Active financial management for ensuring growth is necessary for every business owner. It was the principal reason for which, the owner of Florentine’s Steak & Seafood wanted a fully functional restaurant financial plan . As a financial modeling consultant, I developed a restaurant business model that ensured the growth of the business.
Restaurant Financial Model
The excel restaurant was based on:
- Careful cost controlling
- Weekly and monthly sales
- Cash inflow and outflow
- dea to create the business
Few months ago, I worked with Mr. Allen Parker to develop a restaurant p&l for his steak house. Allen focused on serving high-quality steaks and seafood with Latin flavor for his customers. It was a great idea to start a restaurant.
Since his marketing plan was creative, he was getting good sales. So, he thought everything was in perfect order. But, he realized in six months that the business was not growing. Allen identified that the restaurant was earning good revenue but failing to make enough profits.
The Importance of Restaurant Financial Model
A llen went to a local consultant to seek help for the business. The consultant told him to create a restaurant financial model . A model that would give him a long-term forecast on sales, costs, and cash flow of his business. Also, the consultant helped in identifying some challenges for the business. Moreover, he set some objectives to accomplish. Allen realized the importance of a restaurant business plan (restaurant financial model) and he came to me.
Getting Into The Restaurant Business
Allen came to me with the idea of developing an excel restaurant financial model, that could help him to increase the restaurant profit margin .
Surprisingly, he did not have much idea of how the restaurant business model would look like; what are functions he was looking for. So, I engaged in conversations with Allen about the financial transactions of the business.
Consequently, I learned how to start a restaurant from Allen! After a long discussion on the revenue, restaurant expenses , and cash; I understood what type of excel restaurant financial model Allen was looking for.
Key Challenges And Business Objectives
From Allen’s case, it was clear to me that he knew how to start a small restaurant successfully. But, he did not know how to grow financially after starting a restaurant business . That is the area where I worked for the client.
The task required identifying key challenges the business was facing. I have identified the following challenges the business had to overcome:
- the restaurant revenue pattern
- when the sales increases, why it increases, what is the impact of marketing expenses?
- break-even analysis was another important issue to determine the budgeted sales
- a standard costing for determining the restaurant profit margin
- a standard set of restaurant operating costs
- unnecessary operational budget
- industry trend for setting a standard restaurant profit margin
- human resource management; salaries and wages contribution to the profit margin
- cost of capital and expected rate of return from the investment
- debt and payback planning
- cash flow behavior of the business
- future plan for capital investment that ensures business growth
To overcome the challenges we agreed on accomplishing the following objectives:
- a restaurant business plan as Allen did not have one at the first place
- a restaurant business model
- restaurant income statement, balance sheet, and cash flow statement
- a comprehensive restaurant financial model to manage the business operations
Importance of Understanding How To Open A Restaurant
Understanding how to start a restaurant was important, where Allen failed. He did not write a business plan before starting the business. Consequently, he did not have any restaurant financial model for managing scenarios. Allen & I started developing a restaurant plan. Together, we created a great restaurant spreadsheet for starting a restaurant business.
Although it was prepared for Allen, we created it for a start-up business. It helped me to realize the importance of starting a small restaurant with a perfect plan in place. If you are thinking of starting a restaurant, then you definitely should have a good business plan in place.
Restaurant Financial Plan Dashboard
The dashboard for the financial model plays a vital role. Because it helps to monitor all the financial aspects of the business. In the case of Florentine’s Steaks & Seafood, different variables were necessary for the restaurant business model . I started with is the potential sales in the restaurant. It was done through an analysis of the underlying variables that are determinant of the restaurant revenue.
The following variables were having an impact on sales:
- Population in the area
- Number of competitors
- Current market shares
- Market growth
- Marketing costs
- Other important business-related issues
The next thing that I worked on was creating an interlinked Pro-forma financial model by establishing a connection with the following variables:
- Debt & Interest
- Future capital investments
- Operational costs
Idea to create the business
The pro-forma model was finished successfully. The Pro-forma features met all the expectation of Allen. Let me tell you how the model helped him to achieve his goals. I believe, it will give you a good idea on how to start a restaurant business .
The Restaurant Financial Model & Florentine’s Success
I have customized the restaurant business plan template based on the needs of the client. In particular, the excel restaurant was impressively helpful in Allen’s case. He was able to ensure efficient financial management using my financial plan. Different assumptions helped in customizing the model according to the needs of the restaurant. The following text will give an idea of the features of the pro-forma.
Restaurant Financial Plan Sales Assumptions
In particular, I focused on four different aspects that determine future sales:
- Number of potential customers in the area where the restaurant operates
- The Growth trend in the steaks and seafood items demand
- Macro environment impact on the sales
- Quality of products (taste, authentic raw materials, etc.)
