credits daily.

9eports detailing cash e-penditures, payments by check, and accounts payabletransactions should be readily available. 2onsider how check disbursements will be


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prepared and to whom check'signing authority for the general operating account will begiven.

ccounting system*ser!ice.Allow for the timely preparation of monthly financialstatements, including the monthly 7; and balance sheet. %he plan should state who will

prepare the reports, such as the bookkeeper, 27A or accounting service.

Payroll processing.7rovide an overview on how payroll checks will be processed.2onsider how often checks will be issued such as weekly, biweekly, or semimonthly.Acknowledge your preference of preparing payroll in'house or to have a payrollprocessing service.

*ee% It +nder Your at

hen submitting a business plan for review by potential investors, bankers, andprospective partners, you should consider having reviewers sign a confidentiality

agreement. In the critical planning and negotiating stage of a new operation you need toprotect your trade secrets and confidential information. 2hain restaurants use them instandard practice+ however, independent restaurateurs should consider them as well,particularly if the concept is novel and involves significant proprietary market research.

It Does &atter Whi!h Way You Go

2learly, this article only provides an outline. %he real sweat begins when you addresseach issue. %ry not to think of creating a business plan as a dry academic e-ercise, butrather painting a detailed and vibrant picture of how you see your operation unfolding.$eel free to bring your 27A, attorney, spouse, and committed investors into the process.

%hey may bring up issues that you might have missed, and provide that criticalobectivity that often escapes us when we are too close to a proect. 0oreover, you willnot feel as alone as you chart your course.

No doubt, a business plan takes time and effort. It is well worth it, as the final, polisheddocument will give you, and your investors, confidence that you really can reach yourdestination4 a successful restaurant.

(( Restaurant Startup 0 1rowth

"he 'asiest Way to Cut 2our %ood Cost345

by =ill 0arvin, %he 9estaurant 5octor
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hile there are few absolutes in this business this is one ' 3Engaging in ongoingcompetitive bidding practices to get the lowest prices actually leads to higherfood costs,not lower.3

)hat+s right. Contrary to what most of us! who have grown up in this business havebeen taught! having an ongoing purchasing process that revolves around using lotsof vendors! comparing bids! price shopping and buying from the lowest bidder ,O)only doesn+t save you any money but ends up costing you in several ways.

)o prove my point! how many professionally managed! large chain operators employongoing competitive bidding practices- /(O! ,O,/! ,A$A0 /very large chain usesone primary purveyor to supply 123 4223 of it+s food products. 5ow manyindependent operators do this- 'robably less than 423! easily less than 623.

And who makes more money at the restaurant level! the typical chain orindependent restaurant- According to industry averages published by ,(A theaverage independent nets about a nickel or 73 of sales before federal and stateincome taxes. 5aving worked with several chain operators and from perusing the

annual reports and 428s of many publicly held chains! the average restaurant levelnet income before corporate overhead and income taxes is around 463 473 of netsales.

)he fact that chain restaurants are 6 to 9 times more profitable than independentoperations may not be entirely due to purchasing practices but *+m sure it+s a factor!possibly a big one.

Distra!tion -ro# igh.Return A!ti"ities

Another factor to consider is the amount of time it takes to constantly evaluate bids!deal with lots of vendors and put away lots of deliveries! lots of small deliveries! that

is. :sing a prime vendor frees up management time that can be better spent on highreturn activities like taking better care of your customers and developing yourpeople. *n my mind! trying to save 67 cents on a case of green beans is hardly ahigh return activity worthy of much owner or management time.

What Deter#ines Su%%(ier Pri!es?

)here are four basic elements that go into the pricing formula of most suppliers.

Product Costs;


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the lower their costs are so there+s a builtin incentive for suppliers to move lots ofproduct.

Administrative & Selling Costs; *ncludes the cost of servicing the account andprocessing the orders. =actors that can affect these costs include order processingtime! lead time! order frequency! number of invoices processed! specialty products

needed and credit terms. Another point is that these costs are basically fixed andsuppliers want to spread these costs over as many sales dollars as possible.

