The pandemic has devastated American restaurants and food services. The National Restaurant Association reported in mid-September that six months after COVID-19, nearly 1 in 6 restaurants (almost 100,000) had closed permanently, nearly 3 million employees were still unemployed, and the industry was on track to lose $240 billion in sales by the end of the year.
Survivors used creativity, flexibility, and communication to generate new revenue. 11 business model pivots are succeeding. These companies expanded their distribution channels, product forms, sizes, audiences, geographies, and packaging, as well as their take-out and sidewalk dining. These new business lines may survive and grow after Covid.
What is a restaurant’s business model?
Restaurant business models define your service, menu, and value proposition. You’ll discover all possible expenses and set your restaurant’s pricing while planning your business.
Main restaurant models:
- Fast food: Quick-serve restaurants (QSR) offer affordable menu items without table service.
- Fast-casual: Fast-casual restaurants use higher-quality ingredients and offer faster service.
- Family-style: Casual dining restaurants offer table service and affordable meals.
- Fine dining: Fine dining offers excellent food, service, and ambiance.
- Pop-up: Pop-up restaurants cook and serve food in other restaurants, chefs’ homes, or parks.
- Ghost kitchen: Virtual kitchens only offer delivery and carryout, with no on-site dining.
- Cafe or bistro: Small restaurants may serve drinks or light snacks.
- Buffet: All-you-can-eat or weight-based buffets let customers serve themselves.
What should be in the business model for your restaurant?
Profitable restaurant concepts make the best models. But choosing an idea is hard. Plan for models with high profit margins, low staffing costs, and high cash margins.
Restaurateurs may think this is a unicorn. Planning can prevent some restaurant failures. These restaurant model elements ensure profitability.
Your business model must differentiate your company. Your restaurant’s value proposition is unique.
A unique restaurant concept may offer ready-to-heat options or an unforgettable experience. Idea brainstorming:
- Benefits of eating at your restaurant
- Explaining how these benefits benefit your guests
- Your guest’s main dining issue
- How your value solves customer problems
- Differentiating yourself from competitors
Dine-in customers no longer sustain your business. It may be temporary or a shift toward delivery and carryout.
Your restaurant business proposal should explore all income streams since financial issues are why restaurants fail. Restaurant products and services include:
- On-site meals
- Delivery Carryout
- Heat-and-eat meals
- DIY meals
- Meal kit subscriptions
- Grocery items
- Business and private catering
- House drinks
- Pre-mixed drinks Gift cards
- Shirts, hats, and koozies
- Chef demonstrations
Your restaurant marketing and concept must target your target market. Only some people in town are good restaurant guests. Consider your target market.
- Psychographics: Understand your ideal guest’s lifestyle, values, and priorities.
- Demographics: Examine income, education, age, gender identity, and location to determine your customers.
- Behavior: Consider your guests’ spending and online and offline hobbies.
Financial projections should include all expenses. Reviewing revenue streams and costs is crucial. Selling cookbooks or gift cards requires money to print, buy, and track sales, but only a little labor.
Determine variable and fixed costs for each expense and situation. Restaurant costs:
- Restaurant payroll
- Mortgage/rent payments
- Sales, payroll, and property taxes
- Food costs
- Equipment acquisition and upkeep
- PR and marketing
- Franchise fees
- Delivery costs
Customer service is essential to your restaurant. Ghost kitchens and other contactless businesses must decide on customer service. Concept, restaurant layout, target market, and location determine methods.
Popular service styles:
- Table service: Served at tables in full-service restaurants.
- Family-style service: Platters of food for self-service are popular in family vacation spots.
- French service: Fine-dining establishments serve beverages from the guest’s right side.
- Self-service: Buffet-style and grab-and-go options with limited restaurant customer service.
- Single-point service: Automats and fast-food businesses have one point of contact for customers.
Three tips for making a business plan for a restaurant
Research restaurant business challenges. Doing so helps you find business model gaps and the best ways to reach your target audience.
Pay attention to sustainability and scalability
Restaurants struggle. Most business owners have never experienced a downturn like this, even during recessions or local emergencies.
It would help if you aimed for scalability and sustainability throughout your small restaurant business planning. This way:
- Cost-benefit analysis for each income stream
- Predicting if you can survive a revenue loss
- Startup break-even point determination
- Emergency planning
Carefully plan your investments in technology
Depending on your restaurant business model, various restaurant software can help. If you can’t afford all your systems upfront, you don’t have to buy them.
First, choose essential tools. For example, you’ll need a restaurant website and a POS system. Accounting, payroll, and scheduling software may help.
But If money is tight, start with the basics and plan. Invest in a restaurant management system that works with other technologies so you can add software later and be sure it works with your POS system, reducing administrative work.
Startups are risky, especially in unstable economies. Check your model’s viability with a restaurant feasibility study. Start a business plan after you’ve proven your idea works.
- Company structure
- External services
- Financial forecasts
- Job Requirements
- Target market
- Restaurant layout
Develop a successful restaurant model
Planning can reveal a scalable restaurant business model. Create a core strategy that explains what and how you’ll sell and defines your business’s uniqueness.