Potential customers and market share information together showed realistic forecasting of sales. Macro environment elements such as direct competitors, industry sales volume give a good idea on potential sales.
Pricing Strategy of the Restaurant Business Plan
Our client’s six months experience in the business helped us for setting up prices of each and every product. Besides, the pricing of the product depends on the industry practice, demand and supply, cost of goods sold, and inflation, etc. So I have taken those variables into consideration to develop the pricing strategy function in the pro-forma.
The pricing strategy has helped the client a lot. It saved time and effort. Moreover, the excel restaurant model aided him in determining an optimum price for the products.
Salary and Wages Assumption of Restaurant Financial Plan
I wanted to know how many workers the client currently has, how many visitors a single worker can handle? As a matter of fact, similar issues helped in determining the optimum number of workers for the restaurant. I assumed that the salary and wages will increase according to industry practice. With the growth of the business, the requirement for workers will increase. So I took this matter into consideration.
A lso, tax behavior and potential changes played an important role in the assumption. Allen was impressively benefited from it! He could save around $9,000 monthly just by implementing the financial model.
Fixed Cost Assumption of Restaurant Financial Plan
I have identified all the relevant fixed costs of a restaurant business. The fact is, those fixed costs had been growing at an estimated rate over the years. In addition, fixed cost assumptions reflect real market conditions.
As a result, consistent controlling in the fixed cost has helped Allen to save around $15,000 per year. The restaurant financial plan provides an idea of the necessary fixed expenses for the user to control the unnecessary ones.
Variable Cost Assumption of Restaurant Pro-Forma
The variable expenses for the food products contain different things, and it was quite challenging for us to finalize. After considering all related costs with the food products, the variable expenses assumptions were finalized.
- % of the products selling price
- Number of customer order
- Number of sales of a particular product
The assumptions assisted Allen in determining the variable expenses in case of a specific product line or in case of the total revenue. It has helped the client to monitor the variable expenses and to manage the sales-related costs efficiently.
The break-even analysis shows the minimum order amount the restaurant must get to meet the break-even point. Moreover, it helped the client to understand if each of his product lines was generating enough revenue or not.
Sales seasonality in the restaurant template
The client wanted to measure the impact of seasonality on the sales of the restaurant. As the restaurant may sometimes lose business due to changes in taste, trend, season, and other variables relevant to seasonal changes. So, the model included a seasonality measurement tab that gives information on seasonal sales. Thus, it helped Allen to decide when to increase the promotion budget and when to reduce the marketing budget.
Business plan restaurant capital expenditure
The owner must have an idea about how to open a restaurant, and how to grow it- to become a successful restaurant owner. For a business to grow, a well-planned cost to open a restaurant plays a vital role. Hence, the model assumes different development expenses; and provides a guideline when to go for the planned capital expenditure.
Restaurant financial model valuation
Using a discounted cash flow formula the business net present value (NPV) is calculated. The valuation tab helped Allen in understanding if his business worth was increasing with time. To determine the discount rate weighted average cost of capital (WACC) was calculated.
Projected financial performance of the restaurant
I have created a financial model to provide a realistic financial performance forecast based on assumptions. Moreover, It helped to have a growth forecast of the business. Thus, the forecasting has helped the client to adjust his goals; and to achieve the desired level of success.
End result of restaurant financial model excel
Several other useful features were also added in the model. The useful features are KPI, financial summary, cap table, capital, inventory, and outputs etc. After integrating all functions that would benefit Allen, the following outputs were generated.
How The Client Exerted Benefit From The Restaurant Financial Model
Mr. Allen became a successful restaurant owner, currently thinking of expansion of his business to the next level. He could exert benefit from the excel restaurant template for some of its awesome features:
- The model was easy to use
- We helped the client to set his own assumptions
- Easy to generate a forecast of sales, expenses, and profits
- Understanding the outputs was quite simple
In short, the restaurant business model was designed to provide a realistic forecast. All the essential variables can be changed by the user. The input instructions are quite clear to understand, so the client could utilize it effectively.
If you are thinking of starting a restaurant, or searching on the internet how to start a small restaurant, then you will need a restaurant template. The good news for you is, I have a unified version of the restaurant financial plan. It will definitely help you like Allen. You can buy the excel restaurant template from here (please click on the button below).
You may also want to learn if it is really the model you are in need of? I have a great solution to that!!! Click on the link below and download the template of the model.
If you need the help of an expert for customizing the model for you, then you are welcome to contact me via the “contact us” page.
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