Delivery & Handling Costs; )his boils down to cost per drop. )he drop cost todeliver 4 case to your back door is about the same as it costs to deliver 422 cases.)o a supplier! bigger orders mean less delivery cost per dollar of product delivered.,umber of deliveries per week and the time of the day you will accept deliveries canalso affect these costs.

Profit on the Account; )his is the percentage markup or gross profit in dollars thesupplier needs to make an account profitable after considering all the factorsdiscussed above and the potential volume on the account.

)he key point is that if you find ways to lower the vendor+s cost of servicing youraccount and give them the opportunity to make more profit "dollars"! they areusually willing to work on a lower "markup." As a result! you get lower overall pricesand other important benefits too! which *+ll discuss further below.

Gi"e Su%%(iers the %%ortunity to &a)e &ore &oney on Your A!!ount

>es! you read that right. *t+s in everyone+s best interest to position a supplier tomake more money on your account in return for something . . . LOWER PRCES!5ere+s how it works . . .

mart suppliers don+t ?ust look at the percentage markup on an account. ou currently spread yourpurchases around to 6 or 9 broadline distributors and several specialty suppliers. >ouspend about @422!222 a year with $istributor A and $istributor A is adding a 623markup to everything they sell you BCase ". $o you think $istributor A might bewilling to work on a smaller margin percent if they could get more! a lot more of yourbusiness-

As you see! it makes

economic sense for$istributor A to workon a smaller margin 3#it means convertingyou from a @422!222account into a@722!222 account. >oucan see in Case $!

$istributor A has the opportunity to more than double their gross profit dollars on


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the account even though they gave up a large slice of their average markup 3 to getmore of your business.

A $ase In Point


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One common response to a prime vendor arrangement is that the vendor will ratchetthe prices up once they know you+re not watching them like a hawk. ure that+spossible! but now we+re talking about being a si#eable account which the supplierknows will be put out to bid again within a year. *f they do play games with thepricing! chances are you+ll find out sooner or later.

)here is an element of trust involved in a prime vendor relationship. )he questionyou need to answer is! "will a supplier intentionally inflate prices if it puts them in?eopardy of losing a big customer-" ure it+s possible but it+s hardly a smart businessmove on the part of any supplier who wants you as a customer over the long term.

peaking of trust! in this type of arrangement trust goes both ways. >ou+ll alwayshave another supplier come to you with a better price on a case of tomato saucetoday or box of ribs tomorrow! but the point is sticking with the prime vendor asmuch as possible to get the lowest "overall" prices day after day Band spend yourtime in more productive activities. Once you start cherrypicking the best deals outthere product by product you defeat the purpose of a having prime vendor and itprobably won+t work.

Does Pri#e 1endor &a)e Sense For Your Restaurant?

)here+s really only one way to find out! try it0


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What '!ery Restaurant 6perator Should

7now $out Managing Cash %low

$or many restaurant owners one of the most perple-ing and frustrating aspects of runningtheir business is getting a handle on the ebbs and flows of their cash flow. All too oftencash balances can be more than sufficient one week only to turn into a shortfall andpotential overdraft situation the ne-t.

Cash shortages can be a real distraction from productive activities. A cash deficit canbe disruptive to operations if lack of payment threatens key deliveries and services.And never underestimate the damage to your reputation and credibility when yourlenders and suppliers don+t get paid in a timely and consistent manner.

ou want more income and less expenses to maximi#e theamount of ,et *ncome you earn.

Janaging cash flow! however! is primarily a "timing" issue. *t+s about managing

"when" the money comes in and when it+s paid out.=or example! in the image below you can see that based on a simple pro?ection ofcash coming in and going out it this business is looking at a cash shortfall ofaround @42!222 at the end of Jonth 6.

)he quickest and usually easiest way to fix the problem is to start exploring waysthat cash could be received quicker! in Jonth 6 rather than Jonth 9 or delay somepayments scheduled for Jonth 6 until Jonth 9.


