Financial Startup Feasibility Plans
Restaurant Resource Group has created more than 40 financial plans for restaurant clients since 2002. Before telling you how we collaborate closely with you to develop these plans, let me give you a brief overview.
What precisely is a restaurant financial feasibility plan, when would you need one, and why is it so critical to have one?
What it is?
In the most basic of terms it’s a detailed evaluation of whether a planned project is viable after taking into consideration its total costs, projected revenues and operating expenses. If the net revenues cover the costs of the project, and generate an acceptable return, then the project may be considered viable. A financial feasibility study therefore evaluates the project's potential for success; and is particularly critical if you expect to obtain financing from a lending institution or from potential investors.
When do you need it? There are generally three scenarios where you would need a financial feasibility plan
- Opening a new restaurant
- Purchasing an existing restaurant
- Operating an existing restaurant (especially if you are considering a significant capital investment)
Why do you need it? Again there are a few reasons why you would need a financial feasibility plan:
- To evaluate whether the project makes financial sense; will it be profitable?
- To obtain financing from a lending institution or investor(s)
- To evaluate which capital structures (relative inputs of cash, loans and equity investments) make the most sense in terms of business cash flow and the owners & investors desired return on (and of) their investment.
- To give you a better understanding of the financial implications of each of the many assumptions you will need to make when developing the plan (e.g. how does profitability change as revenues, specific expenses or capital structures change)
We work with clients in a variety of ways. In some cases we will create a complete financial plan from scratch. We will always perform this with your close collaboration in order to fully understand the concept, location, market considerations, experience, management, capital structure and many other factors that will impact the assumptions that form the “inputs” to the plan. In this case we typically charge a “flat fee” based on the estimated time we expect the project will take.
In other cases we will provide the client with a financial template (Excel based) to use as a starting point. The client, with our direct support, will make many of the inputs themselves, and we will collaborate as needed, and charge on an “hourly basis” to assist with other inputs, and with the assumptions necessary to create a realistic assessment of capital strucures and associated restaurant performance metrics.
We draw on 45 years of experience as owners and operators of a wide range of restaurant businesses from quick to full service establishments. We also draw specifically from current industry metrics published bi-annually by the National Restaurant Association.
Our plans include detailed sections as follows:
General Company Information
Projected Sources & Uses of Funds
Project Capital Budget Detail
Hourly Labor Cost Projection
Opening Balance Sheet
Detailed P&L Projections
Summary P&L Projections
5 Year P&L and Equity Return Rates (for both owners and investors)
Break Even Worksheet
Break Even P&L Summary
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