18/22

*f part of the @422!222 of cash receipts expected in Jonth 9 is due to catering orbanquet sales! maybe deposits could be collected in advance of the events. *f @7!222of receipts could be received in Jonth 6 instead of Jonth 9! then our shortfall isdown to @7!222.

Another possibility is to delay some payments scheduled for Jonth 6 to Jonth 9.


19/22

*f @7!222 of payments due in Jonth 6 could be rescheduled to Jonth 9 the shortfallis gone. ,o more problem.


20/22

CASH +#LOWS 1RECEP(S2

Cash D Credit Card (eceipts ales

'lus; ales )ax &ess; 'aid Outs

5ouse Account Collections*nterest *ncome&oan 'roceedsOther

)hen estimate your cash payments by week.

CASH O3(#LOWS 1PA.-E+(S2

endors =ood

Eeer! &iquor D


21/22

much they spent getting their restaurant open. %his survey yielded nearly CC results,creating a valuable resource for those planning to open a new restaurant.

%he cost to finance the opening of a restaurant can vary greatly. %he following tableillustrates how various factors affect the overall investment based on the type of venture

and whether the restaurant is purchased or leased.

9enture "ype

: o/

Respondents

5 o/

6!erall

Median

; Spent

!erage

; Spent

Created ? @A5 ;=@4444 ;@43=D

Leased Space B?B GFH BC,CCC G?,?K?

Purchased Land 0 Building F? BBH CC,CCC KGB,KFG

6ther BH LC,CCC BFC,CCC

"oo# 6!er 'Eisting Concept 3F3 45 ;3D4444 ;=?33=?

Leased Space KC FMH ?C,CCC B?,C

Purchased Land 0 Building MK H BB,CCC M?,?

6ther B ?H ?,CCC ?,CCC

Purchased %ranchise =? D5 ;44444 ;F@3>?D

Leased Space B LKH CC,CCC GM,LCCPurchased Land 0 Building ??H MB,CCC ?,CK,

6ther ' ' ' '

6ther =@ @5 ;F@4444 ;D>@=4

Leased Space ?M FH C,CCC MLF,BL

Purchased Land 0 Building G BLH LCC,CCC ?,?CG,?M

6ther M ?FH B,CCC GC,CCC

ll Respondents F>= 3445 ;=@4444 ;FF3D>@

Leased Space M? GBH BCC,CCC MM,MFL

Purchased Land 0 Building ?BC BH G,CC GB,KG


22/22

6ther ?? BH BCC,CCC ,FF

e also asked respondents to tell us 3how3 they raised the money to get their restaurantopen. %he response was tremendous, resulting in se!eral hundred in depth testimonialson how these operators raised capital. 0oreover, each of the respondents share thelessons they learned on everything from budgeting, finding money, and pitfalls youshould try to avoid. %he results have been grouped based on the amount spent.

1iew !o##ents 2 resu(ts -or restaurants that !ost3

456,666 and (ess

457,666 . 4766,666

4767,666 . 4856,666

4857,666 . 4566,666

4567,666 . 47,666,666

&ore than 47,666,666

thers
http://www.restaurantowner.com/members/783.cfmhttp://www.restaurantowner.com/members/784.cfmhttp://www.restaurantowner.com/members/785.cfmhttp://www.restaurantowner.com/members/786.cfmhttp://www.restaurantowner.com/members/787.cfmhttp://www.restaurantowner.com/members/788.cfmhttp://www.restaurantowner.com/members/789.cfmhttp://www.restaurantowner.com/members/783.cfmhttp://www.restaurantowner.com/members/784.cfmhttp://www.restaurantowner.com/members/785.cfmhttp://www.restaurantowner.com/members/786.cfmhttp://www.restaurantowner.com/members/787.cfmhttp://www.restaurantowner.com/members/788.cfmhttp://www.restaurantowner.com/members/789.cfm

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